News Release
------------
LA-Z-BOY HAD HIGHER SALES, LOWER PROFITS
IN SECOND QUARTER
MONROE, MI., November 4, 1997: La-Z-Boy Incorporated continued reaching
record levels of quarterly sales; while profits rebounded from the first
quarter.
Financial Details
- -----------------
For the second quarter ended 10/25/97, sales reached $293.2 million, up
8% from last year's second quarter of $271.6 million. Operating profit was
$27.4 million vs. $25.5 million. Net income was $16.8 million vs. $15.3
million, and net income per share was $0.94 vs. $0.84.
For the six months ended 10/25/97 sales were $506.5 million, up 7% from
last year's first half of $473.8 million. Operating profit was $30.2
million vs. $33.5 million. Net income was $18.5 million vs. $19.8 million,
and net income per share was $1.04 vs. $1.09. (About $0.10 of the $0.15
decline in first quarter net income per share was due to La-Z-Boy's largest
customer, Montgomery Ward, declaring bankruptcy.)
Short Term Sales Trends are Good:
- --------------------------------
Sales order backlogs as of today and recent short term trends in sales
orders indicate that November's and December's shipments over comparable
prior year months will be above the 8% second quarter increase. The
strength in sales extends across most product lines and divisions
Marketing
- ---------
The recently completed International Home Furnishings Market in High
Point, North Carolina featured a broad spectrum of introductions from
England/Corsair, "Cadence", a lifestyle occasional collection from Hammary,
and "American Artifact", an updated "mission" look from Kincaid. La-Z-Boy
Residential introductions included deluxe massage recliners with built-in
telephones and digital answering machines aimed at today's "high tech"
customers and significant enhancements to the reclining sofa category.
The La-Z-Boy brand recently placed 9th out of 260 household brands in a
study by HFN magazine. (The next highest furniture manufacturer placed
32nd.) To continue building the power and the strength of the La-Z-Boy
name, the Residential Division recently launched an extensive national
magazine advertising campaign in the nation's most widely read women's
magazines and home decorating publications. The series of four ads shows
how the style, comfort and variety of La-Z-Boy upholstered home furnishings
fit many family lifestyles. The campaign will run through April 1998 and
continues to offer consumers the free La-Z-Boy Home Furnishings Kit and the
name of their nearest authorized La-Z-Boy dealer through our 1-800 Make-A-
Home toll free number.
The Contract Furniture Group continues to post solid gains as a result
of a very healthy business climate in the office furniture market. The
closing of the Grand Rapids, Michigan facilities has been completed and the
manufacturing of systems furniture and laminate desks in the Lincolnton,
North Carolina facility is well underway.
More Information
- ----------------
La-Z-Boy's second quarter 10-Q filing including a full income statement,
balance sheet, cash flow statement and additional management discussion is
available now at La-Z-Boys worldwide web site (www.lazboy.com). About 24
to 48 hours after this release, the second quarter 10-Q information should
be available on the SEC's web site in their EDGAR databases (www.sec.gov).
The SEC's site also contains additional La-Z-Boy financial information,
including 8-K and other filings, going back about two years.
NYSE & PCX: LZB Contact: Gene Hardy (313) 241-4306
11/04/97 La-Z-Boy Incorporated Financial Information Release 1 of 3
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
SECOND QUARTER ENDED (UNAUDITED)
---------------------------------------------
Percent of Sales
Oct. 25, Oct. 26, % Over ----------------
1997 1996 (Under) 1997 1996
-------- -------- ------- ------ ------
Sales $293,208 $271,554 8% 100.0% 100.0%
Cost of sales 215,370 197,017 9% 73.5% 72.6%
-------- -------- ------- ------ ------
Gross profit 77,838 74,537 4% 26.5% 27.4%
S, G & A 50,400 49,006 3% 17.1% 18.0%
-------- -------- ------- ------ ------
Operating profit 27,438 25,531 7% 9.4% 9.4%
Interest expense 1,027 1,097 -6% 0.4% 0.4%
Interest income 512 367 40% 0.2% 0.1%
Other income 527 521 1% 0.2% 0.2%
-------- -------- ------- ------ ------
Pretax income 27,450 25,322 8% 9.4% 9.3%
Income taxes 10,628 10,070 6% 38.7%* 39.8%*
-------- -------- ------- ------ -----
Net income $16,822 $15,252 10% 5.7% 5.6%
======== ======== ======= ====== ======
Average shares 17,888 18,125 -1%
Net income per share $0.94 $0.84 12%
Dividends per share $0.21 $0.19 11%
SIX MONTHS ENDED (UNAUDITED)
---------------------------------------------
Percent of Sales
Oct. 25, Oct. 26, % Over ----------------
1997 1996 (Under) 1997 1996
-------- -------- ------- ------ ------
Sales $505,534 $473,781 7% 100.0% 100.0%
Cost of sales 379,554 351,934 8% 75.1% 74.3%
-------- -------- ------- ------ ------
Gross profit 125,980 121,847 3% 24.9% 25.7%
S, G & A 95,757 88,360 8% 18.9% 18.6%
-------- -------- ------- ------ ------
Operating profit 30,223 33,487 -10% 6.0% 7.1%
Interest expense 2,051 2,204 -7% 0.4% 0.5%
Interest income 994 830 20% 0.2% 0.2%
Other income 1,277 1,306 -2% 0.2% 0.3%
-------- -------- ------- ------ ------
Pretax income 30,443 33,419 -9% 6.0% 7.1%
Income taxes 11,895 13,569 -12% 39.1%* 40.6%*
-------- -------- ------- ------ -----
Net income $18,548 $19,850 -7% 3.7% 4.2%
======== ======== ======= ====== ======
Average shares 17,920 18,208 -2%
Net Income per share $1.04 $1.09 -5%
Dividends per share $0.42 $0.38 11%
* As a percent of pretax income, not sales.
11/04/97 La-Z-Boy Incorporated Financial Information Release 2 of 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
Oct. 25, Oct. 26, --------------- April 26,
1997 1996 Dollars Percent 1997
-------- -------- ------- ------- --------
Current assets
Cash & equivalents $23,681 $14,956 $8,725 58% $25,382
Receivables 216,989 215,049 1,940 1% 215,032
Inventories
Raw materials 40,672 40,042 630 2% 36,959
Work-in-process 36,652 38,556 (1,904) -5% 34,854
Finished goods 33,110 33,406 (296) -1% 28,177
-------- -------- ------- ------- --------
FIFO inventories 110,434 112,004 (1,570) -1% 99,990
Excess of FIFO over LIFO (21,513) (21,796) 283 1% (21,219)
-------- -------- ------- ------- --------
Total inventories 88,921 90,208 (1,287) -1% 78,771
Deferred income taxes 22,395 20,149 2,246 11% 20,950
Other current assets 427 7,621 (7,194) -94% 2,640
-------- -------- ------- ------- --------
Total current assets 352,413 347,983 4,430 1% 342,775
Property, plant & equipment 119,247 115,297 3,950 3% 114,658
Goodwill 41,755 39,532 2,223 6% 38,702
Other long-term assets 31,169 31,075 94 0% 32,272
-------- -------- ------- ------- --------
Total assets $544,584 $533,887 $10,697 2% $528,407
======== ======== ======= ======= ========
Unaudited Increase
----------------- (Decrease) Audited
Oct. 25, Oct. 26, --------------- April 26,
1997 1996 Dollars Percent 1997
-------- -------- ------- ------- -------
Current liabilities
Current portion - l/t debt $5,118 $4,625 $493 11% $4,611
Current portion - captl leases 1,778 2,072 (294) -14% 2,017
Accounts payable 37,579 41,706 (4,127) -10% 28,589
Payroll/other comp 32,362 32,798 (436) -1% 37,934
Estimated income taxes 11,132 9,217 1,915 21% 5,412
Other current liabilities 23,659 18,973 4,686 25% 19,106
-------- -------- ------- ------ ------
Total current liabilities 111,628 109,391 2,237 2% 97,669
Long-term debt 52,522 55,071 (2,549) -5% 52,449
Capital leases 1,401 3,183 (1,782) -56% 2,202
Deferred income taxes 5,814 6,663 (849) -13% 6,329
Other long-term liabilities 10,343 10,502 (159) -2% 10,420
Commitments & contingencies
Shareholders' equity
17,828,415 shares, $1.00 par 17,828 18,135 (307) -2% 17,908
Capital in excess of par 28,378 27,856 522 2% 27,697
Retained earnings 317,626 303,693 13,933 5% 314,731
Currency translation (956) (607) (349) -57% (998)
-------- -------- ------- ------ -------
Total shareholders' equity 362,876 349,077 13,799 4% 359,338
-------- -------- ------- ------ -------
Total liabilities and
shareholders' equity $544,584 $533,887 $10,697 2% $528,407
======== ======== ======= ====== ========
11/4/97 La-Z-Boy Incorporated Financial Information Release Page 3 of 3
Overall:
- -------
Refer to today's press release for additional information.
The quarter ended October 25, 1997 includes three months of income
statement information and the balance sheet of Centurion Furniture plc, the
recently acquired furniture manufacturer located in England. Annual sales
for Centurion for the year ended 3/31/97 were $12 million.
Gross Profit:
- ------------
Gross profit margins declined to 26.5% of sales from 27.4% in last
year's second quarter on an 8% increase in sales dollars and a 4% increase
in sales units. A combination of both selling price increases and favorable
merchandising trends was offset by increased production costs. Similar to
the first quarter, a major reason for these increased costs was disruptions
in the delivery of hardwood and plywood parts. Secondly, additional costs
associated with the relocation of contract casegoods operations occurred.
The hardwood and plywood problems experienced in the first and second
quarter are thought to be mostly resolved and are not expected to impact
future quarters. Costs relating to the contract casegoods consolidation are
expected to continue into the third quarter but with a declining impact.
S,G & A:
- -------
Second quarter S, G & A decreased from 18.0% of sales last year to 17.1%
due mainly to decreases in bonus accruals and lower commission rates.
Offsetting the decrease, information technologies expenses continue to
increase as discussed in the first quarter.
Interest Income:
- ---------------
Interest income increased 40% from last year due to an increase in cash
balances. The collection rate on receivables was a major contributor to the
increase in cash.
Estimated Income Taxes:
- ----------------------
Estimated income taxes increased 21% over last year. Lower payments
were remitted during the second quarter FY98 compared to FY97 due to first
quarter income being significantly lower than prior year. Federal law
allows estimated taxes for the first and second quarters to be based on
annualized income for the first three months only.
Other Current Assets:
- --------------------
Other current assets have decreased 94% over last year. One major
reason for the decrease was the timing of advertising related expenditures
being later in FY98 vs FY97. In addition, assets for the company's self-
insured healthcare plans have been decreasing over the last year due to many
plants switching from traditional insurance plans to HMO's. This trend is
not expected to continue.
Other Current Liabilities:
- -------------------------
Other current liabilities increased 25% from last year. The third
dividend of the fiscal year was declared in the second quarter to be paid in
the third quarter. In the prior year this dividend was not declared until
the third quarter. The dividend payment is expected to be approximately
$3.7 million.