News Release
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DOUBLE DIGIT SALES AND PROFIT INCREASES
FOR LA-Z-BOY IN THIRD QUARTER
MONROE, MI., February 3, 1998: La-Z-Boy Incorporated, the nation's largest
producer of upholstered and solid wood furniture, continued reaching record
levels of quarterly sales and profits.
Financial Details
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For the third quarter ended 1/24/98, sales reached $280.5 million, up 15%
from last year's third quarter of $244.6 million. Operating profit was $18.6
million vs. $15.8 million. Net income was $11.5 million vs. $9.8 million, and
net income per share was $0.64 vs. $0.54.
For the nine months ended 1/24/98, sales were $786.1 million, up 9% from
last year's nine months of $718.4 million. Operating profit was $48.9 million
vs. $49.3 million. Net income was $30.0 million vs. $29.7 million, and net
income per share was $1.68 vs. $1.63. Nine months results reflect a one time
first quarter $3.1 million pretax bad debts expense relating to the Montgomery
Ward bankruptcy filing.
Short Term Sales Trends are Good
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Sales order backlogs as of today and recent short term trends in sales
orders indicate that February's and March's shipments over comparable prior
year months may be between 6% - 11%.
Marketing
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On January 11th, the Residential Division launched its second "Instant
Win" Sweepstakes in Parade and USA Weekend magazines. Reaching 57 million
readers, the "Remarkable La-Z-Boy Recliner Giveaway" generated markedly
increased retail traffic and over 55,000 phone calls from consumers asking for
the location of their nearest La-Z-Boy retailer.
More Information
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La-Z-Boy's third quarter 10-Q filing including a full income statement,
balance sheet, cash flow statement and additional management discussion is
available now at La-Z-Boy's worldwide web site (www.lazboy.com). About 24 to
48 hours after this release, the 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
02/03/98 La-Z-Boy Incorporated Financial Information Release 1 of 3
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
THIRD QUARTER ENDED (UNAUDITED)
---------------------------------------------
Percent of Sales
Jan. 24, Jan. 25, % Over ----------------
1998 1997 (Under) 1998 1997
-------- -------- ------- ------ ------
Sales $280,520 $244,581 15% 100.0% 100.0%
Cost of sales 211,688 180,979 17% 75.5% 74.0%
-------- -------- ------- ------ ------
Gross profit 68,832 63,602 8% 24.5% 26.0%
S, G & A 50,189 47,765 5% 17.9% 19.5%
-------- -------- ------- ------ ------
Operating profit 18,643 15,837 18% 6.6% 6.5%
Interest expense 1,048 1,096 -4% 0.4% 0.4%
Interest income 568 430 32% 0.2% 0.2%
Other income 240 639 -62% 0.2% 0.2%
-------- -------- ------- ------ ------
Pretax income 18,403 15,810 16% 6.6% 6.5%
Income taxes 6,944 6,009 16% 37.7%* 38.0%*
-------- -------- ------- ------ -----
Net income $11,459 $9,801 17% 4.1% 4.0%
======== ======== ======= ====== ======
Average shares 17,877 18,086 -1%
Net income per share $0.64 $0.54 19%
Dividends per share $0.21 $0.19 11%
NINE MONTHS ENDED (UNAUDITED)
---------------------------------------------
Percent of Sales
Jan. 24, Jan. 25, % Over ----------------
1998 1997 (Under) 1998 1997
-------- -------- ------- ------ ------
Sales $786,054 $718,362 9% 100.0% 100.0%
Cost of sales 591,242 532,913 11% 75.2% 74.2%
-------- -------- ------- ------ ------
Gross profit 194,812 185,449 5% 24.8% 25.8%
S, G & A 145,946 136,125 7% 18.6% 18.9%
-------- -------- ------- ------ ------
Operating profit 48,866 49,324 -1% 6.2% 6.9%
Interest expense 3,099 3,300 -6% 0.4% 0.5%
Interest income 1,562 1,260 24% 0.2% 0.2%
Other income 1,517 1,945 -22% 0.2% 0.3%
-------- -------- ------- ------ ------
Pretax income 48,846 49,229 -1% 6.2% 6.9%
Income taxes 18,839 19,578 -4% 38.6%* 39.8%*
-------- -------- ------- ------ -----
Net income $30,007 $29,651 1% 3.8% 4.1%
======== ======== ======= ====== ======
Average shares 17,905 18,168 -1%
Net Income per share $1.68 $1.63 3%
Dividends per share $0.63 $0.57 11%
* As a percent of pretax income, not sales.
02/03/98 La-Z-Boy Incorporated Financial Information Release 2 of 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
Jan. 24, Jan. 25, --------------- April 26,
1998 1997 Dollars Percent 1997
-------- -------- ------- ------- --------
Current assets
Cash & equivalents $38,473 $37,554 $919 2% $25,382
Receivables 196,879 177,933 18,946 11% 215,032
Inventories
Raw materials 44,478 41,235 3,243 8% 36,959
Work-in-process 37,726 39,868 (2,142) -5% 34,854
Finished goods 30,511 33,010 (2,499) -8% 28,177
-------- -------- ------- ------- --------
FIFO inventories 112,715 114,113 (1,398) -1% 99,990
Excess of FIFO over LIFO (21,550) (21,928) 378 2% (21,219)
-------- -------- ------- ------- --------
Total inventories 91,165 92,185 (1,020) -1% 78,771
Deferred income taxes 24,761 19,732 5,029 25% 20,950
Other current assets 4,086 4,092 (6) 0% 2,640
-------- -------- ------- ------- --------
Total current assets 355,364 331,496 23,868 7% 342,775
Property, plant & equipment 117,627 115,167 2,460 2% 114,658
Goodwill 40,974 39,117 1,857 5% 38,702
Other long-term assets 29,953 31,464 (1,511) -5% 32,272
-------- -------- ------- ------- --------
Total assets $543,918 $517,244 $26,674 5% $528,407
======== ======== ======= ======= ========
Unaudited Increase
----------------- (Decrease) Audited
Jan. 24, Jan. 25, --------------- April 26,
1998 1997 Dollars Percent 1997
-------- -------- ------- ------- -------
Current liabilities
Current portion - l/t debt $5,107 $4,625 $482 10% $4,611
Current portion - captl leas 1,561 2,067 (506) -24% 2,017
Accounts payable 38,714 33,941 4,773 14% 28,589
Payroll/other comp 33,315 30,961 2,354 8% 37,934
Estimated income taxes 4,469 2,741 1,728 63% 5,412
Other current liabilities 23,858 22,625 1,233 5% 19,106
-------- -------- ------- ------ ------
Total current liabilities 107,024 96,960 10,064 10% 97,669
Long-term debt 49,723 55,007 (5,284) -10% 52,449
Capital leases 1,111 2,679 (1,568) -59% 2,202
Deferred income taxes 5,627 5,808 (181) -3% 6,329
Other long-term liabilities 10,468 10,876 (408) -4% 10,420
Commitments & contingencies
Shareholders' equity
17,856,292 shares, $1.00 par 17,856 17,961 (105) -1% 17,908
Capital in excess of par 28,239 27,733 506 2% 27,697
Retained earnings 325,138 300,861 24,277 8% 314,731
Currency translation (1,268) (641) (627) -98% (998)
-------- -------- ------- ------ -------
Total shareholders' equity 369,965 345,914 24,051 7% 359,338
-------- -------- ------- ------ -------
Total liabilities and
shareholders' equity $543,918 $517,244 $26,674 5% $528,407
======== ======== ======= ====== ========
02/03/98 La-Z-Boy Incorporated Financial Information Release Page 3 of 3
Overall:
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Refer to today's press release for additional information.
Gross Profit:
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Gross profit margins declined to 24.5% of sales from 26.0% in last year's
third quarter on a 15% increase in sales dollars and an 11% increase in sales
units. A combination of both selling price increases and favorable
merchandising trends on upholstery products was offset by unfavorable
merchandising for some casegood products and increased production costs at
most manufacturing facilities. The unfavorable casegood merchandising was
primarily a result of discounting obsolete product and introductory pricing on
new product to establish it in the marketplace. Both of these unfavorable
merchandising items are considered to be one time events. Provided below, in
no specific order, is a list of the most significant unfavorable production
cost factors:
Hardwood and plywood parts delivery problems and the related production
disruptions experienced in the first and second quarter are mostly resolved.
However, the transition costs associated with the consolidation
of seven hardwood frame supply centers into three and the continued conversion
of hardwood parts to our new unibody frame construction were significant just
as they were in recent quarters. Although these unfavorable cost trends are
expected to continue into the fourth quarter, it is believed that the long
term benefits of eliminating excess hardwood supply center capacity will
contribute to manufacturing cost reductions in the early part of fiscal year
1998-1999.
As was the case in the second quarter, the costs associated with the
consolidation of one casegood manufacturing facility into an existing facility
had a measurable impact upon the third quarter. In addition, a second,
separate casegood manufacturing facility consolidation was begun. It is
expected that the transition costs of both the first and second consolidations
will be completed in the fourth quarter and that benefits will be realized in
the first quarter of fiscal year 1998-1999. The consolidation of casegood
manufacturing facilities was initiated to reduce manufacturing costs and is
not a result of, nor an indicator of any shrinking demand for casegood
product.
As a result of a sharp increase in production demand, overtime and
indirect labor costs were up significantly at most upholstery plants. Due to
an expected continuation of strong demand for upholstery products, these costs
are expected to remain unfavorable in the fourth quarter.
Inclement weather in the southern U.S. caused several manufacturing
facilities to close for approximately two days. Although some production was
lost as a result of the plant closures, a good portion was re-captured using
overtime. This event is believed to be a one time occurrence.
S,G & A:
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Third quarter S, G & A decreased to 17.9% of sales in the current year vs.
19.5% last year. Bonus expense decreased over last year's third quarter.
Advertising expense increased over last year's third quarter; however, not at
the rate of the sales increase. Both trends are expected to continue through
the fourth quarter.