News Release
------------
LA-Z-BOY, INC. FINISHES 1998 FISCAL YEAR
WITH A STRONG FOURTH QUARTER
MONROE, MI., May 21, 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 in closing out its 1998 fiscal year.
Financial Details
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For the FOURTH QUARTER that ended 4/25/98, sales reached $322.0 million, up 12%
from last year's fourth quarter of $287.5 million. Operating profit was up
15% to $28.3 million vs. $24.6 million. Net income was up 27% to $19.9
million vs. $15.6 million, and net income per share was up 28% to $1.11
vs. $0.87.
1998 FISCAL YEAR sales were $1.108 billion, up 10% from last year's $1.006
billion. Operating profit was up 4% to $77.2 million vs. $73.9 million.
Net income was up 10% to $49.9 million vs. $45.3 million, and net income
per share was up 12% to $2.79 vs. $2.50. Each La-Z-Boy operating division
recorded higher sales for the year.
Sales Trends
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Current sales orders backlogs and recent incoming order rates indicate that
the upcoming first quarter will continue to have good sales momentum. In
addition, last year's first quarter sales were not strong, which should make
this year's increase better.
According to La-Z-Boy Chairman, Pat Norton, "The state of the economy, current
strength of the industry and the growth of our distribution system in most
of our many divisions indicate favorable results for the near term as we move
into our new fiscal year."
Marketing
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In March, La-Z-Boy Residential hosted three consumer panel discussions in its
High Point, North Carolina showroom. Organized and conducted by Better Homes
and Gardens magazine, the panel consisted of subscribers to the magazine who
were invited to evaluate and comment on La-Z-Boy's newest product and fabric
offerings. Participants were carefully selected to represent La-Z-Boy's ideal
target market - women between the age of 25 and 54 years. The results gave
our Merchandising Department valuable insight. Results of this first ever
pre-screening were shared with dealers during the recently completed Spring
International Home Furnishings Market. Presenting product that was
"pre-approved" by consumers gave us a boost in new product placements. We
anticipate continuing this relationship with Better Homes and Gardens during
future markets.
More Information
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La-Z-Boy, Inc.'s 8-K filing including an income statement, balance sheet, cash
flow statement, notes to year end financial statements, annual report
narratives and additional management discussion is available now at the
Company's internet site (www.lazboy.com). About 48 hours after this release,
the 8-K 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, Inc
financial information, including 10-Q and other filings for the past three
years.
NYSE & PCX: LZB Contact: Gene Hardy (734) 241-4306
5/21/98
La-Z-Boy Incorporated Financial Information Release 1 of 3
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
FOURTH QUARTER ENDED
----------------------------------------------
(Unaudited)
Percent of Sales
Apr. 25, Apr. 26, % Over ----------------
1998 1997 (Under) 1998 1997
--------- -------- ------- ------- -------
Sales $321,984 $287,463 12% 100.0% 100.0%
Cost of sales 234,070 211,749 11% 72.7% 73.7%
--------- -------- ------- ------- -------
Gross profit 87,914 75,714 16% 27.3% 26.3%
S, G & A 59,577 51,105 17% 18.5% 17.7%
--------- -------- ------- ------- -------
Operating profit 28,337 24,609 15% 8.8% 8.6%
Interest expense 1,058 1,076 -2% 0.3% 0.4%
Interest Income 459 510 -10% 0.1% 0.2%
Other income 2,690 563 378% 0.9% 0.2%
--------- -------- ------- ------- -------
Pretax income 30,428 24,606 24% 9.5% 8.6%
Income taxes 10,515 8,960 17% 34.6%* 36.4%*
--------- -------- ------- ------- -------
Net income $19,913 $15,646 27% 6.2% 5.4%
========= ======== ======= ======= =======
Average shares 17,822 17,929 -1%
Net income per share $1.11 $0.87 28%
Dividends per share $0.21 $0.21 0%
FISCAL YEAR ENDED
----------------------------------------------
(Audited)
Percent of Sales
Apr. 25, Apr. 26, % Over ----------------
1998 1997 (Under) 1998 1997
-------- -------- ------- ------- -------
Sales $1,108,038 $1,005,825 10% 100.0% 100.0%
Cost of sales 825,312 744,662 11% 74.5% 74.0%
-------- -------- ------- ------- -------
Gross profit 282,726 261,163 8% 25.5% 26.0%
S,G & A 205,523 187,230 10% 18.5% 18.6%
-------- -------- ------- ------- -------
Operating profit 77,203 73,933 4% 7.0% 7.4%
Interest expense 4,157 4,376 -5% 0.4% 0.4%
Interest Income 2,021 1,770 14% 0.2% 0.2%
Other income 4,207 2,508 68% 0.4% 0.1%
-------- -------- ------- ------- -------
Pretax income 79,274 73,835 7% 7.2% 7.3%
Income taxes 29,354 28,538 3% 37.0%* 38.7%*
-------- -------- ------- ------- -------
Net income $49,920 $45,297 10% 4.5% 4.5%
======== ======== ======= ======= =======
Average shares 17,885 18,108 -1%
Net income per share $2.79 $2.50 12%
Dividends per share $0.84 $0.78 8%
* As a percent of pretax income, not sales.
5/21/98 La-Z-Boy Incorporated Financial Information Release 2 of 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Audited Increase
------------------- (Decrease)
Apr. 25, Apr. 26, -----------------
1998 1997 Dollars Percent
--------- --------- --------- -------
Current assets
Cash & equivalents $28,700 $25,382 $3,318 13%
Receivables 238,260 215,032 23,228 11%
Inventories
Raw materials 43,883 36,959 6,924 19%
Work-in-process 40,640 34,854 5,786 17%
Finished goods 30,193 28,177 2,016 7%
--------- --------- --------- -------
FIFO inventories 114,716 99,990 14,726 15%
Excess of FIFO over LIFO (22,812) (21,219) (1,593) -8%
--------- --------- --------- -------
Total inventories 91,904 78,771 13,133 17%
Deferred income taxes 16,679 20,950 (4,271) -20%
Income taxes 936 -- 936 N/M
Other current assets 6,549 2,640 3,909 148%
--------- --------- -------- -------
Total current assets 383,028 342,775 40,253 12%
Property, plant & equipment 121,762 114,658 7,104 6%
Goodwill 49,413 38,702 10,711 28%
Other long-term assets 26,148 32,272 (6,124) -19%
--------- --------- --------- --------
Total assets $580,351 $528,407 $51,944 10%
========= ========= ========= ========
Current liabilities
Current portion-l/t debt $4,822 $4,611 $211 5%
Current portion-cap. leases 1,383 2,017 (634) -31%
Accounts payable 36,703 28,589 8,114 28%
Payroll/Other Compensation 39,617 37,934 1,683 4%
Income taxes -- 5,412 (5,412) -100%
Other current liabilities 25,764 19,106 6,658 35%
--------- --------- --------- -------
Total current liabilities 108,289 97,669 10,620 11%
Long-term debt 66,434 52,449 13,985 27%
Capital leases 819 2,202 (1,383) -63%
Deferred income taxes 5,478 6,329 (851) -13%
Other long-term liabilities 11,122 10,420 702 7%
Shareholders' equity
Common stock, $1.00 par 17,850 17,908 (58) 0%
Capital in excess of par 29,262 27,697 1,565 6%
Retained earnings 342,146 314,731 27,415 9%
Currency translation (1,049) (998) (51) -5%
--------- --------- --------- -------
Total shareholders' equity 388,209 359,338 28,871 8%
--------- --------- --------- -------
Total liabilities and
shareholders' equity $580,351 $528,407 $51,944 10%
========= ========= ========= =======
5/21/98 La-Z-Boy Incorporated Financial Information Release 3 of 3
Overall:
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Refer to today's press release for additional information.
Results for the quarter ended April 25, 1998 include one month of
income statement information and the balance sheet of Sam Moore Furniture
Industries, Inc.. La-Z-Boy acquired this Bedford, Virginia-based producer
of up-scale furniture on April 1, 1998.
S, G and A:
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Fiscal fourth quarter S, G & A increased to 18.5% of sales vs. 17.7% last year,
due to professional related expenses. In addition, expense related to
performance-based restricted stock options was higher primarily due to the
increase in the price of La-Z-Boy, Inc. common stock. Information technology
expenses also were up faster than the rate of sales and are expected to
continue to be higher next year. These were offset in part by bonus related
expenses being lower than last year.
Other income:
- ------------
Other income increased to $2.7 million from $0.6 million during the fourth
quarter due to income tax refund claims based on the Company's election to
value its marketable securities (including trade notes and receivables) at
fair market value for tax purposes. This is expected to be a one-time
occurrence.
Income tax related:
- ------------------
The fourth quarter tax rate decreased to 34.6% from 36.4% of pretax income
reflecting a favorable shift of earnings to entities with lower effective tax
rates and the settlement of an IRS audit. We expect slightly lower effective
tax rates to continue for the immediate future.
Income taxes went to a prepaid of $0.9 million from a liability of $5.4 million
due to the income tax refund claims as discussed in the "Other income" note
above.
Deferred tax asset increased to $16.7 million in April of 1998 from $21.0
million in April of 1997 as a result of the refund claims discussed above
becoming a deferred item.
Inventories:
- -----------
FIFO inventories have increased compared to last year in large part due to the
acquisition of companies throughout the year. On a comparable basis, that is
for those divisions with full 1998-year sales and balances at both the
beginning and end of the year, FIFO inventory increased 7% in total. This
correlates to a comparable 9% full-year increase in sales. Year-end raw
materials increased 6%, work-in-process increased 11% and finished goods
increased 3%; all on a comparable basis. In addition, work-in
- -process inventories have increased to support newly introduced products
requiring special electrical and other purchased components, to support an
increased volume of units being produced in leather, and to alleviate
shortages in hardwood and plywood parts experienced earlier.
Other current assets:
- --------------------
Other current assets increased mainly due to prepaid advertising. More
store display materials and selling aids were purchased this fiscal year for
resale to dealers during the coming fiscal year.
Goodwill:
- --------
The increase in goodwill during the quarter was due to the purchase of Sam
Moore Furniture Industries, Inc.
Other current liabilities:
- -------------------------
The increase in other current liabilities during the quarter is due mainly to
accruals relating to pending legal issues.
Long-term debt:
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The increase in long-term debt during the quarter was due to a private
placement financing obtained primarily for the acquisition of Sam Moore.