News Release
LA-Z-BOY REPORTS RECORD THIRD QUARTER
NYSE & PCX: LZB Contact: Gene Hardy (734) 241-4306
MONROE, MI., February 2, 1999: La-Z-Boy Incorporated, one of the world's
largest producers of furniture, continued reaching record levels of quarterly
sales and profit.
Financial Details
For the third quarter ended 1/23/99 of La-Z-Boy's 1999 fiscal year, sales
reached $318.1 million, up 13% from last year's third quarter of $280.5 million.
Net income was up 55% to $17.7 million vs. $11.5 million. Diluted EPS (Earnings
Per Share) increased 57% to $0.33 vs. $0.21.
For the nine months ended 1/23/99 of La-Z-Boy's 1999 fiscal year, sales
reached $921.8 million, up 17% from last year's $786.1 million. Net income was
up 44% to $43.4 million vs. $30.0 million. Diluted EPS was up 45% to $0.81 vs.
$0.56.
President Comments
La-Z-Boy President and Chief Operating Officer, Gerald L. Kiser said, "An
improvement in gross margin over last year's third quarter resulted from more
efficient plant operations as well as higher sales volume. With plant
productivity rising, current capacity can meet forecasted demand, at least for
the near-term. However, we are expanding our Residential division and
England/Corsair plants in Tennessee, and installing a new finishing facility at
the Sam Moore division in Virginia.
"We don't expect the exceptional 13% third quarter sales growth rate to
continue into the fourth quarter. La-Z-Boy's fourth quarter sales could rise
4% to 6% above last year's record-setting final quarter."
Marketing
This month, the Residential division launches its third "Instant Win"
Sweepstakes in Parade and USA Weekend magazines. We expect to reach 57 million
readers. This "Picture Yourself in America's Favorite Recliner" campaign
features a special 800 phone number to help consumers locate their most
convenient La-Z-Boy participating dealers. Over 4,000 La-Z-Boy locations are
taking part in this sweepstakes, marking the highest level of dealer support
ever for this type of program.
The La-Z-Boy Furniture Galleries program continues to expand with recent
openings in Madrid, Spain and two new Canadian stores in Burlington and Ottawa,
Ontario.
Time Magazine recognized La-Z-Boy chairs and our founders in a special
edition commemorating the 100 most influential inventions of the 20th century.
And the La-Z-Boy Maxim massage chair was featured in Parade magazine,
demonstrated by the cast of the popular Drew Carey Show and in the January
issue of House Beautiful, in an article by the editor of the magazine.
Company Overview
La-Z-Boy manufactures quality upholstered and casegoods home furniture as
well as office furniture. In addition to the La-Z-Boy brand name, which is the
most recognized home furniture brand name in North America, four other major
brands are part of La-Z-Boy Incorporated: Kincaid, England/Corsair, Hammary and
Sam Moore.
More Information
La-Z-Boy Incorporated's third quarter 10-Q filing including an income
statement, balance sheet, cash flow statement and additional management
discussion is available now at the Company's internet site (www.lazboy.com).
This press release is just one part of La-Z-Boy Incorporated's disclosures and
should be read in conjunction with all other 10-Q information. About 48 hours
after this release, this third quarter 10-Q information should be available on
the SEC's internet site (www.sec.gov).
2/2/99 Page 1 of 3
La-Z-Boy Incorporated Financial Information Release
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
THIRD QUARTER ENDED (UNAUDITED)
------------------------------------------------------
January 23, January 24, % Over Percent of Sales
----------------
1999 1998 (Under) 1999 1998
----------- ----------- ------- ------ ------
Sales $318,105 $280,520 13% 100.0% 100.0%
Cost of sales 230,923 211,688 9% 72.6% 75.5%
----------- ----------- ------- ------ ------
Gross profit 87,182 68,832 27% 27.4% 24.5%
S, G & A 58,758 50,189 17% 18.5% 17.9%
----------- ----------- ------- ------ ------
Operating profit 28,424 18,643 52% 8.9% 6.6%
Interest expense 1,110 1,048 6% 0.3% 0.4%
Interest income 430 568 -24% 0.1% 0.2%
Other income 962 240 301% 0.3% 0.2%
----------- ----------- ------- ------ ------
Pretax income 28,706 18,403 56% 9.0% 6.6%
Income tax expense 10,978 6,944 58% 38.2% * 37.7% *
----------- ----------- ------- ------ ------
Net income $17,728 $11,459 55% 5.6% 4.1%
=========== =========== ======= ====== ======
Diluted average shares 52,925 54,055 -2%
Diluted EPS $0.33 $0.21 57%
Basic EPS $0.34 $0.22 55%
Dividends per share $0.08 $0.07 14%
NINE MONTHS ENDED (UNAUDITED)
-----------------------------------------------------
January 23, January 24, % Over Percent of Sales
----------------
1999 1998 (Under) 1999 1998
----------- ----------- ------- ------ ------
Sales $921,816 $786,054 17% 100.0% 100.0%
Cost of sales 681,416 591,242 15% 73.9% 75.2%
----------- ----------- -------- ------ ------
Gross profit 240,400 194,812 23% 26.1% 24.8%
S, G & A 169,556 145,946 16% 18.4% 18.6%
----------- ----------- -------- ------ ------
Operating profit 70,844 48,866 45% 7.7% 6.2%
Interest expense 3,461 3,099 12% 0.4% 0.4%
Interest income 1,478 1,562 -5% 0.2% 0.2%
Other income 2,182 1,517 44% 0.2% 0.2%
----------- ----------- -------- ------ ------
Pretax income 71,043 48,846 45% 7.7% 6.2%
Income tax expense 27,684 18,839 47% 39.0% * 38.6% *
----------- ----------- -------- ------ ------
Net income $43,359 $30,007 44% 4.7% 3.8%
=========== =========== ======== ====== ======
Diluted average shares 53,331 54,060 -1%
Diluted EPS $0.81 $0.56 45%
Basic EPS $0.82 $0.56 46%
Dividends per share $0.23 $0.21 10%
<FN>
* As a percent of pretax income, not sales.
</FN>
2/2/99 Page 2 of 3
La-Z-Boy Incorporated Financial Information Release
CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except par value)
Unaudited Increase Audited
------------------------
January 23, January 24, (Decrease) Apr. 25,
---------------------
1999 1998 Dollars Percent 1998
--------- --------- --------- ------- ---------
Current assets
Cash & equivalents ............. $ 44,037 $ 38,473 $ 5,564 14% $ 28,700
Receivables .................... 228,820 196,879 31,941 16% 238,260
Inventories
Raw materials .............. 52,122 44,478 7,644 17% 43,883
Work-in-process ............ 41,271 37,726 3,545 9% 40,640
Finished goods ............. 36,984 30,511 6,473 21% 30,193
--------- --------- --------- --------- ---------
FIFO inventories ....... 130,377 112,715 17,662 16% 114,716
Excess of FIFO over LIFO (22,780) (21,550) (1,230) -6% (22,812)
--------- --------- --------- --------- ---------
Total inventories . 107,597 91,165 16,432 18% 91,904
Deferred income taxes .......... 18,936 24,761 (5,825) -24% 16,679
Income taxes ................... -- -- N/M N/M 936
Other current assets ........... 4,672 4,086 586 14% 6,549
-------- --------- --------- --------- ---------
Total current assets ....... 404,062 355,364 48,698 14% 383,028
Property, plant & equipment ........ 121,135 117,627 3,508 3% 121,762
Goodwill ........................... 47,501 40,974 6,527 16% 49,413
Other long-term assets ............. 29,139 29,953 (814) -3% 26,148
--------- --------- --------- --------- ---------
Total assets ........... $ 601,837 $ 543,918 $ 57,919 11% $ 580,351
========= ========= ========= ========= =========
Current liabilities
Current portion - l/t debt ..... $ 4,647 $ 5,107 ($ 460) -9% $ 4,822
Current portion - capital leases 1,099 1,561 (462) -30% 1,383
Accounts payable ............... 48,952 38,714 10,238 26% 36,703
Payroll/other comp ............. 39,316 33,315 6,001 18% 39,617
Income taxes ................... 4,596 4,469 127 3% --
Other current liabilities ...... 24,917 23,858 1,059 4% 25,764
--------- --------- --------- --------- ---------
Total current liabilities .. 123,527 107,024 16,503 15% 108,289
Long-term debt ..................... 63,279 49,723 13,556 27% 66,434
Capital leases ..................... 204 1,111 (907) -82% 819
Deferred income taxes .............. 5,459 5,627 (168) -3% 5,478
Other long-term liabilities ........ 12,551 10,468 2,083 20% 11,122
Commitments & contingencies ........ -- -- N/M N/M --
Shareholders' equity
Common shares, $1 par * ........ 52,397 53,569 (1,172) -2% 53,551
Capital in excess of par ....... 30,441 28,239 2,202 8% 29,262
Retained earnings * ............ 316,158 289,425 26,733 9% 306,445
Currency translation ........... (2,179) (1,268) (911) -72% (1,049)
--------- --------- --------- --------- ---------
Total shareholders' equity . 396,817 369,965 26,852 7% 388,209
Total liabilities and
--------- --------- --------- --------- ---------
shareholders' equity ... $ 601,837 $ 543,918 $ 57,919 11% $ 580,351
========= ========= ========= ========= =========
<FN>
* Restated to reflect three-for-one stock split, in the form of a 200% stock dividend effective September 1998.
</FN>
2/2/99 Page 3 of 3
La-Z-Boy Incorporated Financial Information Release
COMMENTS AND ANALYSIS
Overall:
Refer to today's press release for additional information.
Gross profit margins:
The gross profit margin increased to 27.4% of sales from 24.5% of sales in
last year's third quarter on a 13% increase in sales and a 9% increase in unit
volume. The absence of production disruptions associated with hardwood and
plywood part delivery problems, costs associated with casegood manufacturing
consolidations, and inclement weather conditions all favorably affected the
gross profit margin. In addition, similar to the second quarter, favorable
volume related cost reductions and unfavorable Canadian currency exchange
effects were also realized.
Sales in the fourth quarter is expected to increase roughly 4% to 6% over
the prior year's fourth quarter, and the gross profit margin as a percentage of
sales is expected to approximate last year.
Inventories:
Finished goods inventories were up 21% over the same period last year
primarily as a result of two new casegood product line introductions increasing
stock inventory levels, and increased daily production volume resulting in more
finished product being staged for shipment. The stock inventory build-up for
the larger of the two product line introductions is expected to be short-term.
Finished goods inventory levels at the end of the upcoming fourth quarter are
expected to be higher than the prior year, but not as high as at the end of the
third quarter.
S,G & A:
Third quarter S, G & A increased to 18.5% of sales vs. 17.9% last year.
The largest cause was due to an increase in Information Technology (IT)
expenses relating to Year 2000 projects. As expected, performance bonus related
expenses increased due to higher sales and profits. La-Z-Boy held many other
S, G & A expenses at a growth rate consistent with or lower than the sales
growth rate, thus somewhat offsetting the higher IT related and performance
bonus increases. For the fourth quarter, IT expenses are expected to be
slightly higher than last year. Higher bonus related expenses are expected to
continue through the fourth quarter.
Other income:
Other income is volatile by nature and fluctuates from one period to
another. Last year's fourth quarter included an income item related to tax
refund claims. Looking forward, this is not expected to occur in this year's
fourth quarter.
Income tax expense:
The third quarter tax rate increased to 38.2% of pretax income from 37.7%
last year. This is due in part to Canadian division profit impacts creating
unfavorable tax impacts. This is somewhat offset by several favorable items.
This trend is expected to continue for the fourth quarter.