LZB
$32.40
La-Z-Boy
Earnings Details
4th Quarter April 2018
Tuesday, June 19, 2018 4:15:00 PM
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Summary

La-Z-Boy Reports In-line

La-Z-Boy (LZB) reported 4th Quarter April 2018 earnings of $0.66 per share on revenue of $420.0 million. The consensus earnings estimate was $0.64 per share on revenue of $426.8 million. The Earnings Whisper number was $0.66 per share. Revenue grew 1.8% on a year-over-year basis.

La-Z-Boy Inc through its subsidiaries manufactures, markets, imports, distributes and retails upholstery furniture products.

Results
Reported Earnings
$0.66
Earnings Whisper
$0.66
Consensus Estimate
$0.64
Reported Revenue
$420.0 Mil
Revenue Estimate
$426.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

La-Z-Boy Reports Fiscal 2018 Fourth-Quarter and Full-Year Results

MONROE, Mich., June 19, 2018 (GLOBE NEWSWIRE) -- La-Z-Boy Incorporated (NYSE:LZB) today reported its operating results for the fiscal 2018 full year and fourth quarter ended April 28, 2018.

Fiscal 2018 fourth quarter:

  • Consolidated sales for the fourth quarter increased 1.8% to $420.0 million;
  • Earnings per diluted share attributable to La-Z-Boy Incorporated increased 26.3% to $0.72 and included a $0.06 per share benefit related to tax reform;
  • Consolidated operating margin increased to 10.9% from 10.5% in last year’s fourth quarter;
  • The company generated cash from operating activities of $24.6 million during the quarter;
  • The company returned $16.3 million to shareholders through share purchases and dividends; and
  • Same-store written sales for the La-Z-Boy Furniture Galleries® network increased 3.9%.

Fiscal 2018 full year:

  • Consolidated sales for the full fiscal 2018 year increased 4.2% to $1.58 billion;
  • Earnings per diluted share attributable to La-Z-Boy Incorporated were $1.67 versus $1.73 in the prior year. The reduction in the current year was primarily due to tax reform charges;
  • Consolidated operating margin was 8.2% versus 8.8% in the prior-year period, with the reduction in the current year primarily the result of inflationary pressures, including raw materials and transportation;
  • The company generated cash from operating activities of $115.8 million for the year;
  • The company returned $78.7 million to shareholders through share purchases and an increased dividend; and
  • Same-store written sales for the La-Z-Boy Furniture Galleries® network for the full fiscal 2018 year increased 2.3%.

Kurt L. Darrow, Chairman, President and Chief Executive Officer of La-Z-Boy, said, “For fiscal 2018, we increased sales 4.2% and delivered an 8.2% consolidated operating margin, driven by solid performance in all three business segments. We generated $116 million in cash from operating activities and returned a combined total of almost $79 million to shareholders through share purchases and an increased dividend. Strong cash generation also funded $36 million in capital expenditures which included four large capital projects across the company, primarily designed to strengthen our operations and competitive positioning. With the most recognized brand in the industry, a solid balance sheet and world-class supply chain, we are executing a dual growth strategy focused on growing our core La-Z-Boy brand through existing channels, while leveraging our supply chain to develop a greater presence in online channels as we look to attract a new and younger consumer.”

Sales in the company’s upholstery segment increased 0.6% to $327.2 million and the operating margin was 12.8% compared with 13.7% in last year’s fourth quarter.  In the casegoods segment, sales increased 17.5% to $30.6 million and the operating margin increased to 9.2% from 7.8%. Sales in the retail segment increased 3.0% to $121.5 million and the operating margin increased to 6.6% from 6.5%. On the core base of 138 stores included in last year’s fourth quarter, delivered sales declined 1.1% versus the prior year.

Darrow commented, “For the quarter, we posted a 12.8% operating margin in our upholstery segment.  Throughout this inflationary period, we continue to modify our business plan and make necessary price adjustments in the face of increased raw materials and transportation cost pressures. At the same time, we are mindful of achieving a proper balance between raw material costs and selling prices and believe we are offering consumers innovative products with a compelling value proposition. Against that backdrop, we are pleased with our operating margin performance for the quarter. On the product side, the power category remains popular and is growing while our new duo™ collection continues to outpace expectations. With strong appeal, it has quickly become a significant collection within our assortment.  Supply chain initiatives put into place throughout our manufacturing operations have greatly increased productivity and improved our already excellent quality. As our team works to drive volume, we expect to further leverage the efficiencies of our operations.” 

Darrow added, “The casegoods group continues to deliver exceptional sales and operating margin performance driven by on-trend product collections, which are resonating with consumers. At the same time, the business is providing excellent service to dealers through a reliable in-stock position on best sellers and quick shipping which is allowing us to expand our floor space with existing accounts and open new accounts across the country. We are pleased with the segment’s performance and believe it is well positioned for ongoing growth and market share gains.”

Darrow said, “In the retail segment, we opened one new La-Z-Boy Furniture Galleries® store during the quarter and closed two. The segment’s operating margin for the fourth quarter was the highest of all four quarters in the fiscal year, and above last year’s fourth quarter. As consumers visit our stores, we are able to provide them with a differentiated and compelling La-Z-Boy Furniture Galleries® store experience, including our complimentary design services which, along with custom orders, drove the improved average ticket and operating margin for the period.”

La-Z-Boy Furniture Galleries® Store Network

In the fourth quarter of fiscal 2018, same-store written sales increased 3.9% versus last year’s fourth quarter for the La-Z-Boy Furniture Galleries® store system, which includes both company-owned and independent-licensed stores. For the full fiscal 2018 year, same store written sales for the La-Z-Boy Furniture Galleries® store network increased 2.3%.

For the fourth quarter of fiscal 2018, total written sales from new and closed stores increased 5.4% compared with the fourth quarter of fiscal 2017. For the full fiscal 2018 period, total written sales from new and closed stores increased 4.2% versus fiscal 2017.

Darrow commented, “The La-Z-Boy Furniture Galleries® store network posted its fifth consecutive quarterly written same-store sales increase. Across the network, 20 projects were completed in fiscal 2018, including new stores, relocations and remodels. Throughout the year, we significantly upgraded the quality of the La-Z-Boy Furniture Galleries® network and ended the year with a total of 350 stand-alone stores, with 132 in the new concept design format. For fiscal 2019, we are planning for approximately 24 projects to be completed and we expect to end the year with about 154 stores in the new concept design format and 355 in total.”

The tables below summarize the store projects for the network in fiscal 2018 and provide a projection for activity during fiscal 2019.

FISCAL 2018 STORE ACTIVITY

 Total FY17NewClosedAcquiredTotal FY18Remodel Relocation
Company-owned1436(4)1 146--
Dealer-owned2044(3)(1)20473
Total34710(7)- 35073

FISCAL 2019 PROJECTED* STORE ACTIVITY

 Total FY18NewClosedTotal FY19RemodelRelocation
Company-owned1462(2)1463-
Dealer-owned2046(1)20993
Total3508(3)355123

*Projects anticipated to be completed.

Darrow continued, “The future for La-Z-Boy Incorporated is promising as we execute strategic initiatives to drive growth, deliver top-quartile profitability performance within the industry, and provide increasing returns to shareholders. We are making strategic investments across the company to ensure we remain a leader in the dynamic marketplace while delivering an enhanced customer experience through a combination of investments in online, in-store and in-home design options and services. Our consistent cash flow enables us to continue to invest in our brand and world-class global supply chain which we believe is a key to long-term success and meaningful financial returns for investors while providing the ability to pursue a multi-faceted e-commerce strategy to capture a new and younger consumer.  During the summer months, the furniture industry typically experiences weaker demand, and the majority of our plants shut down for one week of vacation and maintenance in July, during the first quarter.  Accordingly, the first quarter is usually the company’s weakest in terms of sales and earnings.”

2017 Tax Cuts and Jobs Act

Results for the fourth quarter of fiscal 2018 included a $0.06 per share benefit related to tax reform, or $2.8 million. This primarily related to adjustments of income tax expense recorded in the third quarter of fiscal 2018 for the estimated effects of the transition tax on the deemed repatriation of foreign earnings and to adjust the company’s re-measurement of certain deferred taxes and related amounts. Based on the company’s current interpretation of the tax reform legislation, it made reasonable estimates to record provisional adjustments during the fourth quarter of fiscal 2018. Since the company is still accumulating and processing data to finalize the underlying calculations and expects regulators to issue further guidance, among other things, it believes its estimates may change. The company will continue to refine such amounts within the measurement period allowed, which is not to extend beyond one year of the enactment date.

Balance Sheet and Cash Flow

During the quarter, the company generated $24.6 million in cash from operating activities. La-Z-Boy ended the year with $134.5 million in cash and cash equivalents, $34.4 million in investments to enhance returns on cash, and $2.4 million in restricted cash. During fiscal year 2018, the company had $36.3 million in capital expenditures, invested $16.5 million to fund our prior-year acquisition of the La-Z-Boy wholesale business in the U.K. and Ireland and to acquire an independent La-Z-Boy Furniture Galleries® organization, paid $22.0 million in dividends, and spent $56.7 million purchasing 2.0 million shares of stock, including 0.4 million in the fourth quarter, in the open market under its existing authorized share purchase program, leaving 6.7 million shares of purchase availability in the program.

Conference Call

La-Z-Boy will hold a conference call with the investment community on Wednesday, June 20, 2018, at 8:30 a.m. eastern time. The toll-free dial-in number is 877.407.0778; international callers may use 201.689.8565. 

The call will be webcast live, with corresponding slides, and archived on the Internet.  It will be available at https://lazboy.gcs-web.com/. A telephone replay will be available for a week following the call. This replay will be accessible to callers from the U.S. and Canada at 877.481.4010 and to international callers at 919.882.2331. Enter Conference ID #10453.

Forward-looking Information

This news release contains, and oral statements made from time to time by representatives of La-Z-Boy may contain, “forward-looking statements.” With respect to all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 

Actual results could differ materially from those we anticipate or project due to a number of factors, including: (a) changes in consumer confidence and demographics; (b) the possibility of a recession; (c) changes in the real estate and credit markets and their effects on our customers, consumers and suppliers; (d) international political unrest, terrorism or war; (e) volatility in energy and other commodities prices; (f) the impact of logistics on imports and exports; (g) tax rate, interest rate, and currency exchange rate changes; (h) changes in the stock market impacting our profitability and our effective tax rate; (i) operating factors, such as supply, labor or distribution disruptions (e.g. port strikes); (j) changes in legislation, including the tax code, or changes in the domestic or international regulatory environment or trade policies, including new or increased duties, tariffs, retaliatory tariffs, trade limitations and termination or renegotiation of the North American Free Trade Agreement; (k) adoption of new accounting principles; (l) fires, severe weather or other natural events such as hurricanes, earthquakes, flooding, tornadoes and tsunamis; (m) our ability to procure, transport or import, or material increases to the cost of transporting or importing, fabric rolls, leather hides or cut-and-sewn fabric and leather sets domestically or abroad; (n) information technology conversions or system failures and our ability to recover from a system failure; (o) effects of our brand awareness and marketing programs; (p) the discovery of defects in our products resulting in delays in manufacturing, recall campaigns, reputational damage, or increased warranty costs; (q) litigation arising out of alleged defects in our products; (r) unusual or significant litigation; (s) our ability to locate new La-Z-Boy Furniture Galleries® stores (or store owners) and negotiate favorable lease terms for new or existing locations; (t) the ability to increase volume through our e-commerce initiatives; (u) the impact of potential goodwill or intangible asset impairments; and (v) those matters discussed in Item 1A of our fiscal 2018 Annual Report on Form 10-K and other factors identified from time to time in our reports filed with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking statements, whether to reflect new information or new developments or for any other reason.

Additional Information

This news release is just one part of La-Z-Boy’s financial disclosures and should be read in conjunction with other information filed with the Securities and Exchange Commission, which is available at: https://lazboy.gcs-web.com/financial-information/sec-filings. Investors and others wishing to be notified of future La-Z-Boy news releases, SEC filings and quarterly investor conference calls may sign up at:  https://lazboy.gcs-web.com/.

Background Information

La-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The La-Z-Boy upholstery segment companies are England and La-Z-Boy. The casegoods segment consists of three brands: American Drew, Hammary, and Kincaid. The company-owned retail segment includes 146 of the 350 La-Z-Boy Furniture Galleries® stores.

The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 350 stand-alone La-Z-Boy Furniture Galleries® stores and 535 independent Comfort Studio® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units. Additional information is available at http://www.la-z-boy.com/.

  
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
 
  
  Unaudited For the Fiscal
Quarter Ended
 Unaudited For the Fiscal
Year Ended
 
(Amounts in thousands, except per share data) 4/28/2018 4/29/2017 4/28/2018 4/29/2017 
Sales $420,025 $412,706 $1,583,947 $1,520,060 
Cost of sales  253,831  243,815  961,200  910,757 
Gross profit  166,194  168,891  622,747  609,303 
Selling, general and administrative expense  120,487  125,437  493,378  475,961 
Operating income  45,707  43,454  129,369  133,342 
Interest expense  108  279  538  1,073 
Interest income  546  302  1,709  981 
Other income (expense), net  (1,379) (1,000) (1,650) (2,510)
Income before income taxes  44,766  42,477  128,890  130,740 
Income tax expense  10,406  14,248  47,295  43,756 
Net income  34,360  28,229  81,595  86,984 
Net income attributable to noncontrolling interests  (150) (232) (729) (1,062)
Net income attributable to La-Z-Boy Incorporated $34,210 $27,997 $80,866 $85,922 
          
Diluted weighted average common shares  47,472  49,181  48,135  49,470 
          
Diluted net income attributable to La-Z-Boy
  Incorporated per share
 $0.72 $0.57 $1.67 $1.73 
          
Dividends declared per share $0.12 $0.11 $0.46 $0.42 


LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
 
  
  Unaudited 
 (Amounts in thousands, except par value) 4/28/2018 4/29/2017 
Current assets     
Cash and equivalents $134,515 $141,860 
Restricted cash  2,356  8,999 
Receivables, net of allowance of $1,956 at 4/28/18 and $2,563 at 4/29/17  154,055  150,846 
Inventories, net  184,841  175,114 
Other current assets  42,451  40,603 
Total current assets  518,218  517,422 
Property, plant and equipment, net  180,882  169,132 
Goodwill  75,254  74,245 
Other intangible assets, net  18,190  18,489 
Deferred income taxes – long-term  21,265  40,131 
Other long-term assets, net  79,158  69,436 
Total assets $892,967 $888,855 
      
Current liabilities     
Current portion of long-term debt $223 $219 
Accounts payable  62,403  51,282 
Accrued expenses and other current liabilities  118,721  147,175 
Total current liabilities  181,347  198,676 
Long-term debt  199  296 
Other long-term liabilities  86,205  88,778 
Contingencies and commitments     
Shareholders' equity     
Preferred shares – 5,000 authorized; none issued     
Common shares, $1 par value – 150,000 authorized; 46,788 outstanding at 4/28/18 and 48,472 outstanding at 4/29/17  46,788  48,472 
Capital in excess of par value  298,948  289,632 
Retained earnings  291,644  284,698 
Accumulated other comprehensive loss  (25,199) (32,883)
Total La-Z-Boy Incorporated shareholders’ equity  612,181  589,919 
Noncontrolling interests  13,035  11,186 
Total equity  625,216  601,105 
Total liabilities and equity $892,967 $888,855 
      


LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
 
  
  Unaudited For the Fiscal
Year Ended
 
(Amounts in thousands) 4/28/2018 4/29/2017 
Cash flows from operating activities     
Net income $81,595 $86,984 
Adjustments to reconcile net income to cash provided by operating activities     
Gain on disposal of assets  (2,108) (224)
Gain on conversion of investment  (2,204)  
Gain on sale of investments  (770) (471)
Change in deferred taxes  17,261  569 
Change in provision for doubtful accounts  276  (291)
Depreciation and amortization  31,767  29,131 
Stock-based compensation expense  9,474  8,864 
Pension plan contributions  (2,000) (2,300)
Change in receivables  (2,801) (7,850)
Change in inventories  (8,009) 12,517 
Change in other assets  (3,245) (1,211)
Change in accounts payable  6,602  4,541 
Change in other liabilities  (10,088) 17,731 
Net cash provided by operating activities  115,750  147,990 
Cash flows from investing activities      
Proceeds from disposals of assets  1,440  761 
Proceeds from property insurance  2,087   
Capital expenditures  (36,337) (20,304)
Purchases of investments  (28,593) (29,763)
Proceeds from sales of investments  22,674  19,954 
Acquisitions, net of cash acquired  (16,495) (35,878)
Net cash used for investing activities  (55,224) (65,230)
Cash flows from financing activities      
Payments on debt  (262) (288)
Payments for debt issuance costs  (231)  
Stock issued for stock and employee benefit plans, net of shares withheld for taxes  2,977  1,749 
Excess tax benefit on stock option exercises    1,737 
Purchases of common stock  (56,730) (35,957)
Dividends paid  (22,009) (20,655)
Net cash used for financing activities  (76,255) (53,414)
Effect of exchange rate changes on cash and equivalents  1,741  178 
Change in cash, cash equivalents and restricted cash  (13,988) 29,524 
Cash, cash equivalents and restricted cash
  at beginning of period
  150,859  121,335 
Cash, cash equivalents and restricted cash
  at end of period
 $136,871 $150,859 
      
Supplemental disclosure of non-cash investing activities     
  Capital expenditures included in accounts payable $5,667 $1,795 


LA-Z-BOY INCORPORATED
SEGMENT INFORMATION
 
  
  Unaudited For the Fiscal
Quarter Ended
 Unaudited For the Fiscal
Year Ended
 
 (Unaudited, amounts in thousands) 4/28/2018 4/29/2017 4/28/2018 4/29/2017 
Sales         
Upholstery segment:         
Sales to external customers $270,668 $271,560 $1,010,097 $986,917 
Intersegment sales  56,569  53,755  217,266  204,526 
Upholstery segment sales  327,237  325,315  1,227,363  1,191,443 
          
Casegoods segment:         
Sales to external customers  27,098  22,530  95,919  87,181 
Intersegment sales  3,505  3,513  15,474  13,047 
Casegoods segment sales  30,603  26,043  111,393  100,228 
          
Retail segment sales  121,545  118,032  474,613  443,238 
          
Corporate and Other:         
Sales to external customers  714  584  3,318  2,724 
Intersegment sales  2,582  1,686  9,421  6,437 
Corporate and Other sales  3,296  2,270  12,739  9,161 
          
Eliminations  (62,656) (58,954) (242,161) (224,010)
Consolidated sales $420,025 $412,706 $1,583,947 $1,520,060 
          
Operating Income (Loss)         
Upholstery segment $41,927 $44,608 $130,349 $148,996 
Casegoods segment  2,808  2,036  11,641  8,623 
Retail segment  7,963  7,690  20,709  19,205 
Corporate and Other  (6,991) (10,880) (33,330) (43,482)
Consolidated operating income $45,707 $43,454 $129,369 $133,342 
          


LA-Z-BOY INCORPORATED
UNAUDITED QUARTERLY FINANCIAL DATA
 
  
(Amounts in thousands, except per share data) (13 weeks) (13 weeks) (13 weeks) (13 weeks) 
Fiscal Quarter Ended 7/29/2017 10/28/2017 1/27/2018 4/28/2018 
Sales $357,079 $393,205 $413,638 $420,025 
Cost of sales  217,976  238,253  251,140  253,831 
Gross profit  139,103  154,952  162,498  166,194 
Selling, general and administrative expense  122,805  120,683  129,403  120,487 
Operating income  16,298  34,269  33,095  45,707 
Interest expense  157  160  113  108 
Interest income  343  376  444  546 
Other income (expense), net  1,749  (926) (1,094) (1,379)
Income before income taxes  18,233  33,559  32,332  44,766 
Income tax expense  6,489  10,353  20,047  10,406 
Net income  11,744  23,206  12,285  34,360 
Net income attributable to noncontrolling interests  (93) (310) (176) (150)
Net income attributable to La-Z-Boy Incorporated $11,651 $22,896 $12,109 $34,210 
          
Diluted weighted average common shares  48,846  48,297  47,757  47,472 
          
Diluted net income attributable to
  La-Z-Boy Incorporated per share
 $0.24 $0.47 $0.25 $0.72 
          
Dividends declared per share $0.11 $0.11 $0.12 $0.12 


LA-Z-BOY INCORPORATED
UNAUDITED QUARTERLY FINANCIAL DATA
 
  
(Amounts in thousands, except per share data) (13 weeks) (13 weeks) (13 weeks) (13 weeks) 
Fiscal Quarter Ended 7/30/2016 10/29/2016 1/28/2017 4/29/2017 
Sales $340,783 $376,579 $389,992 $412,706 
Cost of sales  206,562  227,195  233,185  243,815 
Gross profit  134,221  149,384  156,807  168,891 
Selling, general and administrative expense  111,763  115,526  123,235  125,437 
Operating income  22,458  33,858  33,572  43,454 
Interest expense  115  117  562  279 
Interest income  204  234  241  302 
Other income (expense), net  (762) (969) 221  (1,000)
Income before income taxes  21,785  33,006  33,472  42,477 
Income tax expense  7,777  11,901  9,830  14,248 
Net income  14,008  21,105  23,642  28,229 
Net income attributable to noncontrolling interests  (202) (272) (356) (232)
Net income attributable to La-Z-Boy Incorporated $13,806 $20,833 $23,286 $27,997 
          
Diluted weighted average common shares  49,594  49,511  49,384  49,181 
          
Diluted net income attributable to
  La-Z-Boy Incorporated per share
 $0.28 $0.42 $0.47 $0.57 
          
Dividends declared per share $0.10 $0.10 $0.11 $0.11 

 

Contact:Kathy Liebmann(734) 241-2438kathy.liebmann@la-z-boy.com

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Source: La-Z-Boy Incorporated