MONROE, Mich., June 23, 2020 (GLOBE NEWSWIRE) — La-Z-Boy Incorporated (NYSE: LZB), a global leader in residential furniture, today reported its operating results for the fiscal 2020 fourth quarter and full year ended April 25, 2020.
Fiscal 2020 full year versus Fiscal 2019 full year:• Consolidated sales decreased 2.4% to $1.70 billion, reflecting ten months of strength and two months of dramatic temporary impact from the COVID-19 pandemic
• Consolidated operating margin:GAAP: 7.0% versus 7.4%Non-GAAP*: 8.2% versus 7.8%
• Upholstery: 10.8% versus 10.1%
• Retail: 8.2% versus 6.9%• Net income attributable to La-Z-Boy Incorporated per diluted share (“EPS”):GAAP: $1.66 versus $1.44Non-GAAP*: $2.16 versus $2.14• Cash generated from operating activities increased 9.0% to $164.2 million
• The company returned $68.4 million to shareholders through share purchases and dividends
• Cash, cash equivalents, and restricted cash were $263.5 million at year end, including $75.0 million in cash proactively drawn on the company’s credit facility, and the company held $28.6 million in investments to enhance returns on cash, up from $131.8 million in cash, cash equivalents and restricted cash, and $31.5 million in investments to enhance returns on cash at the end of fiscal 2019Fiscal 2020 fourth quarter versus Fiscal 2019 fourth quarter:• Consolidated sales decreased 19.1% to $367.3 million, reflecting two months of dramatic temporary impact from the COVID-19 pandemic
• Consolidated operating margin:GAAP: 3.7% versus 8.2%Non-GAAP*: 9.3% versus 8.6%
• Upholstery: 11.8% versus 11.6%
• Retail: 10.8% versus 8.5%• Net income attributable to La-Z-Boy Incorporated per diluted share (“EPS”):GAAP:  $0.05 versus $0.03Non-GAAP*: $0.49 versus $0.64• Cash generated from operating activities was $44.5 million
• The company returned $14.5 million to shareholders through share purchases and dividendsKurt L. Darrow, Chairman, President and Chief Executive Officer of La-Z-Boy, said, “La-Z-Boy delivered strong performance for 10 months of fiscal 2020 through February.  The iconic La-Z-Boy brand, excellent Retail performance, great product introductions and supply chain strength translated to solid sales and earnings growth for those 10 months.  Our fourth quarter started with a 20.4% increase in written same-store sales for the entire La-Z-Boy Furniture Galleries^® network in February, and we experienced other examples of strength across our vast network of distribution.  However, the trajectory of sales and earnings growth for the last two months of the year were significantly impacted by COVID-19 and mandated retail closures across North America.  With the health, safety and well-being of our employees, customers and the communities in which we operate of paramount importance, we responded to the pandemic swiftly, with a decisive Action Plan announced March 29, 2020. The majority of retailers, including our company-owned La-Z-Boy Furniture Galleries^® stores, closed for at least the last four weeks of our quarter, and most closures extended into the first quarter of fiscal 2021. We temporarily closed the majority of our manufacturing operations, and managed all other expenses, including temporarily furloughing 70% of our workforce and dramatically reducing all other cash expenditures to preserve liquidity.”Darrow added, “As we have moved through this uncertain period and look to the future, we have remained  agile and continued to make tough choices to align and strengthen our business with the new operating environment.  We are pleased to have called back some 6,000 furloughed workers, who have eagerly returned or will return to work by July 1st.  However, we also made the decision to permanently close our Newton, Mississippi manufacturing facility and reduce our global workforce by approximately 10%.  We deeply regret the impact of our actions on affected employees, but these moves are in the best long-term interest of the company.”Darrow concluded, “Moving forward, furniture retailers and La-Z-Boy Furniture Galleries^® stores have reopened and we are seeing strong early demand. Our manufacturing facilities have ramped from zero production at the end of April and are moving toward 80% of prior-year production as we head into July. While time will tell how these trends continue to evolve, with the inherent strengths of the La-Z-Boy brand and our broad base of retail customers, I have every confidence we will emerge with strength and have the potential for market share gains as the demand environment improves. I am proud of our company’s performance for the year, including our quick response to the pandemic and the aggressive ramp up we have achieved since re-starting operations.  With a philosophy of fiscal conservatism, we entered the pandemic period with a solid cash position, managed through the early stages of the crisis well, and still generated $164.2 million in cash from operations and returned $68.4 million to shareholders through dividends and share purchases.”Consolidated sales in the fourth quarter of fiscal 2020 decreased 19.1% to $367.3 million, due to the impact of COVID-19 on the last two months of the quarter. Consolidated GAAP operating margin decreased to 3.7% versus 8.2% in the prior-year quarter.  Non-GAAP operating margin was 9.3% in the current-year quarter versus 8.6% in last year’s fourth quarter, reflecting increases in the Upholstery and Retail segments offset by a decline in the Casegoods segment. GAAP and Non-GAAP results for the fourth quarter include a 440 basis point benefit related to a rebate of previously paid China tariffs, partially offset by higher bad debt expense. The fiscal 2019 fourth-quarter GAAP and Non-GAAP results include a 40 basis point charge related to changes in employee benefit policies.For the entire La-Z-Boy Furniture Galleries^® network, after nine months of written same-store sales up 6.4%, written same-store sales for the La-Z-Boy Furniture Galleries^® network decreased 35.0% in the fourth quarter as a result of the COVID-19 pandemic and related store closures.For the quarter, sales in the company’s Upholstery segment decreased 21.7% to $253.3 million and GAAP operating margin increased to 11.8% from 11.5% in last year’s fourth quarter.  Non-GAAP operating margin increased to 11.8% versus 11.6%.  Operating margin increased primarily as a result of a one-time rebate of previously paid tariffs, mostly offset by higher bad debt expense, including a write-off for the Art Van bankruptcy and a provision for potential credit losses in the COVID-19 environment. Also, during the quarter, SG&A spending was lower due to the company’s COVID-19 Action Plan, but higher as a percent of sales due to the decline in sales related to the pandemic. In the Casegoods segment, sales decreased 19.7% to $21.4 million and operating margin was 1.9% compared with 9.1% in the prior-year period, primarily reflecting the impact of COVID-19.Sales in the Retail segment decreased 8.0% to $139.7 million in the fourth quarter of fiscal 2020.  GAAP operating margin for the Retail segment improved to 10.7% from 8.4% in last year’s fourth quarter.  Non-GAAP operating margin increased to 10.8% in the current-year quarter from 8.5% in last year’s fourth quarter. Operating margin improvement was driven primarily by prior-period written sales delivered in the current quarter, and lower operating expenses related to the company’s COVID-19 Action Plan, including compensation and advertising, due to closed stores. After a strong February start, on the core base of 152 company-owned stores in last year’s fourth quarter, delivered same-store sales declined 10.0% with the majority of stores closed for the last four weeks of the quarter, and many remaining closed into the first quarter of fiscal 2021.Fiscal 2020 fourth-quarter sales for Joybird (reported in the Corporate & Other segment) decreased 29.6% to $15.4 million. Joybird posted a larger GAAP loss versus the prior-year quarter, primarily due to a $26.9 million non-cash pre-tax goodwill impairment charge, partially offset by the reversal of the Joybird contingent consideration liability valued at $7.9 million.  La-Z-Boy continues to make improvements across the Joybird business model with the objective to balance investments in growth with bottom-line performance.  However, the negative impact of COVID-19 tempered financial projections and the company concluded the fair value of future earn-out payments is zero and the carrying value of goodwill was partially impaired.  As Joybird continues to hone its business model, it is expected to deliver value to the La-Z-Boy enterprise over the long term.GAAP diluted EPS was $0.05 for the fiscal 2020 fourth quarter versus $0.03 in the prior-year quarter. Non-GAAP* diluted EPS was $0.49 versus $0.64 in last year’s fourth quarter.Balance Sheet and Cash FlowFor the fourth quarter, the company generated $44.5 million in cash from operating activities.  La-Z-Boy ended the quarter with $263.5 million in cash, cash equivalents, and restricted cash, including $75 million in cash proactively drawn on the company’s credit facility to enhance liquidity in response to COVID-19, and $28.6 million in investments to enhance returns on cash compared with $131.8 million in cash, cash equivalents and restricted cash, and $31.5 million in investments to enhance returns on cash at the end of fiscal 2019. During the period, the company invested $10.6 million in the business through capital expenditures. The company paid $6.5 million in dividends and spent $8.0 million purchasing 0.3 million shares of stock in the open market under its existing authorized share purchase program during the fourth quarter.  For the full fiscal 2020 year, the company paid $25.1 million in dividends and spent $43.4 million purchasing 1.4 million shares, leaving 4.5 million shares of purchase availability in the program.*Non-GAAP amounts for the fiscal 2020 year exclude:a non-cash pre-tax, non-tax-deductible goodwill impairment charge of $26.9 million, or $0.58 per diluted sharea non-cash pre-tax charge of $6.0 million, or $0.09 per diluted share, related to an impairment for one investmenta pre-tax purchase accounting net benefit related to acquisitions completed in prior periods totaling $1.4 million, or $0.07 per diluted share, with a $2.1 million benefit included in operating income and $0.7 million expense included in interest expensepre-tax net benefit of $4.4 million, or $0.07 per diluted share, related to the company’s supply chain optimization initiative, including the closure and sale of the company’s Redlands, California upholstery manufacturing facility and relocation of its Newton, Mississippi leather cut-and-sew operationspre-tax benefit of $1.9 million, or $0.03 per diluted share, related to the 2019 termination of the company’s defined benefit pension plan*Non-GAAP amounts for the full fiscal 2019 year exclude:a non-cash pre-tax charge of $32.7 million, or $0.58 per diluted share, related to the termination of the company’s defined benefit pension planpre-tax purchase accounting charges totaling $7.5 million, or $0.12 per diluted share, with $6.9 million included in operating income and $0.6 million included in interest expense*Non-GAAP amounts for the fourth quarter of fiscal 2020 exclude:a non-cash pre-tax, non-tax-deductible goodwill impairment charge of $26.9 million, or $0.58 per diluted sharea pre-tax purchase accounting net benefit related to acquisitions completed in prior periods totaling $5.9 million, or $0.14 per diluted share, with a $6.1 million benefit included in operating income and $0.2 million expense included in interest expensepre-tax benefit of $0.1 million, or $0.00 per diluted share, related to the company’s supply chain optimization initiative*Non-GAAP amounts for the fourth quarter of fiscal 2019 exclude:a non-cash pre-tax charge of $32.7 million, or $0.58 per diluted share, related to the termination of the company’s defined benefit pension planpre-tax purchase accounting charges of $2.0 million, or $0.03 per diluted share, with $1.8 million included in operating income and $0.2 million included in interest expensePlease refer to the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” for detailed information on calculating Non-GAAP measures used in this press release and a reconciliation to the applicable GAAP measure.Conference CallLa-Z-Boy will hold a conference call with the investment community on Wednesday, June 24, 2020, at 8:30 a.m. eastern time. The toll-free dial-in number is 844.602.0380; international callers may use 862.298.0970.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 Replay Passcode: 35012. The webcast replay will be available for one year.Cautionary Note Regarding Forward-Looking StatementsThis news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, business, and industry and the effect of the novel coronavirus (“COVID-19”) pandemic on our business operations and financial results.The forward-looking statements in this press release are based on certain assumptions and currently available information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our fiscal 2020 Annual Report on Form 10-K and other factors identified in our reports filed with the Securities and Exchange Commission. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information future events or for any other reason.Additional InformationThis 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 InformationLa-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The 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 154 of the 354 La-Z-Boy Furniture Galleries^® stores.  Joybird is an e-commerce retailer and manufacturer of upholstered furniture.The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 354 stand-alone La-Z-Boy Furniture Galleries^® stores and 555 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/.Non-GAAP Financial MeasuresIn addition to the financial measures prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), this press release also includes Non-GAAP financial measures. Management uses these Non-GAAP financial measures when assessing our ongoing performance. This press release contains references to Non-GAAP operating income, Non-GAAP operating margin, Non-GAAP income before income taxes, Non-GAAP net income attributable to La-Z-Boy Incorporated and Non-GAAP net income attributable to La-Z-Boy Incorporated per diluted share, each of which exclude goodwill impairment charges, purchase accounting charges, charges for our supply chain optimization initiative, an impairment charge for one investment and impacts from terminating the company’s defined benefit pension plan. The purchase accounting charges may include the amortization of intangible assets, incremental expense upon the sale of inventory acquired at fair value, amortization of employee retention agreements, fair value adjustments of future cash payments recorded as interest expense, and adjustments to the fair value of contingent consideration. The charges for our supply chain optimization initiative may include severance costs, accelerated depreciation expense, costs to relocate equipment and inventory, as well as other costs related to the closure, relocation and sale of certain manufacturing operations. These Non-GAAP financial measures are not meant to be considered superior to or a substitute for La-Z-Boy Incorporated’s results of operations prepared in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of such Non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables.Management believes that presenting certain Non-GAAP financial measures will help investors understand the long-term profitability trends of our business and compare our profitability to prior and future periods and to our peers. Management excludes goodwill impairment charges and purchase accounting charges because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions consummated and the success with which we operate the businesses acquired. While the company has a history of acquisition activity, it does not acquire businesses on a predictable cycle, and the impact of goodwill impairment charges and purchase accounting charges is unique to each acquisition and can vary significantly from acquisition to acquisition. Similarly, the charges related to the company’s supply chain optimization initiative are dependent on the timing, size, number and nature of the operations being moved or closed, and the charges may not be incurred on a predictable cycle. Management also excludes impacts from the termination of the company’s defined benefit pension plan and an impairment charge for one investment when assessing the company’s operating and financial performance due to the one-time nature of the transactions. Management believes that exclusion of these items facilitates more consistent comparisons of the company’s operating results over time. Where applicable, the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” tables present the excluded items net of tax calculated using the effective tax rate from operations for the period in which the adjustment is presented, except for the non-cash pension termination charge, which had a specific tax impact due to the one-time nature of the transaction, the non-tax deductible goodwill impairment charge and the adjustment to the fair value of contingent consideration.LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOMELA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEETLA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWSLA-Z-BOY INCORPORATED
SEGMENT INFORMATIONLA-Z-BOY INCORPORATED
UNAUDITED QUARTERLY FINANCIAL DATAFiscal 2020Fiscal 2019LA-Z-BOY INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURESLA-Z-BOY INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
SEGMENT INFORMATION



Bay Street News