Highlights From La-Z-Boy Inc. (LZB) Q1 Conference Call; Our Business Model Is Now Much Stronger

August 19, 2009 1:00 PM EDT

Last night, La-Z-Boy Inc. (NYSE: LZB) reported Q1 adj-EPS of $0.05, 10 cents better than the analyst estimate of ($0.05). Revenue for the quarter was $262.7 million, versus the consensus of $255.14 million.

La-Z-Boy is trading up 8.5% to $8.02 in today's trading.
LZB Q1 conference call highlights:

• The furniture industry continues to go through a challenging period and La-Z-Boy is not immune to the difficulties that exist throughout our sector.
  
• However, our performance for the past two quarters demonstrates the depth and breadth of what we have done, we have strengthened our business model, and I'm sure that we could run our business profitably even in a low volume environment.
  
• For Q1, which is historically our lowest demand period due to seasonality issues, we posted net income attributable to La-Z-Boy to incorporative of $2 million or $0.4 per share on the sales decline of 18.3%. This compares with the loss of last years first quarter of 8.5 million or $0.17 per share. For the low line environment persist, our positive results for the quarter are reflective of the following.
  
• Over the past few years, we have made many strategic decisions which are enabling us to be more comparative with the linear operating platform.
  
• This includes plant rationalizations, continued cost reduction, the conversion facility of production, warehouse consolidations, the Mexican cut-and-sew facility and other project's including our commitment to marketing even in difficult times.
  
• We've also divested smaller companies and are focusing on the La-Z-Boy brand as well as our larger entities.
  
• Upholstery, for the quarter our operating margin increased to 8.3% from 4.2% in last year's first quarter, our sales in the segment declined 17% or $40 million. We are becoming a lean and efficient organization as evidence by the almost doubling of our operating margin.
  
• The full benefit of Mexico's cut-and-sew operations, which is expected to be $20M on an annual basis will flow through in fiscal 2011.
  
• On a Casegoods side of the business, although our sales declined 25%, we essentially broke even on an operating basis.
  
• Our operating margin was impacted this quarter by continued discounting to reduce the inventory of discontinued collections.
  
• For the third consecutive quarter, we significantly reduced our retail losses on much lower volume levels. This quarter our volume declined 15.2%, we decreased our losses by 4.3 million.
  
• When we analyze our business, we look at the branded, wholesale, retail margins as well as cash flow models and anticipate being cash neutral on the integrated retail model with an increase of volume of 10 to 15%
  
• We generated $13.8M in cash from operating activity. We reduced debt by $11.7M bringing our net debt position with $10.8M.
  
• We have $38.3M of cash and increased availability on our revolving line of credit to $70.5M.
  
• Our capital expenditures for 2010 will be in range of 12 to 14 million primarily related to main suburb facilities, transportation equipment, IT upgrades, and our cut-and-sew center in Mexico.

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