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La-Z-Boy Incorporated F4Q10 (Qtr End 04/24/10) Earnings Call Transcript

La-Z-Boy Incorporated F4Q10 (Qtr End 04/24/10) Earnings Call Transcript

La-Z-Boy Incorporated (LZB)

F4Q10 (Qtr End 04/24/10) Earnings Call

June 15, 2010 8:30 am ET


Kathy Liebmann – Director, IR

Kurt Darrow – President and CEO

Mike Riccio – SVP and CFO


Budd Bugatch – Raymond James & Associates

Matt McCall – BB&T Capital Markets

Todd Schwartzman – Sidoti & Company

Stanley Elliott – Stifel Nicolaus



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Good morning, ladies and gentlemen. Welcome to the La-Z-Boy’s fiscal 2010 fourth quarter and year-end conference call. (Operator instructions) It is now my pleasure to introduce Ms. Kathy Liebmann, Director of Investor Relations for La-Z-Boy Incorporated. Thank you, Ms. Liebmann, you may now begin.

Kathy Liebmann

Thank you, Rob. Good morning everyone. Thank you for joining us to discuss our fiscal 2010 fourth quarter and year-end’s results. Present on the call this morning are Kurt Darrow, La-Z-Boy’s President and Chief Executive Officer; and Mike Riccio, our Chief Financial Officer.

Kurt will begin today’s call, and then Mike will speak about the financials before turning the call back to Kurt for his concluding remarks. We will then open the call to questions.

As is our custom, the time allotted for this call is one hour. A telephone replay of the call will be available for one week beginning this afternoon. These regular quarterly investor conference calls are one of La-Z-Boy’s primary vehicles to communicate with investors about the company’s current operations and future prospects. We will make forward-looking statements during this call, so I will repeat our usual Safe Harbor remarks. While these statements reflect the best judgment of management at the present time, they are subject to numerous future risks and uncertainties as detailed in our regular SEC filings. And they may differ materially from actual results due to a wide range of factors. We undertake no obligation to update any forward-looking statements made during this call.

And with that, let me turn over the call to Kurt Darrow, La-Z-Boy’s President and Chief Executive Officer. Kurt?

Kurt Darrow

Thank you, Kathy, and good morning everyone. Yesterday afternoon we reported our fourth quarter results for fiscal 2010.

For the quarter we earned $0.26 on a sales increase of 9.2%. For the year we earned $0.62 on a 3.9% decline in sales.

From an operating environment perspective, fiscal 2010 was undoubtedly one of the most challenging years our company has faced at its 82 year history. However, it was also the year when the transformation of our company came to fruition. Our performance for the full year, where we generally outpaced our peer group demonstrates the success of our strategic initiatives, La-Z-Boy’s resiliency in a difficult market, and our ability to adapt to change. Today, we are a much stronger company, one that is equipped to operate in the dynamic marketplace and one with a focus on growing the top line profitably.

Before going through a review of our operating segments, I would like to take a moment to the recap a number of the strategic initiatives and changes our company has gone through over the past several years to give you a context or perspective for our operating structure today. In addition to our focus on lean manufacturing, thriving in this environment is also dependent upon the ability to be nimble and be willing to make difficult decisions.

As I mentioned earlier, the ability to adapt is critical in the furniture industry. The business has undergone a sea change over the past decade, and not only does it differ from what it once was in terms of the way we manufacture and sell furniture, but in 10 years it probably won't look like it does today. I have to credit my team for embracing the challenges, developing creative solutions, and adapting our business to what is and what will continue to be a new landscape.

We made significant changes to our operating structure, most notably the conversion of our La-Z-Boy branded facilities to the cellular production process. We changed the way in which we source component parts to ensure our domestic facilities remain competitive. We sold off non-core companies in order to focus on the La-Z-Boy brand, the growth engine of our company, and we transitioned our Casegoods business to be primarily an importer, marketer and distributor.

At the same time, we acted quickly 18 months ago, when the experienced a precipitous decline in our order flow based on macroeconomic factors, and we reduced our operating cost significantly. Additionally, we are expanding our company owned distribution center system to serve as independent dealer stores, which I will discuss in more detail in a few moments, and over the course of the past 16 months we opened our Mexican cut-and-sew operation, moving the cut-and-sewing operation for our custom order business to that facility.

And finally, we have made comprehensive changes to our retail structure to improve its performance. These combined moves completely changed the complexion of our company, but were essential to long-term success and profitability. At the same time, we strengthened our balance sheet by reducing our debt and increasing our cash position as well as the availability on our revolving line of credit, all to ensure we have the ability to maneuver our way through the changing economic scenarios. And finally we believe the strength of the La-Z-Boy brand built over the last eight decades contributed to our recovery this past year. La-Z-Boy is the best-known brand in the furniture business, and consumers tend to return to brands they know and trust in difficult economic times.

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