MONROE, Mich., Feb. 17 /PRNewswire-FirstCall/ -- La-Z-Boy Incorporated
(NYSE: LZB) today reported its operating results for the fiscal third
quarter ended January 24, 2009.

    -- Net sales for the period were $288.6 million, down 23% compared with
the prior year's third quarter, reflecting ongoing demand challenges in a
difficult macroeconomic environment.

    -- The company generated $28.0 million in cash from operations,
including $8.1 million in anti-dumping duties received on bedroom furniture
imported from China.

    -- La-Z-Boy paid down its debt by $27.8 million to $90.4 million. Over
the past 12 months, the company decreased its total debt by $60.2 million,
or by 40%.

    -- Including the charges highlighted below, the company posted a net
loss of $64.4 million, or a loss of $1.25 per share. This includes various
non- cash accounting charges which impacted the company's results for the
quarter. They included an intangible write-down of $46.0 million and a $7.0
million impairment of property, plant and equipment, reflecting the
continued weakness in the financial markets and the impact of the current
economy on our business, which caused the company's market capitalization
to fall below its book value and triggered the requirement to test the
valuation of the company's long-lived assets.

    Selected non-cash items increasing/(decreasing) operating income (loss):

                                        Three months ended  Nine months ended
                                         Jan. 24, Jan. 26,  Jan. 24,  Jan. 26,
                                           2009     2008      2009      2008

    Adjusted operating income (loss)      $(5,397) $5,911  $(22,405)  $(3,431)
      Restructuring - non-cash portion       (441)    (71)   (1,908)     (335)
      Provision for bad debts              (9,439) (2,754)  (18,439)   (6,373)
      Impairment of Intangible assets     (45,977)    -     (47,677)   (5,809)
      Impairment of P, P & E               (7,036)    -      (7,036)      -

    Operating income (loss) - as
     reported                            $(68,290) $3,086  $(97,465) $(15,948)

    -- Due to market conditions, in the fiscal 2009 third quarter, the company
       had $5.1 million in write-downs of investments.  In the prior year's
       quarter, it had $3.5 million of gains on the sale of investments.

    -- In the prior year's third quarter, La-Z-Boy reported net income of $9.5
       million, or $0.18 per share, which included income per share of $0.09
       after tax related to anti-dumping duties received on bedroom furniture
       imported from China.

    Kurt L. Darrow, La-Z-Boy's President and Chief Executive Officer, said:
"In what remains an extraordinarily challenging demand environment for
furniture, on a 23%, or $85 million, sales decline, we limited our adjusted
operating loss to $5.4 million, reflecting the many structural changes we
have made to our business. Importantly, in the third quarter, we generated
cash from operations, reduced our debt, improved our liquidity, reduced our
retail losses and maintained our focus on strategic projects.

    "We are managing our business aggressively. In November, we reacted
quickly and decisively to the rapid deterioration in sales trends
experienced during October, and, we have continued to make changes to the
business model on a monthly basis to align our operating platform with
order trends. Since November, we removed approximately $60 million in
structural costs on an annual basis from our operations in the form of
personnel reductions, the closure of a Bauhaus upholstery manufacturing
facility, changes to our employee benefit plans and other cost reductions
across the entire company. Compared with year-ago levels, our employment
has decreased by 24%, or approximately 2,500 people."

    Darrow continued, "With the objective of strengthening and improving
our operating structure, over the past four years, we have invested in
modernizing our manufacturing facilities, upgrading our proprietary store
program, and improving our Information Technology platform. Currently, we
are in the process of completing our structural improvement projects,
including our Mexican cut-and-sew center and our regional distribution
centers to serve both company-owned and dealer stores. Most importantly, as
a result of the strategic investments we have made, we are operating with a
new and competitive infrastructure, which allows us to function more
efficiently. We will continue to make whatever operating improvements are
necessary to ensure that we thrive within the difficult macroeconomic
environment. Going forward, we will require minimal near-term capital
expenditures, which will improve our cash flow.

    Wholesale Segments

    For the fiscal 2009 third quarter, sales in the company's upholstery
segment decreased 30% to $199.2 million compared with $282.5 million in the
prior year's third quarter. The segment's operating margin was (1.0%). In
the casegoods segment, sales for the fiscal third quarter were $42.1
million, down 20% from $52.7 million in the prior year's third quarter. The
segment's operating margin decreased to (0.7%) from 4.2% in last year's
comparable period.

    During the quarter, La-Z-Boy shifted the reporting of its retail
warehouse operations to the upholstery segment to garner greater
efficiencies as the warehouse operations have been expanded to service some
independent dealers through the company-operated warehouse system. This
reporting change affected the timing of inter-company revenue and profit
recognition for the Upholstery Group. This resulted in a reduction in
inter-company sales and operating income for the Upholstery Group of $12.1
million and $3.3 million, respectively, with corresponding offsets recorded
in consolidation. The adjustments did not affect the company's consolidated
operating results.

    Darrow commented, "With a significant decline in volume for the
quarter, without the one-time adjustment to sales and operating income that
impacted the segment, the upholstery operation would have been profitable,
reflecting the improvements we have made to our operating structure,
particularly those derived from cellular manufacturing. Additionally, most
of the bad debt charge for the quarter resided in the upholstery group,
further affecting its results. Going forward, we expect to see further
progress in the segment's performance with an increasing number of
custom-order cut-and-sewn kits coming from Mexico. We are pleased to report
we opened the Mexican cut-and-sew facility last month on time and on
budget."

    Darrow continued, "Our casegoods segment's business model is predicated
upon the ability to deliver products in two weeks or less. As retail demand
slowed during the quarter, we experienced cancellations or postponements of
orders from large dealers and reluctance to purchase stock inventory. As a
result of the 20% decline in sales experienced during the quarter, the
casegoods segment operated essentially at a break-even level. Moving
forward, our team is continuing to work on a smaller but more productive
product line and align the cost structure of the business to the current
economic challenges."

    For the fiscal 2009 third quarter, the La-Z-Boy Furniture Galleries(R)
store system, which includes both company-owned and independent-licensed
stores, opened two new stores, relocated and/or remodeled three and closed
four, bringing the total store count to 328, of which 223 are in the New
Generation format. For the fourth quarter of fiscal 2009, the network plans
to open three New Generation format La-Z-Boy Furniture Galleries(R) stores
(one remodeled store and two relocations) and anticipates closing 10.

    Darrow added, "Last November, we announced that 15 to 20 La-Z-Boy
Furniture Galleries(R) stores, principally independently owned, would
close. To date, 15 stores, located primarily in the southeast Michigan,
California and Florida markets, have already closed or are in the process
of a store closing sale. Additionally, in several instances, certain
independent dealers in nearby markets have taken on some of these
locations. While the closure of stores will impact our volumes, it is
prudent to make these moves to allocate resources to more productive stores
in the system in what continues to be a tight credit environment."

    During the quarter, the company incurred a charge of $9.4 million for
bad debts, reflecting the continued weak retail environment, particularly
in Florida, Michigan and the West Coast markets.

    System-wide, for the fiscal 2009 third quarter, including company-owned
and independent-licensed stores, same-store written sales, which the
company tracks as an indicator of retail activity, were down 12.4%. Total
written sales, which include new and closed stores, were down 14.5%.

    Retail

    For the quarter, retail sales were $40.5 million, down 19% compared
with the prior-year period. The retail group posted an operating loss for
the quarter, and its operating margin was (17.6%). Darrow stated, "The
macroeconomic challenges pervasive throughout our industry are magnified in
our retail operation. Our new Chief Retail Officer, Mark Bacon, and his
team are making significant changes to the business platform to improve our
performance and we have already seen some positive results due to more
effective advertising programs, the change in our warehouse structure and
improved gross margins. For the quarter, on significantly lower volume, we
decreased our operating loss by $1.4 million compared with last year's
third quarter. We will continue to evaluate best demonstrated practices to
operate the stores more efficiently and improve our performance despite
this difficult sales environment."

    Intangibles and Long-Lived Asset Impairment

    Due to the continued weakness in the financial and credit markets and
the impact of economic conditions on our business, La-Z-Boy's market
capitalization fell below its book value and triggered the requirement to
test the valuation of its intangible assets before year end when it
normally performs its annual testing. The result was a significant
impairment of the company's goodwill and trade name valuations, principally
from acquisitions made years ago when economic conditions were very
different. Consequently, the company was required to take a non-cash
write-down of $46 million on its intangible assets. In addition, we
recorded a $7 million write-down of long- lived assets relating to
buildings and leasehold improvements of some of our retail stores.

    Balance Sheet

    At the end of the fiscal 2009 third quarter, the company's debt-to-
capitalization ratio was 22.0% compared with 24.8% a year ago and 23.5% at
the end of the second quarter. Although the company paid down its debt by
$27.8 million in the third quarter, the debt-to-capitalization ratio was
impacted by the change in shareholders' equity, driven primarily by the
write-down of intangible assets. During the quarter, the company's accounts
receivables decreased $43.4 million, net of write-downs, to $153.4 million,
and its accounts payable decreased by $8.5 million to $49.8 million.
Inventories increased to $172.3 million from $167.1 million, reflecting the
long lead times associated with foreign sourcing and the orders placed
before October when consumer demand was significantly curtailed. The
company plans to decrease its inventory by 10% during the fourth quarter.

    Dividend

    Given the continued challenges of the business environment coupled with
limited visibility as to when the economy will improve, the company
believes it prudent to conserve cash and increase its financial
flexibility. Accordingly, it made the decision to suspend the quarterly
dividend to shareholders.

    Conference Call

    La-Z-Boy will hold a conference call with the investment community on
Wednesday, 18 February 2009, at 8:30 a.m. eastern time. The toll-free
dial-in number is 877.407.0778; international callers may use 201.689.8565.

    Forward-looking Information

    Any forward-looking statements contained in this news release are based
on current information and assumptions and represent management's best
judgment at the present time. Actual results could differ materially from
those anticipated or projected due to a number of factors. These factors
include, but are not limited to: (a) changes in consumer confidence; (b)
changes in demographics; (c) further changes in residential housing and
commercial real estate market; (d) the impact of terrorism or war; (e)
continued energy and other commodity price changes; (f) the impact of
logistics on imports; (g) the impact of interest rate changes; (h) changes
in currency exchange rates; (i) competitive factors; (j) operating factors,
such as supply, labor or distribution disruptions including changes in
operating conditions or costs; (k) effects of restructuring actions; (l)
changes in the domestic or international regulatory environment; (m)
ability to implement global sourcing organization strategies; (n) continued
economic recession and decline in the equity market; (o) the impact of
adopting new accounting principles; (p) the impact from natural events such
as hurricanes, earthquakes and tornadoes; (q) the ability to procure fabric
rolls and leather hides or cut and sewn fabric and leather sets
domestically or abroad; (r) continued decline in the credit market and
potential impacts on our customers and suppliers; (s) unanticipated
labor/industrial actions (t) those matters discussed in Item 1A of our
fiscal 2008 Annual Report and factors relating to acquisitions 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, either to reflect 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
http://www.la-z-boy.com/about/InvestorRelations/sec_filings.aspx. 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:
http://www.la-z-boy.com/about/investorRelations/IR_email_alerts.aspx.

    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 Group companies are Bauhaus, England and La-Z-Boy. The
La-Z-Boy Casegoods Group companies are American Drew/Lea, Hammary and
Kincaid.

    The corporation's proprietary distribution network is dedicated
exclusively to selling La-Z-Boy Incorporated products and brands, and
includes 328 stand-alone La-Z-Boy Furniture Galleries(R) stores and 449
Comfort Studios, in addition to in-store gallery programs at the company's
Kincaid, England and Lea operating units. According to industry trade
publication In Furniture, the La-Z-Boy Furniture Galleries retail network
is North America's largest single-brand furniture retailer. Additional
information is available at http://www.la-z-boy.com/

                              LA-Z-BOY INCORPORATED
                        CONSOLIDATED STATEMENT OF OPERATIONS

                                                      Third Quarter Ended
    (Unaudited, amounts in thousands,                 01/24/09    01/26/08
    except per share data)

    Sales                                             $288,576    $373,081
    Cost of sales
      Cost of goods sold                               207,356     265,078
      Restructuring                                      1,664        (632)
    Total cost of sales                                209,020     264,446
      Gross profit                                      79,556     108,635
    Selling, general and administrative                 94,092     104,672
    Write-down of long-lived assets                      7,036           -
    Write-down of intangibles                           45,977           -
    Restructuring                                          741         877
      Operating income (loss)                          (68,290)      3,086
    Interest expense                                     1,386       2,148
    Interest income                                        323       1,134
    Income from Continued Dumping and
     Subsidy Offset Act, net                             8,124       7,147
    Other income (expense), net                         (7,433)      3,785
      Income (loss) from continuing operations
       before income taxes                             (68,662)     13,004
    Income tax (benefit) expense                        (4,280)      3,876
      Income (loss) from continuing operations         (64,382)      9,128
    Income from discontinued operations (net of tax)         -         384
      Net income (loss)                               $(64,382)     $9,512

    Basic average shares                                51,475      51,417
    Basic income (loss) from continuing
     operations per share                               $(1.25)      $0.18
    Discontinued operations per share (net of tax)           -        0.01
    Basic net income (loss) per share                   $(1.25)      $0.19

    Diluted average shares                              51,475      51,590
    Diluted income (loss) from continuing
     operations per share                               $(1.25)      $0.18
    Discontinued operations per share (net of tax)           -           -
    Diluted net income (loss) per share                 $(1.25)      $0.18
    Dividends paid per share                             $0.02       $0.12

                               LA-Z-BOY INCORPORATED
                         CONSOLIDATED STATEMENT OF OPERATIONS

                                                       Nine Months Ended
    (Unaudited, amounts in thousands,                 01/24/09    01/26/08
    except per share data)

    Sales                                             $942,176  $1,082,911
    Cost of sales
      Cost of goods sold                               685,151     790,879
      Restructuring                                      9,696       2,447
    Total cost of sales                                694,847     793,326
      Gross profit                                     247,329     289,585
    Selling, general and administrative                287,873     297,278
    Write-down of long-lived assets                      7,036           -
    Write-down of intangibles                           47,677       5,809
    Restructuring                                        2,208       2,446
      Operating loss                                   (97,465)    (15,948)
    Interest expense                                     4,532       6,365
    Interest income                                      1,885       3,039
    Income from Continued Dumping and
     Subsidy Offset Act, net                             8,124       7,147
    Other income (expense), net                         (7,974)      4,701
      Loss from continuing operations before income
     taxes                                             (99,962)     (7,426)
    Income tax expense (benefit)                        26,708      (4,359)
      Loss from continuing operations                 (126,670)     (3,067)
    Loss from discontinued operations (net of tax)           -      (6,050)
      Net loss                                       $(126,670)    $(9,117)

    Basic average shares                                51,454      51,402
    Basic loss from continuing operations per share     $(2.46)     $(0.06)
    Discontinued operations per share (net of tax)           -       (0.12)
    Basic net loss per share                            $(2.46)     $(0.18)

    Diluted average shares                              51,454      51,402
    Diluted loss from continuing operations per share   $(2.46)     $(0.06)
    Discontinued operations per share (net of tax)           -       (0.12)
    Diluted net loss per share                          $(2.46)     $(0.18)
    Dividends paid per share                             $0.10       $0.36

                                LA-Z-BOY INCORPORATED
                              CONSOLIDATED BALANCE SHEET

    (Unaudited, amounts in thousands)                01/24/09     04/26/08

    Current assets
      Cash and equivalents                            $18,686      $14,982
      Receivables, net of allowance of $31,045
       in 2009 and $17,942 in 2008                    153,401      200,422
      Inventories, net                                172,259      178,361
      Deferred income taxes-current                     3,397       12,398
      Other current assets                             25,458       21,325
        Total current assets                          373,201      427,488
    Property, plant and equipment, net                156,341      171,001
    Deferred income taxes-long term                     1,292       26,922
    Goodwill                                            5,097       47,233
    Trade names                                         3,100        9,006
    Other long-term assets, net of allowance
     of $4,723 in 2009 and $2,801 in 2008              66,912       87,220
        Total assets                                 $605,943     $768,870

    Current liabilities
      Current portion of long-term debt                $9,547       $4,792
      Accounts payable                                 49,821       56,421
      Accrued expenses and other current
       liabilities                                     89,263      102,700
        Total current liabilities                     148,631      163,913
    Long-term debt                                     80,828       99,578
    Deferred income taxes-long term                     3,995            -
    Other long-term liabilities                        52,121       54,783
    Shareholders' equity
      Common shares, $1 par value                      51,478       51,428
      Capital in excess of par value                  204,735      209,388
      Retained earnings                                65,693      190,215
      Accumulated other comprehensive loss             (1,538)        (435)
        Total shareholders' equity                    320,368      450,596
        Total liabilities and shareholders' equity   $605,943     $768,870

                              LA-Z-BOY INCORPORATED
                        CONSOLIDATED STATEMENT OF CASH FLOWS

                                    Third Quarter Ended    Nine Months Ended
    (Unaudited, amounts in          01/24/09  01/26/08    01/24/09  01/26/08
     thousands)

    Cash flows from operating
     activities
      Net income (loss)             $(64,382)   $9,512   $(126,670)  $(9,117)
      Adjustments to reconcile net
       income (loss) to cash
       provided by operating
       activities
      Gain on sale of assets             (37)        -      (2,707)        -
      (Gain) loss on the sale of
       discontinued operations
       (net of tax)                        -       (96)          -     3,894
      Write-down of businesses held
       for sale (net of tax)               -         -           -     2,159
      Write-down of long-lived assets  7,036         -       7,036         -
      Write-down of intangibles       45,977         -      47,677     5,809
      Write-down of investments        5,140         -       5,140         -
      Restructuring                    2,405       245      11,904     4,893
      Provision for doubtful accounts  9,439     2,754      18,439     6,373
      Depreciation and amortization    5,827     6,193      17,770    18,506
      Stock-based compensation
       expense                         1,012     1,303       2,867     3,165
      Change in receivables           31,405        53      23,314     9,241
      Change in inventories           (3,463)    8,645       7,380    17,897
      Change in payables              (8,351)    9,161      (6,424)   (5,107)
      Change in other assets and
       liabilities                       640       147     (25,885)  (18,650)
      Change in deferred taxes        (4,658)    3,676      38,180    (2,470)
        Total adjustments             92,372    32,081     144,691    45,710

    Net cash provided by operating
     activities                       27,990    41,593      18,021    36,593

    Cash flows from investing
     activities
      Proceeds from disposals of
       assets                             45       456       7,831     7,738
      Proceeds from sale of
       discontinued operations             -       150           -     4,169
      Capital expenditures            (4,089)   (5,239)    (14,079)  (20,838)
      Purchases of investments        (1,630)  (15,807)    (10,595)  (29,077)
      Proceeds from sales of
       investments                    10,854    15,649      21,881    30,242
      Change in other long-term assets  (575)    1,701        (346)    2,086
        Net cash provided by (used for)
         investing activities          4,605    (3,090)      4,692    (5,680)

    Cash flows from financing
     activities
      Proceeds from debt              15,992       574      55,458     1,391
      Payments on debt               (43,752)     (974)    (69,039)   (2,212)
      Stock issued/canceled for stock
       and employee benefit plans          -       (13)          -      (129)
      Dividends paid                  (1,037)   (6,229)     (5,188)  (18,670)

        Net cash used for financing
         activities                  (28,797)   (6,642)    (18,769)  (19,620)

    Effect of exchange rate changes
     on cash and equivalents            (228)   (1,378)       (871)      161
    Change in cash and equivalents     3,570    30,483       3,073    11,454
    Cash and equivalents at
     beginning of period              15,116    32,692      15,613    51,721
    Cash and equivalents at end of
     period                          $18,686   $63,175     $18,686   $63,175

    Cash paid (net of refunds)
     during period - income taxes      $(660)  $(4,336)      $(456)    $(443)
    Cash paid during period -
     interest                         $1,337    $2,652      $3,750    $6,057

                                LA-Z-BOY INCORPORATED
                                 SEGMENT INFORMATION

                             Third Quarter Ended      Nine Months Ended
                            01/24/09     01/26/08   01/24/09     01/26/08
    (Unaudited, amounts    (13 weeks)   (13 weeks) (39 weeks)   (39 weeks)
    in thousands)

    Sales
      Upholstery Group      $199,200     $282,453   $684,252     $806,959
      Casegoods Group         42,116       52,660    138,710      165,126
      Retail Group            40,497       49,884    122,408      141,278
      VIEs/Eliminations        6,763      (11,916)    (3,194)     (30,452)
        Consolidated        $288,576     $373,081   $942,176   $1,082,911

    Operating income (loss)
      Upholstery Group       $(1,938)     $19,467    $16,037      $47,370
      Casegoods Group           (313)       2,222      1,819        8,399
      Retail Group            (7,108)      (8,507)   (27,509)     (27,700)
      Corporate and Other*    (3,513)      (9,851)   (21,195)     (33,315)
      Long-lived asset
       write-down             (7,036)           -     (7,036)           -
      Intangible write-down  (45,977)           -    (47,677)      (5,809)
      Restructuring           (2,405)        (245)   (11,904)      (4,893)
        Consolidated        $(68,290)      $3,086   $(97,465)    $(15,948)

    *Variable Interest Entities ("VIEs") are included in corporate and other.