La-Z-Boy announced a major
reorganization of its Casegoods Group, including a realignment
of several key management responsibilities, the establishment of
a new global sourcing organization, and the rationalization of
the company's casegoods manufacturing facilities.
Gerald L. Kiser
La-Z-Boy president and CEO
"Over the last several years, the furniture industry has
increasingly been facing fierce competition from lower cost
import products, especially the casegoods segment of the
business. It has dramatically altered the domestic manufacturing
environment for the entire industry. We, like many others, have
been transitioning to a more balanced mix of imported and
domestically produced product. In order to compete more
effectively, we are significantly altering the current
organizational structure of our Casegoods Group."
All manufacturing and sourcing will now be consolidated under
one umbrella in order to maximize our manufacturing flexibility
and better coordinate our import supply chain and warehousing
requirements. Bill Johnson has been named president-operations
for the La-Z-Boy Casegoods Group with direct responsibility for
all the domestic manufacturing plants and import sourcing.
Johnson was previously senior vice president-manufacturing of
La-Z-Boy Casegoods Group. In his new role, Johnson will report
directly to Jerry Kiser, as will each of the Casegoods Group
Kiser continued, "As a result, each of our casegoods
companies will focus solely on merchandising, sales, marketing,
and product development and relinquish its manufacturing
responsibilities. Each company will retain and reinforce its
brand identity and continue to sell in the same product lines
and price categories. We believe this realignment will unleash
their ability to expand distribution and grow their top line."
Kiser stated, "We remain strongly committed to domestic
production and are aware that to be competitive on a global
basis, we must maximize the utilization of our domestic
manufacturing assets. Furthermore, as noted earlier, each of the
individual casegoods companies will retain its individual niche
in product design, brand identity, marketing and distribution
channels. Now, however, they will be able to source either from
more efficient domestic production facilities or our newly
formed La-Z-Boy Global, Ltd."
La-Z-Boy Global, Ltd.
All imported casegoods products will now be centrally
coordinated through La-Z-Boy Global, which will be responsible
for vendor selection, quality control, and logistics. Lamont
Hope, previously president of Lea Industries, has been named
president of La-Z-Boy Global and will report to Bill Johnson.
Kiser said, "Lamont has a strong operational background and has
been intimately involved in global sourcing for the past several
years. He is ideally qualified to reorganize and streamline this
effort on a coordinated basis." La-Z-Boy Global will also assist
our Upholstery Group companies with sourcing selected fabrics,
cut and sewn fabric and leather material kits, exposed wood
parts and some fully upholstered product.
Commenting on La-Z-Boy's new global sourcing organization,
Kiser said, "The consolidation of these efforts is a much more
productive way to handle La-Z-Boy's overall import volume, which
has been growing at a rapid pace. La- Z-Boy Global will enable
us to focus our in-house expertise on sourcing products more
effectively and better monitor our suppliers' performance in the
areas of cost, quality and delivery."
Other organizational changes
Kiser further stated, "To fill the void left by Lamont Hope at
Lea Industries, Jack Richardson, president of American Drew,
will now have combined responsibility for American Drew and Lea
Industries. Jack has extensive marketing experience and
management capability to lead a smooth transition of these two
companies' corporate functions. Products for both of the brands
will continue to be separately developed and sold through their
existing distribution. This is merely an administrative
management consolidation and our dealers will not see a change
in brand integrity, products or servicing."
"As noted in our recent news release," Kiser said, "we have been
closely examining our domestic casegoods facilities for some
time now in light of recent sales declines in this segment of
our business and our growing migration to imports. As I said in
our recent investor conference call, imports represented about
31% of our total casegoods sales in fiscal 2003, up from 21%
last year, and we are projecting a nearly 40% import rate in
fiscal 2004. We deeply regret the need to close additional
plants and disrupt the lives of our employees at the affected
locations, but we strongly believe these actions are in the best
long-term interests of our remaining employees and our company.
We will be providing severance pay and transition assistance to
these employees to try and help them through this difficult
The closure of the company's two plants in Morristown, TN and
its plant in Monroe, NC will result in the loss of approximately
480 manufacturing jobs in total, or 11% of the Casegoods Group's
current employee base. Production will be phased out at Lea
Industries' plants #4 and #5 in Morristown, TN, and they will be
closed as of August 15th, impacting approximately 330 jobs at
the two facilities. Production will be relocated to other
La-Z-Boy casegoods manufacturing facilities. The warehousing and
shipping facilities located in Morristown, TN will continue to
operate, employing approximately 40 full-time people.
The Pennsylvania House upholstery plant in Monroe, NC, a
leased facility, will be closed as of August 29th, with the loss
of approximately 150 jobs. This production will also be shifted
to another La-Z-Boy manufacturing location. The required plant
closure notifications have been filed today with appropriate
local officials in each community.
Approximately 75 jobs will be created at several other
La-Z-Boy facilities resulting from this rationalization of
production, with a net reduction of 405 jobs. Qualified
employees from our affected facilities will be given the first
opportunity to fill these new positions.
These actions will result in pre-tax charges of approximately
$10 million, or $0.11 per diluted share on an after-tax basis.
The largely non-cash charge will be taken primarily in the
current fiscal quarter, which ends July 26, 2003, and will cover
the write-down of certain fixed assets and inventories. The
majority of the balance of the charge representing severance and
relocation costs will be incurred in the first half of our
fiscal year in accordance with the recently released Statement
of Financial Accounting Standards No.146 - Accounting for Costs
Associated with Exit or Disposal Activities. The plant closures
and resultant shifting of production to other La-Z-Boy casegoods
facilities should produce annual savings in the range of $5 - $
6 million, after the transition is fully implemented by the
beginning of our fiscal fourth quarter.
Kiser concluded, "Combined, these actions represent a
dramatic cultural change for our Casegoods Group and will take
much of the balance of this year to fully implement. Besides all
the personnel moves and new responsibilities, our processes and
systems will be reorganized to accommodate the change. Our
potential for success over the long term, however, will be
greatly enhanced by these moves as we focus and harness our
resources for maximum effectiveness at a significantly lower
cost. We are committed to growing sales and improving our
operating profit margins. We have already made real progress and
these actions will continue to move us forward on this front."
With annual sales in excess of $2 billion, La-Z-Boy
Incorporated is one of the world's leading residential furniture
producers, marketing furniture for every room of the home and
office, as well as for the hospitality, health care and
assisted-living industries. The La-Z-Boy Upholstery Group
companies are Bauhaus, Centurion, Clayton Marcus, England,
La-Z-Boy, La-Z-Boy Contract Furniture Group and Sam Moore, and
the La-Z-Boy Casegoods Group companies are Alexvale, American
Drew, American of Martinsville, Hammary, Kincaid, Lea and
Web site: http://www.la-z-boy.com/
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