Greetings. And welcome to the La-Z-Boy Incorporated First Quarter Fiscal 2015 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Kathy Liebmann, Director, Investor Relations and Corporate Communications for La-Z-Boy. Thank you. You may begin.

Thank you, Melissa. Good morning. And thank you for joining us to discuss our fiscal 2015 first quarter results. With us today are Kurt Darrow, La-Z-Boy's Chairman, 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. 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 judgments 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 Chairman, President and Chief Executive Officer. Kurt?

Thank you, Kathy. Good morning, everyone and thank you for joining us. Yesterday afternoon, we reported our first quarter results for fiscal 2015. During the period we increased consolidated sales by 7% and increased operating income by 12%. While this was accomplished to meet the challenging Retail environment and seasonally slow quarter, we also made important investments in the company to drive long-term profitable growth. These includes activities associated with opening new stores, a core part of our 4-4-5 strategy, additional advertising to drive sales and further increase market share and investments in technology. Our team remained focused on the steady execution of strategic initiatives to deliver growth throughout the enterprise, while leveraging the power of our brand, our distribution network and the lean operating structure to fuel profitability. At the same time, our balance sheet remained strong, strong which provides us with necessary flexibility to execute our strategy in a dynamic environment, while allowing us to continue to invest in the business to provide returns to shareholders. And on that note, I’m pleased to report that our Board of Directors approved an increase of 5 million shares for our share repurchase authorization, demonstrating their confidence in the company’s ability to successfully execute its growth strategy, while generating ongoing strong free cash flow. Now let me turn to the review of our three operating segments, first, our Upholstery segment. For the quarter, sales increased 6.8% and we posted an 8.4% operating margin with the slight increase in the gross margin. With unique multi-channel distribution strategy including branded outlets, as well as independent dealers throughout North America, sales increases were experienced across all channels. Same-store sales for the 317 La-Z-Boy Furniture Galleries stores increased 1%. It’s important to note, however, that we are lapping an average increase of 10.5% over the…

Thank you, Kurt. Consolidated sales for the fiscal 2015 first quarter were $327 million up 7%, compared with last years first quarter of $316 million. This year reflects the reclassification of Lee and last year reflects the reclassification of both Lee and Bauhaus to discontinued operations. For the quarter, consolidated operating income was $16.5 million, compared with $14.8 million in the fiscal 2014 first quarter. The company reported net income from continuing operations attributable to La-Z-Boy Incorporated of $10.6 million or $0.20 per diluted share. Net income for the period includes $200,000 after tax of structuring income mainly related to inventory recoveries in the Casegoods segment. This compares with last years first quarter net income of $9.6 million or $0.18 per diluted share, which includes $100,000 restructuring charge mainly related to write-downs associated with the closure of the lumber processing operation of Casegoods segment. As noted in our press release, adjusted income from continuing operations attributable to La-Z-Boy Incorporated per share was $0.20 and this year’s first quarter versus $0.18 in last years first quarter as there were no adjustments called out that affected the earnings per share in either period. For the quarter, our operating margin was 5% compared with 4.8% in the last year’s comparable quarter. Also during the quarter, we reported $3.8 million in income or $2.4 million after tax and CDSOA money related to a former subsidiary, which was included as a component of our net income from discontinued operations. When we sold the company in fiscal 2007, we retained the right to receive a percentage of duties for some of the years during which we own the company. Now let me turn to SG&A. Selling, general and administrative expenses as a percent of sales increased 0.7 percentage points in the first quarter of fiscal 2015…

Thank you, Mike. As we move into fiscal 2015, we have significant opportunity to drive growth throughout all segments of our business. We have an excellent strategy in place to strengthen our platform across North America, strong brand and distribution network, our advertising, marketing, and merchandising strategy with a lean and efficient manufacturing structure. We are continuing to invest in the number of initiatives to fuel topline growth, feel confident we can deliver on an annual basis a 20% to 30% conversion on the incremental sales growth as we move forward throughout fiscal ‘15. We appreciate you being on the call this morning. And I’ll turn things back to Kathy for the Q&A.

Thank you, Kurt. We will begin the question-and-answer period now. Melissa, please review the instructions for getting into the queue to ask questions.

Thank you. (Operator Instructions) Our first question comes from the line of Budd Bugatch with Raymond James Financial. Please proceed with your question.

Thank you. This is Bobby filling in for Budd. Thank you for taking my questions and good morning.

Good morning Bobby.

My first question is on the Retail segment. Just to clarify, Kurt, the $0.03 impact that you called out in your prepared remarks is for the full fiscal year, correct?

That is correct.

All right. And how should we think about that headwind having impact over the next three quarters? Is it pretty even or should we expect a bigger impact in one of the quarters?

It’s probably a little higher in Q2 and Q3 and less in Q4. The rush to get as many stores as we can open before Thanksgiving and then some that trail on after that. So we will have more projects in Q2 and Q3 than we’ll have in Q4.

All right. Thank you. And do you offer any color on what type of impact those projects had on the Retail margin this quarter to try to help us arrive maybe at some type of normal type of margin without the impact of opening cost?

So we talked about the seven stores that two of them opened in this quarter and the five. So there is a first 60 days before the store opens of training cost and getting things ready to go and then for the first month, you are selling and paying salaries, another start-up cost with no delivered revenues. So it’s hard to give you an exact number because depending on when the store is opened in this period. So in some of the stores, we had all 60 days of that expense before it opens and some of the cases, we have the full 90 days because we opened two stores and in other case, we’re not going to open the couple of stores to later in the second quarter. So it’s -- I mean, it’s not going to be $0.00 one quarter and $0.03 one quarter. It’s going to be probably $800 to a $1 million a quarter here for a while. And next year when we had anniversary that, it will already be in our base. But since we’re being a lot more active in stores, that’s the potential impact it could have this year.

All right. Appreciate that color. And then can you maybe comment on your plans for advertising going forward. I notice it ticked up a little bit as a percentage of sales on the first quarter. But should we expect that to ramp going through the back half of the year?

No. Our plan has been fairly consistent. We have continued to spend more money in marketing and advertising as we’ve grown. But we’ve kept the sales to the expense ratio pretty consistent. And we wouldn’t see any difference. One of the things that we did this quarter because of the new creative we did and the new commercials we ran, we also had to pay for the production cost of those commercials and that was where the spend was up. It was necessarily a lot more media.

Okay. I appreciate that. And then maybe lastly from me, just on the rollout of Urban Attitudes, can you comment maybe on how much of it’s rolled out, is it fully on the floors yet?

Yeah, it’s fully on. All of the La-Z-Boy furniture gallery floors and other dealers. Certainly we would like to sell the collection to other independent dealers that we haven’t been able to penetrate yet. But it was rolled out enough that we felt comfortable running the marketing to launch the collection and our initial response has been very good. And we’ll give some color on the percentage of our total Upholstery business and some other insights here as we go through the end of the year.

Thank you. I appreciate you guys taking my questions and best of luck going forward.

Okay, Bobby. Thank you.

Thanks Bobby.

Thank you. Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets. Please proceed with your question.

Thanks. Good morning, Kurt, Mike and Kathy.

Good morning, Brad.

Good morning.

Just two follow-up on sales. I just was curious what you had been seeing through the course of the quarter and from a regional standpoint and just putting it into context. We did get nice acceleration from 4Q to 1Q against admittedly a tougher comparison here. But we’re not quite back to that torrid run rate that you’ll had in the prior couple of years. So just a little bit more color about what you’ve been seeing would be helpful?

Two general directions comments there, Brad. In general, the quarter improved as we went through it. So July was stronger than May and June before the entire network. So I’m encouraged about that. And the comment on the regionality, frankly the areas that had the most difficulty after the downturn, California, Las Vegas, Phoenix, Florida and frankly Michigan for other reason. We’re still seeing the highest percentage growth in those areas. They also went down the farthest. So whether all parts of the country are yet back to their peak or their norm before the recession, I don’t have that in front of me. But we do get excited about seeing some pretty good costs in certain areas. But then we have to remind ourselves how far down they fell during that difficult time.

Okay. Great. And then just as we look at our models for the balance of the year, even if there is more growth coming from a store standpoint, what do you think the difference could look like between the written same store sales and what the total revenues will be through the balance of the year?

Well, that’s hard for us to predict, Brad. And one of the things that you know this quarter, even thought the same store sales were only up 1%. Our total volume was up 7%. And although we believe the store network is a growth engine for us, with all of our companies with England and Casegoods and 45% of La-Z-Boy sales coming from other than the stores. We’re positioned uniquely to have a multiple distribution channel environment where there is a not one-to-one correlation between how our stores do and how the company does overall. Honestly the stores have a huge impact on how we perform but it’s hard for us to predict how the general viewers are going to perform and some of the major customer that are related to the stores. So that’s why, it’s kind of impossible for us to give that number but I wanted to make that distinction between where we get our wholesale volume versus what the Retail volume alone provides us.

That's helpful. Thank you. And if I could just squeeze one more on the opportunity to upgrade the website and ecommerce, you all are in a bit of a different situation than many companies and that you sell-through your own stores and licensees and then third parties. Could you maybe talk a little bit about what you see the role of the website being longer term as you make these investments?

Obviously, it's a necessary tool for the consumer to gather information, be educated, understand your company. So we think the easier we can make it for her to navigate, the more options we have for them to do to the render product, to put on fabrics, to use our room planners, all of that is important. And we're approaching 2 million hits a month on our website. So it is growing all the time. So it is a way the customer wants to communicate and like any other technology, it continues to improve and you have to invest to keep up to date. This will be a big upgrade for us but I can probably tell you another four or five years would make other one because that’s just the way it happens because technology. If that’s the first impression that the consumer have about your brand, you want to do a little job as possible to entice her.

Great. Thank you so much, Kurt.

Thanks, Brad

Thank you. Our next questions come from the line of John Baugh with Stifel. Please proceed with your questions.

Thank you. Good morning, team. A couple things here to start out with case goods, nice number. Kurt, is that -- help me understand how much of this is, say, sell-through versus I don't know, sample or reshuffling or are we at a point where case goods sales have bottomed and are likely to go up from here or is there just timing with something that happened a year ago or this quarter unusual?

I would give you two insights, John. Our case goods business was performing better than it appeared last year on our report outs because our youth business was declining so much. So the net effect of that kind of dwarfed the true performance of those businesses and now that we are going to have that move along, the business wasn't as weak as it seemed to on our financials and our sales growth. The other part is part of this quarter was we were out of stock on some things and we caught up. So we do not expect a continued 16% growth right now. But we do expect the case goods model has bottomed and will contribute to the company's growth through the rest of the year.

Great. Thanks for the color. And then on -- I believe I heard a comment about 30% contribution margins. Is that, was that essentially guidance which I know you avoid like the plague but for the remaining nine months of the quarter or did I mistake that or any color there?

You have bad hearing, John. You did not hear that. You heard 20% to 30%.

Okay.

On an annual basis, on incremental volume, so one of things we have to be sure that as we open more stores or we would buy back stores or things of that nature. For us, that’s not incremental volume because we have the expense associated with it. So on true incremental piece, we don't think there is any reason like we’ve done the last two year. We don’t think there's any reason why we couldn't convert somewhere depending on where the volume comes from the 20% to 30% range. That’s not guidance, that’s not on the entire sales growth. And you’ll have fluctuations like we did this quarter, quarter-to-quarter but still thinking in the whole year’s time frame, we’re construable with that position.

Great. Thanks for that color. And then maybe specifically, and tying into that SG&A. So I guess, if we add back the incentive comp, it was 160 basis points year-over-year in the first quarter. I understand the first quarter is seasonal. I understand there were some perhaps production ad costs, other things. Any color, Mike, on how we think about that for the latter nine months of the year, just leaving out the incentive comp piece for the moment?

John, we give the conversion range from 20% to 30% on how we're going to do the incremental volume. We gave some color this quarter on why our SG&A and you're right about the seasonality. It is our low volume quarter. So all that being said, I think you've summarized what our issues are for the quarter and we don't really have much more color to add to that.

I would say though, John, if you think about a typical quarter other than the first quarter for us is somewhere between $40 million to $50 million larger. And so those same expenditures during a time when you have that much more volume is not going to be impactful, seeing they're impacts. So -- but we had to do these. There were timing reasons why we did them in the first quarter. And we wanted to be in a position for the fall and be ready to go. So we -- just like our advertising percentage, we don't expect to greatly enhance our SG&A spending going forward. Other than when we talked about the drag on the new stores and Mike's talked the last couple quarters about the additional expense we have on E1 as we finish the year. But we have that in our plan and our expectations and still are confident on the conversion.

Great. And then the last question would be through your contributions of 20% to 30% on incremental. If there some way for you to help us think about either a dollar amount or a percentage of revenue for the year that would be non-incremental that you know today that would in other words roughly be anything in terms of new stores or acquired revenue, any dollar amounts. So if we had a 5% or 7% revenue increase for the year, half of that or a third of that or whatever would be non-incremental?

Yeah. That’s a fair question. We don’t have that in front of us today but I think, to help all of you with your models and all, I think, we need to give you some color on that in the next call. We’ll try to give you some idea what our expectations are.

Great. Thanks. Good luck.

Okay. Thanks, John.

Thank you. Our next question comes from the line of Todd Schwartzman with Sidoti & Company. Please proceed with your question. Todd Schwartzman - Sidoti & Company: Hi. Good morning, everyone.

Good morning, Todd. Todd Schwartzman - Sidoti & Company: I'd like to get your early assessment of Urban Attitudes, what you're experiencing, what you've learned thus far. And maybe also I know, you’ve mentioned but were there any close out to speak of within Upholstery or Retail that were discontinued in favor of some of the newer merchandise?

Well, I’ll answer the second part of the question first, Todd. Flowing in Urban Attitudes to all of the floors is a normal cycling we do after every market within the product. So we always have things coming off the floor and things going in. I think we change about 25% to 30% of the floor every year, so that’s a natural progression. Urban Attitudes wasn’t added on to all the other product introductions we do any one season. So there wasn’t any mass discounting or close out going on during the quarter. We’re very pleased with the rollout of Urban Attitudes. We’ve had a lot of marketing support of it. I think one of the great statistics that I won’t give you all of the data that hopefully we will later in the year but all the great indications right now is two of the styles from the Urban item collection have made into our top 10 styles in Upholstery line. So that would indicate great receptivity to the line. And again, this is all new and it’s not on as many floor as some of our core product is being out there for years. So we’re very encouraged by the initial response and all, but again, Urban Attitudes other than from just a product sale standpoint has a lot going forward in trying to serve a customer that we don’t serve today, try to get more interest, try to elevate the style quotient of the brand. And so it’s got a lot of other intangible benefits rather than just a peer sales of the collection. Todd Schwartzman - Sidoti & Company: Got it. By my math, you're planning to open about -- actually exactly half of the net new stores you expect for the year in this quarter Q2. Have you opened any since July 26th?

No, but we are -- the company has not but we're opening three or four of them here before Labor Day. So we expect that some of these to actually open in the first quarter. We had some delays for various reasons but we had two -- in the quarter, we had opening in Florida, one in Brookfield, Connecticut, one in Canton, Michigan and one in Kansas City. So they will all be open I think by mid September. Todd Schwartzman - Sidoti & Company: Thanks, guys. That does help. Kurt, on the -- just want to ask you for a little clarification on the statement that you made regarding commercial production costs for Q1 had incurred some of the production. Does that -- do those expenses fulfill all your obligation or your need for all of the spots that will air in this fiscal year or is that -- are you set for the next two quarters or one quarter? How should we think about when, if at all, that ramps again production costs that is ramp again out to year end?

Good question, Todd. We will probably have some new creative commercials in most likely in the fourth quarter of next year but there won't be any more between now and Christmas. Todd Schwartzman - Sidoti & Company: And roughly what was it in dollars? What was their contribution in dollars in the first quarter?

Well, I’m not going to tough call there but these, we produce very high quality, very first-class commercials. And they come with a cost and that’s why we called it out but we’re going to quantify exactly. Todd Schwartzman - Sidoti & Company: Will the Q4 cost be comparable or less or greater?

Depends on how many commercials we do. And we haven't planned that yet and again, the fourth quarter could be $50 million, $60 million, $70 million more. This is historically. I'm not giving you a projection but typically, it's a heck of a lot more. So one extra commercial, we wouldn't even call it out because of the size of the business and that season would be much different. Todd Schwartzman - Sidoti & Company: Understood. Thanks a lot.

Thank you, Todd.

Thank you. (Operator Instructions) Our next question comes from the line of Kristine Koerber with Barrington Research. Please proceed with your question.

Good morning. A couple of questions. First, as we look at the Upholstery sales growth, as I read that there was a shift to more recliners and less sales in motion -- sales in chairs over last year? Can you, just any idea of what's driving the shift to more recliners, is it the product or consumers maybe being a little more cautious with their spending, sort of little color?

Yes. Kristine, I'd have two comments on that. First of all, we don't believe it's a long-term trend. We have a very mature recliner business and the growth opportunities there are not as large as in some other of our businesses. So I think that was something that we're not counting on that being a continued trend. I think the other issue for us and with our general dealer population, and other major accounts stores, I think there's been a lot of change in the marketplace with our various competitors and I think, La-Z-Boy has benefited from a number of those changes. So, I think, we have probably have larger assortments on floors and maybe a few more dealers carrying our line than previously. So, again, that was a competitive thing. But, no, we cannot point to one product thing that we've done that, I would say that, that was the reason, it just so happened that there were things flowed his quarter that popped out.

Okay. That’s helpful. And then you’ve indicated that trends improved throughout the quarter? Does that include traffic trends or you just talking about overall sales, because I know conversion really maturing the Upholstery?

I was pretty much talking about sales. I don’t have the traffic trends ahead of me, but normally they go hand-in-hand, but my comment that was strictly about our sales performance.

Okay. And then, as far as, Urban Attitudes and some of the new product in general and just what you're doing on the advertising side, you indicated that you are trying to attract and have attracted new demographic? I mean, how are you measuring that or how do you get your arms around, the customers coming in and if you are getting that demographic on Board?

Well, I think, there's a couple of ways we do that. We get a tremendous feedback not only from our own stores but from all of our dealers about the type of customer they're seeing, the type of customer that's coming in doing large in-home design projects. We just got a note yesterday from one of our dealers who did an $80,000 in-home design project in California and it's -- so anecdotally we received that. We're continuing to have increase in sales on slightly down traffic, so our conversion rates because of our discipline and selling processes that are very good, we also believe the customers coming in a little more predisposed to buy. She gets a lot more information today on our -- on the internet about our brand, about things that we do. And so we got various points of the customers that we get in and when we do our research, six and nine months later about the customer’s addresses and everything, and where they live and their zip codes and everything. We can tell that there’s being a shift in the income disparity of our customers as we move forward.

Okay. That's helpful. And then, just lastly, you indicated the average volume for new -- for stores under the new concept are roughly $4.5 million? Have you remodeled the some smaller stores or converted smaller stores to the new concept and if so, what are the volumes at the smaller stores, because I think you have a decent percentage of smaller-size stores in your base and I'm just trying to get some idea, what the range is on volumes under the new concept.

So let me try to clarify. The number we have talked about the $4.5 million volume for store was what the new design concept stores did in calendar year ‘13. We're only going to give the updates on the different segments performance or different store design performance once a year and candidly, we don't have enough remodels yet to give you clarity on what's the lift on that and what's the difference between small store, big store. Let us get these next 30 stores open and we think we'll have a little base there to be able to answer those questions more intelligently.

Okay. Great. Thank you.

Thank you, Kristine.

Thank you. Ms. Liebmann, there are no further questions at this time. I’d like to turn the floor back to you for closing comments.

Thank you everyone for participating this morning. If you have follow-up questions, please give me a call. Have a great day. Bye-bye.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.