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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED July 30, 1994 COMMISSION FILE NUMBER 0-5091
LA-Z-BOY CHAIR COMPANY
(Exact name of registrant as specified in its charter)
MICHIGAN 38-0751137
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1284 North Telegraph Road, Monroe, Michigan 48161-3390
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (313) 241-4414
None
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the last practicable date:
Class Outstanding at July 30, 1994
Common Shares, $1.00 par value 18,010,860
Part I. Financial Information
The Consolidated Balance Sheet and Consolidated Statement of Income required
for Part I are contained in the Registrant's Financial Information Release
dated August 22, 1994 and are incorporated herein by reference.
LA-Z-BOY CHAIR COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited, dollar amounts in thousands)
Three Months Ended
-------------------
July 30, July 24,
1994 1993
--------- ---------
Cash Flows from Operating Activities
Net income $4,270 $7,326
Adjustments to reconcile net income
to net cash provided by operating
activities
Accounting change 0 (3,352)
Depreciation and amortization 3,732 3,299
Change in receivables 33,909 30,984
Change in inventories (9,192) (12,331)
Change in other assets and liab. (12,093) (15,239)
Change in deferred taxes 0 358
--------- ---------
Total adjustments 16,356 3,719
--------- ---------
Cash Provided by Operating
Activities 20,626 11,045
Cash Flows from Investing Activities
Proceeds from disposals of assets 24 11
Capital expenditures (5,990) (3,320)
Change in other investments (459) (1,064)
--------- ---------
Cash Used for Investing Activities (6,425) (4,373)
Cash Flows from Financing Activities
Short-term debt 0 0
Long-term debt 7,500 0
Change in unexpended IRB funds (2,566) 0
Retirements of debt (4,750) (89)
Sale of stock under stock option plans 203 643
Stock for 401(k) employee plans 401 759
Purchase of La-Z-Boy stock (6,609) (517)
Payment of cash dividends (3,109) (2,730)
--------- ---------
Cash Used for Financing Activities (8,930) (1,934)
Effect of exch. rate changes on cash (17) (125)
--------- ---------
Net change in cash and equivalents 5,254 4,613
Cash and equiv. - beginning of period 25,926 28,808
--------- ---------
Cash and equiv. - end of period $31,180 $33,421
========= =========
Cash paid during period - Income taxes $2,873 $3,407
- Interest 602 674
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
Certain July 24, 1993 balance sheet items have been reclassed for comparability
to July 30, 1994.
LA-Z-BOY CHAIR COMPANY AND OPERATING DIVISIONS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The financial information is prepared in conformity with generally
accepted accounting principles and such principles are applied on a basis
consistent with those reflected in the 1994 Annual Report filed with the
Securities and Exchange Commission. The financial information included
herein, other than the consolidated condensed balance sheet as of April
30, 1994, has been prepared by management without audit by independent
certified public accountants who do not express an opinion thereon. The
consolidated condensed balance sheet as of July 30, 1994 has been
derived from, but does not include all the disclosures contained in, the
audited consolidated financial statements for the year ended April 30,
1994. The information furnished includes all adjustments and accruals
consisting only of normal recurring accrual adjustments which are, in the
opinion of management, necessary for a fair presentation of results for
the interim period.
2. Interim Results
---------------
The foregoing interim results are not necessarily indicative of the
results of operations for the full fiscal year ending April 29, 1995.
3. Commitments and Contingencies
-----------------------------
There has been no significant change from the prior fiscal year end
audited financial statements.
LA-Z-BOY CHAIR COMPANY AND OPERATING DIVISIONS
MANAGEMENT DISCUSSION
La-Z-Boy's sales and profits historically have been weakest in the first
quarter of the fiscal year due to the Company's two-week vacation shutdown
which coincides with the slowest sales period. Therefore, first quarter
comparison to the prior year's first quarter may not be indicative of trends
that will continue in the remaining quarters of the fiscal year.
Due to the cyclical nature of the Company's business, comparison of operations
between the most recently completed quarter and the immediate preceding
quarter would not be meaningful and could be misleading to the reader of these
financial statements.
For further Management Discussion, see attached Exhibit I.
The Company's strong financial position is reflected in the debt to capital
percentage of 17% and a current ratio of 4.4 to 1 at the end of the first
quarter. At April 30, 1994, the debt to capital percentage was 17% and the
current ratio was 4.1 to 1. At the end of the preceding year's first quarter,
the debt to capital percentage was 17% and the current ratio was 4.4 to 1.
As of July 30, 1994, there was $60 million of unused lines of credit available
under several credit arrangements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- - --------------------------
The Company has been named as defendant in various lawsuits arising in the
normal course of business. It is not possible at the present time to estimate
the ultimate outcome of these actions; however, management believes that the
resultant liability, if any, will not be material to the Company's
consolidated financial position.
Item 2. Changes in Securities
- - ------------------------------
None.
Item 3. Default Upon Senior Securities
- - ---------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
The Annual Meeting of Shareholders of La-Z-Boy Chair Company was held on
July 25, 1994, for the purposes of electing three members to the board of
directors. Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities and Exchange Act of l934 and there was no solicitation in
opposition of management's solicitations. All of management's nominees for
directors as listed in the proxy statement were elected.
Item 5. Other Information
- - --------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
Exhibit I News Release and Financial Information Release: re Actual first
quarter results and Management Discussion dated August 22, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Quarterly Report on Form 10-Q for the quarter
ended July 30, 1994 to be signed on its behalf by the undersigned thereunto
duly authorized.
LA-Z-BOY CHAIR COMPANY
(Registrant)
Date: August 22, 1994 James J. Korsnack
Corporate Controller
NYSE & PSE: LZB News Release Contact: Jim Korsnack
(313) 241-4208
LA-Z-BOY'S FIRST QUARTER SALES AND EARNINGS IMPROVE
MONROE, MI., August 22, 1994: La-Z-Boy Chair Company's fiscal first quarter
that ended July 30, 1994 recorded sales up 8%, operating profit up 17% and net
income up 7% compared to last year's first quarter. Both sales and earnings
were record highs for a first quarter (excluding the effect of an accounting
change).
Financial Details
- - -----------------
First quarter sales grew to $174 million vs. $162 million, an increase of 8%.
Net income for the quarter (before an accounting change) improved 7% to $4.3
million ($.23 per share) vs. $4.0 million ($.22 per share) in last year's
first quarter. (Last year there was an $.18 per share earnings gain due to a
tax accounting change which increased net income to $.40 per share.) Income
tax expense was higher than last year as a percent of pretax income due
primarily to an unfavorable mix of tax rates across tax divisions.
Chairman Comments
- - -----------------
La-Z-Boy Chairman and President Charles T. Knabusch said, "First quarter sales
were good and we look forward to an historically strong fall season. The
consumer magazine advertising campaign that proved highly successful this
spring will run again in September and October."
After six consecutive quarters of double-digit sales increases compared to the
prior year, the first quarter's 8% increase indicates a slower rate of growth.
Mr. Knabusch said, "Over the past two year period, La-Z-Boy has experienced a
25% increase in first quarter sales, achieved through internal growth and with
few price increases. The full year [FY 95] could look similar to the first
quarter in that our sales increases might be less than double-digit percentages
but would be strong nevertheless."
More
- - ----
La-Z-Boy's first quarter health-care costs were higher than anticipated.
Costs for health care also had been higher than expected in the preceding four
months. On August 1, La-Z-Boy enacted changes in its health-care plan to help
offset these increases.
During the month of July, La-Z-Boy bought back 300,000 shares of its own stock
in a privately negotiated transaction. This represented less than 2% of the
roughly 18,300,000 shares outstanding at the time. There are about 660,000
shares of company stock remaining of the 2,000,000 shares that the Board has
authorized management to repurchase. La-Z-Boy has no set timetable for future
buybacks.
La-Z-Boy Chair Company Financial Information Release 1 of 4
CONSOLIDATED SUMMARY OF OPERATIONS 08/22/94
(Amounts in thousands, except per share data)
FIRST QUARTER ENDED (UNAUDITED)
----------------------------------------------
Amounts
------------------ Percent of Sales
July 30, July 24, % Over ----------------
1994 1993 (Under) 1994 1993
-------- -------- ------- ------- -------
Sales $174,387 $162,096 8% 100.0% 100.0%
Cost of sales 133,654 123,047 9% 76.6% 75.9%
-------- -------- ------- ------- -------
Gross profit 40,733 39,049 4% 23.4% 24.1%
S,G & A 32,772 32,249 2% 18.8% 19.9%
-------- -------- ------- ------- -------
Operating profit 7,961 6,800 17% 4.6% 4.2%
Interest expense 662 720 -8% 0.4% 0.4%
Other income 286 457 -37% 0.1% 0.2%
-------- -------- ------- ------- -------
Pretax income 7,585 6,537 16% 4.3% 4.0%
Income taxes 3,315 2,563 29% 43.7%** 39.2%**
-------- -------- ------- ------- -------
Income before acctg. change 4,270 3,974 7% 2.4% 2.4%
Accounting change - 3,352 N/A - 2.1%
-------- -------- ------- ------- -------
Net income $4,270 $7,326 -42% 2.4% 4.5%
======== ======== ======= ======= =======
Average shares 18,253 18,214 0%
Earnings per share:
- - -------------------
Income before acctg. change $0.23 $0.22 5%
Accounting change - 0.18 N/A
-------- -------- -------
Net income $0.23 $0.40 -43%
======== ======== =======
Dividends per share $0.17 $0.15 13%
** As a percent of pretax income, not sales.
La-Z-Boy Chair Company Financial Information Release 2 of 4
CONSOLIDATED BALANCE SHEET 08/22/94
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
July 30, July 24, ---------------- April 30,
1994 1993 Dollars Percent 1994
-------- -------- ------- ------- ---------
Current Assets
Cash & equivalents $31,180 $33,421 ($2,241) -7% $25,926
Receivables 149,206 138,966 10,240 7% 183,115
Inventories
Raw materials 36,451 33,833 2,618 8% 31,867
Work-in-process 30,621 30,998 (377) -1% 29,325
Finished goods 30,137 25,843 4,294 17% 26,676
-------- -------- ------- ------- ---------
FIFO inventories 97,209 90,674 6,535 7% 87,868
Excess of FIFO over LIFO (20,781) (17,856) (2,925) -16% (20,632)
-------- -------- ------- ------- ---------
Total inventories 76,428 72,818 3,610 5% 67,236
Deferred income taxes 15,160 13,719 1,441 11% 15,160
Other current assets 6,419 6,422 (3) -0% 4,148
-------- -------- ------- ------- ---------
Total Current Assets 278,393 265,346 13,047 5% 295,585
Property, plant & equipment 96,770 90,677 6,093 7% 94,277
Goodwill 20,529 21,436 (907) -4% 20,752
Other long-term assets 22,456 17,707 4,749 27% 19,639
-------- -------- ------- ------- ---------
Total Assets $418,148 $395,166 $22,982 6% $430,253
======== ======== ======= ======= =========
La-Z-Boy Chair Company Financial Information Release 3 of 4
CONSOLIDATED BALANCE SHEET 08/22/94
(Dollars in thousands)
Current Liabilities
Current portion of L/T debt $1,875 $3,328 ($1,453) -44% $2,875
Accounts payable 24,160 20,851 3,309 16% 21,552
Payroll/benefits 16,475 16,267 208 1% 29,453
Estimated income taxes 4,293 7,859 (3,566) -45% 3,882
Other current liabilities 16,238 12,454 3,784 30% 13,701
-------- -------- ------- ------- ---------
Total Current Liabilities 63,041 60,759 2,282 4% 71,463
Long-term debt 56,245 52,495 3,750 7% 52,495
Deferred income taxes 6,949 6,430 519 8% 6,949
Other long-term liabilities 8,933 6,776 2,157 32% 8,435
Shareholders' Equity
18,010,860 shares, $1.00 par 18,011 18,242 (231) -1% 18,287
Capital in excess of par 10,237 8,770 1,467 17% 10,147
Retained earnings 255,627 241,999 13,628 6% 263,348
Currency translation (895) (305) (590) -193% (871)
-------- -------- ------- ------- ---------
Total Shareholders' Equity 282,980 268,706 14,274 5% 290,911
-------- -------- ------- ------- ---------
Total Liabilities and
Shareholders' Equity $418,148 $395,166 $22,982 6% $430,253
======== ======== ======= ======= =========
Certain July 24, 1993 balance sheet items have been reclassed for comparability
to July 30, 1994.
La-Z-Boy Chair Company Financial Information Release 4 of 4
08/22/94
Overall:
- - --------
Refer to today's news release for additional comments.
Gross Profit:
- - -------------
Gross profit declined from 24.1% of sales last year to 23.4% of sales this
year primarily due to lower sales in Canada, changes in freight programs and
plant expansion start-up costs.
S, G & A:
- - ---------
The S, G & A expense decreased from 19.9% of sales last year to 18.8% of sales
this year largely due to changes in freight programs, lower bonus expense, and
lower bad debt expense.
Other Income:
- - -------------
The decrease in other income was related to pensions. The discount rate and
rate of return on assets were reduced in the third quarter last year. In
addition, the rate of return was further reduced in this year's first quarter.
Other Long-Term Assets and Debt:
- - --------------------------------
An Industrial Revenue Bond (IRB) loan of $7.5 million relating to the new
Siloam Springs plant was obtained in the first quarter of this year. The
Company made scheduled debt payments of $2.9 million, and an early payment
of $1.9 million in the first quarter this year, therefore the net increase in
debt from April was $2.7 million. Other long-term assets increased $2.6
million relating to unexpended funds for the Siloam Springs IRB.
Other Current Liabilities:
- - --------------------------
The increase in other current liabilities over last year was primarily due to
declaring a dividend in the first quarter of fiscal year 1995 vs. early in the
second quarter of fiscal 1994.