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 October 28, 1995 COMMISSION FILE NUMBER 1-9656
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 48162-3390
(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 Oct. 28, 1995
Common Shares, $1.00 par value 18,525,490
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 November 14, 1995 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 Six Months Ended
------------------ -----------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
1995 1994 1995 1994
------- -------- ------- --------
Cash Flows from Operating Activities
Net income $14,256 $12,078 $17,431 $16,348
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 4,735 3,590 9,419 7,322
Change in receivables (51,526) (43,798) (13,677) (9,889)
Change in inventories 1,163 621 (3,230) (8,571)
Change in other assets and liab. 21,921 15,134 6,075 3,041
Change in deferred taxes (889) (875) (889) (875)
-------- -------- -------- --------
Total adjustments (24,596) (25,328) (2,302) (8,972)
-------- -------- -------- --------
Cash Provided by Operating
Activities (10,340) (13,250) 15,129 7,376
Cash Flows from Investing Activities
Proceeds from disposals of assets 645 1,210 778 1,234
Capital expenditures (6,079) (4,498) (9,239) (10,488)
Change in other investments 129 (75) 1,088 (534)
--------- -------- -------- --------
Cash Used for Investing Activities (5,305) (3,363) (7,373) (9,788)
Cash Flows from Financing Activities
Short-term debt - 261 - 261
Long-term debt - - - 7,500
Capital lease obligations 1,161 - 1,161 -
Change in unexpended IRB funds - 1,827 - (739)
Retirements of debt (6,479) (261) (10,551) (5,011)
Capital lease principal payments (560) - (1,077) -
Sale of stock under stock option plans 807 1,154 2,075 1,357
Stock for 401(k) employee plans 338 429 643 830
Purchase of La-Z-Boy stock (41) (2,742) (4,433) (9,351)
Payment of cash dividends (3,505) (3,067) (6,660) (6,176)
--------- -------- -------- --------
Cash Used for Financing Activities (8,279) (2,399) (18,842) (11,329)
Effect of exch. rate changes on cash 60 131 (18) 114
--------- -------- -------- --------
Net change in cash and equivalents (23,864) (18,881) (11,104) (13,627)
Cash and equiv. at beginning of period 39,808 31,180 27,048 25,926
--------- -------- -------- --------
Cash and equiv. at end of period $15,944 $12,299 $15,944 $12,299
========= ======== ======== ========
Cash paid during period - Income taxes $7,154 $8,980 $8,811 $11,853
- Interest $1,401 $816 $2,511 $1,418
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.
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 1995 Annual Report filed with the
Securities and Exchange Commission. The financial information included
herein, other than the consolidated condensed balance sheet as of April
29, 1995, 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 October 28, 1995 has been
derived from, but does not include all the disclosures contained in, the
audited consolidated financial statements for the year ended April 29,
1995. 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 27, 1996.
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
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 99.
The Company's strong financial position is reflected in the debt to capital
percentage of 18% and a current ratio of 3.3 to 1 at the end of the second
quarter. At April 29, 1995, the debt to capital percentage was 20% and the
current ratio was 3.7 to 1. At the end of the preceding year's second quarter,
the debt to capital percentage was 17% and the current ratio was 3.8 to 1.
As of October 28, 1995, there was $62 million of unused lines of credit
available under several credit arrangements.
Approximately 44% of the 3 million shares of Company stock authorized for
purchase on the open market are still available for purchase by the Company.
The Company plans to be in the market for its shares as changes in its stock
price and other factors present appropriate opportunities.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Annual Meeting of Stockholders of La-Z-Boy Chair Company was held on
July 31, 1995, for the purposes of electing four members to the board of
directors. Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities and Exchange Act of 1934 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 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a)(27) Financial Data Schedule (EDGAR only)
(99) News Release and Financial Information Release: re Actual second
quarter results and Management Discussion dated November 14, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995 to be signed on its behalf by the undersigned thereunto
duly authorized.
LA-Z-BOY CHAIR COMPANY
(Registrant)
Date: November 14, 1995 James J. Korsnack
Corporate Controller
5
1,000
APR-27-1996
OCT-28-1995
6-MOS
15,944
0
225,290
18,675
84,321
333,623
117,790
141,169
511,530
102,154
0
18,525
0
0
310,597
511,530
454,077
454,077
340,022
340,022
83,842
0
2,901
29,103
11,672
17,431
0
0
0
17,431
.94
.94
News Release
LA-Z-BOY'S SECOND QUARTER SALES AND EARNINGS STRENGTHENED; REACHED RECORD LEVELS
MONROE, MI., November 14, 1995: For its 1996 fiscal second quarter and half
year ended October 28, 1995, La-Z-Boy Chair Company set records for sales and
profits (excluding changes in accounting). Second quarter sales rose 12% as
reported or 1% on a comparable basis (which includes a recently acquired
company's sales as if they were in last year's results). Second quarter
earnings per share were 15% more than last year's record second quarter.
Financial Details
1996 SECOND QUARTER sales were $258 million vs. $231 million, an increase of
12%. Comparable sales--that is, including England/Corsair's sales on a pro
forma basis in last year's sales, rose 1%. England/Corsair was acquired at
the beginning of fiscal 1996 and is a separate operating division. Second
quarter net income rose 18% to $14.3 million vs. $12.1 million last year.
Net income per share increased 15% to $0.77 vs. $0.67 last year.
1996 FIRST HALF reported sales were $454 million vs. $405 million, an increase
of 12%. Comparable sales were similar to last year's first half sales. Net
income was up 7% to $17.4 million vs. $16.3 million. Net income per share
increased 4% to $0.94 from $0.90 in last year's first half.
Chairman Comments
La-Z-Boy Chairman and President Charles T. Knabusch said, "Second quarter
profit strengthened significantly on a relatively minor increase in comparable
sales. The retail environment will continue to be challenging for us looking
through at least the end of our third quarter but we are seeing some good
things affecting profit margins as a result of our employees cost control
efforts, merchandising, and marketing."
With respect to marketing and other non-financial items, Mr. Knabusch said,
"The third flight of national advertising for La-Z-Boy ran in connection
with the kickoff of the new television season in September and October.
Response to the commercials continues to be strong with well over 270,000
consumer phone calls being generated during calendar year 1995. Those 270,000
consumers not only received a La-Z-Boy decorating guide, but also received the
name of our nearest authorized La-Z-Boy dealer.
"At this October's High Point, N.C. furniture market, La-Z-Boy received the
ARROS award from Home Furnishings Executive magazine for the third consecutive
year. This award is voted upon by home furnishings retailers across the
country and La-Z-Boy swept the upholstery category being named best for overall
product, for delivery and for dealer support.
"At the High Point market, Patrick H. Norton, senior vice president of sales
and marketing, was inducted into the American Furniture Hall of Fame. Mr.
Norton was the third La-Z-Boy executive to be so honored, following company
founders Edward Knabusch and Edwin Shoemaker."
More
In general, sales backlogs, as of this press release date, were at a lower
level than at a similar time a year ago. However, the rate of incoming sales
orders in recent weeks has been about the same as the similar period of last
year.
For more details please see La-Z-Boy's Form 10-Q filed with the SEC (available
on EDGAR) which includes, among other things, a full income statement, balance
sheet, cash flow statement and more management discussion.
NYSE & PSE: LZB Contact: Jim Korsnack (313) 241-4208
11/14/95 La-Z-Boy Chair Company Financial Information Release 1 of 3
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
SECOND QUARTER ENDED (UNAUDITED)
----------------------------------------------
Percent of Sales
Oct. 28, Oct. 29, % Over ----------------
1995 1994 (Under) 1995 1994
-------- -------- ------- ------- -------
Sales $258,320 $230,586 12% 100.0% 100.0%
Cost of sales 188,644 166,816 13% 73.0% 72.3%
-------- -------- ------- ------- -------
Gross profit 69,676 63,770 9% 27.0% 27.7%
S, G & A 45,905 43,539 5% 17.8% 18.9%
-------- -------- ------- ------- -------
Operating profit 23,771 20,231 17% 9.2% 8.8%
Interest expense 1,437 752 91% 0.6% 0.3%
Interest income 484 355 36% 0.2% 0.2%
Other income 476 506 -6% 0.2% 0.1%
-------- -------- ------- ------- -------
Pretax income 23,294 20,340 15% 9.0% 8.8%
Income taxes 9,038 8,262 9% 38.8%* 40.6%*
-------- -------- ------- ------- -------
Net income $14,256 $12,078 18% 5.5% 5.2%
======== ======== ======= ======= =======
Average shares 18,497 18,028 3%
Earnings per share $0.77 $0.67 15%
Dividends per share $0.19 $0.17 12%
SIX MONTHS ENDED (UNAUDITED)
----------------------------------------------
Percent of Sales
Oct. 28, Oct. 29, % Over ----------------
1995 1994 (Under) 1995 1994
-------- -------- ------- ------- -------
Sales $454,077 $404,973 12% 100.0% 100.0%
Cost of sales 340,022 300,470 13% 74.9% 74.2%
-------- -------- ------- ------- -------
Gross profit 114,055 104,503 9% 25.1% 25.8%
S, G & A 83,842 76,571 9% 18.4% 18.9%
-------- -------- ------- ------- -------
Operating profit 30,213 27,932 8% 6.7% 6.9%
Interest expense 2,901 1,414 105% 0.6% 0.3%
Interest income 940 628 50% 0.2% 0.2%
Other income 851 779 9% 0.1% 0.1%
-------- -------- ------- ------- -------
Pretax income 29,103 27,925 4% 6.4% 6.9%
Income taxes 11,672 11,577 1% 40.1%* 41.5%*
-------- -------- ------- ------- -------
Net income $17,431 $16,348 7% 3.8% 4.0%
======== ======== ======= ======= =======
Average shares 18,496 18,140 2%
Earnings per share $0.94 $0.90 4%
Dividends per share $0.36 $0.34 6%
* As a percent of pretax income, not sales.
Acquisition amortization of $260 for the second quarter and $520 for the six
months ended October 29, 1994 has been reclassified from other income to
selling, general and administrative.
England/Corsair was included in the second quarter and six months ended
October 28, 1995 results, but not in the second quarter and six months
ended October 29, 1994 results.
11/14/95 La-Z-Boy Chair Company Financial Information Release 2 of 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
Oct. 28, Oct. 29, ---------------- April 29,
1995 1994 Dollars Percent 1995
-------- -------- ------- ------- ---------
Current assets
Cash & equivalents $15,944 $12,299 $3,645 30% $27,048
Receivables 206,615 193,004 13,611 7% 192,938
Inventories
Raw materials 37,938 35,561 2,377 7% 39,604
Work-in-process 36,130 33,302 2,828 8% 35,036
Finished goods 33,075 27,885 5,190 19% 29,051
-------- -------- ------- ------- --------
FIFO inventories 107,143 96,748 10,395 11% 103,691
Excess of FIFO over LIFO (22,822) (20,941) (1,881) -9% (22,600)
-------- -------- ------- ------- --------
Total inventories 84,321 75,807 8,514 11% 81,091
Deferred income taxes 19,131 15,849 3,282 21% 18,242
Other current assets 7,612 8,735 (1,123) -13% 6,081
-------- -------- ------- ------- --------
Total current assets 333,623 305,694 27,929 9% 325,400
Property, plant & equipment 117,790 96,663 21,127 22% 117,175
Goodwill 41,094 20,307 20,787 102% 41,701
Other long-term assets 19,023 19,850 (827) -4% 19,542
-------- -------- ------- ------- --------
Total assets $511,530 $442,514 $69,016 16% $503,818
======== ======== ======= ======= ========
Unaudited Increase
----------------- (Decrease) Audited
Oct. 28, Oct. 29, ----------------- April 29,
1995 1994 Dollars Percent 1995
------- ------- ------- ------- --------
Current liabilities
Current portion of l/t debt $5,658 $1,875 $3,783 202% $4,676
Current portion - captl leases 2,198 - 2,198 N/M 2,078
Accounts payable 34,774 27,170 7,604 28% 29,323
Payroll/benefits 29,968 28,561 1,407 5% 31,845
Estimated income taxes 8,524 3,940 4,584 116% 4,855
Other current liabilities 21,032 18,605 2,427 13% 15,343
-------- -------- ------- ------- ---------
Total current liabilities 102,154 80,151 22,003 27% 88,120
Long-term debt 59,616 56,245 3,371 6% 71,149
Capital leases 5,261 - 5,261 N/M 5,298
Deferred income taxes 6,610 6,763 (153) -2% 6,610
Other long-term liabilities 8,767 8,286 481 6% 9,001
Shareholders' equity
18,525,490 shares, $1.00 par 18,525 17,975 550 3% 18,562
Capital in excess of par 27,705 10,412 17,293 166% 28,085
Retained earnings 283,686 263,342 20,344 8% 277,738
Currency translation (794) (660) (134) -20% (745)
-------- -------- ------- ------- ---------
Total shareholders' equity 329,122 291,069 38,053 13% 323,640
-------- -------- ------- ------- ---------
Total liabilities and
shareholders' equity $511,530 $442,514 $69,016 16% $503,818
======== ======== ======= ======= =========
The Oct. 28, 1995 and the April 29, 1995 balance sheets include E/C's assets
and liabilities. The Oct. 29, 1994 balance sheet does not include E/C and is
not comparable to the other periods.
11/14/95 La-Z-Boy Chair Company Financial Information Release Page 3 of 3
Overall:
Refer to today's press release for additional information.
Gross profit:
Second quarter gross profit was 27.0% of sales vs. 27.7% of sales last year.
The decline of 0.7 points was primarily due to the inclusion of the
historically lower than average gross profit of England/Corsair (E/C).
This impact is expected to continue throughout the fiscal year.
S, G & A:
Second quarter S, G & A was 17.8% of sales vs. 18.9% of sales last year. The
decline of 1.1 points was primarily due to the inclusion of the historically
lower than average S, G & A of E/C. This impact is expected to continue
throughout the fiscal year. In addition, bonus and incentive expenses were
lower.
Operating profit margin:
Second quarter operating profit was 9.2% of sales vs. 8.8% of sales last year.
The 0.4 point increase was primarily due to profitability improvements in
upholstery operating divisions.
The largest division, U.S. Residential, improved primarily due to productivity
improvements, selling price increases and reduced health-care expenses. This
improvement is expected to continue but is sensitive to changes in sales
volume and other factors. The Contract Division also improved and is expected
to continue improving into the third quarter. In addition, the Canadian
Division improved in the second quarter vs. last year but third quarter results
are expected to be below prior year's level.
Income taxes:
Second quarter income tax expense as a percent of pretax income was 38.8% vs.
40.6%. The 1.8 point decline was primarily due to the favorable results of the
Canadian Division reversing some of the unfavorable tax impacts recorded in
prior quarters. The third quarter is not expected to be favorably affected to
this degree. In addition, the overall tax rate of the other divisions is
lower than the prior year's rate.
Inventories:
At the end of the second quarter, total FIFO inventories were 11% higher than
at the same time last year almost entirely due to recently acquired E/C whose
inventories were not included in last year's figures. Overall, finished
goods inventories increased 19% largely due to the inclusion of E/C.
Debt:
Long-term debt declined $6 million in the second quarter. This was debt of
E/C and was retired early to reduce interest expense.
Share repurchase:
During the second quarter, the Board of Directors authorized the repurchase of
an additional 1 million shares of company stock, bringing the total authorized
but not yet repurchased level to 1.3 million shares.
