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 27, 1996 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 July 27, 1996
Common Shares, $1.00 par value 18,164,437
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 14, 1996 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 27, July 29,
1996 1995
------- --------
Cash Flows from Operating Activities
Net income $4,598 $3,175
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 4,855 4,684
Change in receivables 44,935 37,849
Change in inventories (12,928) (4,393)
Change in other assets and liab. (19,136) (15,846)
Change in deferred taxes - -
-------- --------
Total adjustments 17,726 22,294
-------- --------
Cash Provided by Operating
Activities 22,324 25,469
Cash Flows from Investing Activities
Proceeds from disposals of assets 113 133
Capital expenditures (4,580) (3,160)
Change in other investments (5,621) 959
--------- --------
Cash Used for Investing Activities (10,201) (2,068)
Cash Flows from Financing Activities
Short-term debt - -
Long-term debt - -
Retirements of debt (2,940) (4,072)
Capital leasees - -
Capital lease principal payments (565) (517)
Stock for stock option plans 1,470 1,268
Stock for 401(k) employee plans 383 305
Purchase of La-Z-Boy stock (7,126) (4,392)
Payment of cash dividends (3,482) (3,155)
--------- --------
Cash Used for Financing Activities (12,260) (10,563)
Effect of exch. rate changes on cash (53) (78)
--------- --------
Net change in cash and equivalents (190) 12,760
Cash and equiv. at beginning of period 27,060 27,048
--------- --------
Cash and equiv. at end of period $26,870 $39,808
========= ========
Cash paid during period - Income taxes $2,257 $1,657
- Interest $833 $1,110
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 1996 Annual Report filed with the
Securities and Exchange Commission. The financial information included
herein, other than the consolidated condensed balance sheet as of April
27, 1996, 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 27, 1996 has been derived
from, but does not include all the disclosures contained in, the audited
consolidated financial statements for the year ended April 27, 1996. 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 26, 1997.
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 99
The Company's strong financial position is reflected in the debt to capital
percentage of 16% and a current ratio of 3.9 to 1 at the end of the first
quarter. At April 27, 1996, the debt to capital percentage was 20% and the
current ratio was 3.7 to 1. At the end of the preceding year's first
quarter, the debt to capital percentage was 20% and the current ratio was
4.0 to 1. As of July 27, 1996, there was $63 million of unused lines of
credit available under several credit arrangements.
Approximately 29% 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 Shareholders of La-Z-Boy Chair Company was held on
July 29, 1996, for the purposes of electing four members to the board of
directors, amending and restating the Company's 1993 Performance-Based Stock
Plan and amending the Company's Articles of Incorporation to change the
Company's name to "La-Z-Boy Incorporated". 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. The Shareholders elected all of Management's nominees for
directors as listed in the proxy statement and approved amending and
restating the stock plan and changing the Company name. The name change is
expected to become effective August 30, 1996.
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
first quarter results and Management Discussion dated
August 14, 1996.
(b) An 8-K was filed on May 30, 1996 releasing fourth quarter and
full year financial results. This release also included the financial
section of the 1996 Annual Report.
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 July 27, 1996 to be signed on its behalf by the undersigned thereunto
duly authorized.
LA-Z-BOY CHAIR COMPANY
(Registrant)
/s/ James J. Korsnack
Date August 14, 1996 James J. Korsnack
Corporate Controller
5
1,000
3-MOS
APR-26-1997
JUL-27-1996
26,870
0
161,406
0
92,120
306,211
116,323
153,256
493,120
78,812
0
18,207
0
0
320,920
493,120
202,227
202,227
154,917
154,917
39,354
0
1,107
8,097
3,499
4,598
0
0
0
4,598
.25
.25
Receivables are reported net of allowances for doubtful accounts on the
Statement of Financial Position.
NEWS RELEASE
------------
HIGHER SALES AND EARNINGS FOR LA-Z-BOY
Company's name will change. "We make much more than chairs."
MONROE, MI., August 14, 1996: For its 1997 fiscal first quarter ended
July 27, 1996, La-Z-Boy Chair Company continued to improve its sales and
profits compared to last year. This was the fourth consecutive quarterly
improvement. First quarter sales rose 3% and net income per share increased
by $0.08 to $0.25.
On 8/30/96 the company will change its name to La-Z-Boy(R) Incorporated.
The creator of the reclining chair industry has become America's largest
manufacturer of upholstered furniture for living rooms and family rooms.
La-Z-Boy also produces dining room, bedroom and occasional furniture, and
has a growing office furniture business.
FINANCIAL DETAILS
First quarter sales were $202 million vs. last year's $196 million, an
increase of 3%. First quarter operating profit rose to $8.0 million vs.
last year's $6.4 million. Net income rose to $4.6 million vs. last year's
$3.2 million. Net income per share increased to $0.25 vs. $0.17 last year.
CHAIRMAN COMMENTS
La-Z-Boy Chairman and President Charles T. Knabusch said, "We had a soft
quarter in last year's first quarter for both sales and profits. This year,
sales were generally in line with industry sales and they were at their
highest rate in about a year on a comparable basis excluding acquisitions.
Incoming sales orders are at a rate above last year's and are pointing to a
good second quarter, especially for our Hammary and Kincaid divisions' Ducks
Unlimited exclusive new product introduction."
Mr. Knabusch said that profits improved not only because of increased
sales but because of a moderation of raw material prices and ongoing cost
reduction initiatives. He added that the company has just begun to reduce
the number of plants producing wood frame parts in order to improve quality
and reduce costs.
Regarding the company's name change, Mr. Knabusch said the "chair com-
pany" identification is no longer appropriate. "We make much more than
chairs. Today's families can enjoy La-Z-Boy comfort throughout their homes.
As a single source for quality furniture and accessories, La-Z-Boy is chang-
ing the way America shops for furniture, and it is time to update our Com-
pany's name."
MORE
The Company's repositioning effort continues through the use of national
television featuring its two talking raccoons, "Wendall and Al". Both deal-
ers and consumers have responded enthusiastically to the new TV campaign,
which was launched in May and is scheduled to run again in September and Oc-
tober. In addition to the national exposure, an extensive retail marketing
program has been designed for dealer use during the same period to help in-
crease sales.
La-Z-Boy purchased about $7.1 million of its own stock on the open market
in the quarter compared to $4.4 million last year. La-Z-Boy still has over
800,000 shares of its stock remaining and authorized to be purchased. There
is no set stock purchase timetable.
The number of shares outstanding continues to drop. As of 7/29/95 there
were 18.5 million shares compared to 18.4 million at 4/27/96 and 18.2 mil-
lion at 7/27/96.
La-Z-Boy's Form 10-Q filed with the SEC (and available on EDGAR) includes
a full income statement, balance sheet, cash flow statement and additional
management discussion.
NYSE & PSE: LZB Contact: Jim Korsnack (313) 241-4208
8/14/96 La-Z-Boy Chair Company Financial Information Release 1 of 3
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
FIRST QUARTER ENDED (UNAUDITED)
----------------------------------------------
Percent of Sales
July 27, July 29, % Over ----------------
1996 1995 (Under) 1996 1995
-------- -------- ------- ------- -------
Sales $202,227 $195,757 3% 100.0% 100.0%
Cost of sales 154,917 151,378 2% 76.6% 77.3%
-------- -------- ------- ------- -------
Gross profit 47,310 44,379 7% 23.4% 22.7%
S, G & A 39,354 37,937 4% 19.5% 19.4%
-------- -------- ------- ------- -------
Operating profit 7,956 6,442 24% 3.9% 3.3%
Interest expense 1,107 1,464 -24% 0.5% 0.7%
Interest income 463 456 2% 0.2% 0.2%
Other income 785 375 109% 0.4% 0.2%
-------- -------- ------- ------- -------
Pretax income 8,097 5,809 39% 4.0% 3.0%
Income taxes 3,499 2,634 33% 43.2%* 45.3%*
-------- -------- ------- ------- -------
Net income $4,598 $3,175 45% 2.3% 1.6%
======== ======== ======= ======= =======
Average shares 18,291 18,494 -1%
Earnings per share $0.25 $0.17 47%
Dividends per share $0.19 $0.17 12%
* As a percent of pretax income, not sales.
8/14/96 La-Z-Boy Chair Company Financial Information Release 2 of 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
July 27, July 29, ---------------- April 27,
1996 1995 Dollars Percent 1996
-------- -------- ------- ------- ---------
Current assets
Cash & equivalents $26,870 $39,808 ($12,938) -33% $27,060
Receivables 161,406 155,089 6,317 4% 206,430
Inventories
Raw materials 40,309 38,968 1,341 3% 37,274
Work-in-process 35,701 35,570 131 0% 35,241
Finished goods 37,845 33,742 4,103 12% 28,333
-------- -------- ------- ------- --------
FIFO inventories 113,855 108,280 5,575 5% 100,848
Excess of FIFO over LIFO (21,735) (22,795) 1,060 5% (21,656)
-------- -------- ------- ------- --------
Total inventories 92,120 85,485 6,635 8% 79,192
Deferred income taxes 19,271 18,242 1,029 6% 19,271
Other current assets 6,544 8,246 (1,702) -21% 5,148
-------- -------- ------- ------- --------
Total current assets 306,211 306,870 (659) 0% 337,101
Property, plant & equipment 116,323 115,848 475 0% 116,199
Goodwill 39,947 41,414 (1,467) -4% 40,359
Other long-term assets 30,639 18,891 11,748 62% 23,887
-------- -------- ------- ------- --------
Total assets $493,120 $483,023 $10,097 2% $517,546
======== ======== ======= ======= ========
Unaudited Increase
----------------- (Decrease) Audited
July 27, July 29, ----------------- April 27,
1996 1995 Dollars Percent 1996
------- ------- ------- ------- --------
Current liabilities
Current portion of l/t debt 4,625 $5,676 ($1,051) -19% $5,625
Current portion - captl leases 2,114 2,078 36 2% 2,114
Accounts payable 27,027 29,169 (2,142) -7% 30,997
Payroll/other comp 21,651 18,549 3,102 17% 34,609
Estimated income taxes 6,903 5,854 1,049 18% 5,572
Other current liabilities 16,492 14,777 1,715 12% 17,601
-------- -------- ------- ------- ---------
Total current liabilities 78,812 76,103 2,709 4% 96,518
Long-term debt 55,135 66,077 (10,942) -17% 57,075
Capital leases 3,654 5,141 (1,487) -29% 4,219
Deferred income taxes 6,663 6,610 53 1% 6,663
Other long-term liabilities 9,729 8,318 1,411 17% 9,695
Shareholders' equity
18,206,857 shares, $1.00 par 18,207 18,461 (254) -1% 18,385
Capital in excess of par 28,225 28,130 95 0% 28,016
Retained earnings 293,563 274,995 18,568 7% 297,750
Currency translation (868) (812) (56) -7% (775)
-------- -------- ------- ------- --------
Total shareholders' equity 333,127 320,774 18,353 6% 343,376
-------- -------- ------- ------- ---------
Total liabilities and
shareholders' equity $493,120 $483,023 $10,097 2% $517,546
======== ======== ======= ======= =========
08/14/96 La-Z-Boy Chair Company Financial Information Release Page 3 of 3
Overall:
- --------
Refer to today's press release for additional information.
Gross profit:
- -------------
Gross profit improved to 23.4% of sales from 22.7% of sales last year.
The improvement was primarily due to favorable sales mix effects between
divisions. That is, some divisions with greater than average gross profit
margins had higher than the average 3% increase to sales and some divisions
with lower than average margins had lower than the 3% average increase to
sales. These favorable mix effects more than offset unfavorable division
effects in the opposite direction.
A secondary reason for the gross profit margin improvement was an im-
provement within some divisions compared to themselves in the prior year
first quarter; primarily in the contract Business Furniture Group. This di-
vision is not expected to have as great of an improvement in the upcoming
second quarter because first quarter last year was depressed and a more nor-
mal second quarter occurred last year.
Interest expense:
- -----------------
Interest expense declined 24% from last year largely due to paying
down debt. To a lesser extent, lower interest rates have reduced interest
ex- pense. Assuming additional debt is not taken on and interest rates do
not increase substantially, interest expense should remain below the prior
year level for the remainder of the fiscal year.
Other income:
- -------------
Other income exceeded last year by 109% largely due to royalty income.
Future quarters are not expected to exceed the prior year to this degree.
In the past, this line item has had large percentage ups and downs and has
been difficult to predict.
Income taxes:
- -------------
Income tax expense as a percent of pretax income was 43.2% vs. 45.3%
last year. The decline was largely due to changes in profitability among
the di- visions. Due to the traditionally lower profit level of the first
quarter, rate fluctuations are common. In the second quarter, the effective
tax rate is likely to exceed the prior year due to last year's rate for the
quarter being very low. This was due to favorable Canadian division
results in the quarter last year that are not expected to be repeated this
year. Tax rates for the last two quarters of the year are likely to be
similar to the prior year.
Cash:
- -----
The first quarter cash balance was 33% below the prior year level.
The decline was largely due to increases in raw and finished goods
inventories and other long-term assets.
Finished goods inventories:
- ---------------------------
Finished goods inventories increased 12% from last year primarily due
to higher residential casegoods. At the April High Point market, the
Ducks Un- limited Collection was introduced by the Hammary and Kincaid
divisions. To reserve production time for this new collection, other
products needed to be built so that those products could continue to be
supported. A decline in these inventories is expected next quarter.
Other long-term assets:
- -----------------------
Other long-term assets increased 62% from last year. A major reason
for the increase was an investment in the international area. Most of the
re- maining increase relates to various proprietary store related financing
activities.
