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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 January 22, 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 January 22, 1994
Common Shares, $1.00 par value 18,320,185
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 February 14, 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 Nine Months Ended
------------------- -------------------
Jan. 22, Jan. 23, Jan. 22, Jan. 23,
1994 1993 1994 1993
--------- --------- --------- ---------
Cash Flows from Operating Activities:
Net income $ 7,988 $ 6,391 $25,729 $15,681
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,580 4,406 10,254 11,458
Change in receivables 28,195 17,598 16,826 14,201
Change in inventories (1,460) 357 (16,364) (4,241)
Change in other assets and liab. (7,331) 567 (7,001) 6,110
Change in deferred taxes 3 281 (2,970) 280
--------- --------- --------- ---------
Total adjustments 22,987 23,209 745 27,808
--------- --------- --------- ---------
Cash Provided by Operations 30,975 29,600 26,474 43,489
Cash Flows from Investing Activities:
Proceeds from disposals of assets 79 176 146 228
Capital expenditures (4,069) (3,190) (13,283) (8,341)
Change in other investments (234) (157) (3,311) (2,470)
--------- --------- --------- ---------
Cash Used for Investing Activities: (4,224) (3,171) (16,448) (10,583)
Cash Flows from Financing Activities:
Short-term debt 0 486 441 1,767
Retirements of debt (530) (1,456) (983) (3,907)
Sale of Stock under stock option plans 456 350 1,683 962
Stock for 401(k) employee plans 707 636 2,073 1,895
Purchase of La-Z-Boy stock (261) (33) (857) (1,246)
Payment of cash dividends (3,109) (2,723) (8,576) (8,172)
--------- --------- --------- ---------
Cash Used for Financing Activities: (2,737) (2,740) (6,219) (8,701)
Effect of exch. rate changes on cash 23 (176) (213) (489)
--------- --------- --------- ---------
Net change in cash and equivalents 24,037 23,513 3,594 23,716
Cash and equiv. - beginning of period 8,365 21,940 28,808 21,737
--------- --------- --------- ---------
Cash and equiv. - end of period $32,402 $45,453 $32,402 $45,453
========= ========= ========= =========
Cash paid during period - Income tax $ 6,542 $ 4,323 $20,269 $12,353
- Interest 522 554 1,945 2,246
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 1993 Annual Report filed with the
Securities and Exchange Commission. The financial information included
herein, other than the consolidated condensed balance sheet as of April
24, 1993, 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 January 22, 1994 has been
derived from, but does not include all the disclosures contained in, the
audited consolidated financial statements for the year ended April 24,
1993. 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 30, 1994.
3. Income Taxes
------------
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes", was issued by the Financial Accounting Standards Board
(FASB) in February 1992. The Company elected to adopt the new standard
effective April 25, 1993. The Company's first quarter 10-Q report dated
August 17, 1993 includes notes which more fully discuss the adoption of
this new standard.
4. 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 I.
The Company's strong financial position is reflected in the debt to capital
percentage of 16% and a current ratio of 3.8 to 1 at the end of the third
quarter. At April 24, 1993, the debt to capital percentage was 17% and the
current ratio was 3.6 to 1. At the end of the preceding year's third quarter,
the debt to capital percentage was 19% and the current ratio was 3.7 to 1. As
of January 22, 1994, there was $61 million of unused lines of credit
available under several credit arrangements.
The Company is authorized to purchase up to 2 million shares of Company stock
on the open market. Approximately 47% of the shares have been purchased to
date. 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 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
- ------------------------------------------------------------
None.
Item 5. Other Information
- --------------------------
None.
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
Exhibit I News Release and Financial Information Release: re Actual third
quarter results and Management Discussion dated February 14, 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 January 22, 1994 to be signed on its behalf by the undersigned thereunto
duly authorized.
LA-Z-BOY CHAIR COMPANY
(Registrant)
Date: February 14, 1994 James J. Korsnack
Corporate Controller
NYSE & PSE: LZB News Release Contact: Jim Korsnack
(313) 241-4208
THIRD QUARTER LA-Z-BOY SALES UP 13%, EARNINGS UP 25%
MONROE, MI., February 14, 1994: La-Z-Boy Chair Company's third quarter that
ended on January 22, 1994 recorded sales up 13% and net income up 25% vs. last
year's third quarter. Both sales and earnings were record highs for a third
quarter.
Details of Financial Results
- ----------------------------
Third quarter sales grew to $193 million vs. $170 million, an increase of 13%,
while net income improved 25% to $8.0 million( $.44 per share) from $6.4
million ($.35 per share) in last year's third quarter. Cash dividends paid
rose 13%.
For the nine months ended January, sales were $564 million, 16% more than last
year's $486 million, and net income before an accounting change for income
taxes was $22.4 million ($1.23 per share) vs. $15.7 million ($.86 per share)
last year. After the accounting change, net income was $1.41 per share vs.
$.86 last year.
Chairman Comments
- -----------------
Charles T. Knabusch, La-Z-Boy Chairman and President, said, "Sales volume
was strong again across all five of our operating divisions, particularly
at Hammary [which primarily produces occasional tables]. La-Z-Boy modulars,
sofas, sleepers and reclining sofas continue to have much higher than average
rates of sales increases. Operating profit improved 28% even though many of
our plants had extra costs and problems due to the bad weather in late
December and early January."
Regarding the near future, Mr. Knabusch was generally optimistic. "Last
year's fourth quarter had very strong sales and profits. Even so, it looks
like we can do better this year although the percentage improvements probably
won't be as strong as the last two quarters."
New Manufacturing Facility
- --------------------------
Earlier this quarter La-Z-Boy announced that it will begin construction on a
new upholstery factory in Arkansas. The plant will be over 350,000 square
feet and will replace an existing older 200,000 square foot plant. It is
expected to cost roughly $7 million (including equipment) and generate new
jobs within the first two years of operation.
La-Z-Boy Chair Company Financial Information Release 1 of 4
CONSOLIDATED SUMMARY OF OPERATIONS 02/14/94
(Amounts in thousands, except per share data)
THIRD QUARTER ENDED (UNAUDITED)
----------------------------------------------
Amounts
------------------ Percent of Sales
Jan. 22, Jan. 23, % Over ----------------
1994 1993 (Under) 1994 1993
-------- -------- ------- ------- -------
Sales $192,648 $169,810 13% 100.0% 100.0%
Cost of sales 141,771 125,677 13% 73.6% 74.0%
-------- -------- ------- ------- -------
Gross profit 50,877 44,133 15% 26.4% 26.0%
S, G & A 36,877 33,210 11% 19.1% 19.6%
-------- -------- ------- ------- -------
Operating profit 14,000 10,923 28% 7.3% 6.4%
Interest expense 682 765 -11% 0.4% 0.5%
Other income 153 346 -56% 0.1% 0.3%
-------- -------- ------- ------- -------
Pretax income 13,471 10,504 28% 7.0% 6.2%
Income taxes * 5,483 4,113 33% 40.7% 39.2%
-------- -------- ------- ------- -------
Net income $ 7,988 $ 6,391 25% 4.1% 3.8%
======== ======== ======= ======= =======
Average shares 18,302 18,175 1%
Earnings per share $0.44 $0.35 26%
Dividends per share $0.17 $0.15 13%
* Percent of sales column is calculated as a percent of pretax income.
La-Z-Boy Chair Company Financial Information Release 2 of 4
CONSOLIDATED SUMMARY OF OPERATIONS 02/14/94
(Amounts in thousands, except per share data)
NINE MONTHS ENDED (UNAUDITED)
----------------------------------------------
Amounts
------------------ Percent of Sales
Jan. 22, Jan. 23, % Over ----------------
1994 1993 (Under) 1994 1993
-------- -------- ------- ------- -------
Sales $563,788 $485,690 16% 100.0% 100.0%
Cost of sales 416,978 363,144 15% 74.0% 74.8%
-------- -------- ------- ------- -------
Gross profit 146,810 122,546 20% 26.0% 25.2%
S,G & A 108,330 95,557 13% 19.2% 19.6%
-------- -------- ------- ------- -------
Operating profit 38,480 26,989 43% 6.8% 5.6%
Interest expense 2,178 2,473 -12% 0.4% 0.5%
Other income 1,021 1,295 -21% 0.2% 0.2%
-------- -------- ------- ------- -------
Pretax income 37,323 25,811 45% 6.6% 5.3%
Income taxes * 14,946 10,130 48% 40.0% 39.2%
-------- -------- ------- ------- -------
Income before acctg. change 22,377 15,681 43% 4.0% 3.2%
Accounting change 3,352 - N/A 0.6% N/A
-------- -------- ------- ------- -------
Net income $ 25,729 $ 15,681 64% 4.6% 3.2%
======== ======== ======= ======= =======
Average shares 18,257 18,168 0%
Earnings per share:
- -------------------
Income before acctg. change $1.23 $0.86 43%
Accounting change 0.18 - N/A
-------- -------- -------
Net income $1.41 $0.86 64%
======== ======== =======
Dividends per share $0.47 $0.45 4%
* Percent of sales column is calculated as a percent of pretax income.
La-Z-Boy Chair Company Financial Information Release 3 of 4
CONSOLIDATED BALANCE SHEET 02/14/94
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
Jan. 22, Jan. 23, ---------------- April 24,
1994 1993 Dollars Percent 1993
-------- -------- ------- ------- ---------
Current Assets
Cash & cash equivalents $ 32,402 $ 45,453 ($13,051) -29% $ 28,808
Receivables 158,280 146,430 11,850 8% 175,106
Inventories
Raw materials 33,259 25,394 7,865 31% 27,555
Work-in-process 32,063 28,687 3,376 12% 30,598
Finished goods 29,698 22,227 7,471 34% 20,135
-------- -------- ------- ------- ---------
Total FIFO 95,020 76,308 18,712 25% 78,288
LIFO reserve (18,170) (14,258) (3,912) -27% (17,801)
-------- -------- ------- ------- ---------
Total LIFO inventories 76,850 62,050 14,800 24% 60,487
Deferred income taxes 13,720 7,389 6,331 86% 9,152
Other current assets 5,956 644 5,312 825% 5,423
-------- -------- ------- ------- ---------
Total Current Assets 287,208 261,966 25,242 10% 278,976
Property, plant & equipment 93,889 90,596 3,293 4% 90,407
Goodwill 20,991 22,228 (1,237) -6% 21,658
Other long-term assets 12,922 8,387 4,535 54% 10,023
-------- -------- ------- ------- ---------
Total Assets $415,010 $383,177 $31,833 8% $401,064
======== ======== ======= ======= =========
Current Liabilities
Short-term debt $ 0 $ 1,400 ($ 1,400) -100% $ 0
Current portion of L/T debt 2,875 1,727 1,148 66% 542
Accounts payable 22,740 21,765 975 4% 20,010
Payroll/benefits related 26,913 22,840 4,073 18% 30,842
Estimated income taxes 3,148 3,329 (181) -5% 9,011
Other current liabilities 20,460 19,451 1,009 5% 17,046
-------- -------- ------- ------- ---------
Total Current Liabilities 76,136 70,512 5,624 8% 77,451
Long-term debt 52,495 55,459 (2,964) -5% 55,370
Deferred income taxes 6,455 5,339 1,116 21% 4,857
Shareholders' equity
18,320,185 shares, $1.00 par 18,320 18,200 120 1% 18,195
Capital in excess of par 9,596 8,227 1,369 17% 8,494
Retained earnings 252,550 225,911 26,639 12% 236,842
Currency translation (542) (471) (71) -15% (145)
-------- -------- ------- ------- ---------
Total Shareholders' Equity 279,924 251,867 28,057 11% 263,386
-------- -------- ------- ------- ---------
Total Liabilities and
Shareholders' Equity $415,010 $383,177 $31,833 8% $401,064
======== ======== ======= ======= =========
La-Z-Boy Chair Company Financial Information Release 4 of 4
02/14/94
Overall:
- --------
Refer to today's press release for additional comments.
Other Income:
- -------------
The $193 (56%) decline in other income for the quarter was due to changes
in pension-related assumptions. The expected long-term rate of return and
the discount rate were each lowered .5 points. In addition, a 16 year
amortization of the unrecognized net loss of the plan was started. The
fourth quarter should show a similar decline compared to the prior year.
Accounting Change:
- ------------------
During the first quarter of fiscal year 1994, the Company recorded a change
in accounting principle in connection with the issuance of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", by the
Financial Accounting Standards Board. This change in accounting principle
increased net income and the net deferred tax asset by $3.4 million or $.18
per share.
Cash:
- -----
The decrease in cash from $45 million last January to $32 million this year
was largely due to the increase in inventories, capital expenditures and
receivables. Raw materials were up 31% primarily in the area of fabric, wood
and leather. The availability of wood has been better this year than last
year. Most of the increase in finished goods inventories was due to plans to
better fill dealer orders at LZB's two largest divisions that offer shipments
from stock as opposed to build-to-order. The capital expenditure increase
was planned as expenditures last year were below average. The receivables
increase was largely due to the 13% increase in sales for the quarter.
Other Current Assets:
- ---------------------
The $5 million increase from last year was due to increased VEBA funding,
increased prepaid selling expenses, better estimating of expected health-care
expenses and changes in the timing of health-care payments.
Extra Week in Fourth Quarter:
- -----------------------------
The fourth quarter to end April 30, 1994 will have 14 weeks in it compared to
13 weeks in the prior year's fourth quarter. The full year ending April 30,
1994 will have 53 weeks compared to 52 weeks last year.