-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RvqtbwZLd8oBWt0lGo74DtZ2r+D2CRv0wsS3YxXHfeoG3+e8anAt+J00DbMSvkcG LSZzveE62jxPQSQ8gL0R/w== 0000057131-98-000048.txt : 19981105 0000057131-98-000048.hdr.sgml : 19981105 ACCESSION NUMBER: 0000057131-98-000048 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981024 FILED AS OF DATE: 19981104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LA-Z-BOY INC CENTRAL INDEX KEY: 0000057131 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD FURNITURE [2510] IRS NUMBER: 380751137 STATE OF INCORPORATION: MI FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09656 FILM NUMBER: 98737870 BUSINESS ADDRESS: STREET 1: 1284 N TELEGRAPH RD CITY: MONROE STATE: MI ZIP: 48162 BUSINESS PHONE: 3132414414 FORMER COMPANY: FORMER CONFORMED NAME: LA Z BOY CHAIR CO DATE OF NAME CHANGE: 19920703 10-Q 1 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 24, 1998 COMMISSION FILE NUMBER 1-9656 LA-Z-BOY INCORPORATED - -------------------------------------------------------------------------------- (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 (734) 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 October 24, 1998 - ----------------------------------------- ------------------------------- Common Shares, $1.00 par value 52,908,743 Part 1. Financial Information The Consolidated Balance Sheet and Consolidated Statement of Income required for Part 1 are contained in the Registrant's Financial Information Release dated November 4, 1998 and are incorporated herein by reference. -----------------------------------------------------------
LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited, amounts in thousands) Three Months Ended Six Months Ended ------------------------- ------------------------ Oct 24, Oct 25, Oct 24, Oct 25, 1998 1997 1998 1997 ------------ ---------- ---------- ---------- Cash Flows from Operating Activities Net income $ 18,447 $ 16,822 $ 25,631 $ 18,548 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 5,936 5,195 11,353 10,068 Change in receivables (60,025) (52,888) (17,454) (3,986) Change in inventories 1,393 6,416 (7,975) (7,742) Change in other assets and liabilities 31,233 25,967 21,424 10,744 Change in deferred taxes (2,815) (1,960) (2,742) (1,960) -------- -------- -------- -------- Total adjustments (24,278) (17,270) 4,606 7,124 -------- -------- -------- -------- Cash Provided (Used) by Operating Activities (5,831) (448) 30,237 25,672 Cash Flows from Investing Activities Proceeds from disposals of assets 88 76 293 392 Capital expenditures (4,128) (5,775) (8,233) (11,343) Change in other investments (537) 159 (2,427) (288) -------- -------- -------- -------- Cash Used for Investing Activities (4,577) (5,540) (10,367) (11,239) Cash Flows from Financing Activities Retirements of debt (120) (116) (3,211) (2,041) Capital lease principal payments (361) (513) (803) (1,040) Stock for stock option plans 3,237 1,091 4,688 3,103 Stock for 401(k) employee plans 458 283 837 686 Purchase of La-Z-Boy stock (11,160) (6,973) (18,763) (9,397) Payment of cash dividends (4,263) (3,775) (8,006) (7,543) -------- -------- -------- -------- Cash Used for Financing Activities (12,209) (10,003) (25,258) (16,232) Effect of exchange rate changes on cash (281) 62 (591) 98 -------- -------- -------- -------- Net change in cash and equivalents (22,898) (15,929) (5,979) (1,701) Cash and equivalents at beginning of period 45,619 39,610 28,700 25,382 -------- -------- -------- -------- Cash and equivalents at end of period $ 22,721 $ 23,681 $ 22,721 $ 23,681 ======== ======== ======== ======== Cash paid during period -Income taxes $7,403 $6,222 $7,878 $7,663 -Interest $588 $955 $1,131 $1,794 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 INCORPORATED 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 1998 Annual Report filed with the Securities and Exchange Commission. The financial information included herein, other than the consolidated balance sheet as of April 25, 1998, has been prepared by management without audit by independent certified public accountants. The consolidated balance sheet as of October 24, 1998 has been prepared on a basis consistent with, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended April 25, 1998. 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 24, 1999. 3. Forward-Looking Information Any forward-looking statements contained in this report represent management's current expectations based on present information and current assumptions. These statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "should", or "anticipates". Forward-looking statements are inherently subject to risks and uncertainties. Actual results could differ materially from those which are anticipated or projected due to a number of factors. These factors include, but are not limited to, anticipated growth in sales; success of product introductions; fluctuations of interest rates, changes in consumer confidence/demand and other risks and factors identified from time to time in the Company's reports filed with the Securities and Exchange Commission. 4. Earnings per Share The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" in 1998. The Statement requires both basic and diluted earnings per share to be presented. Basic earnings per share is computed using the weighted-average number of shares outstanding during the period. Diluted earnings per share uses the weighted-average number of shares outstanding during the period plus the additional common shares that would be outstanding if the dilutive potential common shares were issued. This includes employee stock options. Prior period earnings per share information has been restated to be in compliance with SFAS No. 128.
Three Months Ended Six Months Ended --------------------- -------------------- Oct. 24, Oct. 25, Oct. 24, Oct. 25, (Amounts in thousands) 1998 1997* 1998 1997* - ---------------------- ------ ------ ------ ------ Weighted average common shares outstanding (basic) . 53,121 53,665 53,250 53,759 Effect of options ............. 308 170 296 152 ------ ------ ------ ------ Weighted average common shares outstanding (diluted) 53,429 53,835 53,546 53,911 ====== ====== ====== ====== *Restated to reflect a three-for-one stock split, in the form of a 200% stock dividend effective September 1998.
LA-Z-BOY INCORPORATED MANAGEMENT DISCUSSION AND ANALYSIS 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.(a) Financial Position The Company's strong financial position is reflected in the debt to capital percentage of 15% and a current ratio of 3.1 to 1 at the end of the second quarter. At April 25, 1998, the debt to capital percentage was 16% and the current ratio was 3.5 to 1. At the end of the preceding year's second quarter, the debt to capital percentage was 14% and the current ratio was 3.2 to 1. As of October 24, 1998, there was $116 million of unused lines of credit available under several credit arrangements. Stock Repurchase Program Approximately 18% of the 12 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. Year 2000 The Year 2000 issue arises from the use of two-digit date fields used in computer programs which may cause problems as the year changes from 1999 to 2000. These problems could cause disruptions of operations or processing of transactions. To address the Year 2000 challenge, the Company established a Year 2000 Program Office guided by a steering committee consisting of senior executive management. This office serves as the central coordination point for all Year 2000 compliance efforts of the Company. The Company has included IT (Information Technologies) systems and non-IT systems as well as third party readiness in the scope of its Year 2000 project. The Company is on schedule with regards to its internal plan. The Company is in the process of having an independent verification and assessment completed to assure that the Company has adequately identified possible areas of risk. This is expected to be complete in February, 1999. Management believes that the Company is taking the steps necessary to minimize the impact of the Year 2000 challenge. The challenges the Company faces with regards to its IT systems include upgrading of operating systems, hardware and software, and modifying order entry and invoicing programs. For the IT challenges, the Company has completed the inventory and assessment phases. The Company is presently in the remediation (defined as repairing, replacing, or retiring) phase of the project with expected completion by February, 1999. The Company expects to have its critical IT systems compliant and compatible, with the appropriate testing completed, by September, 1999. The primary challenges the Company faces with regards to its non-IT systems include plant floor machinery and facility related items. For these systems, the inventory and assessment phases have been completed. The Company believes these systems to be compliant and compatible. The Company is presently in the testing phase of its non-IT project with expected completion by September, 1999. With respect to third party readiness, the Company continues to work with customers, suppliers, and service providers in order to prevent disruption of business activities. Based on communications with these third parties, the Company believes that all material third parties will be sufficiently prepared for the Year 2000. For critical third parties, testing will be performed as deemed necessary. While the Company believes that it is preparing adequately for all Year 2000 concerns, there is no guarantee against internal or external systems failures. Such failures could have a material adverse effect on the Company's results of operations, liquidity and financial condition. The Company believes that its most likely worst case scenario would be business interruptions caused by third party failures. The Company expects to have contingency plans in place prior to the Year 2000 for IT and non-IT systems, as well as for areas of concern with relation to third parties. At the present time, the total Year 2000 related costs are estimated to be $12 to $16 million. To date, the Company has spent approximately $5 million. Included in the total estimated expenditures are both remediation and, in some cases, enhancement or improvement related costs that cannot easily be separated from remediation costs. Some of these enhancements or improvements were previously planned and were merely accelerated as a means to address Year 2000 challenges. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) (27) Financial Data Schedule (EDGAR only). (99) News Releases and Financial Information Release: re Actual second quarter results and Management Discussion dated November 4, 1998. (b) An 8-K was filed on July 27, 1998 to disclose a three-for-one stock split to be effected as a 200% stock dividend effective September 14, 1998. 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 24, 1998 to be signed on its behalf by the undersigned thereunto duly authorized. LA-Z-BOY INCORPORATED (Registrant) Date November 4, 1998 /s/Gene M. Hardy ----------------------- Gene M. Hardy Secretary and Treasurer (Principal Accounting Officer) EX-27 2
5 1,000 6-mos APR-24-1999 OCT-24-1998 22,721 0 256,328 0 99,880 404,214 119,660 187,252 601,738 128,957 0 0 0 52,909 338,887 601,738 603,711 603,711 450,493 450,493 110,798 0 2,351 42,337 16,706 25,631 0 0 0 25,631 0.48 0.48
EX-99.A 3 News Release LA-Z-BOY REPORTS RECORD SECOND QUARTER NYSE & PCX: LZB Contact: Gene Hardy (734) 241-4306 MONROE, MI., November 4, 1998: La-Z-Boy Incorporated, one of the world's largest producers of furniture, continued reaching record levels of quarterly sales and profit. Financial Details For the second quarter ended 10/24/98 of La-Z-Boy's 1999 fiscal year, sales reached $334.8 million, up 14% from last year's second quarter of $293.2 million. Net income was up 10% to $18.4 million vs. $16.8 million. Diluted EPS (Earnings Per Share) increased at a faster rate than net income due to stock repurchases and was up 13% to $0.35 vs. $0.31. For the six months ended 10/24/98 of La-Z-Boy's 1999 fiscal year, sales reached $603.7 million, up 19% from last year's first half of $505.5 million. Net income was up 38% to $25.6 million vs. $18.5 million. Diluted EPS was up 41% to $0.48 vs. $0.34. President Comments La-Z-Boy President and Chief Operating Officer, Gerald L. Kiser said "We expect our sales momentum to carry over into the third quarter. We look for an overall growth rate of 7%, and perhaps as much as 10% if consumer demand for furniture remains good. La-Z-Boy's rate of sales growth continues to outpace the furniture industry as a whole. "Our Chairman, Patrick Norton, was honored at an all-industry dinner as the 1998 City of Hope Spirit of Life Honoree. As co-honoree with Bill Child of R. C. Willey, Pat helped raise over $1.2 million for cancer research during this year's campaign. The Company extends its congratulations to Pat and Bill." (The City of Hope is a cancer research hospital in Los Angeles, California.) Marketing The recently held High Point Furniture Market was very successful for all residential product divisions. The England/Corsair, Sam Moore and Hammary divisions reported strong, positive dealer reaction to their product introductions and the joint introduction of the Thomas Kinkade Home Furnishings Collection by the La-Z-Boy Residential and Kincaid Divisions was a success by all measures. The collection was the largest single collection launch in Kincaid's history and garnered a great deal of press coverage at market. Demonstrating the Company's design prowess, three separate divisions were awarded the American Society of Furniture Designers' 1998 Pinnacle Design Achievement Awards. Kincaid's LeBistro collection won for casual dining; La-Z-Boy Residential captured the motion upholstery award for its 407 Metro design and Hammary took home the prize in Occasional furniture for its Cadence group. Company Overview La-Z-Boy manufactures quality upholstered and casegoods home furniture as well as office furniture. In addition to the La-Z-Boy brand name, which is the most recognized home furniture brand name in North America, four other major brands are part of La-Z-Boy Incorporated: Kincaid, England/Corsair, Hammary and Sam Moore. More Information La-Z-Boy Incorporated's second quarter 10-Q filing including an income statement, balance sheet, cash flow statement and additional management discussion is available now at the Company's internet site (www.lazboy.com). This press release is just one part of La-Z-Boy Incorporated's disclosures and should be read in conjunction with all other 10-Q information. About 48 hours after this release, this second quarter 10-Q information should be available on the SEC's internet site (www.sec.gov.) 11/4/98 Page 1 of 3 La-Z-Boy Incorporated Financial Information Release CONSOLIDATED STATEMENT OF INCOME (Amounts in thousands, except per share data) SECOND QUARTER ENDED (UNAUDITED) -------------------------------------------------------- October 24, October 25, % Over Percent of Sales ------------------ 1998 1997 (Under) 1998 1997 ----------- ----------- -------- -------- -------- Sales ............... $334,831 $293,208 14% 100.0% 100.0% Cost of sales ....... 245,062 215,370 14% 73.2% 73.5% -------- -------- -- ----- ----- Gross profit ... 89,769 77,838 15% 26.8% 26.5% S, G & A ............ 59,510 50,400 18% 17.8% 17.1% -------- -------- -- ----- ----- Operating profit 30,259 27,438 10% 9.0% 9.4% Interest expense .... 1,164 1,027 13% 0.3% 0.4% Interest income ..... 471 512 -8% 0.1% 0.2% Other income ........ 865 527 64% 0.3% 0.2% -------- -------- -- ----- ----- Pretax income .. 30,431 27,450 11% 9.1% 9.4% Income tax expense .. 11,984 10,628 13% 39.4%* 38.7%* -------- -------- -- ----- ----- Net income ..... $ 18,447 $ 16,822 10% 5.5% 5.7% ======== ======== == ===== ===== Diluted EPS ** $0.35 $0.31 13% Basic EPS ** $0.35 $0.31 13% Dividends per share ** $0.08 $0.07 14% SIX MONTHS ENDED (UNAUDITED) ---------------------------------------------------------- October 24, October 25, % Over Percent of Sales -------------------- 1998 1997 (Under) 1998 1997 ----------- ----------- -------- ---------- -------- Sales ............... $603,711 $505,534 19% 100.0% 100.0% Cost of sales ....... 450,493 379,554 19% 74.6% 75.1% -------- -------- -------- ----- ----- Gross profit ... 153,218 125,980 22% 25.4% 24.9% S, G & A ............ 110,798 95,757 16% 18.4% 18.9% -------- -------- -------- ----- ----- Operating profit 42,420 30,223 40% 7.0% 6.0% Interest expense .... 2,351 2,051 15% 0.4% 0.4% Interest income ..... 1,048 994 5% 0.2% 0.2% Other income ........ 1,220 1,277 -4% 0.2% 0.2% -------- -------- -------- ----- ----- Pretax income .. 42,337 30,443 39% 7.0% 6.0% Income tax expense .. 16,706 11,895 40% 39.5%* 39.1%* -------- -------- -------- ----- ----- Net income ..... $ 25,631 $ 18,548 38% 4.2% 3.7% ======== ======== ======== ===== ===== Diluted EPS ** $0.48 $0.34 41% Basic EPS ** $0.48 $0.35 37% Dividends per share ** $0.15 $0.14 7% * As a percent of pretax income, not sales ** Restated to reflect three-for-one stock split, in the form of a 200% stock dividend effective September 1998.
11/4/98 Page 2 of 3 La-Z-Boy Incorporated Financial Information Release CONSOLIDATED BALANCE SHEET (Amounts in thousands, except par value) Unaudited Increase Audited -------------------------- October 24, October 25, (Decrease) Apr. 25, ------------------- 1998 1997 Dollars Percent 1998 ------------ ----------- ---------- ------- ----------- Current assets Cash & equivalents ..................... $ 22,721 $ 23,681 ($ 960) -4% $ 28,700 Receivables ............................ 256,328 216,989 39,339 18% 238,260 0 Inventories Raw materials ...................... 47,847 40,672 7,175 18% 43,883 Work-in-process .................... 39,118 36,652 2,466 7% 40,640 Finished goods ..................... 35,627 33,110 2,517 8% 30,193 -------- --------- -------- ------- --------- FIFO inventories ............... 122,592 110,434 12,158 11% 114,716 Excess of FIFO over LIFO (22,712) (21,513) (1,199) -6% (22,812) -------- --------- -------- ------- --------- Total inventories ......... 99,880 88,921 10,959 12% 91,904 Deferred income taxes .................. 19,396 22,395 (2,999) -13% 16,679 Income taxes ........................... -- -- N/M N/M 936 Other current assets ................... 5,889 427 5,462 N/M 6,549 -------- --------- -------- ------- --------- Total current assets ............... 404,214 352,413 51,801 15% 383,028 Property, plant & equipment ................ 119,660 119,247 413 0% 121,762 Goodwill ................................... 48,017 41,755 6,262 15% 49,413 Other long-term assets ..................... 29,847 31,169 (1,322) -4% 26,148 --------- --------- -------- ------- --------- Total assets ................... $ 601,738 $ 544,584 $ 57,154 10% $ 580,351 ========= ========= ======== ======= ========= Current liabilities Current portion - l/t debt ............. $ 4,726 $ 5,118 ($ 392) -8% $ 4,822 Current portion - capital leases ....... 1,099 1,778 (679) -38% 1,383 Accounts payable ....................... 50,693 37,579 13,114 35% 36,703 Payroll/other comp ..................... 39,063 32,362 6,701 21% 39,617 Income taxes ........................... 6,885 11,132 (4,247) -38% -- Other current liabilities .............. 26,491 23,659 2,832 12% 25,764 --------- -------- ------- ------ --------- Total current liabilities .......... 128,957 111,628 17,329 16% 108,289 Long-term debt ............................. 63,319 52,522 10,797 21% 66,434 Capital leases ............................. 300 1,401 (1,101) -79% 819 Deferred income taxes ...................... 5,454 5,814 (360) -6% 5,478 Other long-term liabilities ................ 11,912 10,343 1,569 15% 11,122 Commitments & contingencies ................ -- -- N/M N/M -- Shareholders' equity Common shares, $1 par * ................ 52,909 53,485 (576) -1% 53,551 Capital in excess of par ............... 30,328 28,378 1,950 7% 29,262 Retained earnings * .................... 310,417 281,969 28,448 10% 306,445 Currency translation ................... (1,858) (956) (902) -94% (1,049) --------- --------- -------- ------- --------- Total shareholders' equity ......... 391,796 362,876 28,920 8% 388,209 Total liabilities and --------- --------- -------- ------- --------- shareholders' equity ........... $ 601,738 $ 544,584 $ 57,154 10% $ 580,351 ========= ========= ======== ======= ========= * Restated to reflect three-for-one stock split, in the form of a 200% stock dividend effective September 1998.
11/4/98 Page 3 of 3 La-Z-Boy Incorporated Financial Information Release COMMENTS AND ANALYSIS Overall: Refer to today's press release for additional information. Gross profit margins: Gross profit margins increased to 26.8% of sales from 26.5% in last year's second quarter on a 14% increase in sales dollars and a 10% increase in sales units. The absence of hardwood and plywood supply chain disruptions and casegood operation relocation costs favorably impacted this year's gross profit margin. The absence of these items along with volume related reductions in costs more than offset unfavorable Canadian currency exchange effects. Gross profit margin was unfavorably affected by currency exchange impacts associated with inventory purchased by La-Z-Boy's Canadian upholstery plant from various La-Z-Boy plants in the U.S. La-Z-Boy Canada purchases stationary and other finished goods from La-Z-Boy U.S. plants to supplement its motion upholstery production enabling a full complement of La-Z-Boy products to be sold in Canada. In addition, many component parts (e.g. fabric, wood parts, and metal parts) for the motion upholstery products are purchased from the U.S. Management has been evaluating options for minimizing costs and risks associated with changes in currency exchange rates. Inventories: Raw materials inventories were up 18% over the same period last year primarily as a result of air dried lumber stocks being increased to reduce the dependence on kiln dried lumber purchases and leather hides inventories being increased to support new leather upholstery programs. S,G & A: Second quarter S, G & A increased to 17.8% of sales vs. 17.1% last year. The largest cause was due to an increase in Information Technology (I.T.) expenses relating to Year 2000 projects. As expected, performance bonus related expenses increased due to higher sales and profits. La-Z-Boy held many other S, G & A expenses at a growth rate consistent or lower than the sales growth rate, thus somewhat offsetting the higher I.T. related and performance bonus increases. Higher I.T. related and bonus expenses are expected to continue throughout the year. -----END PRIVACY-ENHANCED MESSAGE-----