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 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 Jan. 27, 1996
Common Shares, $1.00 par value 18,537,880
<PAGE>
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, 1996 and are incorporated herein by reference.
<PAGE>
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. 27, Jan. 28, Jan. 27, Jan. 28,
1996 1995 1996 1995
------- -------- ------- --------
Cash Flows from Operating Activities
Net income $7,784 $7,221 $25,215 $23,569
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 4,886 3,829 14,305 11,151
Change in receivables 36,039 26,498 22,362 16,609
Change in inventories (4,871) 173 (8,101) (8,398)
Change in other assets and liab. (6,871) (183) (796) 2,858
Change in deferred taxes (770) (2,310) (1,659) (3,185)
-------- -------- -------- --------
Total adjustments 28,413 28,007 26,111 19,035
-------- -------- -------- --------
Cash Provided by Operating
Activities 36,197 35,228 51,326 42,604
Cash Flows from Investing Activities
Proceeds from disposals of assets 193 104 971 1,338
Capital expenditures (3,351) (4,691) (12,590) (15,179)
Change in other investments (2,918) 1,607 (1,830) 1,073
--------- -------- -------- --------
Cash Used for Investing Activities (6,076) (2,980) (13,449) (12,768)
Cash Flows from Financing Activities
Short-term debt 280 - 280 261
Long-term debt - - - 7,500
Capital lease obligations - - 1,161 -
Change in unexpended IRB funds - 680 - (59)
Retirements of debt (65) - (10,616) (5,011)
Capital lease principal payments (578) - (1,655) -
Sale of stock under stock option plans 428 194 2,503 1,551
Stock for 401(k) employee plans 344 349 987 1,179
Purchase of La-Z-Boy stock (52) (994) (4,485) (10,345)
Payment of cash dividends (3,523) (3,056) (10,183) (9,232)
--------- -------- -------- --------
Cash Used for Financing Activities (3,166) (2,827) (22,008) (14,156)
Effect of exch. rate changes on cash (69) (168) (87) (54)
--------- -------- -------- --------
Net change in cash and equivalents 26,886 29,253 15,782 15,626
Cash and equiv. at beginning of period 15,944 12,299 27,048 25,926
--------- -------- -------- --------
Cash and equiv. at end of period $42,830 $41,552 $42,830 $41,552
========= ======== ======== ========
Cash paid during period - Income taxes $11,668 $10,923 $20,479 $22,776
- Interest ($326) $944 $3,434 $2,362
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.
<PAGE>
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 January 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 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.
<PAGE>
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 3.6 to 1 at the end of the third
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 third quarter,
the debt to capital percentage was 16% and the current ratio was 4.0 to 1.
As of January 27, 1996, there was $62 million of unused lines of credit
available under several credit arrangements.
Approximately 43% 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.
<PAGE>
PART II. OTHER INFORMATION
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 third
quarter results and Management Discussion dated February 14, 1996.
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 January 27, 1996 to be signed on its behalf by the undersigned thereunto
duly authorized.
LA-Z-BOY CHAIR COMPANY
(Registrant)
Date: February 14, 1996 James J. Korsnack
Corporate Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-27-1996
<PERIOD-END> JAN-27-1996
<CASH> 42,830
<SECURITIES> 0
<RECEIVABLES> 170,576
<ALLOWANCES> 0
<INVENTORY> 89,192
<CURRENT-ASSETS> 326,599
<PP&E> 116,098
<DEPRECIATION> 144,202
<TOTAL-ASSETS> 505,969
<CURRENT-LIABILITIES> 91,905
<BONDS> 0
<COMMON> 18,538
0
0
<OTHER-SE> 315,124
<TOTAL-LIABILITY-AND-EQUITY> 505,969
<SALES> 680,431
<TOTAL-REVENUES> 680,431
<CGS> 510,624
<TOTAL-COSTS> 510,624
<OTHER-EXPENSES> 125,625
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,118
<INCOME-PRETAX> 42,681
<INCOME-TAX> 17,466
<INCOME-CONTINUING> 25,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,215
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
<FN> Receivables are reported net of allowances for doubtful accounts on the
Statement of Financial Position.
</TABLE>
News Release
SALES AND EARNING IMPROVE FOR LA-Z-BOY
MONROE, MI., February 14,1996: For its 1996 fiscal third quarter and nine
months ended January 27, 1996, La-Z-Boy Chair Company continued to improve its
sales and profits compared to last year. Third quarter sales rose 7% and
earnings increased 8%. For the nine months, sales were up 10% and earnings
were up 7%.
Financial Details
1996 THIRD QUARTER sales were $226 million vs. last year's $211 million, an
increase of 7%. Comparable sales--that is, including England/Corsair's sales
on a pro forma basis in last year's sales, declined 4%. England/Corsair was
acquired at the beginning of fiscal 1996 and is a separate operating division.
Third quarter net income rose 8% to $7.8 million vs. last year's $7.2 million.
Net income per share increased to $0.42 vs. $0.40 last year.
1996 NINE MONTHS sales were $680 million vs. last year's $616 million, an
increase of 10%. Comparable sales (including England/Corsair) were about 2%
less than last year's level. Net income was up 7% to $25.2 million vs. last
year's $23.6 million. Net income per share increased 5% to $1.36 from $1.30 in
last year.
Chairman Comments
La-Z-Boy Chairman and President Charles T. Knabusch said, "Third quarter
and nine month profits improved even though comparable sales decreased.
Operating profit gains by our U.S. Residential Division, which accounts
for about two-thirds of our total business, and higher sales of office
seating and furniture by our Contract Division contributed to this
improvement.
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.
"The retail marketplace softened in December and January; however, incoming
sales orders have been rising in recent weeks. The retail environment will
continue to be challenging through our fourth fiscal quarter, but with modest
improvement in consumer outlooks, we should be able to match or slightly exceed
last year's fourth quarter sales on a comparable basis."
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.
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
<PAGE>
2/14/96 La-Z-Boy Chair Company Financial Information Release 1 of 3
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
THIRD QUARTER ENDED (UNAUDITED)
----------------------------------------------
Percent of Sales
Jan. 27, Jan. 28, % Over ----------------
1996 1995 (Under) 1996 1995
-------- -------- ------- ------- -------
Sales $226,354 $210,814 7% 100.0% 100.0%
Cost of sales 170,602 157,767 8% 75.4% 74.8%
-------- -------- ------- ------- -------
Gross profit 55,752 53,047 5% 24.6% 25.2%
S, G & A 41,783 39,616 5% 18.4% 18.8%
-------- -------- ------- ------- -------
Operating profit 13,969 13,431 4% 6.2% 6.4%
Interest expense 1,217 1,041 17% 0.5% 0.5%
Interest income 390 374 4% 0.2% 0.2%
Other income 436 (76) 674% 0.1% -0.1%
-------- -------- ------- ------- -------
Pretax income 13,578 12,688 7% 6.0% 6.0%
Income taxes 5,794 5,467 6% 42.7%* 43.1%*
-------- -------- ------- ------- -------
Net income $7,784 $7,221 8% 3.4% 3.4%
======== ======== ======= ======= =======
Average shares 18,533 17,968 3%
Earnings per share $0.42 $0.40 5%
Dividends per share $0.19 $0.17 12%
<PAGE>
NINE MONTHS ENDED (UNAUDITED)
----------------------------------------------
Percent of Sales
Jan. 27, Jan. 28, % Over ----------------
1996 1995 (Under) 1996 1995
-------- -------- ------- ------- -------
Sales $680,431 $615,787 10% 100.0% 100.0%
Cost of sales 510,624 458,237 11% 75.0% 74.4%
-------- -------- ------- ------- -------
Gross profit 169,807 157,550 8% 25.0% 25.6%
S, G & A 125,625 116,187 8% 18.5% 18.9%
-------- -------- ------- ------- -------
Operating profit 44,182 41,363 7% 6.5% 6.7%
Interest expense 4,118 2,455 68% 0.6% 0.4%
Interest income 1,330 1,002 33% 0.2% 0.2%
Other income 1,287 703 83% 0.2% 0.1%
-------- -------- ------- ------- -------
Pretax income 42,681 40,613 5% 6.3% 6.6%
Income taxes 17,466 17,044 2% 40.9%* 42.0%*
-------- -------- ------- ------- -------
Net income $25,215 $23,569 7% 3.7% 3.8%
======== ======== ======= ======= =======
Average shares 18,509 18,083 2%
Earnings per share $1.36 $1.30 5%
Dividends per share $0.55 $0.51 8%
* As a percent of pretax income, not sales.
Acquisition amortization of $259 for the third quarter and $779 for the nine
months ended January 28, 1995 has been reclassified from other income to
selling, general and administrative.
England/Corsair was included in the third quarter and nine months ended
January 27, 1996 results, but not in the third quarter and nine months
ended January 28, 1995 results.
<PAGE>
2/14/96 La-Z-Boy Chair Company Financial Information Release 2 of 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
Jan. 27, Jan. 28, ---------------- April 29,
1996 1995 Dollars Percent 1995
-------- -------- ------- ------- ---------
Current assets
Cash & equivalents $42,830 $41,552 $1,278 3% $27,048
Receivables 170,576 166,506 4,070 2% 192,938
Inventories
Raw materials 42,623 36,362 6,261 17% 39,604
Work-in-process 37,071 33,574 3,497 10% 35,036
Finished goods 32,423 26,732 5,691 21% 29,051
-------- -------- ------- ------- --------
FIFO inventories 112,117 96,668 15,449 16% 103,691
Excess of FIFO over LIFO (22,925) (21,034) (1,891) -9% (22,600)
-------- -------- ------- ------- --------
Total inventories 89,192 75,634 13,558 18% 81,091
Deferred income taxes 19,841 17,820 2,021 11% 18,242
Other current assets 4,160 5,084 (924) -18% 6,081
-------- -------- ------- ------- --------
Total current assets 326,599 306,596 20,003 7% 325,400
Property, plant & equipment 116,098 97,552 18,546 19% 117,175
Goodwill 40,688 20,085 20,603 103% 41,701
Other long-term assets 22,584 17,191 5,393 31% 19,542
-------- -------- ------- ------- --------
Total assets $505,969 $441,424 $64,545 15% $503,818
======== ======== ======= ======= ========
<PAGE>
Unaudited Increase
----------------- (Decrease) Audited
Jan. 27, Jan. 28, ----------------- April 29,
1996 1995 Dollars Percent 1995
------- ------- ------- ------- --------
Current liabilities
Credit lines $280 - $280 N/M -
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 33,187 29,761 3,426 12% 29,323
Payroll/other comp 26,945 26,750 195 1% 31,845
Estimated income taxes 3,361 803 2,558 319% 4,855
Other current liabilities 20,276 16,975 3,301 19% 15,343
-------- -------- ------- ------- ---------
Total current liabilities 91,905 76,164 15,741 21% 88,120
Long-term debt 59,551 56,245 3,306 6% 71,149
Capital leases 4,684 - 4,684 N/M 5,298
Deferred income taxes 6,550 6,424 126 2% 6,610
Other long-term liabilities 9,617 8,170 1,447 18% 9,001
Shareholders' equity
18,537,880 shares, $1.00 par 18,538 17,969 569 3% 18,562
Capital in excess of par 27,867 10,464 17,403 166% 28,085
Retained earnings 288,136 267,014 21,122 8% 277,738
Currency translation (879) (1,026) 147 14% (745)
-------- -------- ------- ------- ---------
Total shareholders' equity 333,662 294,421 39,241 13% 323,640
-------- -------- ------- ------- ---------
Total liabilities and
shareholders' equity $505,969 $441,424 $64,545 15% $503,818
======== ======== ======= ======= =========
The January 27, 1996 and the April 29, 1995 balance sheets include E/C's assets
and liabilities. The January 28, 1995 balance sheet does not include E/C and is
not comparable to the other periods.
<PAGE>
2/14/96 La-Z-Boy Chair Company Financial Information Release Page 3 of 3
Overall:
Refer to today's press release for additional information.
Sales:
As indicated in the press release, comparable sales declined 4% in the third
fiscal quarter following a six month period during which comparable sales
approximated those in the prior year. Much of the recent decline occurred in
January, and was most pronounced in the Hammary and Canadian Divisions.
Overall, the incoming order rate is rising again. During the quarter, Contract
Division sales continued to exceed the prior year's level.
Gross profit:
Third quarter gross profit was 24.6% of sales vs. 25.2% of sales last year.
The decline was primarily due to the inclusion of the historically lower
than average gross profit of England/Corsair (E/C) and is expected to
continue through the fourth quarter.
S, G & A:
Third quarter S, G & A was 18.4% of sales vs. 18.8% of sales last year. The
decline was primarily due to the inclusion of the historically lower than
average S, G & A of E/C and is expected to continue through the fourth quarter.
Other Income:
Other income last year was unfavorably affected by Canadian exchange impacts.
Inventories:
At the end of the third quarter, total FIFO inventories were 16% higher largely
because E/C's inventories were not included in 1995 third quarter results. In
addition, leather and fabric inventories were higher than at this time last
year, but are likely to normalize by the end of the fourth quarter. Soft sales
in January contributed to this increase and helped cause finished goods
inventories to exceed last year's level, primarily in divisions that build wood
furniture to stock.
