UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment Number 1)
to
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED APRIL 24, 1999
Commission File No. 1-9656
LA-Z-BOY INCORPORATED
1284 N. Telegraph Road, Monroe, MI 48162
(734) 242-1444
Incorporated in Michigan I.R.S. Employer Identification Number 38-0751137
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Exchanges on Which Registered
- ----------------------------- ----------------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Based on the closing price of June 18, 1999, the aggregate market value of
common stock held by nonaffiliates of the registrant was $1.2 billion.
The number of common shares outstanding of the Registrant was 52,262,722 as of
June 18, 1999.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the 1999 Annual Report to Shareholders for the year ended April
24, 1999
are incorporated by reference in Part I, II and IV.
(2) Portions of the Annual Proxy Statement filed with the Securities and
Exchange Commission on June 25, 1999 are incorporated by reference into Part
III.
<PAGE>
The Form 10-K Annual Report of La-Z-Boy Incorporated ("Registrant")for the
fiscal year ended April 24, 1999, hereby is amended as follows:
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
Page(s) in the
1999 Annual Report
(1) Financial Statements to Shareholders
-------------------
Report of Management Responsibilities 17
Report of Independent Accountants 17
Consolidated Balance Sheet 18
Consolidated Statement of Income 19
Consolidated Statement of Cash Flows 20
Consolidated Statement of Changes in Shareholders'
Equity 21
Notes to Consolidated Financial Statements 22-27
Management's Discussion and Analysis 28-30
Consolidated Six-Year Summary of Selected
Financial Data 31
Dividend and Market Information 32
Unaudited Quarterly Financial Information 32
(2) Financial Statement Schedule: Pages in Form 10-K
for the Fiscal
Year Ended
April 24, 1999
-------------------
Report of Independent Accountants on Financial
Statement Schedule 14
Schedule II Valuation and Qualifying Accounts 15
Financial statement schedules not included in this Form 10-K Annual Report
have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
(3) Exhibits (Note 1)
Exhibit
Number Description of Exhibit
- -------- ---------------------------------------------------------------
(3.1) La-Z-Boy Incorporated Restated Articles of Incorporation
(Note 13)
(3.2) La-Z-Boy Incorporated Amendment to the Articles of Incorporation
(Note 13)
(3.3) La-Z-Boy Incorporated By-laws as amended and restated (Note 2)
(4) Instruments defining the rights of holders of long-term debt are
not filed herewith, pursuant to paragraph (4)(iii) of Regulation
S-K, Item 601. The Registrant will furnish all such documents to
the Securities and Exchange Commission (the "SEC") upon its
request.
*(10.1) La-Z-Boy Incorporated Amended and Restated 1993 Performance Based
Stock Plan (Note 7)
*(10.2) La-Z-Boy Incorporated Restricted Stock Plan for Non-Employee
Directors (Note 10)
*(10.3) La-Z-Boy Incorporated Executive Incentive Compensation Plan
Description (Note 5)
*(10.4) La-Z-Boy Incorporated Supplemental Executive Retirement Plan
(as revised in 1995) (Note 8)
*(10.5) La-Z-Boy Incorporated Amended and Restated 1997 Restricted Share
Plan (Note 4)
*(10.6) La-Z-Boy Incorporated 1997 Incentive Stock Option Plan (Note 4)
*(10.7) Form of Change in Control Agreement (Note 8) and list of
employees who are parties to the Change in Control Agreement
(Note 3)
*(10.8) Form of Indemnification Agreement (Note 9)
*(10.9) Summary Plan Description and Partial Plan Document for the
La-Z-Boy Incorporated Personal Executive Life Insurance Program
(the "Summary")(Note 5). (In the case of one executive officer,
Gene M. Hardy, the Personal Executive Life Insurance Program
operates differently from the manner described in the Summary,
in that: (a) Mr. Hardy does not benefit from Unscheduled Premium
payments, so information therein relating to such payments does
not apply to him, and (b) "gross up"
<PAGE>
payments to him are not repayable to the Company out of policy
death benefits or otherwise.)
*(10.10) The La-Z-Boy Incorporated 1986 Incentive Stock Option Plan
(Note 11)
*(10.11) The La-Z-Boy Incorporated 1989 Restricted Share Plan (Note 10)
(13) Portions of the 1999 Annual Report to Shareholders (Note 13)
(21) List of subsidiaries of La-Z-Boy Incorporated (Note 12)
(23) Consent of PricewaterhouseCoopers LLP (Note 13)
(27) Financial Data Schedule (Note 12)
NOTES TO EXHIBITS
* Indicates a contract or benefit plan under which one or more executive
officers or directors may receive benefits.
1. Copies of exhibits will be supplied upon request. All necessary annual
and quarterly reports are electronically filed with the SEC. Copies of the
exhibits are available through the SEC site on the Internet.
(http://www.sec.gov/cgi-bin/srch-edgar).
2. Incorporated by reference to an exhibit to the La-Z-Boy Incorporated Form
8-K dated June 11, 1999.
3. Incorporated by reference to an exhibit to the La-Z-Boy Incorporated Form
10-K for the fiscal year ended April 25, 1998.
4. Incorporated by reference to an exhibit to La-Z-Boy Incorporated's
definitive Proxy Statement dated June 27, 1997.
5. Incorporated by reference to an exhibit to the La-Z-Boy Incorporated Form
10-K for the fiscal year ended April 26, 1997.
6. Incorporated by reference to an exhibit to the La-Z-Boy Incorporated Form
10-Q for the quarter ended October 26, 1996.
7. Incorporated by reference to an exhibit to La-Z-Boy Incorporated's
definitive Proxy Statement dated June 27, 1996.
8. Incorporated by reference to an exhibit to the La-Z-Boy Incorporated Form
8-K dated February 6, 1995.
<PAGE>
9. Incorporated by reference to an exhibit to the La-Z-Boy Incorporated Form
8, Amendment No. 1, dated November 3, 1989.
10. Incorporated by reference to an exhibit to La-Z-Boy Incorporated's
definitive Proxy Statement dated July 6, 1989.
11. Incorporated by reference to an exhibit to La-Z-Boy Incorporated's
definitive Proxy Statement dated June 26, 1986.
12. Filed with the Form 10-K (Exhibit 27 is included in the EDGAR version only).
13. This document is filed with this Form 10-K/A.
(b) Reports on Form 8-k
A Form 8-K dated March 10, 1999, which reported on a press release, was
filed with the SEC on March 10, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Form 10-K/A to be signed on its
behalf by the undersigned, thereunto duly authorized.
LA-Z-BOY INCORPORATED
BY /s/Patrick H. Norton September 24, 1999
----------------------
P.H. Norton
Chairman of the Board
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- -------- ---------------------------------------------------------------
(3.1) La-Z-Boy Incorporated Restated Articles of Incorporation
(Note 1)
(3.2) Amendment to the La-Z-Boy Incorporated Restated of the Articles
of Incorporation (Note 1)
(3.3) La-Z-Boy Incorporated By-laws as amended and restated (Note 2)
(4) Instruments defining the rights of holders of long-term debt are
not filed herewith, pursuant to paragraph (4)(iii) of Regulation
S-K, Item 601. The Registrant will furnish all such documents to
the Securities and Exchange Commission (the "SEC") upon its
request.
*(10.1) La-Z-Boy Incorporated Amended and Restated 1993 Performance Based
Stock Plan (Note 2)
*(10.2) La-Z-Boy Incorporated Restricted Stock Plan for Non-Employee
Directors (Note 2)
*(10.3) La-Z-Boy Incorporated Executive Incentive Compensation Plan
Description (Note 2)
*(10.4) La-Z-Boy Incorporated Supplemental Executive Retirement Plan
(as revised in 1995) (Note 2)
*(10.5) La-Z-Boy Incorporated Amended and Restated 1997 Restricted Share
Plan (Note 2)
*(10.6) La-Z-Boy Incorporated 1997 Incentive Stock Option Plan (Note 2)
*(10.7) Form of Change in Control Agreement (Note 2) and list of
employees who are parties to the Change in Control Agreement
(Note 2)
*(10.8) Form of Indemnification Agreement (Note 2)
*(10.9) Summary Plan Description and Partial Plan Document for the
La-Z-Boy Incorporated Personal Executive Life Insurance Program
(the "Summary")(Note 2). (In the case of one executive officer,
Gene M. Hardy, the Personal Executive Life Insurance Program
operates differently from the manner described in the Summary,
in that: (a) Mr. Hardy does not benefit from Unscheduled Premium
payments, so information therein relating to such payments does
not apply to him, and (b) "gross up" payments to him are not
repayable to the Company out of policy death benefits or
otherwise.)
<PAGE>
*(10.10) The La-Z-Boy Incorporated 1986 Incentive Stock Option Plan
(Note 2)
*(10.11) The La-Z-Boy Incorporated 1989 Restricted Share Plan (Note 2)
(13) Portions of the 1999 Annual Report to Shareholders (Note 1)
(21) List of subsidiaries of La-Z-Boy Incorporated (Note 3)
(23) Consent of PricewaterhouseCoopers LLP (Note 1)
(27) Financial Data Schedule (Note 3)
NOTES
* Indicates a contract or benefit plan under which one or more executive
officers or directors may receive benefits.
(1) Filed with this Form 10-K/A.
(2) Incorporated by reference to prior filing (see Item 14(a)(3) of this
Form 10-K/A).
(3) Filed with the Form 10-K that this form amends.
<PAGE>
Exhibit 3.1
LA-Z-BOY INCORPORATED RESTATED ARTICLES OF INCORPORATION
ARTICLE I
The name of this corporation is La-Z-Boy Incorporated
ARTICLE II
The purpose or purposes of this corporation are as follows: To
manufacture, purchase, and sell at wholesale or retail, furniture, household
appliances, tools, dies, machinery and metal stampings, to buy, sell and
license the use of patents; to purchase, mortgage, improve, develop, hold,
lease or sell real estate; to borrow and loan money or its equivalent; to
hold,
sell or buy notes, mortgages and other evidences of indebtedness; to finance
installment sales; to discount and re-discount notes and other installment
paper; to buy bonds and stocks and to hold or sell the same; to develop
patents
and patented products; to develop, investigate and have patented any
patentable
ideas, designs, products or gadgets.
(In general to carry on any business in connection therewith and incident
thereto not forbidden by the laws of the State of Michigan and with all the
powers conferred upon corporations by the laws of the State of Michigan.)
ARTICLE III
Location of the corporation is Monroe, in the County of Monroe, State of
Michigan.
Post Office address of registered office in Michigan is 1284 North
Telegraph Road, Monroe, Michigan.
ARTICLE IV
(1) The aggregate number of shares which the Corporation has authority to
issue
is: (a) 40,000,000 shares of Common Stock, $1.00 par value per share;
and
(b) 5,000,000 shares of Preferred Stock.
(2) The relative rights, preferences, and limitations of the shares of each
class of shares shall be as follows:
PART I: COMMON STOCK
(a) Except as otherwise required by law or by an amendment to these
Articles of Incorporation, each holder of shares of Common Stock shall have
one
vote for each share of Common Stock held by him of record on the books of the
corporation on all matters voted upon by the shareholders.
(b) Subject to the preferential dividend rights, if any, applicable to
shares of Preferred Stock and subject to applicable requirements, if any, with
respect to the setting aside of sums for purchase, retirement or sinking funds
for Preferred Stock, the holders of shares of Common Stock shall be entitled
to
receive, to the extent permitted by law, such dividends as may be declared
from
time to time by the Board of Directors.
(c) In the event of the voluntary or involuntary liquidation,
dissolution,
distribution, of assets or winding up of the corporation, after distribution
in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of shares of Common Stock shall be entitled
to receive all of the remaining assets of the Corporation of whatever kind
available for distribution to shareholders ratably in proportion to the number
of shares of Common Stock held by them respectively. The Board of Directors
may distribute in kind to the holders of shares of Common Stock such remaining
assets of the Corporation or may sell, transfer, or otherwise dispose of all
or
any part of such remaining assets to any other corporation, trust or entity,
or
any combination thereof, and may sell all or any part of the consideration so
received and distribute any balance thereof in kind to holders of shares of
Common Stock. The merger of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or any purchase
or
redemption of shares of stock of the Corporation of any class, or the exchange
of shares of any class of stock of the Corporation for shares or other
securities of any other corporation, shall not be deemed to be a dissolution,
liquidation, or winding up of the Corporation for the purposes of this
paragraph (c).
(d) Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion
of
any shares of Preferred Stock or any obligation of the Corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and (ii) upon
exercise of any options, warrants, or rights at the time outstanding to
purchase shares of Common Stock.
(e) No holder of shares of Common Stock shall have any pre-emptive right
to subscribe for or to purchase any shares of the Corporation of any class or
series (including, for this purpose, any other securities convertible into or
carrying any right to subscribe for or acquire any such shares), whether such
shares or such class or series be now or hereafter authorized.
PART II: PREFERRED STOCK
(a) Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration or considerations as the Board of
Directors may determine.
(b) The Board of Directors is expressly authorized at any time, and from
time to time, to divide the class of Preferred Stock into, and to provide for
the issuance of shares of Preferred Stock in, one or more series, with such
voting powers, full or limited, or without voting powers, and with such
designations, relative rights, preferences and limitations as stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors, including (but without limiting the
generality of the foregoing) the following:
(i) The designation of such series and number of shares comprising
such series, which number may (except where otherwise provided by the
Board of Directors in creating such series) be increased or decreased
(but not below the number of shares then outstanding) from time to time
by action of the Board of Directors.
(ii) The dividend rate or rates on the shares of such series and the
preference or relation which such dividends shall bear to the dividends
payable on any other class of stock of the Corporation or on any other
series of Preferred Stock, the terms and conditions upon which and the
periods in respect of which dividends shall be payable, whether and upon
what condition such dividends shall be cumulative, and, if cumulative,
the date or dates from which dividends shall accumulate.
(iii) Whether the shares of such series shall be redeemable, in
whole
or in part, and if redeemable, whether redeemable for cash, bonds,
securities or other property, at the option of the Corporation, the
holder or upon the happening of a specified event, the limitations and
restrictions with respect to such redemption, the time or times when, or
periods during which, the price or prices or rate or rates at which, the
adjustments with which and the manner in which such shares shall be
redeemable, including the manner of selecting shares of such series for
redemption if less than all shares are to be redeemed.
(iv) The rights to which the holders of shares of such series shall
be entitled, and the preferences if any, over any other series (or of any
other series over such series), upon the voluntary or involuntary
liquidation, dissolution, distribution, or winding up of the corporation,
which rights may vary depending on whether such liquidation, dissolution,
distribution or winding up is voluntary or involuntary, and, if
voluntary, may vary at different dates.
(v) Whether the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, the extent to which
and the manner in which such fund shall be applied to the purchase or
redemption of the shares of such series for retirement or to other
corporate purposes and the terms and provisions relative to the operation
thereof.
(vi) Whether the shares of such series shall be convertible into, or
exchangeable for, at the option of either the holder or the Corporation
or upon the happening of a specified event, shares of any class or any
series of any class, or bonds, and, if so convertible or exchangeable,
the times, prices, rates, adjustments, and other terms and conditions of
such conversion or exchange.
(vii) The voting powers, full and/or limited, if any, of the shares
of such series, and whether and under what conditions the shares of such
series (alone or together with the shares of one or more other series
having similar provisions) shall be entitled to vote separately as a
single class, for the election of one or more directors, or additional
directors, of the corporation in the case of dividend arrearages or other
specified events, or upon other matters.
(viii) Whether the issuance of any additional shares of such series,
or of any shares of any other series, shall be subject to restrictions as
to issuance or as to the powers, preferences or rights of any such other
series.
(ix) Any other preferences, privileges and powers and relative,
participating, optional, or other special rights and qualifications,
limitations, or restrictions of such series, as the Board of Directors
may deem advisable and as shall not be inconsistent with the provisions
of these Articles of Incorporation
(c) Whenever the Board of Directors shall adopt such resolution or
resolutions so establishing and designating one or more series of Preferred
Stock and prescribing the relative rights, preferences and limitations of such
series, a certificate containing such resolution or resolutions shall be filed
as contemplated by Section 302(4) of the Michigan Business Corporation Act, as
amended, superseded or redesignated, and when filed shall constitute an
amendment to these Articles of Incorporation.
(d) Except as expressly provided in said resolution or resolutions of the
Board of Directors, no holder of shares of any series of Preferred Stock shall
have any pre-emptive right to subscribe for or to purchase any shares of the
Corporation of any class or series (including, for this purpose, any other
securities convertible into or carrying any right to subscribe for or acquire
any such shares), whether such shares or such class or series be now or
hereafter authorized.
ARTICLE V
The names and places of residence or business of each of the
incorporators
and the number and class of shares subscribed for by cash are as follows:
Names Residence or Business Address Common
- ------------------------- ------------------------------- --------
Floral City Furniture Company - 1314 N. Telegraph Rd.
Monroe, Michigan 195,500
Edwin J. Shoemaker - 1028 Bentley Drive
Monroe, Michigan 1,000
E.M. Knabusch - 1396 N. Telegraph Rd.
Monroe, Michigan 1,000
H.F. Gertz - 1016 N. Monroe Street
Monroe, Michigan 1,000
Otto C. Uecker - 408 So. Macomb Street
Monroe, Michigan 1,000
Ora H. Sessions - 445 Riverview Avenue
Monroe, Michigan 500
ARTICLE VI
The names and addresses of the First Board of Directors are as follows:
Name Address
Edwin J. Shoemaker 1028 Bentley Drive, Monroe, Michigan
E.M. Knabusch 1396 North Telegraph Rd., Monroe, Mich.
H.F. Gertz 1016 North Monroe Street, Monroe, Mich.
Otto C. Uecker 408 South Macomb Street, Monroe, Mich.
Ora H. Sessions 445 Riverview Avenue, Monroe, Mich.
ARTICLE VII
The term of the corporate existence is perpetual.
ARTICLE VIII
(1) Notwithstanding any other provisions of the Articles of Incorporation or
the Bylaws of the Corporation to the contrary, the Corporation shall not be
authorized to take any of the following actions or engage in any of the
following transactions, unless and until a proposal authorizing such action or
transaction shall have been approved by the affirmative vote of the holders of
not less than sixty-seven (67%) percent of all shares of stock of the
Corporation entitled to vote in elections of directors:
(a) The merger or consolidation of the Corporation with or into any
other corporation, person or entity; or
(b) The sale, exchange or lease by the Corporation of all or any
substantial part of the assets of the Corporation to any other
corporation, person or entity; or
(c) The issuance or transfer by the Corporation of (i) any voting
securities of the Corporation, or (ii) any options or warrants which
carry the right to acquire voting securities of the Corporation which are
convertible into, or exchangeable for, voting securities of the
Corporation, if such securities are issued or transferred in exchange or
payment for any securities or other property, including cash, or any
corporation, person or entity;
if, in any case, as of the record date for the determination of stockholders
entitled to notice thereof and to vote thereon or consent thereto, such other
corporation, person or entity described in (a), (b) or (c) above (hereinafter
referred to as the "Related Entity") is the beneficial owner, directly or
indirectly, of ten (10%) percent or more of the sum of (i) the outstanding
shares of stock of the Corporation entitled to vote in elections of directors,
and (ii) any unissued shares of stock of the Corporation of which the Related
Entity is the beneficial owner for purposes of this Article by virtue of its
beneficial ownership of conversion rights, options, warrants or otherwise
(such
status hereinafter referred to as "10% Stock Ownership").
(2) The provisions of this Article shall not be applicable to, and the
provisions of Michigan law relating to the percentage of stockholder approval
required, if any, shall apply to any action or transaction referred to in
Paragraph (1) of this Article (such actions and transactions being sometimes
individually referred to herein as a "Business Combination") if:
(a) all of the following three conditions shall have been satisfied:
(i) The aggregate amount of cash and the fair market value of other
consideration to be received per share by holders of Voting Stock in such
Business Combination is not less than the highest per share price
(including brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by such Related Entity in acquiring any of its holdings of
that class of Voting Stock;
(ii) the consideration to be received by the holders of Voting
Stock in such Business Combination shall be in the same form and of
the same kind as the consideration paid by the Related Entity in
previously acquiring shares or Voting Stock;
(iii) prior to the consummation of such Business Combination, such
Related Entity shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or tax
credits provided by the Corporation.
(b) prior to the time that such Related Entity shall have acquired a 10%
Stock Ownership, a majority of directors of the Corporation shall have
approved
a memorandum of understanding with such Related Entity with respect to, and
substantially consistent with, such Business Combination; or
(c) subsequent to the acquisition by such Related Entity of a 10% Stock
Ownership, a majority of the Continuing Directors of the Corporation, as in
hereinafter defined, shall have approved such Business Combination; or
(d) such Business Combination relates to, or is with, a corporation of
which a majority of the outstanding shares of each class of equity security is
owned of record or beneficially by the Corporation and where following the
consummation of such action or transaction stockholders of the Corporation
other than the Related Entity will retain their proportionate voting and
equity
interests in the Corporation or the resulting combined entity.
(3) For purposes of this Article:
(a) Such related Entity shall be deemed to be the beneficial owner of
any
shares of stock of the Corporation, whether issued or unissued, which (i) the
Related Entity, its affiliates and associates, as defined below, own directly
or indirectly, or have the right to acquire pursuant to any agreement or upon
exercise of conversion rights, warrants or options or otherwise, or (ii) are
beneficially owned, directly or indirectly, by any other corporation, person
or
entity with which the Related Entity, its affiliates or associates have any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of stock of the Corporation;
(b) The terms "affiliate" and "associate" are defined in this Article as
set forth in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934 as in effect at the date of adoption of this
Article by the stockholders of the Corporation;
(c) The term "Continuing Director" shall mean and include each director
of the Corporation (i) who was a member of the Board of Directors of the
Corporation on the date of the adoption of this Article by the stockholders of
the Corporation, or (ii) who was thereafter elected a director of the
Corporation by the Stockholders prior to the time that such Related Entity
acquired a 10% Stock Ownership, or (iii) who was elected a director of the
Corporation by the stockholders following the time such Related Entity
acquired
a 10% Stock Ownership upon the recommendation of a majority of the then
Continuing Directors in office to succeed a Continuing Director.
(4) A majority of the Continuing Directors of the Board shall have the power
and duty to determine, for purposes of this Article and on the basis of
information known to the Corporation, whether:
(a) a corporation, person or entity holds a 10% Stock Ownership;
(b) a corporation, person or entity is an "affiliate" or "associate" of
another corporation, person or entity;
(c) a memorandum of understanding referred to in subparagraph 2(b) above
is substantially consistent with the transaction covered thereby: and
(d) each of the conditions specified in subparagraph 2(a) hereof has been
satisfied.
Any such determination shall be conclusive and binding for all purposes of
this
Article.
ARTICLE IX
Whenever a compromise or arrangement or any plan of reorganization of this
corporation is proposed between this corporation and its creditors or any
class
of them and/or between this corporation and its shareholders or any class of
them, any court of equity jurisdiction within the state of Michigan, may on
the
application of this corporation or of any creditor or any shareholder thereof,
or on the application of any receiver or receivers appointed for this
corporation, order a meeting of the creditors or class of creditors, and/or of
the shareholders or class of shareholders, as the case may be, to be affected
by the proposed compromise or arrangement or reorganization, to be summoned in
such manner as said court directs. If a majority in number representing
three-
fourths (3/4) in value of the creditors or class of creditors, and/or of the
shareholders or class of shareholders, as the case may be, to be affected by
the proposed compromise or arrangement or re-organization, agree to any
compromise or arrangement or to any reorganization of this corporation as a
consequence of such compromise or arrangement, said compromise or arrangement
and said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the shareholders or class of shareholders, as the
case
may be, and also on this corporation.
ARTICLE X
(1) Any adoption, alteration or repeal of the By-laws of the Corporation by
the stockholders shall require the affirmative vote or consent of the holders
of not less than 67% of all shares of the stock of the Corporation entitled to
vote in elections of directors.
(2) The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation; provided, however, any
amendment or repeal of any provisions of Articles VIII and/or X of these
Articles of Incorporation shall require the affirmative vote or consent of the
holders of not less than 67% of all shares of the Corporation entitled to vote
with respect thereto unless such amendment or repeal is approved by and
recommended to the stockholders by a majority of those members of the Board of
Directors of the Corporation who would qualify as Continuing Directors within
the meaning of Article VIII of these Articles of Incorporation.
ARTICLE XI
Section 1. Limitation of Liability. A director of the Corporation shall not
be personally liable to the Corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director. However, this provision
does not eliminate or limit the liability of a director for any of the
following: (i) any breach of the director's duty of loyalty to the
Corporation
or its shareholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (iii) a violation of
Section 551(1) of the Michigan Business Corporation Act, as amended (the
"Act"), (iv) a transaction from which the director derived an improper
personal
benefit, or (v) an act or omission occurring before the date that the
amendment
to the Articles of Incorporation adding this Section 1 becomes effective in
accordance with the pertinent provisions of the Act. Any repeal, amendment or
other modification of this Section 1 shall not increase the liability or
alleged liability of any director of the Corporation then existing with
respect
to any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or there after brought or threatened based in whole or
in part upon any such state of facts.
Section 2. Indemnification. The Corporation shall indemnify any of its
directors and officers and may indemnify any of its employees and agents (in
each case including such person's heirs, executors, administrators and legal
representatives) who are made or threatened to be made a party to an action,
suit or proceeding (whether civil, criminal, administrative or investigative)
by reason of the fact that such person is or was a director, officer, employee
or agent of the Corporation or serves or served at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, to the fullest extent authorized
or permitted under the Act or other applicable law, as the same presently
exist
or may hereafter be amended, but in the case of any such amendment, only to
the
extent that such amendment permits the Corporation to provide broader
indemnification rights than authorized or permitted before such amendment.
Without limiting the generality of the foregoing, the following provisions,
except to the extent they limit the indemnity which may be provided pursuant
to
the foregoing, shall apply:
2.1 - Indemnification of Directors and Officers: Claims by Third Parties.
The
Corporation shall to the fullest extent authorized or permitted by the Act or
other applicable law, as the same presently exist or may hereafter be amended,
but, in the case of any such amendment, only to the extent such amendment
permits the Corporation to provide broader indemnification rights than before
such amendment, indemnify a director or officer (the "Indemnitee") who was or
is a party or is threatened to be made a party to a threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative,
or investigative and whether formal or informal, other than an action by or in
the right of the Corporation, by reason of the fact that he or she is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, whether for profit or not, against
expenses, including attorneys' fees, judgements, penalties, fines, and amounts
paid in settlement actually and reasonably incurred by him or her in
connection
with the action, suit or proceeding, if the Indemnitee acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation or its shareholders, and with respect to a
criminal action or proceeding, if the Indemnitee had no reasonable cause to
believe his or her conduct was unlawful. The termination of an action, suit
or
proceeding by judgement, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that
the Indemnitee did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its shareholders, and with respect to a criminal action or
proceeding, has reasonable cause to believe that his or her conduct was
unlawful.
2.2 - Indemnification of Directors and Officers: Claims Brought By or In the
Right of the Corporation. The Corporation shall, to the fullest extent
authorized or permitted by the Act or other applicable law, as the same
presently exist or may hereafter be amended, but, in the case of any such
amendment, only to the extent such amendment permits the Corporation to
provide
broader indemnification rights than before such amendment, indemnify a
director
or officer (the "Indemnitee") who was or is a party to or is threatened to be
made a party to a threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, or other enterprise,
whether for profit or not, against expenses, including actual and reasonable
attorneys' fees, and amounts paid in settlement incurred by the Indemnitee in
connection with the action or suit, if the Indemnitee acted in good faith and
in a manner the Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation or its shareholders. However,
indemnification shall not be made under this subsection 2.2 for claim, issue,
or matter in which the Indemnitee has been found liable to the Corporation
unless and only to the extent that the court in which the action or suit was
brought has determined upon application that, despite the adjudication of
liability but in view of all circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnification for the expenses which the
court considers proper.
2.3 - Actions Brought by the Indemnitee. Notwithstanding the provisions of
subsections 2.1 and 2.2 the Corporation shall not be required to indemnify an
Indemnitee in connection with an action, suit, proceeding or claim (or part
thereof) brought or made by such Indemnitee, unless such action, suit,
proceeding or claim (or part thereof): (i) was authorized by the Board of
Directors of the Corporation: or (ii) was brought or made to enforce this
Section 2 and the Indemnitee has been successful in such action, suit,
proceeding or claim (or part thereof).
2.4 - Approval of Indemnification. An indemnification under subsections 2.1
or
2.2 hereof, unless ordered by a court, shall be made by the Corporation only
as
authorized in the specific case upon a determination that indemnification of
the Indemnitee is proper in the circumstances because such Indemnitee has met
the applicable standard of conduct set forth in subsections 2.1 or 2.2 as the
case may be. This determination shall be made in any of the following ways:
(a) By a majority vote of a quorum of the Board consisting of directors
who were not parties to the action, suit, or proceeding.
(b) If the quorum described in subdivision (a) is not obtainable, then
by
a majority vote of a committee of directors who are not parties to the action.
The committee shall consist of not less than three (3) disinterested
directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
2.5 - Advancement of Expenses. Expenses incurred in defending a civil or
criminal action, suit, or proceeding described in subsections 2.1 or 2.2 above
shall be paid by the Corporation in advance of the final disposition of the
action, suit, or proceeding upon receipt of an undertaking by or on behalf of
the Indemnitee to repay the expenses if it is ultimately determined that the
Indemnitee is not entitled to be indemnified by the Corporation. The under
taking shall be by unlimited general obligation of the person on whose behalf
advances are made but need not be secured.
2.6 - Partial Indemnification. If an Indemnitee is entitled to
indemnification
under subsections 2.1 or 2.2 for a portion of expenses including attorneys'
fees, judgments, penalties, fines, and amounts paid in settlement, but not for
the total amount thereof, the Corporation shall indemnify the Indemnitee for
the portion of the expenses, judgments, penalties, fines, or amounts paid in
settlement for which the Indemnitee is entitled to be indemnified.
2.7 - Indemnification of Employees and Agents. Any person who is not covered
by the foregoing provisions of this Section 2 and who is or was an employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, may be indemnified to the fullest
extent authorized or permitted by the Act or other applicable law, as the same
exist or may hereafter be amended, but, in the case of any such amendment,
only
to the extent such amendment permits the Corporation to provide broader
indemnification rights than before such amendment, but in any event only to
the
extent authorized at any time or from time to time by the Board of Directors.
2.8 - Other Rights of Indemnification. The indemnification or advancement of
expenses provided under subsections 2.1 through 2.7 is not exclusive of other
rights to which a person seeking indemnification or advancement of expenses
may
be entitled under the Articles of Incorporation or Bylaws, or an agreement.
However, the total amount of expenses advanced or indemnified from all sources
combined shall not exceed the amount of actual expenses incurred by the person
seeking indemnification or advancement of expenses. The indemnification
provided for in subsections 2.1 through 2.7 continues as to a person who
ceases
to be a director, officer, employee, or agent and shall inure to the benefit
of
the heirs, executors, and administrators of the person.
2.9 - Definitions. "Other enterprise" shall include employee benefit plans;
"fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and "serving at the request of the Corporation" shall
include any service as a director, officer, employee, or agent of the
Corporation which imposes duties on, or involves services by, the director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be considered to have
acted
in a manner "not opposed to the best interests of the Corporation or its
shareholders" as referred to in subsections 2.1 and 2.2.
2.10 - Liability Insurance. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, whether for profit or not, against any liability asserted against
and incurred by such person in any such capacity or arising out of such
person's status as such, regardless of whether or not the Corporation would
have the power to indemnify such person against such liability under the
pertinent provisions of the Act.
2.11 - Enforcement. If a claim under this Section 2 is not paid in full by
the
Corporation within thirty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant
has
not met the standards of conduct which makes it permissible under the Act for
the Corporation to indemnify the claimant for the amount claimed, but the
burden of providing such defense shall be on the Corporation. Neither failure
of the Corporation (including the Board of Directors, a committee thereof,
independent legal counsel, or its shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because such claimant has met the applicable
standard of conduct set forth in the Act nor an actual determination by the
Corporation (including the Board of Directors, a committee thereof,
independent
legal counsel or its shareholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
2.12 - Contract with the Corporation. The right to indemnification conferred
in this Section 2 shall be deemed to be a contract right between the
Corporation and each director or officer who serves in any such capacity at
any
time while this Section 2 is in effect and any repeal or modification of this
Section 2 shall not affect any rights or obligations then existing with
respect
to any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or threatened based in whole or
in
part upon any such state of facts.
2.13 - Application to a Resulting or Surviving Corporation or Constituent
Corporation. The definition for "corporation" found in Section 569 of the
Act,
as the same exists or may hereafter be amended is, and shall be, specifically
excluded form application to this Section 2. The indemnification and other
obligations set forth in this Section 2 of the Corporation shall be binding
upon any resulting or surviving corporation after any merger of consolidation
with the Corporation. Notwithstanding any thing to the contrary contained
herein or in Section 569 of the Act, no person shall be entitled to the
indemnification and other rights set forth in this Section 2 for acting as a
director or officer of another corporation prior to such other corporation
entering into a merger or consolidation with the Corporation.
2.14 - Severability. Each and every paragraph, sentence, term and provision
of
this Section 2 shall be considered severable in that, in the event that a
court
finds any paragraph, sentence, term or provision to be invalid or
unenforceable, the validity and enforceability, operation, or effect of the
remaining paragraphs, sentences, terms or provisions shall not be affected,
and
this Section 2 shall be construed in all respects as if such invalid or
unenforceable matter had been omitted.
Exhibit (3.2)
AMENDMENT TO THE LA-Z-BOY INCORPORATED RESTATED ARTICLES OF
INCORPORATION
Article IV
(1) The aggregate number of shares which the Corporation has
authority to issue is:
(a) 150,000,000 shares of Common Stock, $1.00 par value per
share; and
[the rest of Article IV remains the same]
of Article IV remains the same]
Exhibit (13)
Financial Report
Report of Management Responsibilities
La-Z-Boy Incorporated
The management of La-Z-Boy Incorporated is responsible for the preparation
of the accompanying consolidated financial statements, related financial data
and all other information included in the following pages. The financial
statements have been prepared in accordance with generally accepted accounting
principles and include amounts based on management's estimates and judgements
where appropriate.
Management is further responsible for maintaining the adequacy and
effectiveness of established internal controls. These controls provide
reasonable assurance that the assets of La-Z-Boy Incorporated are safeguarded
and that transactions are executed in accordance with management's authorization
and are recorded properly for the preparation of financial statements. The
internal control system is supported by written policies and procedures, the
careful selection and training of qualified personnel and a program of internal
auditing.
The accompanying report of the Company's independent accountants states
their opinion on the Company's financial statements, based on audits
conducted in accordance with generally accepted auditing standards. The Board of
Directors, through its Audit Committee composed exclusively of outside
directors, is responsible for reviewing and monitoring the financial statements
and accounting practices. The Audit Committee meets periodically with the
internal auditors, management and the independent accountants to ensure that
each is meeting its responsibilities. The Audit Committee and the independent
accountants have free access to each other with or without management being
present.
/s/ Gerald L. Kiser
Gerald L. Kiser
President and Chief Operating Officer
/s/Frederick H. Jackson
Frederick H. Jackson
Chief Financial Officer
Report of Independent Accountants
PricewaterhouseCoopers
To the Board of Directors and Shareholders of La-Z-Boy Incorporated:
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of cash flows and of changes in
shareholders' equity, including pages 18 through 27, present fairly, in all
material respects, the financial position of La-Z-Boy Incorporated and its
subsidiaries (the "Company") at April 24, 1999 and April 25, 1998, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended April 24, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Toledo, Ohio
May 20, 1999
17
<PAGE>
Consolidated Balance Sheet
(Amounts in thousands, except par value) As of 4/24/99 4/25/98
- -------------------------------------------------------------------------------
Assets
Current assets
Cash and equivalents ............................... $ 33,550 $ 28,700
Receivables, less allowance of $19,550 in
1999 and $16,605 in 1998 ...................... 265,157 238,260
Inventories
Raw materials ................................. 47,197 43,883
Work-in-process ............................... 37,447 40,640
Finished goods ................................ 34,920 30,193
--------- ---------
FIFO inventories ......................... 119,564 114,716
Excess of FIFO over LIFO ................. (23,053) (22,812)
--------- ---------
Total inventories ................... 96,511 91,904
Deferred income taxes ............................... 20,028 16,679
Income taxes ........................................ -- 936
Other current assets ................................ 10,342 6,549
--------- ---------
Total current assets .......................... 425,588 383,028
Property, plant and equipment, net ...................... 125,989 121,762
Goodwill, less accumulated amortization of
$13,583 in 1999 and $11,523 in 1998 ................ 46,985 49,413
Other long-term assets, less allowance of
$6,077 in 1999 and $4,034 in 1998 .................. 31,230 26,148
--------- ---------
Total assets .................................. $ 629,792 $ 580,351
========= =========
Liabilities and shareholders' equity
Current liabilities
Current portion of long-term debt .................. $ 2,001 $ 4,822
Current portion of capital leases .................. 784 1,383
Accounts payable ................................... 45,419 36,703
Payroll/other compensation ......................... 53,697 39,617
Income taxes ....................................... 4,103 --
Other current liabilities .......................... 26,424 25,764
--------- ---------
Total current liabilities ..................... 132,428 108,289
Long-term debt .......................................... 62,469 66,434
Capital leases .......................................... 219 819
Deferred income taxes ................................... 5,697 5,478
Other long-term liabilities ............................. 14,064 11,122
Commitments and contingencies ........................... -- --
Shareholders' equity
Preferred shares-5,000 authorized; 0 issued ........ -- --
Common shares, $1 par value-150,000 authorized;
52,340 issued in 1999 and 53,551 in 1998*...... 52,340 53,551
Capital in excess of par value ..................... 31,582 29,262
Retained earnings*.................................. 332,934 306,445
Currency translation adjustments ................... (1,941) (1,049)
--------- ---------
Total shareholders' equity .................... 414,915 388,209
--------- ---------
Total liabilities and shareholders' equity $ 629,792 $ 580,351
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
*Restated to reflect a three-for-one stock split, in the form of a 200% stock
dividend, effective September, 1998.
18
<PAGE>
Consolidated Statement of Income
(Amounts in thousands,
except per share data)Fiscal year ended 4/24/99 4/25/98 4/26/97
- ------------------------------------------------------------------------------
Sales ................................. $ 1,287,645 $ 1,108,038 $ 1,005,825
Cost of sales ......................... 946,731 825,312 744,662
----------- ----------- -----------
Gross profit ..................... 340,914 282,726 261,163
Selling, general and administrative ... 234,075 205,523 187,230
----------- ----------- -----------
Operating profit ................. 106,839 77,203 73,933
Interest expense ...................... 4,440 4,157 4,376
Interest income ....................... 2,181 2,021 1,770
Other income .......................... 2,658 4,207 2,508
----------- ----------- -----------
Pretax income .................... 107,238 79,274 73,835
Income tax expense
Federal-current................... 41,286 28,467 26,247
-deferred.................. (4,727) (2,046) (1,699)
State -current................... 5,114 3,287 4,304
-deferred.................. (577) (354) (314)
----------- ----------- -----------
Total tax expense ..................... 41,096 29,354 28,538
----------- ----------- -----------
Net income ....................... $ 66,142 $ 49,920 $ 45,297
=========== =========== ===========
Diluted weighted average shares* . 53,148 53,821 54,575
Diluted net income per share* .... $ 1.24 $ 0.93 $ 0.83
Basic average shares*............. 52,890 53,654 54,324
Basic net income per share* ...... $ 1.25 $ 0.93 $ 0.83
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
*Restated to reflect a three-for-one stock split, in the form of a 200% stock
dividend, effective September, 1998.
19
<PAGE>
Consolidated Statement of Cash Flows
(Amounts in thousands) Fiscal year ended 4/24/99 4/25/98 4/26/97
- -------------------------------------------------------------------------------
Cash flows from operating activities
Net income .....................................$ 66,142 $ 49,920 $ 45,297
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization .............. 22,081 21,021 20,382
Change in receivables ...................... (26,875) (14,090) (8,178)
Change in inventories ...................... (4,607) (6,918) 421
Change in other assets and liabilities ..... 28,287 2,374 4,254
Change in deferred taxes ................... (3,130) 3,177 (2,014)
-------- -------- --------
Total adjustments ........................ 15,756 5,564 14,865
-------- -------- --------
Cash provided by operating activities .... 81,898 55,484 60,162
Cash flows from investing activities
Proceeds from disposals of assets .............. 401 1,585 1,527
Capital expenditures ........................... (25,316) (22,016) (17,778)
Change in other investments .................... (4,895) (16,066) (8,596)
-------- -------- --------
Cash used for investing activities ....... (29,810) (36,497) (24,847)
Cash flows from financing activities
Long-term debt ................................. -- 35,000 --
Retirements of debt ............................ (6,786) (24,653) (5,640)
Capital leases ................................. 204 -- --
Capital lease principal payments ............... (1,403) (2,017) (2,114)
Stock for stock option plans ................... 6,431 5,748 4,213
Stock for 401(k) employee plans ................ 1,902 1,704 1,568
Purchases of La-Z-Boy stock .................... (30,460) (16,391) (20,751)
Payment of cash dividends ...................... (16,417) (15,029) (14,142)
-------- -------- --------
Cash used for financing activities ....... (46,529) (15,638) (36,866)
Effect of exchange rate changes on cash .......... (709) (31) (127)
-------- -------- --------
Net change in cash and equivalents ............... 4,850 3,318 (1,678)
Cash and equivalents at beginning of the year .... 28,700 25,382 27,060
-------- -------- --------
Cash and equivalents at end of the year ..........$ 33,550 $ 28,700 $ 25,382
======== ======== ========
Cash paid during the year
- Income taxes .................................$ 44,842 $ 29,025 $ 28,670
- Interest .....................................$ 4,340 $ 4,235 $ 4,437
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
20
<PAGE>
Consolidated Statement of Changes in Shareholders' Equity
Capital Currency
in trans-
excess lation
Common of par Retained adjust-
(Amounts in thousands) shares value earnings ments Total
- -------------------------------------------------------------------------------
At April 27, 1996 ....... $ 18,385 $ 28,016 $ 297,750 ($ 775) $343,376
Purchases of La-Z-Boy stock .. (693) (20,058) (20,751)
Currency translation ......... (223) (223)
Stock options/401(k) ......... 216 (319) 5,884 5,781
Dividends paid ............... (14,142) (14,142)
Net income ................... 45,297 45,297
-------- -------- --------- ------- --------
At April 26, 1997 ....... 17,908 27,697 314,731 (998) 359,338
Purchases of La-Z-Boy stock .. (484) (15,907) (16,391)
Currency translation ......... (51) (51)
Stock options/401(k) ......... 333 1,110 6,008 7,451
Acquisition related .......... 93 455 2,423 2,971
Dividends paid ............... (15,029) (15,029)
Net income ................... 49,920 49,920
-------- -------- --------- ------ --------
At April 25, 1998 ...... 17,850 29,262 342,146 (1,049) 388,209
Three-for-one stock split..... 35,700 (35,700) --
Purchases of La-Z-Boy stock .. (1,700) (28,760) (30,460)
Currency translation ......... (892) (892)
Stock options/401(k) ......... 490 2,320 5,523 8,333
Dividends paid ............... (16,417) (16,417)
Net income ................... 66,142 66,142
-------- -------- --------- ------ --------
At April 24, 1999 ....... $ 52,340 $ 31,582 $ 332,934 ($1,941) $414,915
======== ======== ========= ====== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
21
<PAGE>
Notes to Consolidated Financial Statements
Note 1: Accounting Policies
The Company operates primarily in the U.S. furniture industry. The
following is a summary of significant accounting policies followed in the
preparation of these financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of La-Z-Boy
Incorporated and its subsidiaries. All significant intercompany transactions
have been eliminated. Certain non-U.S. subsidiaries are consolidated on a
one-month lag.
Risks and Uncertainties
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, sales and expenses for the reporting periods. Actual results could
differ from those estimates.
Cash and Equivalents
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
on the last-in, first-out (LIFO) basis.
Property, Plant and Equipment
Items capitalized, including significant betterments to existing
facilities, are recorded at cost. Depreciation is computed using primarily
accelerated methods over the estimated useful lives of the assets.
Goodwill
The excess of the cost of operating companies acquired over the value of
their net tangible assets is amortized on a straight-line basis over 30 years
from the date of acquisition.
Goodwill is evaluated periodically as events or circumstances indicate a
possible inability to recover its carrying amount. Such evaluation is based on
profitability projections and cash flow analysis. If future expected
undiscounted cash flows are insufficient to recover the carrying amount of the
asset, then the asset is written down to fair value.
Revenue Recognition
Revenue is recognized upon shipment of product.
Income Taxes
Income tax expense is provided on all revenue and expense items included in
the consolidated statement of income, regardless of the period such items are
recognized for income tax purposes.
Earnings per Share
Basic net income per share is computed using the weighted-average number
of shares outstanding during the period. Diluted net income per share uses the
weighted-average number of shares outstanding during the period plus the
additional common shares that would have been outstanding if the dilutive
potential common shares had been issued. This includes employee stock options.
The information below has been restated for a three-for-one stock split.
Fiscal year
(Amounts in thousands) ended 4/24/99 4/25/98 4/26/97
- ------------------------------------------------------------
Weighted average common
shares outstanding (Basic).. 52,890 53,654 54,324
Effect of options ............... 258 167 251
Weighted average common
------ ------ ------
shares outstanding (Diluted) 53,148 53,821 54,575
====== ====== ======
Note 2: Acquisitions
On April 1, 1998, the Company acquired all of the capital stock of Sam
Moore Furniture Industries, Incorporated, a manufacturer of upholstered
furniture. For the year ended December 31, 1997, Sam Moore Furniture Industries'
sales were $33 million.
During fiscal year 1998, La-Z-Boy acquired the remaining 25% of the
ordinary share capital of Centurion Furniture plc, a furniture manufacturer
located in England. Sales for their year ended March 31, 1997 were $12 million.
The consolidated April 1998 financial statements include the operations of
Distincion Muebles, a furniture manufacturer located in Mexico. Annual sales for
the year ended March 30, 1998 were $1.9 million.
22
<PAGE>
Note 3: Cash and Equivalents
(Amounts in thousands) 4/24/99 4/25/98
- --------------------------------------------------------
Certificates of deposit ............ $19,900 $13,000
Cash in bank ....................... 10,704 10,714
Commercial paper ................... 1,878 3,963
Marketable securities .............. 1,068 1,023
------- -------
Total cash and equivalents..... $33,550 $28,700
======= =======
The Company invests in certificates of deposit with a bank whose board of
directors includes two members of the Company's board of directors. At the end
of fiscal years 1999 and 1998, $15 million and $13 million, respectively, was
invested in this bank's certificates.
Note 4: Property, Plant and Equipment
Life in Depreciation
(Amounts in thousands) years method 4/24/99 4/25/98
- -----------------------------------------------------------------------------
Machinery and equipment .......... 10 200%DB $124,835 $114,502
Buildings and building fixtures .. 15-30 150%DB 116,601 116,145
Information systems .............. 3-5 150-200%DB 23,228 20,738
Transportation equipment ......... 5 SL 15,685 15,606
Land and land improvements ....... 0-20 150%DB 13,514 12,937
Network and production
tracking systems ............ 5-10 SL 4,881 2,407
Other ............................ 3-10 Various 23,923 18,048
-------- --------
322,667 300,383
Less: accumulated depreciation 196,678 178,621
-------- --------
Property, plant and equipment, net $125,989 $121,762
======== ========
DB= Declining Balance SL= Straight Line
Note 5: Debt and Capital Lease Obligations
Interest
(Amounts in thousands) rates Maturities 4/24/99 4/25/98
- -------------------------------------------------------------------------------
Private placement ................. 6.5%-8.8% 1999-08 $36,875 $38,750
Industrial revenue bonds .......... 3.1%-3.9% 2000-14 27,400 28,500
La-Z-Boy notes..................... ---- ---- -- 2,492
Other debt ........................ 5.0%-7.0% 1999-00 195 1,514
------- -------
Total debt ........................ 64,470 71,256
Less: current portion ... 2,001 4,822
------- -------
Long-term debt ... $62,469 $66,434
======= =======
Weighted average interest rate... 5.3% 5.8%
Fair value of debt ... $65,522 $71,352
The Company has a $75 million unsecured revolving credit line through
August 2002, requiring interest only payments through August 2002 and requiring
principal payment in August 2002. The credit agreement also includes covenants
that, among other things, require the Company to maintain certain financial
statement ratios. There were no draws outstanding at April 24, 1999 and April
25, 1998.
On April 22, 1998, the Company obtained $35 million through the sale of
unsecured senior notes in a private placement. The principal on the notes is
payable at the end of 10 years and has an interest rate of 6.47%. The agreement
also includes covenants that, among other things, require the Company to
maintain certain financial statement ratios.
Proceeds from industrial revenue bonds were used to finance the
construction of manufacturing facilities. These arrangements require the Company
to insure and maintain the facilities and make annual payments that include
interest. The bonds are secured by the facilities constructed from the bond
proceeds.
The Company leases equipment (primarily trucks used as transportation
equipment) under capital leases expiring at various dates through fiscal year
2004. The majority of the leases include bargain purchase options.
Maturities of debt and lease obligations for the five years subsequent to
April 24, 1999 are $3 million, $1 million, $5 million, $0 and $0, respectively.
As of April 24, 1999, the Company had remaining unused lines of credit and
commitments of $113 million under several credit arrangements.
Note 6: Financial Guarantees
La-Z-Boy has provided financial guarantees relating to loans and leases in
connection with some proprietary stores. The amounts of the unsecured guarantees
are shown in the following table. Because almost all guarantees are expected to
retire without being funded, the contract amounts are not estimates of future
cash flows.
(Contract
amounts in thousands) 4/24/99 4/25/98
- -----------------------------------------
Loan guarantees ..... $17,193 $23,567
Lease guarantees .... $ 5,649 $ 5,122
Most guarantees require periodic payments to the Company in exchange for
the guarantee. Terms of current guarantees generally range from one to five
years.
The guarantees have off-balance-sheet credit risk because only the periodic
payments and accruals for probable losses are recognized until the guarantee
expires. Credit risk represents the accounting loss that would be recognized at
the reporting date if counter-parties failed to perform completely as
contracted. The credit risk amounts are equal to the contractual amounts,
assuming that the amounts are fully advanced and that no amounts could be
recovered from other parties.
23
<PAGE>
Note 7: Stock Option Plans
The Company's shareholders adopted an employee Incentive Stock Option Plan
that provides grants to certain employees to purchase common shares of the
Company at not less than their fair market value at the date of grant. Options
are for five years and become exercisable at 25% per year beginning one year
from the date of grant. The Company is authorized to grant options for up to
7,500,000 common shares.
Number Weighted
of average
shares exercise price
- -----------------------------------------------------------
Outstanding at April 27, 1996 1,597,650 $ 9.01
Granted ...................... -- --
Exercised .................... (362,142) 7.61
Expired or cancelled ......... (10,977) 9.04
---------
Outstanding at April 26, 1997 1,224,531 9.43
Granted ...................... 860,865 11.60
Exercised .................... (677,316) 9.36
Expired or cancelled ......... (67,521) 10.42
---------
Outstanding at April 25, 1998 1,340,559 10.87
Granted ...................... 422,220 17.58
Exercised .................... (314,814) 9.86
Expired or cancelled ......... (43,779) 13.82
---------
Outstanding at April 24, 1999 1,404,186 13.02
=========
Exercisable at April 24, 1999 499,761 $ 10.51
Shares available for grants at
April 24, 1999 ............ 6,132,000
The options outstanding at April 24, 1999 have exercise prices ranging from
$9.00 - $13.23 for 996,726 shares and $17.58 for 407,460 shares and a
weighted-average remaining contractual live of 2.9 years.
The Company's shareholders have also adopted Restricted Share Plans. Under
one plan, the Compensation Committee of the Board of Directors is authorized to
offer for sale up to an aggregate of 750,000 common shares to certain employees.
Under a second plan, up to an aggregate of 150,000 common shares are authorized
for sale to non-employee directors. Under the Restricted Share Plans, shares are
offered at 25% of the fair market value at the date of grant. The plans
require that all shares be held in an escrow account for a period of three years
in the case of an employee, or until the participant's service as a director
ceases in the case of a director. In the event of an employee's termination
during the escrow period, the shares must be sold back to the Company at the
employee's cost.
Shares aggregating 3,000 were granted and issued during both fiscal year
1999 and 1998, under the directors' plan. Shares remaining for future grants
under the directors' plans amounted to 96,000 at April 24, 1999. Shares
aggregating 67,350 and 69,180 were granted and issued during the fiscal years
1999 and 1998, respectively, under the employee Restricted Share Plan. Shares
remaining for future grants under the above plan amounted to 613,470 at
April 24, 1999.
The Company's shareholders have also adopted a Performance-Based Restricted
Stock Plan. This plan authorizes the Compensation Committee of the Board of
Directors to award up to an aggregate of 1,200,000 shares to key employees.
Grants of shares are based on achievement of goals over a three-year performance
period. Any award made under the plan will be at the sole discretion of the
committee after judging all relevant factors. At April 24, 1999, performance
awards were outstanding pursuant to which up to approximately 327,000 shares may
be issued in fiscal years 2000 through 2002 for the three outstanding target
awards, depending on the extent to which certain specified performance
objectives are met. The cost of performance awards are expensed over the
performance period. In 1999, 48,945 shares were issued.
As permitted by Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," the Company has chosen to continue
to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations.
Had the Company elected to recognize compensation cost for incentive stock
options based on the fair value method of accounting prescribed by SFAS No. 123,
the after tax expense relating to the stock options would have been $0.7 million
in 1999, $0.3 million in 1998 and $0.2 million in 1997. Pro forma net income and
earnings per share would have been as follows:
(Amounts in thousands,
except per share data) 4/24/99 4/25/98 4/26/97
- -------------------------------------------------------------------
Net income ................. $ 65,424 $ 49,575 $ 45,104
Diluted net income per share $ 1.23 $ 0.92 $ 0.83
Basic net income per share . $ 1.24 $ 0.92 $ 0.83
The pro forma effect on net income is not representative of the pro forma
effect on net income that will be disclosed in future years as required by SFAS
No. 123 because it does not take into consideration pro forma compensation
expense relating to grants made prior to 1996.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes model with the following assumptions:
4/24/99 4/25/98 4/26/97
- -----------------------------------------------------
Risk free interest rate.. 5.15% 5.6% 6.4%
Dividend rate ........... 1.6% 1.6% 2.4%
Expected life in years... 4.4 4.6 4.6
Stock price volatility... 39% 23% 25%
24
<PAGE>
Note 8: Retirement/Welfare
The Company has contributory and non-contributory retirement plans covering
substantially all factory employees.
Eligible salaried employees are covered under a trusteed profit sharing
retirement plan. Cash contributions to a trust are made annually based on
profits.
The Company has established a non-qualified deferred compensation plan for
eligible highly compensated employees called a SERP (Supplemental Executive
Retirement Plan).
The Company provides executive life insurance to certain highly compensated
employees. Such employees are not eligible for current contributions to the
profit sharing plan or the SERP.
The Company offers voluntary 401(k) retirement plans to eligible employees
within U.S. operating divisions. Currently over 60% of eligible employees are
participating in the plans. The Company makes matching contributions based on
specific formulas. For most divisions, this match is made in La-Z-Boy stock.
The Company maintains defined benefit pension plans for eligible factory
hourly employees.
The funded status of the pension was as follows (for the fiscal years
ended):
(Amounts in thousands) 4/24/99 4/25/98
- ------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at beginning of year .......... $ 39,948 $ 32,011
Service cost ............................... 2,785 1,903
Interest cost .............................. 3,739 2,508
Amendments and new plans.................... 5,889 474
Benefits paid .............................. (2,051) (1,663)
Acquisition of Sam Moore ................... -- 4,715
-------- --------
Benefit obligation at end of year ...... 50,310 39,948
Change in plan assets
Fair value of plan assets at beginning of year ... 53,545 41,568
Actual return on plan assets ................ 5,458 9,439
Employer contribution ....................... 1,214 --
Benefits paid ............................... (2,051) (1,663)
Acquisition of Sam Moore .................... -- 4,201
-------- --------
Fair value of plan assets at end of year 58,166 53,545
Funded status ......................................... 7,856 13,597
Unrecognized actuarial gain....................... (3,133) (9,218)
Unamortized prior service cost ................... 795 724
-------- --------
Prepaid benefit cost......................... $ 5,518 $ 5,103
======== ========
The actuarially determined net periodic pension cost and retirement costs
are computed as follows (for the fiscal years ended):
(Amounts in thousands) 4/24/99 4/25/98 4/26/97
- --------------------------------------------------------------
Service cost ................. $ 2,785 $ 1,903 $ 1,767
Interest cost ................ 3,739 2,508 2,270
Actual return on plan assets . (5,458) (9,439) (5,475)
Net amortization and deferral (278) 5,843 2,381
------- ------- -------
Net periodic pension cost 788 815 943
Profit sharing/SERP .......... 6,851 6,035 5,999
401(k)........................ 2,174 1,661 1,625
Other ........................ 652 968 882
------- ------- -------
Total retirement costs .. $10,465 $ 9,479 $ 9,449
======= ======= =======
The expected long-term rate of return on plan assets was 8.0% for fiscal
years 1999, 1998 and 1997. The weighted-average discount rate used in
determining the actuarial present value of projected benefit obligations was
6.8% for fiscal year 1999 and 7.5% for fiscal years 1998 and 1997. Vested
benefits included in the projected benefit obligation were $40 million and
$32 million at April 24, 1999 and April 25, 1998, respectively. Plan assets are
invested in a diversified portfolio that consists primarily of debt and equity
securities.
The Company's pension plan funding policy is to contribute annually at
least the amount necessary so that the plan assets exceed the projected benefit
obligation.
While in total the Company is overfunded, at April 24, 1999, there are two
plans with pension benefit obligations of $6.7 million and pension plan assets
of $5.5 million which are included in the tables shown.
Note 9: Health Care
The Company offers eligible employees an opportunity to participate in
group health plans. Participating employees make required premium payments
through pretax payroll deductions. Health-care expenses were as follows (for the
fiscal years ended):
(Amounts in thousands) 4/24/99 4/25/98 4/26/97
- ----------------------------------------------------------
Gross health care ..... $ 37,698 $ 32,020 $ 30,831
Participant payments .. (9,406) (7,531) (6,393)
-------- -------- --------
Net health care .... $ 28,292 $ 24,489 $ 24,438
======== ======== ========
The Company makes annual provisions for any current and future retirement
health-care costs which may not be covered by retirees' collected premiums.
25
<PAGE>
Note 10: Income Taxes
The primary components of the Company's deferred tax assets and liabilities
were as follows:
(Amounts in thousands) 4/24/99 4/25/98
- ----------------------------------------------------------------------------
Current
Deferred income tax assets/(liabilities)
Bad debt ..................................... $ 10,942 $ 9,393
Warranty ..................................... 6,054 4,938
Workers' compensation ........................ 1,662 1,838
SERP/other.................................... 1,626 1,794
Inventory .................................... 1,429 1,795
State income tax ............................. 1,366 926
Stock options ................................ 1,653 1,069
Receivables-mark to market.................... (7,904) (8,700)
Other ........................................ 3,382 3,813
Valuation allowance .......................... (182) (187)
-------- --------
Total current deferred tax assets ....... 20,028 16,679
Noncurrent
Deferred income tax assets/(liabilities)
Pension ...................................... (2,985) (2,506)
Property, plant and equipment ................ (2,943) (3,110)
Net operating losses ......................... 907 842
Other ........................................ 360 246
Valuation allowance .......................... (1,036) (950)
-------- --------
Total noncurrent deferred tax liabilities (5,697) (5,478)
-------- --------
Net deferred tax asset ............. $ 14,331 $ 11,201
======== ========
The differences between the provision for income taxes and income taxes
computed using the U.S. federal statutory rate are as follows (for the fiscal
years ended):
(% of pretax income) 4/24/99 4/25/98 4/26/97
- -------------------------------------------------------------------------
Statutory tax rate .......................... 35.0% 35.0% 35.0%
Increase (reduction) in taxes resulting from:
State income taxes net of
federal benefit ................... 2.7 2.4 3.5
Tax credits ............................ (0.1) (0.2) (0.4)
Goodwill................................ 0.7 0.8 0.9
Unutilized loss carryforwards .......... 0.1 (0.5) 0.1
Miscellaneous items .................... (0.1) (0.5) (0.4)
---- ---- ----
Effective tax rate ..................... 38.3% 37.0% 38.7%
==== ==== ====
Note 11: Segments
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective April 26, 1998. Following the
provisions of SFAS No. 131, La-Z-Boy Incorporated is reporting segment sales and
operating income in the same format reviewed by the Company's management (the
"management approach"). La-Z-Boy Incorporated has two reportable segments:
Residential upholstery and Residential casegoods.
The Residential upholstery segment is comprised of operating divisions that
primarily manufacture and sell upholstered furniture to dealers.
Upholstered furniture includes recliners, sofas, occasional chairs and reclining
sofas that are mostly or fully covered with fabric, leather or vinyl. The
operating divisions included in the Residential upholstery segment are La-Z-Boy
Residential, England/Corsair, Sam Moore, Centurion and Distincion Muebles.
The Residential casegoods segment is comprised of operating divisions that
primarily manufacture and sell hardwood or hardwood veneer furniture to dealers.
Casegoods furniture includes dining room tables and chairs, bed frames and bed
boards, dressers, coffee tables and end tables that are mostly constructed of
hardwoods or veneers. The operating divisions included in the Residential
casegoods segment are Kincaid and Hammary.
The primary difference between the upholstery and the casegoods segments is
in the manufacturing area. In general, upholstery manufacturing requires lower
capital expenditures per dollar of sales than casegoods but higher labor costs.
Equipment needs and manufacturing processes are different in many key areas and
product costs reflect these significant differences. Upholstery typically uses
plywood or other "frame" (not exposed) wood which requires less detailing and
uses some different manufacturing methods than casegoods wood processing.
Casegoods requires more extensive automated equipment for drying, processing,
cutting, sanding and finishing exposed hardwood and veneer products. Wood and
related wood processing costs for upholstery (or total frame costs) are a much
smaller percentage of total unit costs in upholstery than casegoods.
Upholstery's largest costs are related to the purchased cost of fabric (or
leather, vinyl, etc.), cutting fabric, sewing the fabric and upholstering the
fabric and other materials to the frame; whereas casegoods manufacturing
typically has none of these costs or processes. Upholstery also extensively uses
filler materials such as polyurethane foam for cushioning and appearance
whereas casegoods manufacturing typically has none of these costs or processes.
Also, in "motion" upholstery products, which are a large portion of La-Z-Boy's
total upholstery sales, there are metal mechanism processes and costs vs. none
in casegoods.
The Other category is comprised of additional operating divisions reviewed
for performance by management including business furniture operations, logistics
operations, financing, retail and other operations.
26
<PAGE>
The Company's largest customer is less than 3% of consolidated sales.
The accounting policies of the operating segments are the same as those
described in Note 1. Segment operating profit is based on profit or loss from
operations before interest income and expense, other income and income taxes.
Certain corporate costs are allocated to the segments based on revenues and
identifiable assets. Identifiable assets are cash and cash equivalents, notes
and accounts receivable, FIFO inventories and net property, plant and
equipment. Segment information used to evaluate segments is as follows (for the
fiscal years ended):
(Amounts in thousands) 4/24/99 4/25/98 4/26/97
- ---------------------------------------------------------------------------
Net revenues
Residential upholstery .... $1,015,162 $ 850,495 $ 772,049
Residential casegoods ..... 198,969 186,968 170,561
Other ..................... 150,435 90,849 78,670
Eliminations .............. (76,921) (20,274) (15,455)
---------- ---------- ----------
Consolidated ......... 1,287,645 1,108,038 1,005,825
========== ========== ==========
Operating profit
Residential upholstery .... 99,542 70,462 63,872
Residential casegoods ..... 11,787 7,425 8,143
Other ..................... (802) 2,754 2,883
Unallocated corporate costs
& eliminations .......... (3,688) (3,438) (965)
---------- ---------- ----------
Consolidated ......... 106,839 77,203 73,933
========== ========== ==========
Depreciation and amortization
Residential upholstery .... 13,995 12,196 11,465
Residential casegoods ..... 3,806 3,992 3,925
Other ..................... 2,999 3,334 3,383
Corporate & eliminations... 1,281 1,499 1,609
---------- ---------- ----------
Consolidated ......... 22,081 21,021 20,382
========== ========== ==========
Capital expenditures
Residential upholstery .... 19,388 16,556 10,714
Residential casegoods ..... 4,248 3,420 6,032
Other ..................... 3,609 2,263 1,032
Corporate & eliminations... (1,929) (223) --
---------- ---------- ----------
Consolidated ......... 25,316 22,016 17,778
========== ========== ==========
Assets
Residential upholstery .... 399,803 363,160 313,492
Residential casegoods ..... 97,804 94,019 96,064
Other ..................... 54,900 48,839 45,670
Corporate & eliminations... (8,252) (2,580) (164)
Unallocated assets ........ 85,537 76,913 73,345
---------- ---------- ----------
Consolidated ......... $ 629,792 $ 580,351 $ 528,407
========== ========== ==========
Sales by country
United States ............. 93% 94% 94%
Canada and other .......... 7% 6% 6%
--- --- ---
100% 100% 100%
=== === ===
Note 12: Contingencies
The Company has been named as a defendant in various lawsuits arising in
the ordinary 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 based on the
Company's previous experience with lawsuits of these types.
The Company has been named as a potentially responsible party (PRP) at six
environmental clean-up sites. Based on a review of all currently known facts
and the Company's experience with previous environmental clean-up sites,
management does not anticipate that future expenditures for environmental
clean-up sites will have a material adverse effect on the Company.
Note 13: Subsequent Events
On March 10, 1999, the Company entered into a letter of intent to acquire
privately held Bauhaus USA, Inc. The transaction is expected to be completed on
or shortly after June 1, 1999. General terms of the transaction call for
La-Z-Boy to acquire 100 percent of the outstanding shares of Bauhaus.
Sales for their fiscal year ended August, 1998 were about $85 million.
Additionally, on April 12, 1999 the Company entered into a letter of intent
to acquire privately held Alexvale Furniture, Inc. This transaction is expected
to be completed in the first quarter of fiscal year 2000. Sales for their
fiscal year ended April, 1999 were about $62 million.
Both transactions are subject to regulatory approval.
27
<PAGE>
Management's Discussion and Analysis
Management's Discussion and Analysis, as required by the Securities and
Exchange Commission, should be read in conjunction with the Report of
Management Responsibilities, the Report of Independent Accountants, the
Consolidated Financial Statements and related Notes and all other pages that
follow them in the annual report.
La-Z-Boy is the third largest furniture maker in the U.S., the largest
reclining-chair manufacturer in the world and America's largest manufacturer of
upholstered furniture.
La-Z-Boy's largest division is La-Z-Boy Residential, which accounts for
the majority of the upholstery segment. Sales by dealer type are as follows:
La-Z-Boy
Residential division 1999 1998 1997
------------------------------------------
Galleries/proprietary. 53% 51% 51%
General dealers....... 34 35 36
Dept. stores/chains... 13 14 13
--- --- ---
100% 100% 100%
=== === ===
Analysis of Operations
Year Ended April 24, 1999
(1999 compared with 1998)
The 1999 sales of $1.3 billion were 16% greater than 1998. About 80% of
the increase was due to internal growth of existing divisions and the
remainder was due to acquisitions. La-Z-Boy believes that its 1999 internal
growth rate of about 13% exceeded the U.S. industry average for comparable
time periods. Selling price increases per unit were small, but a product
mix that favored higher priced products did yield a favorable impact of
approximately 3 - 4%. No major new product lines were introduced in 1999
although new styles and new collections of styles occurred across all
divisions throughout the year. Of particular note was the joint introduction
of the Thomas Kinkade Home Furnishings Collection by the La-Z-Boy Residential
and Kincaid divisions. In addition, new fabrics were added (replacing
slower moving fabrics) throughout the year. No major new dealers were
added in 1999 and no significant dealers were dropped.
La-Z-Boy's gross profit margin (gross profit dollars as a percent of
sales dollars) increased to 26.5% in 1999 from 25.5% in 1998. An approximate
11% increase in unit volume had a favorable impact on the gross margin
percentage as fixed manufacturing costs were absorbed more efficiently than in
the prior year. The absence of hardwood and plywood supply chain disruptions
and casegood manufacturing plant consolidations also favorably affected the
gross profit margin percentage. Currency exchange impacts associated with
inventory movements between supply center plants and Residential division
plants in the U.S. to a Residential division plant in Canada had a negative
impact on the gross profit margin percentage. Similar to 1998, labor wage
rates rose moderately and purchased material prices were generally flat as
decreased prices for cardboard, batting and poly were offset by increased
prices for other materials.
S,G&A expense decreased to 18.2% of sales in 1999 from 18.5% in 1998.
Bonus related expense was significantly higher in fiscal 1999 as compared to
fiscal 1998 in addition to increased information technology (IT) expenses.
The increased IT expenses were mainly due to Year 2000 related issues. These
increases were more than offset by selling and advertising expenses being
lower as a percent of sales in fiscal 1999.
Analysis of Operations
Year Ended April 25, 1998
(1998 compared with 1997)
The 1998 sales of $1.1 billion were 10% greater than 1997. About 85% of
the increase was due to internal growth of existing divisions and the
remainder was due to acquisitions. Internal division growth rates ranged
from a low of 6% to a high of 19%. In addition, strength in sales occurred in
almost all product lines within each division. La-Z-Boy believes that its
1998 internal growth rate of about 8.5% slightly exceeded the U.S. industry
average for comparable time periods. Selling price increases per unit were
small and there were no significant shifts to higher or lower priced
products. No major new product lines were introduced in 1998 although new
styles and new collections of styles occurred across all divisions throughout
the year. In addition, new fabrics were added (replacing slower moving
fabrics) throughout the year. No major new dealers were added in 1998 and no
significant dealers were dropped. No one dealer accounted for 3% or more of
sales in 1998.
La-Z-Boy's gross profit margin (gross profit dollars as a
percent of sales dollars) declined to 25.5% in 1998 from 26.0% in 1997.
Hardwood and plywood parts production and delivery problems and related
assembly site production disruptions adversely affected gross margins. The
elimination of three manufacturing assembly sites also adversely affected
gross margins. Additionally, cost problems were encountered at multiple sites
trying to gear up quickly to meet unexpectedly high product demand primarily
in the second half of the year. The above items mostly affected plant
overhead costs and unfavorable plant labor variances. 1998 labor wage rates
rose a moderate 2%. Purchased materials prices were about flat compared to
1997. Increased sales volumes, increased selling prices and lower frame
parts costs favorably impacted gross margins.
S,G&A expense decreased to 18.5% of sales in 1998 from 18.6% in 1997.
A decline in bonus expense and small increases to some selling expenses more
than offset increased (greater than the rate of sales) professional related
expenses, bad debts and IT expenses which include Year 2000 costs.
Income tax expense as a percent of pretax income declined to 37.0% in
1998 from 38.7% in 1997, reflecting a favorable shift of earnings to entities
with lower effective tax rates and the settlement of an IRS audit.
28
<PAGE>
Liquidity and Financial Condition
Cash flows from operations amounted to $82 million in 1999, $55 million
in 1998 and $60 million in 1997 and have been adequate for day-to-day
expenditures, dividends to shareholders and capital expenditures. Capital
expenditures were $25.3 million in 1999, $22.0 million in 1998 and $17.8
million in 1997.
Total FIFO inventory increased 4% over the prior year with raw materials
increasing 8%, work-in-process decreasing 8% and finished goods increasing
16%. The absence of hardwood and plywood supply chain disruptions resulting
from improved supply plant production throughput has permitted work-in-process
inventory to be significantly reduced. Finished goods inventory levels are
higher primarily due to increased daily production volumes resulting in more
finished product being staged for shipment.
The Company had unused lines of credit and commitments of $113 million
under several credit arrangements as of April 24, 1999. The primary credit
arrangement is a $75 million unsecured revolving credit line through August
2002, requiring interest only payments through August 2002 and a payment of
principal in August 2002. The credit agreement includes covenants that,
among other things, require the Company to maintain certain financial statement
ratios. The Company has complied with all of the requirements.
Bonus accruals for the year are significantly higher than the past year,
thus driving the increase in payroll/other compensation liability.
In September 1998, the Company declared a three-for-one stock split in the
form of a 200% stock dividend.
The La-Z-Boy Board of Directors has authorized the repurchase of Company
stock. Shares acquired in 1999, 1998 and 1997 totaled 1,643,000, 1,253,000
and 1,941,000, respectively. As of April 24, 1999, 1,526,000 shares were
available for repurchase. Due to repurchases during the year, the Company
was able to increase the diluted earnings per share by $0.02 for the fiscal
year. The Company plans to be in the market for its shares as its stock price
changes and other financial opportunities arise.
The financial strength of the Company is reflected in two commonly used
ratios, the current ratio (current assets divided by current liabilities)
and the debt-to-capital ratio (total debt divided by shareholders' equity
plus total debt). The current ratio at the end of 1999 and 1998 was 3.2:1 and
3.5:1, respectively. The debt to capital ratio was 13.7% at the end of 1999
and 15.9% at the end of 1998.
Continuing compliance with existing federal, state and local provisions
dealing with protection of the environment is not expected to have a material
effect upon the Company's capital expenditures, earnings, competitive position
or liquidity. The Company will continue its program of conducting voluntary
compliance audits at its facilities. The Company has also taken steps to assure
compliance with provisions of Titles III and V of the 1990 Clean Air Act
Amendments. Refer to Note 12: Contingencies, in the Notes to Consolidated
Financial Statements.
Outlook
Statements in this Outlook section are forward looking within the
meaning of the Private Securities Litigation Reform Act of 1995. As
conditions change in the future, actual results may not match these
expectations. In particular, sales and profits can be materially impacted in
any quarter by changes in interest rates or changes in consumer
confidence/demand.
La-Z-Boy's fiscal year ending April 29, 2000 will include 53 weeks
compared to fiscal year 1999 which included 52 weeks. This is approximately a
2% increase in the length of the year which will affect sales and other
financial comparisons from year to year.
One of the up and coming challenges that is currently facing businesses
is the need to respond to "e-commerce", which refers to the electronic
exchange of information. Consumers are doing more and more business via
this global form of communication. The Company recognizes that there are
significant potential rewards and risks associated with e-commerce and
that the e-commerce environment is changing rapidly. The Company has recently
begun formal efforts to clarify its e-commerce strategies.
One of La-Z-Boy's financial goals is to increase sales of existing
operations greater than the furniture industry with a benchmark of at least
10% per year. For 1999, La-Z-Boy sales increased 16% from 1998. On a
comparable basis, excluding Sam Moore which was only included for one month of
fiscal 1998, the sales increase was equal to 13%, which the Company believes
was better than the industry average. Some furniture industry reports for
calendar year 1998 over 1997 showed industry sales increases in the 6-9% range.
At the end of April 1999, the backlog of orders was much higher than at
the end of April 1998. La-Z-Boy primarily builds "to order" and does not
carry large amounts of finished warehouse goods. The expected acquisition of
Bauhaus and Alexvale in the first quarter of fiscal year 2000 are expected to
result in measurable sales gains for all quarters in fiscal year 2000.
La-Z-Boy, without Bauhaus and Alexvale, is expected to realize first quarter
sales increases as a result of a favorable order backlog situation.
Expectations are for a slow-down in sales growth rates in the second half of
2000 based on industry economic projections and the high rate of actual sales
achieved in that period in 1999 which will make fiscal year 2000 comparisons
more difficult. Some furniture industry forecasts for calendar year 1999 over
1998 are estimating that sales increases will be in the 4-6% range.
The Company's major residential efforts and opportunities for U.S.
sales growth greater than industry averages are focused outside the recliner
market segment, e.g., stationary upholstery (single and multi-seat),
29
<PAGE>
reclining sofas and modulars, wood occasional and wall units and wood bedroom
and dining room furniture.
The number of dealer owned and operated proprietary stores is
expected to continue increasing. These stores are a major contributor to
La-Z-Boy's ability to achieve its sales goal.
Existing manufacturing capacity can support unit volume increases of 10 - 15%
should they materialize.
La-Z-Boy's second financial goal is for operating profit to exceed the
current fiscal year's 8.3%. For 2000 it is expected that various management
initiatives, economic events and other items will occur such that the net
effect of these items will result in the second financial goal being achieved.
Increased sales volume should help improve operating margins. Operating
margins benefit from improved investments and machinery and other productivity
enhancements. Capital expenditures are expected to be about $30 million in 2000
compared to $25 million in 1999. IT expenses and bad debts expense are expected
to slightly decrease as a percent of sales.
A third financial goal is to achieve return on capital of greater than
20%. La-Z-Boy defines return on capital as operating profit + interest income
+ other income as a percent of beginning-of-year capital (capital is defined as
shareholders' equity + debt + capital leases + net deferred taxes). For 1999,
return on capital was 24.8% compared to 20.5% in 1998. La-Z-Boy enhances
shareholder value and reduces capital employed through stock repurchases,
dividends and debt reductions.
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 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 regard to its internal plan.
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 regard 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 and substantially completed the
remediation phase. The Company currently is in the testing and implementation
phases. Critical operating systems, hardware and software and in-house
developed programs have been renovated, replaced or upgraded and implemented.
Year 2000 testing is on schedule with regards to the internal plan. 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 and the
testing phase is substantially complete. The Company believes these
systems to be compliant and compatible. The Company is presently completing
the testing phase of its non-IT projects 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. Multiple approaches are being used to determine
compliance based on the priority assigned to the third party. Based on
communications with these third parties, the Company believes that all
material third parties will be sufficiently prepared for the Year 2000 or the
Company will make alternative plans. 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 system
failures. Such failures could have a material adverse effect on the Company's
results of operations, liquidity and financial condition. The Company,
utilizing independent consultants, has initiated an assessment of the
operational risks related to the Year 2000 issue. To the extent such risks are
identified, the Company has or will devise contingency plans to minimize
such risks. 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 $9
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.
In June, 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which will be effective for the Company's fiscal year 2001. SFAS No. 133
requires a company to recognize all derivative instruments as assets or
liabilities in its balance sheet and measure them at fair value. The
Company has not yet determined when it will implement SFAS No. 133 or what
impact implementation will have on its financial position or results of
operations.
30
<PAGE>
<TABLE>
Consolidated Six Year Summary of Selected Financial Data
Fiscal
(Dollar amounts in thousands, year 1999 1998 1997 1996 1995 1994
except per share data) ended (52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales ............................ $1,287,645 $1,108,038 $1,005,825 $947,263 $850,271 $ 804,898
Cost of sales .................... 946,731 825,312 744,662 705,379 629,222 593,890
---------- ---------- ---------- -------- -------- ----------
Gross profit ................... 340,914 282,726 261,163 241,884 221,049 211,008
Selling, general and
administrative ................. 234,075 205,523 187,230 174,376 158,551 151,756
---------- ---------- ---------- -------- -------- ----------
Operating profit ............... 106,839 77,203 73,933 67,508 62,498 59,252
Interest expense ................. 4,440 4,157 4,376 5,306 3,334 2,822
Interest income .................. 2,181 2,021 1,770 1,975 1,628 1,076
Other income ..................... 2,658 4,207 2,508 2,023 1,229 649
---------- ---------- ---------- -------- -------- ----------
Pretax income .................. 107,238 79,274 73,835 66,200 62,021 58,155
Income tax expense ............... 41,096 29,354 28,538 26,947 25,719 23,438
---------- ---------- ---------- -------- -------- ----------
Net income ..................... $ 66,142 $ 49,920 $ 45,297 $ 39,253 $ 36,302 $ 34,717**
========== ========== ========== ======== ======== ==========
Diluted weighted average shares
outstanding (`000s) *** ........ 53,148 53,821 54,575 55,596 54,303 54,085
Per common share outstanding
Diluted net income***........... $ 1.24 $ 0.93 $ 0.83 $ 0.71 $ 0.67 $ 0.63
Basic net income***............. $ 1.25 $ 0.93 $ 0.83 $ 0.71 $ 0.67 $ 0.63**
Cash dividends paid***.......... $ 0.31 $ 0.28 $ 0.26 $ 0.25 $ 0.23 $ 0.21
Book value on year end shares
outstanding***.................. $ 7.93 $ 7.25 $ 6.69 $ 6.23 $ 5.81 $ 5.30
Return on average
shareholders' equity ........... 16.5% 13.4% 12.9% 11.8% 12.2%* 12.5%**
Gross profit as a percent
of sales ....................... 26.5% 25.5% 26.0% 25.5% 26.0% 26.2%
Operating profit as a percent
of sales ....................... 8.3% 7.0% 7.4% 7.1% 7.4% 7.4%
Operating profit, interest income
and other income as a percent
of beginning-of-year capital ... 24.8% 20.5% 19.6% 18.1% 19.3% 19.4%
Net income as a percent
of sales ....................... 5.1% 4.5% 4.5% 4.1% 4.3% 4.3%**
Income tax expense as a
percent of pretax income ....... 38.3% 37.0% 38.7% 40.7% 41.5% 40.3%
- ------------------------------------------------------------------------------------------------------
Depreciation and amortization .... $ 22,081 $ 21,021 $ 20,382 $ 20,147 $ 15,156 $ 14,014
Capital expenditures ............. $ 25,316 $ 22,016 $ 17,778 $ 18,168 $ 18,980 $ 17,485
Property, plant and
equipment (net) ................ $ 125,989 $ 121,762 $ 114,658 $116,199 $117,175 $ 94,277
- ------------------------------------------------------------------------------------------------------
Working capital .................. $ 293,160 $ 274,739 $ 245,106 $240,583 $237,280 $ 224,122
Current ratio .................... 3.2 to 1 3.5 to 1 3.5 to 1 3.5 to 1 3.7 to 1 4.1 to 1
Total assets ..................... $ 629,792 $ 580,351 $ 528,407 $517,546 $503,818 $ 430,253
- ------------------------------------------------------------------------------------------------------
Debt and capital leases .......... $ 65,473 $ 73,458 $ 61,279 $ 69,033 $ 83,201 $ 55,370
Shareholders' equity ............. $ 414,915 $ 388,209 $ 359,338 $343,376 $323,640 $ 290,911
Ending capital ................... $ 466,017 $ 450,466 $ 405,996 $399,801 $395,209 $ 338,070
Ratio of debt to equity .......... 15.8% 18.9% 17.1% 20.1% 25.7% 19.0%
Ratio of debt to capital ......... 13.6% 15.9% 14.6% 16.7% 20.5% 16.0%
- ------------------------------------------------------------------------------------------------------
Shareholders ..................... 16,329 13,592 12,729 12,293 12,665 12,615
Employees ........................ 12,796 12,155 11,236 10,733 11,149 9,370
- ------------------------------------------------------------------------------------------------------
*April 1995 shareholders' equity used in this calculation excludes $18,004 relating to
stock issued on the last day of the fiscal year for the acquisition of an operating division.
**Excludes the income effect of adopting SFAS No. 109 in May 1993 of $3,352 or $0.06 per
share.
***Restated to reflect a three-for one stock split, in the form of a 200% stock dividend
effective September, 1998.
</TABLE>
31
<PAGE>
Dividend and Market Information
Fiscal 1999 Divi- Market price
quarter dends -------------------------------
ended paid High Low Close
-----------------------------------------------------
July 25 $0.07 $19 11/24 $16 1/3 $17 23/24
Oct. 24 0.08 22 1/2 15 5/8 18 1/2
Jan. 23 0.08 20 7/16 15 1/4 16 15/16
April 24 0.08 $22 1/4 $17 $19
-----
$0.31
=====
Fiscal 1998 Divi- Market price
quarter dends -------------------------------
ended paid High Low Close
----------------------------------------------------
July 26 $0.07 $12 31/48 $10 7/12 $12 13/24
Oct. 25 0.07 12 47/48 11 5/12 12 5/8
Jan. 24 0.07 14 15/16 12 19/48 14 5/8
April 25 0.07 $17 5/6 $14 5/16 $17 5/6
-----
$0.28
=====
Diluted
Divi- net
Divi- Divi- dend Market price income P/E ratio
Fiscal dends dend payout ------------------------- per ---------
year paid yield ratio High Low Close share High Low
- ------------------------------------------------------------------------
1999 $0.31 1.6% 24.8% $22 1/2 $15 1/4 $19 $1.24 18 12
1998 0.28 1.6% 30.1% 17 5/6 10 7/12 17 5/6 0.93 19 11
1997 0.26 2.4% 31.2% 12 7/24 9 5/12 10 3/4 0.83 15 11
1996 0.25 2.5% 34.9% 11 1/4 8 13/24 10 1/24 0.71 16 12
1995 0.23 2.5% 33.8% 11 1/4 8 11/24 9 0.67 17 13
1994 $0.21 1.9% 33.7%* $13 1/3 $8 1/2 $11 1/6 $0.63* 21* 13*
La-Z-Boy Incorporated common shares are traded on the NYSE and the PCX (symbol
LZB).
Unaudited Quarterly Financial Information
(Amounts in thousands,
except per share data) Fiscal year
Quarter ended 7/25/98 10/24/98 1/23/99 4/24/99 1999
- ------------------------------------------------------------------------------
Sales ................... $268,880 $334,831 $318,105 $365,829 $1,287,645
Cost of sales ........... 205,431 245,062 230,923 265,315 946,731
-------- -------- -------- -------- ----------
Gross profit ....... 63,449 89,769 87,182 100,514 340,914
Selling, general and
administrative ..... 51,288 59,510 58,758 64,519 234,075
-------- -------- -------- -------- ----------
Operating profit ... 12,161 30,259 28,424 35,995 106,839
Interest expense ........ 1,187 1,164 1,110 979 4,440
Interest income ......... 577 471 430 703 2,181
Other income ............ 355 865 962 476 2,658
-------- -------- -------- -------- ----------
Pretax income ...... 11,906 30,431 28,706 36,195 107,238
Income tax expense ...... 4,722 11,984 10,978 13,412 41,096
-------- -------- -------- -------- ----------
Net income ...... $ 7,184 $ 18,447 $ 17,728 $ 22,783 $ 66,142
======== ======== ======== ======== ==========
Diluted EPS......... $ 0.13 $ 0.35 $ 0.34 $ 0.43 $ 1.24
======== ======== ======== ======== ==========
Fiscal year
Quarter ended 7/26/97 10/25/97 1/24/98 4/25/98 1998
- -----------------------------------------------------------------------------
Sales ................... $212,326 $293,208 $280,520 $321,984 $1,108,038
Cost of sales ........... 164,184 215,370 211,688 234,070 825,312
-------- -------- -------- -------- ----------
Gross profit ....... 48,142 77,838 68,832 87,914 282,726
Selling, general and
administrative ..... 45,357 50,400 50,189 59,577 205,523
-------- -------- -------- -------- ----------
Operating profit ... 2,785 27,438 18,643 28,337 77,203
Interest expense ........ 1,024 1,027 1,048 1,058 4,157
Interest income ......... 482 512 568 459 2,021
Other income ............ 750 527 240 2,690 4,207
-------- -------- -------- -------- ----------
Pretax income ...... 2,993 27,450 18,403 30,428 79,274
Income tax expense ...... 1,267 10,628 6,944 10,515 29,354
-------- -------- -------- -------- ----------
Net income ...... $ 1,726 $ 16,822 $ 11,459 $19,913 $ 49,920
======== ======== ======== ======== ==========
Diluted EPS ........ $ 0.03 $ 0.31 $ 0.21 $0.37 $ 0.93
======== ======== ======== ======== ==========
*Excludes the income effect of adopting SFAS 109 in May 1993 of $3,352 or $0.06
per share.
Various data has been restated to reflect a three-for-one stock split.
32
<PAGE>
Exhibit (23)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-34155, 333-34157, 33-8997, 333-03097 and
33-54743) of La-Z-Boy Incorporated of our report dated May 20, 1999 relating to
the financial statements, which appears in the Annual Report to Shareholders,
which is incorporated in this Annual Report on Form 10-K/A. We also consent to
the incorporation by reference of our report dated May 20, 1999 relating to the
financial statement schedule, which appears in this Form 10-K/A.
/s/PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Toledo, Ohio
September 24, 1999
