SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED July 27, 2002 COMMISSION FILE NUMBER 1-9656
LA-Z-BOY INCORPORATED
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MICHIGAN 38-0751137
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1284 North Telegraph Road, Monroe, Michigan 48162-3390
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (734) 241-4414
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None
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(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the last practicable date:
Class Outstanding at July 27, 2002
- ------------------------------ ----------------------------
Common Shares, $1.00 par value 58,326,053
LA-Z-BOY INCORPORATED
FORM 10-Q FIRST QUARTER OF FISCAL 2003
TABLE OF CONTENTS
Page
Number(s)
---------
PART I Financial Information
Item 1. Financial Statements
Consolidated Statement of Income............................ 3
Consolidated Balance Sheet.................................. 4
Consolidated Statement of Cash Flows........................ 5
Notes to Consolidated Financial Statements
Note 1. Basis of Presentation.............................. 6
Note 2. Interim Results.................................... 6
Note 3. Reclassification................................... 6
Note 4. Earnings per Share................................. 6
Note 5. Inventories........................................ 7
Note 6. Restructuring...................................... 7
Note 7. Segment Information................................ 8
Note 8. New Accounting Pronouncement....................... 8-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements.. 9-10
Results of Operations....................................... 10-11
Liquidity and Capital Resources............................. 11-12
Outlook..................................................... 12-13
Item 3. Quantitative & Qualitative Disclosures About Market Risk.... 13
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K............................ 14
Signature Page............................................................ 15
<Table>
<caption>
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
First Quarter Ended
--------------------------------------------------------------------
Percent of Sales
% Over ------------------------
7/27/02 7/28/01 (Under) 7/27/02 7/28/01
------------ ------------ --------- ------------ ----------
<s> <c> <c> <c> <c> <c>
Sales $497,375 $456,935 8.9% 100.0% 100.0%
Cost of sales 382,552 369,729 3.5% 76.9% 80.9%
------------ ------------ --------- ------------ ----------
Gross profit 114,823 87,206 31.7% 23.1% 19.1%
S, G & A 81,936 80,229 2.1% 16.5% 17.6%
------------ ------------ --------- ------------ ----------
Operating profit 32,887 6,977 371.4% 6.6% 1.5%
Interest expense 2,027 2,956 -31.4% 0.4% 0.6%
Interest income 602 358 68.2% 0.1% 0.0%
Other income (expense), net (486) 263 -284.8% -0.1% 0.1%
------------ ------------ --------- ------------ ----------
Pretax income 30,976 4,642 567.3% 6.2% 1.0%
Tax expense 11,848 1,811 554.2% 38.2%* 39.0%*
------------ ------------ --------- ------------ ----------
Income before cumulative effect of
accounting change 19,128 2,831 575.7% 3.8% 0.6%
Cumulative effect of accounting change
(net of tax of $17,920) 59,782 -- 100.0% 12.0% --
------------ ------------ --------- ------------ ----------
Net income (loss) ($40,654) $2,831 N/M -8.2% 0.6%
============ ============ ========= ============ ==========
Basic average shares 59,125 60,772
============ ============
Basic net income per share before
cumulative effect of accounting change $0.32 $0.05
Cumulative effect of accounting change
per share (1.01) --
------------ ------------
Basic net income (loss) per share ($0.69) $0.05
============ ============
Diluted average shares 59,667 61,021
============ ============
Diluted net income per share before
cumulative effect of accounting change $0.32 $0.05
Cumulative effect of accounting change
per share (1.00) --
------------ ------------
Diluted net income (loss) per share ($0.68) $0.05
============ ============
Dividends paid per share $0.10 $0.09
* As a percent of pretax income, not sales.
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</fn>
</table>
<Table>
<Caption>
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
(Unaudited)
----------------------------------------------------------------------------------
Increase/(Decrease)
--------------------------
7/27/02 7/28/01 Dollars Percent 4/27/02
----------------- --------------- ------------- ----------- ---------------
<s> <c> <c> <c> <c> <c>
Current assets
Cash and equivalents $25,550 $42,447 ($16,897) -39.8% $26,771
Receivables, net 324,687 306,005 18,682 6.1% 382,843
Inventories, net 233,525 260,178 (26,653) -10.2% 208,657
Deferred income taxes 35,648 23,281 12,367 53.1% 35,035
Income taxes 2,517 2,944 (427) -14.5% 2,490
Other current assets 13,304 19,612 (6,308) -32.2% 15,896
----------------- ------------- ------------- ----------- ---------------
Total current assets 635,231 654,467 (19,236) -2.9% 671,692
Property, plant and equipment, net 207,426 227,672 (20,246) -8.9% 205,463
Goodwill 78,833 111,624 (32,791) -29.4% 108,244
Trade names 68,454 119,928 (51,474) -42.9% 116,745
Other long-term assets 53,486 52,602 884 1.7% 58,632
----------------- ------------- ------------- ----------- ---------------
Total assets $1,043,430 $1,166,293 ($122,863) -10.5% $1,160,776
================= ============= ============= =========== ===============
Current liabilities
Lines of credit $ -- $20,750 ($20,750) -100.0% $ --
Current portion of long-term
debt and capital leases 2,276 3,695 (1,419) -38.4% 2,276
Accounts payable 77,986 76,845 1,141 1.5% 68,497
Accrued expenses and other
current liabilities 127,890 116,367 11,523 9.9% 156,120
----------------- ------------- ------------- ----------- ---------------
Total current liabilities 208,152 217,657 (9,505) -4.4% 226,893
Long-term debt 147,917 168,976 (21,059) -12.5% 137,444
Capital leases 1,801 2,359 (558) -23.7% 1,942
Deferred income taxes 28,364 46,281 (17,917) -38.7% 46,145
Other long-term liabilities 36,856 36,724 132 0.4% 34,830
Contingencies and commitments
Shareholders' equity
Common shares, $1 par value 58,326 60,898 (2,572) -4.2% 59,953
Capital in excess of par value 215,585 210,559 5,026 2.4% 215,060
Retained earnings 351,885 429,899 (78,014) -18.1% 444,173
Accumulated other
comprehensive loss (5,456) (7,060) 1,604 -22.7% (5,664)
----------------- ------------- ------------- ----------- ---------------
Total shareholders' equity 620,340 694,296 (73,956) -10.7% 713,522
----------------- ------------- ------------- ----------- ---------------
Total liabilities and
shareholders' equity $1,043,430 $1,166,293 ($122,863) -10.5% $1,160,776
================= ============= ============= =========== ===============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
</Table>
<page>
<table>
<caption>
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
First Quarter Ended
-----------------------
7/27/02 7/28/01
---------- ---------
<s> <c> <c>
Cash flows from operating activities
Net income (loss) ($40,654) $2,831
Adjustments to reconcile net income to cash provided by operating
activities
Cumulative effect of accounting change - net of income taxes 59,782 --
Depreciation and amortization 7,066 10,921
Change in receivables 58,156 75,998
Change in inventories (23,474) (2,291)
Change in payables 9,345 (15,985)
Change in other assets and liabilities (22,516) (33,180)
Change in deferred taxes (448) 3,459
---------- ---------
Total adjustments 87,911 38,922
---------- ---------
Net cash provided by operating activities 47,257 41,753
Cash flows from investing activities
Proceeds from disposals of assets 63 539
Capital expenditures (8,945) (6,085)
Acquisitions, net of cash acquired (1,166) --
Change in other long-term assets 4,128 3,236
---------- ---------
Net cash used for investing activities (5,920) (2,310)
Cash flows from financing activities
Proceeds from debt 10,608 35,370
Payments on debt (133) (55,097)
Capital leases (141) (137)
Stock issued for stock option & 401(k) plans 693 4,948
Repurchase of common stock (47,454) --
Dividends paid (5,973) (5,464)
---------- ---------
Net cash used for financing activities (42,400) (20,380)
Effect of exchange rate changes on cash and equivalents (158) (181)
---------- ---------
Net increase (decrease) in cash and equivalents (1,221) 18,882
Cash and equivalents at beginning of period 26,771 23,565
---------- ---------
Cash and equivalents at end of period $25,550 $42,447
========== =========
Cash paid during period -Income taxes $12,645 $3,063
-Interest $971 $2,262
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
</table>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
The interim financial information is prepared in conformity with generally
accepted accounting principles and, except as indicated in Note 8, such
principles are applied on a basis consistent with those reflected in our
2002 Annual Report on Form 10-K, filed with the Securities and Exchange
Commission but does not include all the disclosures required by generally
accepted accounting principles. In the opinion of management, the interim
financial information includes all adjustments and accruals, consisting
only of normal recurring adjustments other than the adoption of Statement
of Financial Accounting Standard (SFAS) No. 142 discussed in Note 8, which
are, in our opinion, necessary for a fair presentation of results for the
respective interim period.
Note 2: Interim Results
The foregoing interim results are not necessarily indicative of the results
of operations for the full fiscal year ending April 26, 2003.
Note 3: Reclassification
Certain prior year information has been reclassified to be comparable to
the current year presentation.
Note 4: Earnings per Share
Basic earnings per share is computed using the weighted-average number of
shares outstanding during the period. Diluted earnings per share uses the
weighted-average number of shares outstanding during the period plus the
additional common shares that would be outstanding if the dilutive
potential common shares issuable under employee stock options were issued.
(Unaudited)
First Quarter Ended
---------------------
(Amounts in thousands) 7/27/02 7/28/01
---------- ---------
Weighted average common shares outstanding (basic) 59,125 60,772
Effect of options 542 249
---------- ---------
Weighted average common shares outstanding (diluted) 59,667 61,021
========== =========
Note 5: Inventories
A summary of inventory follows:
(Unaudited)
(Amounts in thousands) 7/27/02 7/28/01 4/27/02
--------- --------- ---------
Raw materials $80,167 $89,497 $72,389
Work-in-progress 55,574 62,793 53,947
Finished goods 109,655 118,306 94,062
--------- --------- ---------
FIFO inventories 245,396 270,596 220,398
Excess of FIFO over LIFO (11,871) (10,418) (11,741)
--------- --------- ---------
Inventories, net $233,525 $260,178 $208,657
========= ========= =========
Note 6: Restructuring
In fiscal years 2002 and 2001 we recorded restructuring liabilities of
$22.2 million and $11.2 million, respectively. As of July 27, 2002, 20 of
the 1,132 employees expected to be terminated as a result of these plans
remain with the company. Restructuring liabilities along with charges to
expense, cash payments or asset write-offs were as follows:
Fiscal 2003
------------------------
Cash
Charges Payments
4/27/02 to or Asset 7/27/02
(Amounts in thousands) Balance Expense Write-offs Balance
- ---------------------- --------- ---------- ------------ ---------
Fixed asset write-downs -- -- -- --
Severance and benefit
related costs $1,500 -- ($600) $900
Inventory write-downs -- -- -- --
Other 3,100 -- (800) 2,300
--------- ---------- ------------ ---------
Total restructuring $4,600 -- ($1,400) $3,200
========= ========== ============ =========
Fiscal 2002
------------------------
Cash
Charges Payments
4/28/01 to or Asset 4/27/02
(Amounts in thousands) Balance Expense Write-offs Balance
- ---------------------- --------- ---------- ------------ ---------
Fixed asset write-downs -- $11,000 ($11,000) --
Severance and benefit
related costs $1,200 4,600 (4,300) $1,500
Inventory write-downs -- 3,500 (3,500) --
Other 2,700 3,100 (2,700) 3,100
--------- ---------- ------------ ---------
Total restructuring $3,900 $22,200 ($21,500) $4,600
========= ========== ============ =========
<page>
Note 7: Segment Information
Our reportable operating segments are the Upholstery segment and the
Casegoods segment. Operating income for the first quarter of fiscal 2002 is
net of $2.3 million of goodwill and trade name amortization expense. See
Note 8 for additional information.
Unaudited
Quarter Unaudited Fiscal 2002 Quarter Ended
ended --------------------------------------------
(Amounts in 7/27/02 7/28/01 10/27/01 1/26/02 4/27/02
thousands) ---------- ---------- ---------- --------- ----------
Sales
Upholstery segment $366,889 $308,398 $389,239 $396,553 $449,566
Casegoods segment 131,274 148,683 168,441 147,274 146,870
Eliminations (788) (146) (272) (280) (374)
---------- ---------- ---------- --------- ----------
Consolidated $497,375 $456,935 $557,408 $543,547 $596,062
========== ========== ========== ========= ==========
Operating income
Upholstery segment $31,219 $11,966
Casegoods segment 7,593 (27)
Corporate and other (5,925) (4,962)
---------- ----------
Consolidated $32,887 $6,977
========== ==========
Note 8: New Accounting Pronouncement
Effective April 28, 2002, we adopted Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." SFAS No.
142 eliminates the amortization of goodwill and indefinite-lived intangible
assets and requires a review at least annually for impairment. We have
determined that our trade names are indefinite-lived assets, as defined by
SFAS No. 142, and therefore not subject to amortization beginning in fiscal
2003. Amortization expense for goodwill and trade names was $9.3 million
($7.5 million after tax) in fiscal 2002. Of this $9.3 million, $3.3 million
was attributable to the Upholstery segment and $6.0 was attributable to the
Casegoods segment. Excluding the effect of amortization, our reported net
income for the first quarter of fiscal 2002 would have been increased to
$4.7 million from $2.8 million and our diluted net income per common share
would have been increased to $0.08 from $0.05 per common share.
In accordance with SFAS No. 142, trade names were tested for impairment by
comparing their fair value to their carrying values. The fair value for
each trade name was based upon a royalty approach. As of April 28, 2002,
the carrying value of trade names exceeded their fair value creating an
impairment loss of $48.3 million. Additionally, goodwill was tested for
<page>
impairment by comparing the fair value of our operating units to their
carrying values. The fair value for each operating unit was based upon a
combination of the discounted cash flows and the projected profitability of
the market in which the entity operates. As of April 28, 2002, the carrying
value of goodwill exceeded its fair value creating an impairment loss of
$29.4 million. Of the pre-tax impairment loss, $17.1 million is
attributable to the Upholstery segment and $60.6 million is attributable to
the Casegoods segment. The after-tax effect of $59.8 million for these
impairment losses is included in the "Cumulative effect of accounting
change" in the Consolidated Statement of Income.
The amount for goodwill and trade names recorded in the fiscal 2002
financial statements were supported by the undiscounted estimated future
cash flows of the related operations in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Upholstery Casegoods
(Amounts in thousands) Group Group
------------- -----------
Goodwill
Balance as of 4/27/02 $70,265 $37,979
Effect of adopting SFAS No. 142 (17,062) (12,349)
------------- -----------
Balance at 7/27/02 $53,203 $25,630
============= ===========
Trade names
Balance as of 4/27/02 $14,255 $102,490
Effect of adopting SFAS No. 142 -- (48,291)
------------- -----------
Balance at 7/27/02 $14,255 $54,199
============= ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Concerning Forward-Looking Statements
We are making forward-looking statements in this item. Generally,
forward-looking statements include information concerning possible or assumed
future actions, events or results of operations. More specifically,
forward-looking statements include the information in this document regarding:
future income and margins future economic performance
future growth industry trends
adequacy and cost of financial resources management plans
<page>
Forward-looking statements also include those preceded or followed by the words
"anticipates," "believes," "estimates," "hopes," "plans," " intends" and
"expects" or similar expressions. With respect to all forward-looking
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
Many important factors, including future economic, political and industry
conditions (for example, changes in interest rates, changes in consumer demand,
changes in currency exchange rates, changes in demographics and consumer
preferences, changes in housing sales, oil price changes, terrorism impacts and
changes in the availability and cost of capital); competitive factors (such as
the competitiveness of foreign-made products, new manufacturing technologies, or
other actions taken by current or new competitors); operating factors (for
example, supply, labor, or distribution disruptions, changes in operating
conditions or costs, effects of restructuring actions and changes in regulatory
environment); and factors relating to acquisitions, could affect our future
results and could cause those results or other outcomes to differ materially
from what may be expressed or implied in our forward-looking statements. We
undertake no obligation to update or revise any forward-looking statements for
new developments or otherwise.
Results of Operations
First Quarter Ended July 27, 2002 Compared to First Quarter Ended July 28, 2001.
See page 4 for the consolidated statement of income with analysis of percentages
and calculations.
Our results for the first quarter of fiscal 2002 included the operations of our
former Pilliod subsidiary, which operated in the Casegoods segment and which we
divested effective November 30, 2001.
First quarter sales increased 8.9% to $497.4 million from the prior year first
quarter. On a pro forma basis, excluding $10.9 million of Pilliod's sales, the
increase in sales totaled 11.5%. The major factor contributing to the increased
sales was the ongoing strength of the La-Z-Boy Furniture Galleries(R)
proprietary store system, which had a 6.0% increase over the same
store sales for the previous first quarter. Although these comparisons are
against depressed numbers from the previous year, the La-Z-Boy Furniture
Galleries have seen a significant increase in the quarterly sales and orders. In
addition, on April 28, 2002 we acquired three stores in the Boston,
Massachusetts area to add to our Retail division. The Upholstery segment had a
19.0% increase in sales while the Casegoods segment had a 4.7% decline in sales
after taking into account the Pilliod 2002 first quarter net sales. The
hospitality sector of our Casegoods segment is still experiencing weak sales
activity as hotel occupancies and refurbishments continue to be below prior year
levels.
Gross profit as a percent of sales increased to 23.1% as compared to 19.1% in
the fiscal 2002 first quarter. Although the increased sales volume attributed to
the increased gross margins through better absorption of overhead in the
factories, the main reason for the increase was management's continued efforts
to adjust capacity of the plants to production requirements. The restructurings
announced in both fiscal 2001 and 2002 continue to positively impact the current
year gross margins as we better matched domestic production requirements and
plant manufacturing capacity. Additionally, the Casegoods segment margins
improved due to our increased sales of imported goods, which we are able to sell
at higher margins than comparable products manufactured domestically.
Selling, General & Administrative (S, G & A) expenses as a percent of sales
declined from 17.6% in first quarter fiscal 2002 to 16.5% in the current
quarter. This decline was primarily attributable to the Upholstery segment's
19.0% increase in sales volume, which absorbed the fixed portion of the SG&A
expenses at a better rate than the previous year. In the previous year's quarter
a sales training and support event for our La-Z-Boy proprietary dealers that
occurs every two years increased our S, G & A expenses.
<page>
Operating profit as a percent of sales increased to 6.6% from 1.5% in the
previous years first quarter. The Casegoods margin went from breakeven to an
operating margin of 5.8%. With the closing of four casegoods plants and
converting two other plants to warehouse, sub-assembly and import service
operations as well as divesting Pilliod, the Casegoods segment was able to
reduce its overhead at a faster rate than the sales decline. In addition, the
Upholstery segment, benefiting from its strong sales growth, increased its
margins from 3.9% to 8.5% in the current year's quarter.
The 31.4% decline in interest expense is mainly attributable to the $46.2
million decline in debt over the past twelve months. Due to the interest
rate swap agreements we use to reduce the impact of changing rates on our
floating rate revolving debt and the fixed rates on the majority of our other
outstanding debt, our overall weighted average interest rate does not fluctuate
significantly.
Our income tax rate of 38.2% is lower than the 39.0% rate of last year's first
quarter due mainly to the elimination of goodwill amortization.
Liquidity and Capital Resources
See pages 3 through 5 for our Consolidated Statement of Income, Consolidated
Balance Sheet and Consolidated Statement of Cash Flows.
Cash flows from operations amounted to $47.3 million in the first three months
of fiscal year 2003 compared to $41.8 million in the prior year. In the
aggregate, capital expenditures, dividends and stock repurchases totaled
approximately $62.4 million during the first quarter, which is up from about
$11.5 million in the first three months of fiscal 2002. Cash and cash
equivalents decreased by $1.2 million during the three-month period compared to
an increase of $18.9 million in the prior year.
Capital expenditures were $8.9 million during the quarter ended July 27, 2002
compared to last year's $6.1 million.
During the first quarter of the current fiscal year, we used $47.5 million to
repurchase common stock under the repurchase program approved by our Board of
Directors. We did not repurchase any shares during the first quarter last year.
As of July 27, 2002, approximately 1.9 million additional shares could be
repurchased pursuant to the repurchase program.
Our financial strength is reflected in three commonly used calculations. Our
current ratio (current assets divided by current liabilities) was 3.1:1 at July
27, 2002 and 3.0:1 at April 27, 2002 and July 28, 2001. Our total
debt-to-capital percentage (total debt divided by shareholders' equity plus
total debt) was 19.7% at July 27, 2002, 16.6% at April 27, 2002, and 22.0% at
July 28, 2001.
<page>
As of July 27, 2002, we had lines of credit availability of approximately $349.5
million under several credit agreements.
Outlook
We believe the longer-term outlook for our industry remains very positive -
especially for a company such as La-Z-Boy, operating under the umbrella of
powerful consumer brand names and a strong and growing proprietary distribution
system. We expect the recent declines in U.S. interest rates to ultimately
rejuvenate consumer spending and strengthen housing turnover and home remodeling
- - both strong drivers of retail furniture demand.
We expect interest expense to continue to be less next quarter than the prior
year quarter.
We are anticipating our fiscal 2003 full year income tax rate to be
approximately 38.25% down from 39.0% excluding the tax benefit of the Pilliod
divestiture mainly due to the elimination of goodwill amortization.
We estimate that our diluted net income per share for the second quarter ending
October 2002 will be between $0.45-$0.50 compared to $0.20 last year (which
included $0.13 per share of restructuring charges) with middle single digit
sales growth. Excluding the cumulative effect of adoption of SFAS
No. 142, we are tentatively looking for $1.70 - $1.80 for our full fiscal
year ending April 2003 with middle single digit sales growth as well. This
compares to earnings per share in FY 2002 of $1.01. Prior to restructuring
charges of $0.22 in fiscal 2002 earnings per diluted share were $1.23.
We expect total capital expenditures to be between $35.0 million and $40.0
million for fiscal 2003. This compares to $33.0 million of capital expenditures
in fiscal 2002.
We expect to continue to be in the open market for purchasing our shares from
time to time as changes in our stock price and other factors present appropriate
opportunities, but we have no commitments for repurchases.
We expect to meet our cash needs for capital expenditures, stock repurchases and
dividends during fiscal year 2003 from cash generated by operations and
borrowings under available lines of credit.
Recently the Financial Accounting Standards Board issued SFAS No. 143
"Accounting for Asset Retirement Obligations," SFAS No. 145 "Rescission of
<page>
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" and SFAS No. 146 "Accounting for Costs Associated
with Exit and Disposal Activities." SFAS No. 146 is effective for activities
occurring after December 31, 2002, and the other standards must be
implemented during our next fiscal year. We have not yet determined the
impact, if any, of these standards on our financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates. Our exposure to
interest rate risk results from our floating rate $300 million revolving credit
facility under which we had $80 million borrowed at July 27, 2002. We have
entered into several interest rate swap agreements with counter-parties that are
participants in the revolving credit facility to reduce the impact of changes in
interest rates on a portion of this floating rate debt. We believe that
potential credit loss from counter-party non-performance is minimal. The purpose
of these swaps is to fix interest rates on a notional amount of $70 million for
a three year period at 6.095% plus our applicable borrowing spread under the
revolving credit facility, which can range from 0.475% to 0.800%. Management
estimates that a 1% change in interest rates would not have a material impact on
the results of operations for fiscal 2003 based upon the year end levels of
exposed liabilities.
We are exposed to market risk from changes in the value of foreign currencies.
Our exposure to changes in the value of foreign currencies is reduced through
our use of foreign currency forward contracts from time to time. Substantially
all of our imported purchased parts and finished goods are denominated in U.S.
dollars. Thus, we believe that gains or losses resulting from changes in the
value of foreign currencies will not be material to our results from operations
in fiscal year 2003.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3) Restated Bylaws
(4) Second Amendment dated as of August 6, 2002 to Credit Agreement
dated as of May 12, 2000
(10) Form of Change in Control Agreement executed by John J. Case.
Directors or executive officers currently covered: Patrick H.
Norton, Gerald L. Kiser, David M. Risley, John J. Case; incorporated
by reference to an exhibit to Form 8-K dated February 6, 1995
(11) Statement of Computation of Per Share Earnings See note 4 to
the financial statements included in this report.
(99.1) Press Release dated August 14, 2002
(99.2) Certifications of Executive Officers pursuant to 18 U.S.C. Section
1350
(b) Reports on Form 8-K
We filed a Form 8-K on May 29, 2002 containing a press release and
financial information about our fourth quarter and full fiscal year
2002 financial results.
We filed a Form 8-K on August 14, 2002 reporting that our chief
executive officer and chief financial officer had filed the statement
under oath required by the SEC's June 29, 2002 order directed to 947 of
the country's largest publicly traded companies.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LA-Z-BOY INCORPORATED
---------------------
(Registrant)
Date: August 14, 2002 /s/ Louis M. Riccio, Jr.
------------------------
Louis M. Riccio, Jr.
On behalf of the registrant and as
Chief Accounting Officer
Exhibit (3)
AMENDED AND RESTATED BYLAWS
OF
LA-Z-BOY INCORPORATED
(as of July 1, 2002)
ARTICLE I
Name and Office
Section 1. Name. The name of this corporation is La-Z-Boy Incorporated.
Section 2. Registered Office. The principal and registered office of the
corporation shall be located at 1284 North Telegraph Road, Monroe, Michigan.
Section 3. Other Offices. The corporation may also have other offices for the
transaction of business located at such places, both within and without the
State of Michigan, as the Board of Directors may from time to time determine.
ARTICLE II
Capital Stock and Transfers
Section 1. Share Certificates.
(A) Required Signatures. The shares of the corporation shall be
represented by certificates signed by the Chairman of the Board or the President
or an Executive Vice President and the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer of the corporation, and may be sealed
with the seal of the corporation or a facsimile thereof. The signatures of the
officers of the corporation upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent, or is registered by a
registrar, other than the corporation itself or an employee of the corporation.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer, transfer agent or registrar before such certificate is issued,
it may be issued by the corporation with the same effect as if the signer were
still such officer, transfer agent or registrar at the date of the certificate's
issue.
(B) Required Information. A certificate representing shares of the
corporation shall state upon its face all of the following:
(a) That the corporation is formed under the laws of this state.
(b) The name of the person to whom issued.
(c) The number and class of shares, and the designation of the series,
if any, which the certificate represents.
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Section 2. Lien. The corporation shall have a first lien on all the shares of
its capital stock, and upon all dividends declared upon the same for any
indebtedness of the respective holders thereof to the corporation.
Section 3. Transfers. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate representing shares fully endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate canceled and the transaction recorded upon the books of the
corporation.
Section 4. Replacement of Lost, Stolen or Destroyed Share Certificates. The
Board of Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may prescribe such terms and conditions as it deems expedient, and may
require such indemnities as it deems adequate, to protect the corporation from
any claim that may be made against it with respect to any such certificate
alleged to have been lost, stolen or destroyed.
Section 5. Transfer Agent and Registration. The Board of Directors may appoint
a transfer agent and a registrar in the registration of transfers of its
securities.
Section 6. Rules of Issue and Transfer. The Board of Directors shall have power
and authority to make all such rules and regulations as the board shall deem
expedient regulating the issue, transfer and registration of certificates for
shares in the corporation.
Section 7. Registered Shareholders. The corporation shall have the right to
treat the registered holder of any share as the absolute owner thereof, and
shall not be bound to recognize any equitable or other claim to, or interest in,
such share on the part of any other person, whether or not the corporation shall
have express or other notice thereof, save as may be otherwise provided by the
statutes of Michigan.
ARTICLE III
Shareholders and Meetings
Section 1. Annual Meeting of Shareholders. The 1991 Annual Meeting of
Shareholders was held August 5, 1991 and all subsequent Annual Meetings of
Shareholders shall be held on the last Monday in July of each year, or at such
other date as shall be designated by the Board of Directors and stated in the
notice of the meeting. At said meeting the shareholders shall elect by a
plurality vote the Directors to be elected at such meeting, and shall transact
such other business as may properly be brought before the meeting.
Section 2. Special Meetings of Shareholders. A special meeting of the
shareholders for any purpose or purposes other than election of Directors may be
called at any time and place by the Chairman of the Board, and in his absence,
by the President; or by the Directors. It shall be the duty of the Directors,
the Chairman of the Board, or the President to call such meeting whenever so
requested in writing by shareholders owning, in the aggregate, at least
seventy-five percent (75%) of the entire capital stock of the corporation
entitled to vote at such special meeting. Such request shall state the purpose
or purposes of the proposed meeting.
Section 3. Notice of Meetings of Shareholders. Notice of the time, date and
place of all annual and special meetings shall be mailed by the Secretary to
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each shareholder entitled to vote at such meeting not less than ten (10) days
nor more than sixty (60) days before the date thereof. The business transacted
at any special meeting of shareholders shall be limited to the purpose(s) stated
in the notice.
Section 4. Presiding Officer. The Chairman of the Board, or in his absence, the
President, or in his absence such Vice President as the Board of Directors may
designate, shall preside at any meeting of shareholders.
Section 5. Vote of Shareholders; Proxies. At every such meeting each shareholder
entitled to vote thereat may cast such vote or votes either in person, or by
proxy, but no proxy shall be voted after three (3) years from its date, unless
the proxy provides for a longer period. A shareholder may authorize one or more
persons to act for him by proxy. All proxies shall be in writing by the
shareholder or by his duly authorized agent or representative and shall be filed
with the Secretary.
Section 6. Quorum of Shareholders. The holders of a majority of the shares of
stock issued and outstanding and entitled to vote thereat, represented in person
or by proxy, shall constitute a quorum at all meetings of the shareholders for
the transaction of business except as otherwise provided by statute or by the
Articles of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 7. Required Vote. If a quorum is present, the affirmative vote of the
holders of a majority of the shares of stock represented at the meeting shall be
the act of the shareholders unless the vote of a greater number of shares of
stock is required by law or the Articles of Incorporation.
Section 8. Removal. The shareholders shall have power by a majority vote at
any such meeting, to remove any Director from office.
Section 9. List of Shareholders Entitled to Vote. The officer or agent having
charge of the stock transfer books for shares of the corporation shall make and
certify a complete list of the shareholders entitled to vote at a shareholders'
meeting or any adjournment thereof. The list shall:
(a) Be arranged alphabetically within each class and series, with the
address of, and the number of shares held by, each shareholder.
(b) Be produced at the time and place of the meeting.
(c) Be subject to inspection by any shareholder during the whole time
of the meeting.
(d) Be prima facie evidence as to who are the shareholders entitled
to examine the list or to vote at the meeting.
Section 10. Record Date for Determination of Shareholders. For the purpose of
determining shareholders entitled to notice of and to vote at a meeting of
shareholders or an adjournment of a meeting, the Board of Directors may fix a
record date, which shall not precede the date on which the resolution fixing the
record date is adopted by the Board. The date shall not be more than sixty (60)
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nor less than ten (10) days before the date of the meeting. If a record date is
not fixed, the record date for determination of shareholders entitled to notice
of or to vote at a meeting of shareholders shall be the close of business on the
day next preceding the day on which notice is given, or if no notice is given,
the day next preceding the day on which the meeting is held. When a
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders has been made as provided in this Section, the
determination applies to any adjournment of the meeting, unless the Board of
Directors fixes a new record date under this Section for the adjourned meeting.
For the purpose of determining shareholders entitled to receive payment of a
share dividend or distribution, or allotment of a right, or for the purpose of
any other action, the Board of Directors may fix a record date, which shall not
precede the date on which the resolution fixing the record date is adopted by
the Board. The date shall not be more than sixty (60) days before the payment of
the share dividend or distribution or allotment of a right or other action. If a
record date is not fixed, the record date shall be the close of business on the
day on which the resolution of the Board of Directors relating to the corporate
action is adopted.
Section 11. Inspectors of Election. The Board of Directors may appoint one or
more inspectors of election to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at a shareholders' meeting
may, and on request of a shareholder entitled to vote thereat shall, appoint one
or more inspectors. The inspectors shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine challenges and questions arising
in connection with the right to vote, count and tabulate votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or a shareholder entitled to vote thereat, the
inspectors shall make and execute a written report to the person presiding at
the meeting of any of the facts found by them and matters determined by them.
The report is prima facie evidence of the facts stated and of the vote as
certified by the inspectors.
ARTICLE IV
Directors
Section 1. Number and Powers of Directors. The business and affairs of the
corporation shall be managed by a Board of Directors consisting of 10 Directors
who shall be elected by the shareholders. The Directors shall be elected at the
annual meeting of the shareholders, as detailed hereinafter, and each Director
shall serve until his successor shall have been elected and qualified. When
acting as such, the Board of Directors may exercise all powers and do all such
lawful acts and things (including, without limitation, the making of such
adjustments in the number of Directors in any Director class or classes that may
be determined by the Board to be necessary or appropriate in light of an
increase or decrease in the total number of Directors specified in these bylaws)
as are not by statute or by the Articles of Incorporation or these bylaws
directed or required to be exercised or done by the shareholders.
Section 2. Classification and Term of Office. The Directors shall be severally
classified with the respect to the time for which they shall hold office by
dividing them into three classifications, with the number of Directors in each
class being as nearly equal as possible to the number of directors in each other
class.
Section 3. Regular Meetings of Board. Regular meetings of the Directors shall be
held immediately after the adjournment of each annual shareholders' meeting and
may be held at such time and at such place as shall from time to time be
determined by the Board.
Section 4. Special Meetings of Board. Special meetings of the Board of Directors
may be called by the Chairman, and, in his absence, by the President or any four
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members of the Board of Directors. By unanimous consent of the Directors,
special meetings of the Board may be held without notice, at any time and place.
The presence of a Director at a meeting shall constitute a Waiver of Notice
except where the Director attends solely to protest the legality of the meeting.
Section 5. Notice. Notice of all regular and special meetings, except those
specified in the second sentence of Section 4 or in Section 7 of this article,
shall be delivered in person, mailed, e-mailed, faxed, or sent by telegram to
each Director, by the Secretary, at least one day previous to the time fixed for
the meetings. All notices of special meetings shall state the purposes thereof.
Section 6. Quorum and Required Vote. A majority of the Directors shall
constitute a quorum for the transaction of business unless a greater number is
required by law or by the Articles of Incorporation. The act of a majority of
the Directors present at any meeting at which a quorum is present shall be the
act of the Board of Directors, unless the act of a greater number is required by
statute, these bylaws, or by the Articles of Incorporation. If a quorum shall
not be present at any meeting of Directors, the Directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 7. Annual Meeting; Election of Officers. The Directors shall elect
officers of the corporation, and fix their salaries; such elections to be held
at the Directors' meeting following each annual shareholders' meeting. No notice
of such meeting shall be necessary to any newly elected Director in order to
legally constitute the meeting, provided a quorum shall be present. The Board of
Directors also may elect other officers, and fix the salaries of such officers,
at other times and from time to time as the Board may deem necessary or
appropriate for transaction of the business of the corporation. Any officer may
be removed at any time by a two-thirds vote of the full Board of Directors.
Section 8. Vacancies. All vacancies occurring in the Board of Directors, whether
caused by resignation, death or otherwise, may be filled by the affirmative vote
of two-thirds of the remaining Directors though less than a quorum of the Board
of Directors. A Director elected to fill a vacancy shall be elected for the
unexpired portion of the term of his predecessor in office.
Section 9. Directors' Report. At each annual shareholders' meeting the Directors
shall submit a statement of the business done during the preceding year,
together with a report of the general financial condition of the corporation,
and of the condition of its tangible property.
Section 10. Committees of Directors. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, or in these bylaws, shall have and may exercise all of the power and
authority of the Board of Directors in the management of the business and
affairs of the corporation, but no such committee shall have the power or
authority in reference to amending the Articles of Incorporation, adopting an
agreement of merger or consolidation, recommending to shareholders the sale,
lease, or exchange of all or substantially all of the corporation's property and
assets, recommending to the shareholders the dissolution of the corporation or
revocation of a dissolution, amending the bylaws of the corporation, or filling
vacancies in the Board, and unless a resolution of the Board of Directors, the
Articles of Incorporation or the bylaws expressly so provides, no such committee
shall have the power or authority to declare a distribution, dividend, or to
authorize the issuance of stock.
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Section 11. Compensation of Directors. The Board of Directors, by the
affirmative vote of a majority of the Directors then in office, and irrespective
of any personal interest of any of them, shall have authority to fix the
compensation of all Directors for services to the corporation as directors,
officers, or otherwise.
Section 12. Action by Written Consent. Unless otherwise restricted by the
Articles of Incorporation or these Bylaws, any action required or permitted to
be taken at any meeting of the Board of Directors or of any Committee thereof
may be taken without a meeting, if all members of the Board or Committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes or proceedings of the Board or Committee.
Section 13. Participation in Meeting by Telephone. By oral or written permission
of a majority of the Board of Directors, a member of the Board of Directors or
of a Committee designated by the Board may participate in a meeting by means of
conference telephone or similar communications equipment through which all
persons participating in the meeting can communicate with the other
participants. Participation in a meeting pursuant to this Section constitutes
presence in person at the meeting.
Section 14. Nomination of Director Candidates. Nomination of candidates for
election as Directors of the Corporation at any meeting of shareholders called
for election of Directors (an "Election Meeting") may be made by the Board of
Directors or by any shareholder entitled to vote at such Election Meeting but
only in accordance with the procedure outlined herein.
(a) Procedure for Nominations by the Board of Directors. Nominations
made by the Board of Directors shall be made at a meeting of the
Board of Directors, or by written consent of Directors in lieu of
a meeting, not less than 30 days prior to the date of the Election
Meeting, and such nominations shall be reflected in the minute
books of the corporation as of the date made. At the request of
the Secretary of the corporation each proposed nominee shall
provide the corporation with such information concerning himself
or herself as is required, under the rules of the Securities and
Exchange Commission, to be included in the corporation's proxy
statement soliciting proxies for his or her election as a
director.
Any shareholder who wishes to recommend a director candidate for
consideration for nomination by the Board of Directors must send
the recommendation to the Secretary of the Corporation, who shall
forward it to the Committee on the Board. The recommendation must
include a description of the candidate's qualifications for board
service, the candidate's consent to be considered for nomination
and to serve if nominated and elected, and addresses and telephone
numbers for contacting the recommending shareholder and the
candidate for more information. The deadline for the corporation's
receipt of such a recommendation shall be as follows: (1) if the
proposal is submitted for a regularly scheduled annual meeting of
shareholders, the deadline shall be 120 calendar days before the
date of the corporation's proxy statement in connection with the
previous year's annual meeting, except that if the corporation did
not hold an annual meeting in the previous year, or if the date of
annual meeting for which the recommendation is submitted has been
changed by more than 30 days from the date of the previous year's
annual meeting, the deadline shall be a reasonable time (as
determined by the Secretary of the corporation) before the
corporation begins to print and mail its proxy materials; and (2)
if the proposal is submitted for a meeting other than a regularly
scheduled annual meeting, the deadline shall be a reasonable time
(as determined by the Secretary of the corporation) before the
corporation begins to print and mail its proxy materials.
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(b) Procedure for Nominations by Shareholders. Not less than 90 days
prior to the first anniversary of the preceding year's annual
meeting any shareholder who intends to make a nomination at the
Election Meeting shall deliver a notice to the Secretary of the
Corporation setting forth (i) the name, age, business address and
residence of each nominee proposed in each such notice, (ii) the
principal occupation or employment of each such nominee, (iii) the
number of shares of capital stock of the Corporation which are
beneficially owned by each such nominee and (iv) such other
information concerning each such nominee as would be required,
under the rules of the Securities and Exchange Commission, in a
proxy statement soliciting proxies for the election of such
nominee.
(c) Determination of Compliance with Procedures. If the Chairman of
the Election Meeting determines that a nomination was not in
accordance with the foregoing procedures, such nomination shall be
void.
ARTICLE V
Officers
Section 1. In General. The officers of this corporation shall include a Chairman
of the Board, a President, a Secretary and a Treasurer, and may include a Vice
Chairman of the Board, one or more Vice Presidents, Senior Vice Presidents or
Executive Vice Presidents and such Assistant Secretaries and Treasurers or other
officers as shall seem necessary or appropriate to the Board of Directors from
time to time. None of said officers, except the Chairman of the Board, the
President, and the Vice Chairman of the Board, need be a Director. Any of the
aforementioned offices, except those of Chairman of the Board and President, of
Chairman of the Board and Vice-Chairman of the Board, of President and
Vice-President or Executive Vice President, of Treasurer and Assistant
Treasurer, or of Secretary and Assistant Secretary, may be held by the same
person, but no officer shall execute, acknowledge, or verify any instrument or
document in more than one capacity. As and whenever it determines the same to be
appropriate, the Board of Directors may designate the President, an Executive
Vice President, a Vice President, or the Treasurer as the Chief Financial
Officer of the corporation, and any such officer so designated (while he
continues to hold the office held at the time of such designation and until such
designation is revoked or a different officer is so designated by the Board of
Directors) may identify himself and execute instruments and other documents
using the title of Chief Financial Officer.
Section 2. Chairman of the Board. The Chairman of the Board shall be selected
by, and from among the membership of, the Board of Directors. Except as
otherwise indicated in these bylaws, the Chairman of the Board shall preside at
all meetings of the shareholders and of the Board of Directors and of any Board
committee at which he is in attendance. He shall serve as principal adviser with
respect to all sales and marketing activities of the corporation and its
subsidiaries, shall sign stock certificates as provided in Section 1 of Article
II of these bylaws and shall perform such other duties and functions as shall be
assigned to him from time to time by the Board of Directors. Except where by law
the signature of the President of the corporation is required, the Chairman of
the Board shall possess the same power and authority as the President to sign
all certificates, contracts, instruments, papers, and documents of every
conceivable kind and character whatsoever, in the name of and on behalf of the
corporation, as may be authorized by the Board of Directors. During the absence
or disability of the President, the Chairman of the Board shall exercise all of
the powers and discharge all of the duties of the President. In case of the
absence or the disability of the Chairman of the Board, his duties shall be
performed by the President, and in case of the President's absence, by the Vice
Chairman of the Board or, with respect to a shareholder meeting, by such Vice
President or Executive Vice President as the Board of Directors may designate.
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Section 3. Vice Chairman of the Board. If the Board of Directors elects a Vice
Chairman of the Board, he shall be selected from the membership of the Board of
Directors. During the absence or disability of both the Chairman of the Board
and the President, or while both such offices are vacant, he shall preside at
all meetings of the Board of Directors and of any Board committee at which he is
in attendance. During the absence or disability of both the President and the
Chairman of the Board, or while both such offices are vacant for any reason, the
Vice Chairman of the Board shall have and may exercise any and all of the powers
and duties of the President and of the Chairman of the Board. At all other times
the Vice Chairman of the Board shall be responsible to the Chairman of the Board
and through him (or during the absence or disability of the Chairman of the
Board or while that office is vacant for any reason, directly) to the Board of
Directors for the exercise, performance, and discharge of such powers, duties,
and responsibilities as the Chairman of the Board or the Board of Directors
shall see fit to vest in or delegate to him or which are vested in or imposed
upon him by the bylaws.
Section 4. President and Chief Executive Officer. The President shall be
selected by, and from among the membership of, the Board of Directors. The
President shall be (and may identify himself and execute instruments and other
documents using the title of) the Chief Executive Officer of the corporation and
shall, in general, supervise and manage the business affairs of the corporation,
including, but not limited to, by discharging any and all duties normally and
customarily incident to the office of President and Chief Executive Officer of a
corporation and such other duties and functions as shall be assigned to him from
time to time by the Board of Directors. During the absence or disability of the
Chairman of the Board, or while such office is vacant, the President shall
perform all duties and functions, and while so acting shall have all of the
powers and authority, of the Chairman of the Board.
Section 5. Vice Presidents. The Board of Directors may elect or appoint one or
more Vice Presidents and may designate one or more Vice Presidents as Executive
Vice Presidents. Unless the Board of Directors shall otherwise provide by
resolution duly adopted by it, or as otherwise provided in these bylaws, such of
the Vice Presidents as shall have been designated Executive Vice Presidents and
who are members of the Board of Directors in the order specified by the Board of
Directors shall perform the duties and exercise the powers of the President
during the absence or disability of the President if the office of the Chairman
of the Board is vacant. The Vice Presidents shall perform such other duties as
may be delegated to them by the Board of Directors, the Chairman of the Board or
the President.
Section 6. Secretary and Assistant Secretaries. The Secretary shall issue
notices of all Directors' and shareholders' meeting, and shall attend and keep
the minutes of the same; shall have charge of all corporation books, records and
papers; shall be custodian of the corporate seal, all stock certificates and
written contracts of the corporation; and shall perform all such other duties as
are incident to his office. The Secretary shall also perform such duties as are
assigned to him from time to time by the Board of Directors. The Assistant
Secretary or Assistant Secretaries, in the absence or disability of the
Secretary, shall perform the duties and exercise the powers of the Secretary.
Section 7. Treasurer and Assistant Treasurers. The Treasurer shall have custody
of all corporate funds and securities and shall keep in books belonging to the
corporation full and accurate accounts of all receipts and disbursements; he
shall deposit all moneys, securities and other valuable effects in the name of
the corporation in such depositories as may be designated for that purpose by
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the Board of Directors. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the Board, the President, and
the Board of Directors whenever requested by them an account of all his
transactions as Treasurer. If required by the Board of Directors, he shall keep
in force a bond, in form, amount and with a surety or sureties satisfactory to
the Board of Directors, conditioned for faithful performance of the duties of
his office, and for restoration to the corporation in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and property of whatever kind in his possession or under his control
belonging to the corporation. He shall perform such other duties as may be
delegated to him by the Board of Directors or the President. The Assistant
Treasurer or Assistant Treasurers, in the absence or disability of the
Treasurer, shall perform the duties and exercise the powers of the Treasurer. If
required by the Board of Directors, any Assistant Treasurer also shall keep in
force a bond as provided in this Section.
Section 8. Indemnification of Directors, Officers and Others. Pursuant to the
provisions of Article XI of the Articles of Incorporation of the corporation,
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) in accordance with
the following provisions of this bylaw:
A. Indemnification of Directors and Officers: Claims by Third Parties. The
corporation shall, to the fullest extent authorized or permitted by the
Michigan Business Corporation Act, as amended (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 (an "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, judgments, 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 judgment, 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, had reasonable cause to believe that his or her conduct was
unlawful.
B. 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 an Indemnitee who was or is a party 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 attorneys' fees, and amounts paid in settlement actually and
reasonably 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 Section B for a 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.
<page>
C. Actions Brought by the Indemnitee. Notwithstanding the provisions of
Subsections A and B of this Section 8, 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 8 and the Indemnitee has been
successful in such action, suit, proceeding or claim (or part thereof).
D. Approval of Indemnification. An indemnification under Subsections A or B
of this Section 8, unless ordered by the 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 A or B of this Section 8, as the case may be, and
upon an evaluation of the reasonableness of expenses and amounts paid in
settlement. This determination and evaluation shall be made in any of the
following ways:
(a) By a majority vote of a quorum of the Board of Directors consisting
of Directors who are not parties or threatened to be made parties to
the action, suit, or proceeding.
(b) If a quorum cannot be obtained in subsection (a), then by majority
vote of a committee of Directors who are not parties to the action.
The committees shall consist of not less than three (3)
disinterested Directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
E. Advancement of Expenses. The corporation may pay or reimburse the
reasonable expenses incurred by an Indemnitee who is a party or
threatened to be made a party to an action, suit, or proceeding in
advance of final disposition of the proceeding if all of the following
apply:
(a) The Indemnitee furnishes the corporation a written affirmation of
his or her good faith belief that he or she has met the applicable
standard of conduct set forth in Subsections A and B above.
(b) The Indemnitee furnishes the corporation a written undertaking,
executed personally or on his or her behalf, to repay the advance if
is ultimately determined that he or she did not meet the standard
of conduct.
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under the Act.
The undertaking required by subsection (b) must be an unlimited general
obligation of the Indemnitee but need not be secured. Determinations of
payments under this Section shall be made in the manner specified in
Subsection D above.
F. Partial Indemnification. If an Indemnitee is entitled to indemnification
under Subsections A or B of this Section 8 for a portion of expenses,
including reasonable attorneys' fees, judgments, penalties, fines, and
amounts paid in settlement, but not for the total amount, 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.
<page>
G. Indemnification of Employees and Agents. Any person who is not covered
by the foregoing provisions of this Section 8 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 exists 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.
H. Other Rights of Indemnification. The indemnification or advancement of
expenses provided under Subsections A through G of this Section 8 is not
exclusive of other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the articles of
incorporation, bylaws, or a contractual agreement. 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 A through G of this Section 8 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.
I. Definitions. "Other enterprises" 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 its 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 A and B of this Section 8.
J. 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 him or her and incurred by him or her in any
such capacity or arising out of his or her status as such, whether or not
the corporation would have power to indemnify him or her against
liability under the pertinent provisions of the Act.
K. Enforcement. If a claim under this Section 8 is not paid in full by the
corporation within thirty (30) 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
<page>
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 make it permissible under the Act for the
corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its 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 its 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.
L. Contract With the Corporation. The right to indemnification conferred in
this Section 8 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 8 is in effect, and any repeal or
modification of this Section 8 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.
M. 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 from application to this Section 8. The
indemnification and other obligations set forth in this Section 8 of the
corporation shall be binding upon any resulting or surviving corporation
after any merger or consolidation with the corporation. Notwithstanding
anything 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 8 for acting as a Director or officer of another
corporation prior to such other corporation entering into a merger or
consolidation with the corporation.
N. Severability. Each and every paragraph, sentence, term and provision of
this Section 8 shall be considered severable in that, in the event 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 8 shall be construed in all respects as if
the invalid or unenforceable matter had been omitted.
ARTICLE VI
Dividends and Finance
Section 1. Dividends. Dividends, to be paid out of the surplus earnings of the
corporation, or as otherwise permitted in accordance with the provisions of the
governing statute, may be declared from time to time by resolution of the Board
of Directors; but no dividend shall be paid that will impair the capital of the
corporation. Dividends may be paid in cash, in property or in shares of the
capital stock, subject to any provisions of the governing statute or the
Articles of Incorporation.
Section 2. Deposits. The funds of the corporation shall be deposited in such
banks or trust companies as the Directors shall designate and shall be withdrawn
only upon checks issued and signed in accordance with regulations adopted by the
Board of Directors.
Section 3. Checks. All checks, drafts and orders for the payment of money shall
be signed in the name of the corporation in such manner and by such officer or
officers or such other person or persons as the Board of Directors shall from
time to time designate for that purpose.
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of this corporation shall end on the last Saturday of
April each year. The fiscal year may be changed by the Board of Directors by
resolution of the Board of Directors.
<page>
ARTICLE VIII
Amendments
These bylaws may be altered, amended or repealed in whole or in part and new
bylaws may be adopted either:
(a) By the affirmative vote of the holders of record of not less than 67%
of the outstanding stock of the Corporation entitled to vote in
elections of Directors; or
(b) By the affirmative vote of a majority of the Board of Directors at any
meeting of the Board, or by written consent signed by all members of the
Board of Directors; provided, however, no such alteration, amendment or
repeal of Article VIII (a) of these bylaws shall be made by the Board of
Directors or be effective unless such alteration, amendment or repeal
shall be first approved by the affirmative vote of the holders of record
of not less than 67% of the outstanding stock of the corporation entitled
to vote in elections of Directors.
ARTICLE IX
General Provisions
Section 1. Distributions in Cash or Property. The Board of Directors may
authorize and the corporation may make distributions to its shareholders subject
to restriction by the Articles of Incorporation and/or unless otherwise limited
by the Articles of Incorporation, these bylaws or the Act.
Section 2. Reserves. The Board of Directors shall have power and authority to
set apart such reserve or reserves, for any proper purpose, as the Board in its
discretion shall approve, and the Board shall have the power and authority to
abolish any reserve created by the Board.
Section 3. Voting Securities. Unless otherwise directed by the Board of
Directors, the President or in the case of his absence or inability to act, the
Chairman of the Board or the Vice Chairman of the Board, or in the case of their
absence or inability to act, the Vice Presidents, including Executive Vice
Presidents, in order of their seniority, shall have full power and authority on
behalf of the corporation to attend and to act and to vote, or to execute in the
name or on behalf of the corporation a consent in writing in lieu of a meeting
of shareholders or a proxy authorizing an agent or attorney-in-fact for the
corporation to attend and vote at any meetings of security holders of
corporations in which the corporation may hold securities, and at such meetings
he or his duly authorized agent or attorney-in-fact shall possess and may
exercise on behalf of the corporation any and all rights and powers incident to
the ownership of such securities and which, as the owner thereof, the
corporation might have possessed and exercised if present. The Board of
Directors by resolution from time to time may confer like power upon any other
person or persons.
Section 4. Contracts, Conveyances, Etc. When the execution of any contract,
conveyance or other instrument has been authorized without specification of the
executing officers, the Chairman of the Board, the Vice Chairman of the Board,
the President or any Vice President, and the Secretary or any Assistant
Secretary, may execute the same in the name and on behalf of this corporation
and may affix the corporate seal thereto. The Board of Directors shall have
power to designate the officers and agents who shall have authority to execute
any instrument in behalf of the corporation.
<page>
Section 5. Corporate Books and Records. The corporation shall keep books and
records of account and minutes of the proceedings of its shareholders, Board of
Directors and executive committees, if any. The corporation shall keep at its
registered office, or at the office of its transfer agent in or outside the
State of Michigan, records containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became holders of record. Any of the books, records or
minutes may be in written form or in any other form capable of being converted
into written form within a reasonable time. The corporation shall convert into
written form without charge any record not in written form, unless otherwise
requested by a person entitled to inspect the records.
Section 6. Seal. The seal of the corporation shall have inscribed thereon the
name of the corporation and the words "Corporate Seal" and "Michigan." The seal
may be used by causing it or a facsimile to be affixed, impressed or reproduced
in any other manner.
<page>
Exhibit (4)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment")
is made as of the 6th day of August, 2002, among LA-Z-BOY INCORPORATED, a
Michigan corporation (the "Borrower"), WACHOVIA BANK, NATIONAL ASSOCIATION as
Administrative Agent under the Credit Agreement (as herein defined) and the
BANKS named in the Credit Agreement.
Background:
----------
The Borrower, the Administrative Agent and the Banks have
entered into a certain Credit Agreement dated as of May 12, 2000, as amended by
that First Amendment to Credit Agreement dated as of December 19, 2000 (as
amended, the "Credit Agreement").
The Borrower, the Administrative Agent and the Banks wish to
amend the Credit Agreement in certain respects, as hereinafter provided.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used herein which
are not otherwise defined herein shall have the respective meanings assigned
to them in the Credit Agreement.
SECTION 2. Amendments. (a) The definition of "Consolidated Net
Income" in Section 1.01 is hereby amended and restated in its entirety to read
as follows:
"Consolidated Net Income" means for any period the net income
(or the net deficit if expenses and charges exceed revenues and other
proper income credits) of the Borrower and its Consolidated
Subsidiaries for such period taken as one accounting period, without
giving effect to non-cash charges incurred during such period related
to the compliance by the Borrower with the provisions of Financial
Accounting Statement Board Statement No. 142, all determined in
accordance with GAAP.
(b) The definition of "Consolidated Net Worth" in Section 1.01 is
hereby amended and restated in its entirety to read as follows:
"Consolidated Net Worth" means, at any time, shareholders'
equity of the Borrower and its Subsidiaries, as set forth or reflected
on the most recent consolidated balance sheet of the Borrower and its
Subsidiaries, without giving effect to non-cash charges incurred during
any period related to the compliance by the Borrower with the
provisions of Financial Accounting Statement Board Statement No. 142,
as prepared in accordance with GAAP.
SECTION 3. Conditions to Effectiveness. The effectiveness of
this Amendment and the obligations of the Banks hereunder are subject to the
following conditions, unless the Required Banks waive such conditions:
(a) receipt by the Administrative Agent from each of the parties
hereto of a duly executed counterpart of this Amendment signed by such party;
<page>
(b) the fact that the representations and warranties of the
Borrower contained in Section 5 of this Amendment shall be true on and as of the
date hereof; and
(c) receipt by the Administrative Agent from the Borrower for
the account of each Bank executing this Amendment of an amendment fee in an
amount equal to $5,000 per such Bank.
SECTION 4. No Other Amendment. Except for the amendments set
forth above, the text of the Credit Agreement shall remain unchanged and in full
force and effect. This Amendment is not intended to effect, nor shall it be
construed as, a novation. The Credit Agreement and this Amendment shall be
construed together as a single instrument and any reference to the "Agreement"
or any other defined term for the Credit Agreement in the Credit Agreement, the
Notes or any certificate, instrument or other document delivered pursuant
thereto shall mean the Credit Agreement as amended hereby and as it may be
amended, supplemented or otherwise modified hereafter.
SECTION 5. Representations and Warranties. The Borrower hereby
represents and warrants in favor of the Administrative Agent and the Banks as
follows:
(a) No Default or Event of Default under the Credit Agreement
has occurred and is continuing on the date hereof;
(b) The Borrower has the corporate power and authority to enter
into this Amendment and to do all acts and things as are required or
contemplated hereunder to be done, observed and performed by it;
(C) This Amendment has been duly authorized, validly executed
and delivered by one or more authorized officers of the Borrower and each of
this Amendment and the Credit Agreement, as amended hereby, constitutes the
legal, valid and binding obligation of the Borrower enforceable against it in
accordance with its terms; provided, that the enforceability of each of this
Amendment and the Credit Agreement, as amended hereby, is subject to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally; and
The execution and delivery of this Amendment and the
Borrower's performance hereunder and under the Credit
Agreement, as amended hereby, do not and will not require
the consent or approval of any regulatory authority or
governmental authority or agency having jurisdiction over the
Borrower other than those which have already been obtained
or given, nor be in contravention of or in conflict with the
Articles of Incorporation or Bylaws of the Borrower, or the
provision of any statute, or any judgment, order or
indenture, instrument, agreement or undertaking, to which
the Borrower is a party or by which its assets or properties
are or may become bound.
SECTION 6. Counterparts. This Amendment may be executed in
multiple counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same agreement.
<page>
SECTION 7. Governing Law. This Amendment shall be construed in
accordance with and governed by the law of the State of Georgia.
SECTION 8. Effective Date. This Amendment shall become effective
as of August 6, 2002, upon receipt by the Administrative Agent from each of the
parties hereto of either a duly executed signature page from a counterpart of
this Amendment or a facsimile transmission of a duly executed signature page
from a counterpart of this Amendment, signed by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed, under seal, by their respective authorized officers as of the day
and year first above written.
LA-Z-BOY INCORPORATED
By: (SEAL)
-------------------------
Title:
-------------------
1284 North Telegraph Road
Monroe, Michigan 48162
Attention: Mark A. Stegeman
Telecopy number: (734) 457-2005
Telephone number: (734) 241-4418
WACHOVIA BANK, NATIONAL ASSOCIATION
(formerly known as First Union National Bank
and successor by merger to Wachovia Bank,
N.A.), as Administrative Agent and as a Bank
By: (SEAL)
-----------------------------
Title:
----------------------
Lending Office
--------------
301 South College Street, DC-5
Charlotte, North Carolina 28288-0760
Attention: Roger Pelz, Managing Director
Telecopy number: (704) 374-6319
Telephone number: (704) 383-6060
With a copy to:
301 South College Street, DC-5
Charlotte, North Carolina 28288-0760
Attention: George Scott, Vice President
Telecopy number: (704) 374-6319
Telephone number: (704) 383-3562
COMERICA BANK, as Syndication Agent and as
a Bank
By: (SEAL)
--------------------------
Name:
------------------------
Title:
-----------------------
Lending Office
--------------
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226-3268
Attention: Jeffrey J. Judge
Vice President, U.S.
Banking
Telecopy number: (313) 222-9514
Telephone number: (313) 222-3801
SUNTRUST BANK, as Documentation Agent
and as a Bank
By: (SEAL)
-------------------------
Name:
-----------------------
Title:
----------------------
Lending Office
--------------
P.O. Box 448
Atlanta Georgia 30302
Attention: Brad Staples
Director, Corporate and Investment Banking
Telecopy number: (404) 575-2594
Telephone number: (404) 230-5099
BANK ONE, MICHIGAN
By: (SEAL)
-----------------------------
Name:
---------------------------
Title:
--------------------------
Lending Office
--------------
611 Woodward Avenue
Mail Suite MI1-8074
Detroit, Michigan 48226
Attention: Thomas A. Gamm
Director
Telecopy number: (313) 226-0855
Telephone number: (313) 225-2531
BRANCH BANKING & TRUST COMPANY
By: (SEAL)
-----------------------------
Name: John Bondurant
Title: Senior Vice President
Lending Office
--------------
201 West Market Street
Greensboro, North Carolina 27401
(or)
P.O. Box 26122
Greensboro, North Carolina 27402
Attention: John Bondurant
Senior Vice President
Telecopy number: (336) 433-4099
Telephone number: (336) 433-4075
KEYBANK NATIONAL ASSOCIATION
By: (SEAL)
-----------------------------
Name:
---------------------------
Title:
--------------------------
Lending Office
127 Public Square
Mail Code: OH-01-27-0606
Cleveland, Ohio 44114
Attention: James Taylor
Telecopy number: (216) 689-4981
Telephone number: (216) 689-3589
THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO
BRANCH
By: (SEAL)
------------------------------
Name:
----------------------------
Title:
---------------------------
Lending Office
--------------
227 West Monroe Street
Suite 2300
Chicago, Illinois 60606
Attention: Thomas Denio
Vice President
Telecopy number: (312) 696-4535
Telephone number: (312) 696-4665
FIFTH THIRD BANK, NORTHWESTERN OHIO, N.A.
By: (SEAL)
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Lending Office
--------------
606 Madison Avenue
Toledo, Ohio 43604
Attention: William Behe
Senior Vice President
Telecopy number: (419) 259-7134
Telephone number: (419) 259-7135
NATIONAL CITY BANK
By: (SEAL)
----------------------------
Name:
--------------------------
Title:
-------------------------
Lending Office
--------------
1001 South Worth
Birmingham, Michigan 48009-6943
Attention: Michael Hinz
Assistant Vice President
Telecopy number: (248) 901-2033
Telephone number: (248) 901-2139
MIZUHO CORPORATE BANK, LTD.,
(formerly known as The Fuji Bank, Limited)
By: (SEAL)
----------------------------
Name:
--------------------------
Title:
-------------------------
Lending Office
--------------
The Fuji Bank, Limited
New York Branch
2 World Trade Center
79th Floor
New York, New York 10048
Attention: Loans Administration Dept.
Telecopy number: (212) 775-1460
Telephone number: (212) 898-2088
With a copy to:
--------------
227 West Monroe Street
Suite 2600
Chicago, Illinois 60606
Attention: Rick Dunning
Senior Vice President
Telecopy number: (312) 621-3386
Telephone number: (312) 621-9485
News Release
Contact: Mark Stegeman (734) 241-4418 mark.stegeman@la-z-boy.com
--------------------------
LA-Z-BOY REPORTS FIRST QUARTER RESULTS
MONROE MI, August 14, 2002 - La-Z-Boy Incorporated (NYSE, PCX: LZB) today
reported results for its first fiscal quarter ended July 27, 2002. Net sales for
the first quarter were $497 million, which was an 8.9% increase over the prior
year and above the sales growth rate the company had anticipated in late May.
Exclusive of the company's former Pilliod subsidiary, which was divested
effective November 30, 2001, sales for the quarter were up 11.5%. Diluted
earnings per share, before the cumulative effect of a change in accounting
principle for goodwill and intangible assets resulting from the company's
adoption of Statement of Financial Accounting Standards No. 142 ("SFAS 142"),
were $0.32 per diluted share. This was substantially above the company's recent
earnings guidance for the quarter of $0.22-$0.27 per diluted share, and compares
to $0.05 per diluted share earned in the July 2001 first quarter. The
elimination of goodwill and trade name amortization under SFAS 142 added $0.03
to this year's first quarter diluted EPS, and would have added $0.03 to the
year-earlier quarter's diluted EPS had SFAS 142 been in effect at that time.
Including the cumulative effect of the change in accounting principle, the net
loss for the July 2002 first quarter was $0.68 per diluted share.
The revenue strength was primarily due to better than expected sales growth in
the company's upholstery segment, paced by the continued above-average sales
performance from the La-Z-Boy Furniture Galleries(R) network of mostly
independently-owned stand-alone stores. Operating margin for the quarter was
6.6%, up sharply from a depressed 1.5% in the year-earlier quarter and was the
third consecutive quarter in which the company's operating margin, "normalized"
to exclude restructuring and divestiture expenses recorded in fiscal years 2002
and 2001, increased over the year-earlier level.
President and CEO Jerry Kiser said he was particularly pleased with the healthy
sales gains recorded by the company's upholstery businesses during the quarter
and with the continuing year-over-year comparative margin improvement. "Our
margins are benefiting from the strong growth in volume combined with the
aggressive restructuring actions we implemented last year," Kiser said. He
pointed out that this restructuring, primarily on the casegoods (wood furniture)
side, has reduced the company's cost structure and enabled it to successfully
blend a growing volume of imports with its domestic production. He continued,
"while margins were below the previous quarter this was the result of the
seasonality of our business. Our July quarter is our lowest volume quarter and a
significant number of our plants shut down for summer vacations."
<page>
Business segments
- -----------------
First quarter upholstery sales rose 19.0% with an operating margin of 8.5%,
sharply above the 3.9% margin of 2001's first quarter, which represented last
year's quarterly sales low point. The La-Z-Boy Furniture Galleries(R) store
system enjoyed an overall same store sales gain of 6.0% for the three months
ended July 2002, well ahead of observable industry trends and resulted in a
record quarter for La-Z-Boy. Overall this segment benefited from the broad price
point range of the product lines and the proprietary distribution programs of
most of the companies.
Casegoods remained substantially weaker than upholstery during the quarter, with
sales declining 11.7% from a year earlier. Excluding Pilliod, first quarter
year-over-year casegoods sales were down 4.7% attributable principally to the
commercial hospitality market which remains in a slump. But despite this
softness, casegoods operating margins continued to strengthen, rising to 5.8% in
the most recent quarter. This reflects a combination of benefits from 2001's
restructuring efforts and a growing mix of imported products.
Change in accounting principle
- ------------------------------
During the first quarter, the company adopted as required Statement of Financial
Accounting Standards No. 142 ("SFAS 142"). The adoption of this new Statement is
considered a change in accounting principle and affects the financial results in
several ways. The amortization of goodwill and trade names is eliminated. The
elimination of goodwill and trade name amortization under SFAS 142 added $0.03
to this year's first quarter diluted EPS, and would have added $0.03 to the
year-earlier quarter's diluted EPS had SFAS 142 been in effect at that time. The
Statement requires initial and subsequent periodic tests of recorded goodwill
and indefinite-lived intangible assets to determine if the carrying values of
such assets exceed their implied fair values as calculated under the new
Standard. The cumulative effect of the adoption of SFAS 142 resulted in a
non-operating non-cash pretax charge of $77.7 million and an after-tax charge of
$59.8 million, or $1.00 per diluted share.
Balance sheet
- -------------
Kiser continued, "During the July quarter, we generated $47 million in free cash
flow, which was used to repurchase 1.8 million shares of the company's stock,
reducing shares outstanding to 58.3 million. Under the authorization the company
has 1.9 million shares remaining available for repurchase. Inventories during
the quarter increased reflecting the higher sales volumes and additional import
volume, which requires higher inventory levels."
Business outlook
- ----------------
Commenting on the current business outlook, president and CEO Kiser said,
"Assuming that consumer confidence is currently near a cyclical low point, prior
to stabilizing and then regaining momentum later this year and on into 2003, we
expect the coming year to be fairly strong. Our casegoods business remains
sluggish, but we anticipate that continuing growth in the upholstery segment
<page>
will produce an overall mid-single digit sales increase for our seasonally
strong October quarter, and we expect earnings for the quarter to be in the
range of $0.45-$0.50 per diluted share, compared with $0.33 a year ago,
excluding restructuring charges of $0.13 per diluted share. When casegoods
demand rebounds even somewhat, as we believe it will, in the second half of our
April 2003 fiscal year, we would expect sales gains for the full year in the
mid-single digit range, with earnings in the area of $1.70- $1.80 per diluted
share excluding the cumulative effect of the adoption of SFAS 142."
Kiser also noted that he and La-Z-Boy Incorporated's Senior Vice President and
Chief Financial Officer, David M. Risley, are today filing with the Securities
and Exchange Commission their statements under oath to the effect that, to the
best of their knowledge, the corporation's Annual Report on Form 10-K for the
2002 fiscal year and its reports and proxy materials filed after the filing of
Form 10-K do not contain any material misstatements, or omit any material facts.
Kiser said, "we want to publicly demonstrate our strong belief in the integrity
and accuracy of our accounting and financial reporting procedures."
Conference Call Information
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The dial-in phone number for tomorrow's live conference call (August 15, 2002 at
11 a.m. EDT) will be (800) 374-1298 for persons calling from within the U.S. or
Canada, and (706) 634-5855 for international callers. The call will also be
webcast live and archived on the Internet, both at www.la-z-boy.com. A telephone
replay will be available from approximately 2 p.m. tomorrow, August 15th,
through noon on August 22nd. This replay will be available to callers from the
U.S. and Canada at (800) 642-1687 and to international callers at (706)
645-9291, with a replay passcode of 5014429.
Forward-looking Information
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Any forward-looking statements contained in this report are based on current
information and assumptions and represent management's best judgment at the
present time. Actual results could differ materially from those anticipated or
projected due to a number of factors. These factors include, but are not limited
to: changes in consumer sentiment or demand, changes in housing sales, the
impact of terrorism, the impact of interest rate changes, the impact of imports,
changes in currency rates, competitive factors, operating factors, and other
factors identified from time to time in the company's reports filed with the
Securities and Exchange Commission. The company undertakes no obligation to
update or revise any forward-looking statements, either to reflect new
developments, or for any other reason.
Additional Information
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This news release is just one part of La-Z-Boy's financial disclosures and
should be read in conjunction with other information filed with the Securities
and Exchange Commission. Today we plan on filing a Form 10-Q report which
includes a condensed balance sheet, income statement and cash flow statement for
the fiscal quarter ending July 27, 2002, and, will be available at
http://www.la-z-boy.com. Investors and others wishing to be notified via e-mail
of future La-Z-Boy news releases, SEC filings and conference calls may do so at:
http://my.lazboy.com/mygallery/investor_relations.htm.
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Background Information
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With annual sales in excess of $2 billion, La-Z-Boy Incorporated is one of the
world's leading residential furniture producers, marketing furniture for every
room of the home and office, as well as for the hospitality, health care and
assisted-living industries. The La-Z-Boy Upholstery Group companies are Bauhaus,
Centurion, Clayton Marcus, England, HickoryMark, La-Z-Boy, La-Z-Boy Contract
Furniture Group and Sam Moore, and the La-Z-Boy Casegoods Group companies are
Alexvale, American Drew, American of Martinsville, Hammary, Kincaid, Lea and
Pennsylvania House.
The corporation's vast proprietary distribution network is dedicated exclusively
to selling La-Z-Boy Incorporated products and brands, and includes 299
stand-alone La-Z-Boy Furniture Galleries(R) and 313 La-Z-Boy In-Store Gallerys,
in addition to in-store gallery programs at the company's Kincaid, Pennsylvania
House, Clayton Marcus, England and Lea operating units. According to industry
trade publication Furniture/Today, the La-Z-Boy Furniture Galleries retail
network by itself represents the industry's fifth largest U.S. furniture
retailer. Additional information is available at www.la-z-boy.com.
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Exhibit 99.2
CERTIFICATION OF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. section 1350, the undersigned officer of La-Z-Boy
Incorporated (the "Company") hereby certifies, to such officer's knowledge, that
the Company's Quarterly Report on Form 10-Q for the period ended July 27, 2002
(the "Report") fully complies with the requirements of section 13(a) or 15(d),
as applicable, of the Securities Exchange Act of 1934 and the information
contained in the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company.
/s/ David M. Risley
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David M. Risley
Senior Vice President and Chief Financial Officer
August 14, 2002
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
section 1350 and is not being filed as part of the Report or as a separate
disclosure document.
CERTIFICATION OF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. section 1350, the undersigned officer of La-Z-Boy
Incorporated (the "Company") hereby certifies, to such officer's knowledge, that
the Company's Quarterly Report on Form 10-Q for the period ended July 27, 2002
(the "Report") fully complies with the requirements of section 13(a) or 15(d),
as applicable, of the Securities Exchange Act of 1934 and the information
contained in the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company.
/s/ Gerald L. Kiser
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Gerald L. Kiser
President and Chief Executive Officer
August 14, 2002
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
section 1350 and is not being filed as part of the Report or as a separate
disclosure document.