NEWS RELEASE
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HIGHER SALES AND EARNINGS FOR LA-Z-BOY
Company's name will change. "We make much more than chairs."
MONROE, MI., August 14, 1996: For its 1997 fiscal first quarter ended
July 27, 1996, La-Z-Boy Chair Company continued to improve its sales and
profits compared to last year. This was the fourth consecutive quarterly
improvement. First quarter sales rose 3% and net income per share increased
by $0.08 to $0.25.
On 8/30/96 the company will change its name to La-Z-Boy(R) Incorporated.
The creator of the reclining chair industry has become America's largest
manufacturer of upholstered furniture for living rooms and family rooms.
La-Z-Boy also produces dining room, bedroom and occasional furniture, and
has a growing office furniture business.
FINANCIAL DETAILS
First quarter sales were $202 million vs. last year's $196 million, an
increase of 3%. First quarter operating profit rose to $8.0 million vs.
last year's $6.4 million. Net income rose to $4.6 million vs. last year's
$3.2 million. Net income per share increased to $0.25 vs. $0.17 last year.
CHAIRMAN COMMENTS
La-Z-Boy Chairman and President Charles T. Knabusch said, "We had a soft
quarter in last year's first quarter for both sales and profits. This year,
sales were generally in line with industry sales and they were at their
highest rate in about a year on a comparable basis excluding acquisitions.
Incoming sales orders are at a rate above last year's and are pointing to a
good second quarter, especially for our Hammary and Kincaid divisions' Ducks
Unlimited exclusive new product introduction."
Mr. Knabusch said that profits improved not only because of increased
sales but because of a moderation of raw material prices and ongoing cost
reduction initiatives. He added that the company has just begun to reduce
the number of plants producing wood frame parts in order to improve quality
and reduce costs.
Regarding the company's name change, Mr. Knabusch said the "chair com-
pany" identification is no longer appropriate. "We make much more than
chairs. Today's families can enjoy La-Z-Boy comfort throughout their homes.
As a single source for quality furniture and accessories, La-Z-Boy is chang-
ing the way America shops for furniture, and it is time to update our Com-
pany's name."
MORE
The Company's repositioning effort continues through the use of national
television featuring its two talking raccoons, "Wendall and Al". Both deal-
ers and consumers have responded enthusiastically to the new TV campaign,
which was launched in May and is scheduled to run again in September and Oc-
tober. In addition to the national exposure, an extensive retail marketing
program has been designed for dealer use during the same period to help in-
crease sales.
La-Z-Boy purchased about $7.1 million of its own stock on the open market
in the quarter compared to $4.4 million last year. La-Z-Boy still has over
800,000 shares of its stock remaining and authorized to be purchased. There
is no set stock purchase timetable.
The number of shares outstanding continues to drop. As of 7/29/95 there
were 18.5 million shares compared to 18.4 million at 4/27/96 and 18.2 mil-
lion at 7/27/96.
La-Z-Boy's Form 10-Q filed with the SEC (and available on EDGAR) includes
a full income statement, balance sheet, cash flow statement and additional
management discussion.
NYSE & PSE: LZB Contact: Jim Korsnack (313) 241-4208
8/14/96 La-Z-Boy Chair Company Financial Information Release 1 of 3
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
FIRST QUARTER ENDED (UNAUDITED)
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Percent of Sales
July 27, July 29, % Over ----------------
1996 1995 (Under) 1996 1995
-------- -------- ------- ------- -------
Sales $202,227 $195,757 3% 100.0% 100.0%
Cost of sales 154,917 151,378 2% 76.6% 77.3%
-------- -------- ------- ------- -------
Gross profit 47,310 44,379 7% 23.4% 22.7%
S, G & A 39,354 37,937 4% 19.5% 19.4%
-------- -------- ------- ------- -------
Operating profit 7,956 6,442 24% 3.9% 3.3%
Interest expense 1,107 1,464 -24% 0.5% 0.7%
Interest income 463 456 2% 0.2% 0.2%
Other income 785 375 109% 0.4% 0.2%
-------- -------- ------- ------- -------
Pretax income 8,097 5,809 39% 4.0% 3.0%
Income taxes 3,499 2,634 33% 43.2%* 45.3%*
-------- -------- ------- ------- -------
Net income $4,598 $3,175 45% 2.3% 1.6%
======== ======== ======= ======= =======
Average shares 18,291 18,494 -1%
Earnings per share $0.25 $0.17 47%
Dividends per share $0.19 $0.17 12%
* As a percent of pretax income, not sales.
8/14/96 La-Z-Boy Chair Company Financial Information Release 2 of 3
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
Unaudited Increase
------------------ (Decrease) Audited
July 27, July 29, ---------------- April 27,
1996 1995 Dollars Percent 1996
-------- -------- ------- ------- ---------
Current assets
Cash & equivalents $26,870 $39,808 ($12,938) -33% $27,060
Receivables 161,406 155,089 6,317 4% 206,430
Inventories
Raw materials 40,309 38,968 1,341 3% 37,274
Work-in-process 35,701 35,570 131 0% 35,241
Finished goods 37,845 33,742 4,103 12% 28,333
-------- -------- ------- ------- --------
FIFO inventories 113,855 108,280 5,575 5% 100,848
Excess of FIFO over LIFO (21,735) (22,795) 1,060 5% (21,656)
-------- -------- ------- ------- --------
Total inventories 92,120 85,485 6,635 8% 79,192
Deferred income taxes 19,271 18,242 1,029 6% 19,271
Other current assets 6,544 8,246 (1,702) -21% 5,148
-------- -------- ------- ------- --------
Total current assets 306,211 306,870 (659) 0% 337,101
Property, plant & equipment 116,323 115,848 475 0% 116,199
Goodwill 39,947 41,414 (1,467) -4% 40,359
Other long-term assets 30,639 18,891 11,748 62% 23,887
-------- -------- ------- ------- --------
Total assets $493,120 $483,023 $10,097 2% $517,546
======== ======== ======= ======= ========
Unaudited Increase
----------------- (Decrease) Audited
July 27, July 29, ----------------- April 27,
1996 1995 Dollars Percent 1996
------- ------- ------- ------- --------
Current liabilities
Current portion of l/t debt 4,625 $5,676 ($1,051) -19% $5,625
Current portion - captl leases 2,114 2,078 36 2% 2,114
Accounts payable 27,027 29,169 (2,142) -7% 30,997
Payroll/other comp 21,651 18,549 3,102 17% 34,609
Estimated income taxes 6,903 5,854 1,049 18% 5,572
Other current liabilities 16,492 14,777 1,715 12% 17,601
-------- -------- ------- ------- ---------
Total current liabilities 78,812 76,103 2,709 4% 96,518
Long-term debt 55,135 66,077 (10,942) -17% 57,075
Capital leases 3,654 5,141 (1,487) -29% 4,219
Deferred income taxes 6,663 6,610 53 1% 6,663
Other long-term liabilities 9,729 8,318 1,411 17% 9,695
Shareholders' equity
18,206,857 shares, $1.00 par 18,207 18,461 (254) -1% 18,385
Capital in excess of par 28,225 28,130 95 0% 28,016
Retained earnings 293,563 274,995 18,568 7% 297,750
Currency translation (868) (812) (56) -7% (775)
-------- -------- ------- ------- --------
Total shareholders' equity 333,127 320,774 18,353 6% 343,376
-------- -------- ------- ------- ---------
Total liabilities and
shareholders' equity $493,120 $483,023 $10,097 2% $517,546
======== ======== ======= ======= =========
08/14/96 La-Z-Boy Chair Company Financial Information Release Page 3 of 3
Overall:
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Refer to today's press release for additional information.
Gross profit:
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Gross profit improved to 23.4% of sales from 22.7% of sales last year.
The improvement was primarily due to favorable sales mix effects between
divisions. That is, some divisions with greater than average gross profit
margins had higher than the average 3% increase to sales and some divisions
with lower than average margins had lower than the 3% average increase to
sales. These favorable mix effects more than offset unfavorable division
effects in the opposite direction.
A secondary reason for the gross profit margin improvement was an im-
provement within some divisions compared to themselves in the prior year
first quarter; primarily in the contract Business Furniture Group. This di-
vision is not expected to have as great of an improvement in the upcoming
second quarter because first quarter last year was depressed and a more nor-
mal second quarter occurred last year.
Interest expense:
- -----------------
Interest expense declined 24% from last year largely due to paying
down debt. To a lesser extent, lower interest rates have reduced interest
ex- pense. Assuming additional debt is not taken on and interest rates do
not increase substantially, interest expense should remain below the prior
year level for the remainder of the fiscal year.
Other income:
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Other income exceeded last year by 109% largely due to royalty income.
Future quarters are not expected to exceed the prior year to this degree.
In the past, this line item has had large percentage ups and downs and has
been difficult to predict.
Income taxes:
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Income tax expense as a percent of pretax income was 43.2% vs. 45.3%
last year. The decline was largely due to changes in profitability among
the di- visions. Due to the traditionally lower profit level of the first
quarter, rate fluctuations are common. In the second quarter, the effective
tax rate is likely to exceed the prior year due to last year's rate for the
quarter being very low. This was due to favorable Canadian division
results in the quarter last year that are not expected to be repeated this
year. Tax rates for the last two quarters of the year are likely to be
similar to the prior year.
Cash:
- -----
The first quarter cash balance was 33% below the prior year level.
The decline was largely due to increases in raw and finished goods
inventories and other long-term assets.
Finished goods inventories:
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Finished goods inventories increased 12% from last year primarily due
to higher residential casegoods. At the April High Point market, the
Ducks Un- limited Collection was introduced by the Hammary and Kincaid
divisions. To reserve production time for this new collection, other
products needed to be built so that those products could continue to be
supported. A decline in these inventories is expected next quarter.
Other long-term assets:
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Other long-term assets increased 62% from last year. A major reason
for the increase was an investment in the international area. Most of the
re- maining increase relates to various proprietary store related financing
activities.