SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED January 23, 1999 COMMISSION FILE NUMBER 1-9656
LA-Z-BOY INCORPORATED
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(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
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
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the last practicable date:
Class Outstanding at January 23, 1999
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Common Shares, $1.00 par value 52,396,805
Part 1. Financial Information
The Consolidated Balance Sheet and Consolidated Statement of Income required for Part 1 are contained in the
Registrant's Financial Information Release dated February 2, 1999 and are incorporated herein by reference.
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LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited, amounts in thousands)
Three Months Ended Nine Months Ended
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Jan 23, Jan 24, Jan 23, Jan 24,
1999 1998 1999 1998
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Cash Flows from Operating Activities
Net income .......................................... $ 17,728 $ 11,459 $ 43,359 $ 30,007
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization ................. 5,709 5,140 17,062 15,208
Change in receivables ......................... 27,209 22,393 9,755 18,407
Change in inventories ......................... (7,718) (2,485) (15,693) (10,227)
Change in other assets and liabilities ........ (3,124) (8,607) 18,300 2,137
Change in deferred taxes ...................... 465 (2,553) (2,277) (4,513)
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Total adjustments .......................... 22,541 13,888 27,147 21,012
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Cash Provided by Operating Activities....... 40,269 25,347 70,506 51,019
Cash Flows from Investing Activities
Proceeds from disposals of assets ................... 20 1,108 313 1,500
Capital expenditures ................................ (6,749) (4,218) (14,982) (15,561)
Change in other investments ......................... 700 (419) (1,727) (707)
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Cash Used for Investing Activities ......... (6,029) (3,529) (16,396) (14,768)
Cash Flows from Financing Activities
Retirements of debt ................................. (119) (2,428) (3,330) (4,469)
Capital lease principal payments .................... (96) (507) (899) (1,547)
Stock for stock option plans ........................ 226 2,299 4,914 5,402
Stock for 401(k) employee plans ..................... 545 417 1,382 1,103
Purchase of La-Z-Boy stock .......................... (8,931) (3,086) (27,694) (12,483)
Payment of cash dividends ........................... (4,216) (3,749) (12,222) (11,292)
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Cash Used for Financing Activities ......... (12,591) (7,054) (37,849) (23,286)
Effect of exchange rate changes on cash .................. (333) (233) (924) (135)
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Net change in cash and equivalents ....................... 21,316 14,531 15,337 12,830
Cash and equivalents at beginning of period .............. 22,721 23,681 28,700 25,382
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Cash and equivalents at end of period .................... $ 44,037 $ 38,212 $ 44,037 $ 38,212
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Cash paid during period -Income taxes ............... $ 10,620 $ 14,345 $ 18,498 $ 22,008
-Interest ................... $ 1,631 $ 1,016 $ 2,762 $ 2,810
<FN>
For purposes of the Statement of Cash Flows, the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part
of these statements.
</FN>
LA-Z-BOY INCORPORATED AND OPERATING DIVISIONS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial information is prepared in conformity with generally accepted
accounting principles and such principles are applied on a basis consistent
with those reflected in the 1998 Annual Report filed with the Securities
and Exchange Commission. The financial information included herein, other
than the consolidated balance sheet as of April 25, 1998, has been prepared
by management without audit by independent certified public accountants.
The consolidated balance sheet as of January 23, 1999 has been prepared on
a basis consistent with, but does not include all the disclosures contained
in the audited consolidated financial statements for the year ended
April 25, 1998. The information furnished includes all adjustments and
accruals consisting only of normal recurring accrual adjustments which are,
in the opinion of management, necessary for a fair presentation of results
for the interim period.
2. Interim Results
The foregoing interim results are not necessarily indicative of the results
of operations for the full fiscal year ending April 24, 1999.
3. Forward-Looking Information
Any forward-looking statements contained in this report represent
management's current expectations based on present information and current
assumptions. These statements can be identified by the use of forward-
looking terminology such as "believes", "expects", "may", "should", or
"anticipates". Forward-looking statements are inherently subject to risks
and uncertainties. Actual results could differ materially from those which
are anticipated or projected due to a number of factors. These factors
include, but are not limited to, anticipated growth in sales; success of
product introductions; fluctuations of interest rates, changes in consumer
confidence/demand and other risks and factors identified from time to time
in the Company's reports filed with the Securities and Exchange Commission.
4. Earnings per Share
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share" requires both basic and diluted earnings per share to be presented.
Basic earnings per share is computed using the weighted-average number of
shares outstanding during the period. Diluted earnings per share uses the
weighted-average number of shares outstanding during the period plus the
additional common shares that would be outstanding if the dilutive
potential common shares were issued. This includes employee stock options.
Three Months Ended Nine Months Ended
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Jan. 23, Jan. 24, Jan. 23, Jan. 24,
(Amounts in thousands) 1999 1998 1999 1998
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Weighted average common
shares outstanding (basic) 52,680 53,630 53,061 53,716
Effect of options 245 425 270 344
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Weighted average common
shares outstanding (diluted) 52,925 54,055 53,331 54,060
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LA-Z-BOY INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS
Due to the cyclical nature of the Company's business, comparison of operations
between the most recently completed quarter and the immediate preceding quarter
would not be meaningful and could be misleading to the reader of these financial
statements.
For further Management Discussion, see attached Exhibit 99.(a)
Financial Position
The Company's strong financial position is reflected in the debt to capital
percentage of 15% and a current ratio of 3.3 to 1 at the end of the third
quarter. At April 25, 1998, the debt to capital percentage was 16% and the
current ratio was 3.5 to 1. At the end of the preceding year's third quarter,
the debt to capital percentage was 13% and the current ratio was 3.3 to 1. As of
January 23, 1999, there was $116 million of unused lines of credit available
under several credit arrangements.
Stock Repurchase Program
Approximately 14% of the 12 million shares of Company stock authorized for
purchase on the open market are still available for purchase by the Company. The
Company plans to be in the market for its shares as changes in its stock price
and other factors present appropriate opportunities. Through the nine months
ended January 23, 1999, the Company purchased $27.7 million, which is over
double the $12.5 million in the prior year.
Year 2000
The Year 2000 issue arises from the use of two-digit date fields used in
computer programs which may cause problems as the year changes from 1999 to
2000. These problems could cause disruptions of operations or processing of
transactions.
To address the Year 2000 challenge, the Company established a Year 2000 Program
Office guided by a steering committee consisting of senior executive management.
This office serves as the central coordination point for all Year 2000
compliance efforts of the Company. The Company has included IT (Information
Technologies) systems and non-IT systems as well as third party readiness in the
scope of its Year 2000 project. The Company is on schedule with regards to its
internal plan. Management believes that the Company is taking the steps
necessary to minimize the impact of the Year 2000 challenge.
The challenges the Company faces with regards to its IT systems include
upgrading of operating systems, hardware and software, and modifying order entry
and invoicing programs. For the IT challenges, the Company has substantially
completed the inventory, assessment and remediation phases. The Company expects
to have its critical IT systems compliant and compatible, with the appropriate
testing completed, by September, 1999.
The primary challenges the Company faces with regards to its non-IT systems
include plant floor machinery and facility related items. For these systems, the
inventory and assessment phases have been completed. The Company believes these
systems to be compliant and compatible. The Company is presently in the testing
phase of its non-IT project with expected completion by September, 1999.
With respect to third party readiness, the Company continues to work with
customers, suppliers, and service providers in order to prevent disruption of
business activities. Multiple approaches are being used to determine compliance
based on the priority assigned to the third party. Based on communications with
these third parties, the Company believes that all material third parties will
be sufficiently prepared for the Year 2000. For critical third parties, testing
will be performed as deemed necessary.
While the Company believes that it is preparing adequately for all Year 2000
concerns, there is no guarantee against internal or external systems failures.
Such failures could have a material adverse effect on the Company's results of
operations, liquidity and financial condition. The Company anticipates
initiating an independent verification and assessment of the possible risks. The
Company believes that its most likely worst case scenario would be business
interruptions caused by third party failures. The Company expects to have
contingency plans in place prior to the Year 2000 for IT and non-IT systems, as
well as for areas of concern with relation to third parties.
At the present time, the total Year 2000 related costs are estimated to be $12
to $16 million. To date, the Company has spent approximately $7.5 million.
Included in the total estimated expenditures are both remediation and, in some
cases, enhancement or improvement related costs that cannot easily be separated
from remediation costs. Some of these enhancements or improvements were
previously planned and were merely accelerated as a means to address Year 2000
challenges.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) (27) Financial Data Schedule (EDGAR only).
(99) News Releases and Financial Information Release: re Actual third
quarter results and Management Discussion dated February 2, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the Quarterly Report on Form 10-Q for the quarter
ended January 23, 1999 to be signed on its behalf by the undersigned thereunto
duly authorized.
LA-Z-BOY INCORPORATED
(Registrant)
Date February 2, 1999
/s/Gene M. Hardy
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Gene M. Hardy
Secretary and Treasurer
(Principal Accounting Officer)