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 28, 2001 COMMISSION FILE NUMBER 1-9656
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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
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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 28, 2001
- ------------------------------- ----------------------------
Common Shares, $1.00 par value 60,898,113
Page 1 of 14
LA-Z-BOY INCORPORATED
FORM 10-Q FIRST QUARTER OF FISCAL 2002
TABLE OF CONTENTS
Page
Number(s)
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet..................................3
Consolidated Statement of Income............................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. Earnings per Share.................................6
Note 4. Accounting Change..................................6-7
Note 5. Segment Information................................7-8
Note 6. Restructuring......................................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements..9
Results of Operations.......................................9-10
Liquidity and Capital Resources............................10-11
Outlook....................................................11-12
Item 3. Quantitative & Qualitative Disclosures About Market Risk...12-13
PART II Other Information
Item 4. Results of Votes of Security Holders........................13
Item 6. Exhibits and Reports on Form 8-K............................13
Signature Page..........................................................14
Page 2 of 14
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except par value)
Unaudited
----------------------------------------------
Increase/(Decrease)
------------------ Audited
7/28/01 7/29/00 Dollars Percent 04/28/01
---------- ---------- -------- ------- ----------
Current assets
Cash and equivalents $42,447 $18,025 $24,422 135% $23,565
Receivables - net 306,005 348,067 (42,062) -12% 380,867
Inventories
Raw materials 89,497 100,033 (10,536) -11% 90,381
Work-in-process 62,793 67,813 (5,020) -7% 62,465
Finished goods 118,306 105,762 12,544 12% 115,425
---------- ---------- -------- ------- ----------
FIFO inventories 270,596 273,608 (3,012) -1% 268,271
Excess of FIFO over LIFO (10,418) (7,637) (2,781) -36% (10,384)
---------- ---------- -------- ------- ----------
Total inventories 260,178 265,971 (5,793) -2% 257,887
Deferred income taxes 23,281 21,005 2,276 11% 26,168
Income taxes - current 2,944 - 2,944 N/M 2,944
Other current assets 19,612 15,545 4,067 26% 17,345
---------- ---------- -------- ------- ----------
Total current assets 654,467 668,613 (14,146) -2% 708,776
Property, plant and equipment 227,672 226,810 862 0% 230,341
Goodwill 111,624 117,362 (5,738) -5% 112,755
Trade names 119,928 124,130 (4,202) -3% 120,981
Other long-term assets 52,602 55,753 (3,151) -6% 49,650
---------- ---------- -------- ------- ----------
Total assets $1,166,293 $1,192,668 ($26,375) -2% $1,222,503
========== ========== ======== ======= ==========
Current liabilities
Lines of credit $20,750 $6,674 $14,076 211% $10,380
Current portion of long-term debt 3,154 2,730 424 16% 5,304
Current portion of capital leases 541 457 84 18% 541
Accounts payable 76,845 83,207 (6,362) -8% 92,830
Payroll and other compensation 56,260 54,935 1,325 2% 78,550
Income taxes 10,488 5,492 4,996 91% 11,490
Other current liabilities 49,619 51,635 (2,016) -4% 50,820
---------- ---------- -------- ------- ----------
Total current liabilities 217,657 $205,130 12,527 6% 249,915
Long-term debt 168,976 240,893 (71,917) -30% 196,923
Capital leases 2,359 3,002 (643) -21% 2,496
Deferred income taxes 46,281 52,317 (6,036) -12% 45,709
Other long-term liabilities 36,724 29,905 6,819 23% 32,314
Contingencies and commitments - -
Shareholders' equity
Common shares, $1 par value 60,898 60,652 246 0% 60,501
Capital in excess of par value 210,559 211,633 (1,074) -1% 210,924
Retained earnings 429,899 391,460 38,439 10% 427,616
Accum. other comprehensive loss (7,060) (2,324) (4,736) -204% (3,895)
---------- ---------- -------- ------- ----------
Total shareholders' equity 694,296 661,421 32,875 5% 695,146
---------- ---------- -------- ------- ----------
Total liabilities and
shareholders' equity $1,166,293 $1,192,668 ($26,375) -2% $1,222,503
========== ========== ======== ======= ==========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
Page 3 of 14
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
(UNAUDITED)
FIRST QUARTER ENDED
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Percent of Sales
7/28/01 7/29/00 % Over --------------------
(13 Weeks) (13 Weeks) (Under) 7/28/01 7/29/00
----------- ------------ -------- --------- ---------
Sales $458,981 $516,707 -11% 100.0% 100.0%
Cost of sales 361,117 400,366 -10% 78.7% 77.5%
----------- ------------ -------- --------- ---------
Gross profit 97,864 116,341 -16% 21.3% 22.5%
S, G & A 90,887 91,761 -1% 19.8% 17.7%
----------- ------------ -------- --------- ---------
Operating profit 6,977 24,580 -72% 1.5% 4.8%
Interest expense 2,956 4,352 -32% 0.6% 0.8%
Interest income 358 453 -21% 0.1% 0.0%
Other income, net 263 616 -57% 0.0% 0.1%
----------- ------------ -------- --------- ---------
Pretax income 4,642 21,297 -78% 1.0% 4.1%
Tax expense 1,811 8,294 -78% 39.0%* 38.9%*
----------- ------------ -------- --------- ---------
Net income $2,831 $13,003 -78% 0.6% 2.5%
=========== ============ ======== ========= =========
Basic EPS $0.05 $0.21 -76%
Diluted avg. shares 61,021 61,280 0%
Diluted EPS $0.05 $0.21 -76%
Dividends paid $0.09 $0.08 13%
per share
* As a percent of pretax income, not sales.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
Page 4 of 14
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
First Quarter Ended
-----------------------
7/28/01 7/29/00
------- -------
Cash flows from operating activities
Net income $2,831 $13,003
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization 10,921 10,565
Change in receivables 75,998 45,616
Change in inventories (2,291) (20,168)
Change in payables (15,985) (7,185)
Change in other assets and liabilities (33,180) (26,988)
Change in deferred taxes 3,459 3,406
------- -------
Total adjustments 38,922 5,246
------- -------
Cash provided by operating activities 41,753 18,249
Cash flows from investing activities
Proceeds from disposals of assets 539 186
Capital expenditures (6,085) (7,395)
Change in other long-term assets 3,236 3,148
------- -------
Cash used for investing activities (2,310) (4,061)
Cash flows from financing activities
Proceeds from debt 35,370 62,000
Payment of debt (55,097) (58,760)
Capital leases (137) 846
Stock issued for stock options & 401(k) plans 4,948 2,420
Repurchase of common stock - (12,008)
Dividends paid (5,464) (4,906)
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Cash provided by (used for)financing activities (20,380) (10,408)
Effect of exchange rate changes on cash (181) (108)
------- -------
Change in cash and equivalents 18,882 3,672
Cash and equivalents at beginning of period 23,565 14,353
------- -------
Cash and equivalents at end of period $42,447 $18,025
======= ========
Cash paid during period -Income taxes $3,063 $6,448
-Interest $2,262 $2,257
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
Page 5 of 14
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 notes 4 and 5,
such principles are applied on a basis consistent with those reflected in
our 2001 Annual Report on Form 10-K, filed with the Securities and Exchange
Commission. Management has prepared the financial information included in
these financial statements. The consolidated balance sheet as of April 28,
2001, has been audited by our independent certified public accountants. The
interim financial information as of and for the interim periods ended July
28, 2001 and July 29, 2000 have been prepared on a basis consistent with,
but do not include all the disclosures contained in, the audited
consolidated financial statements for the year ended April 28, 2001. The
interim financial information includes all adjustments and accruals,
consisting only of normal recurring adjustments, which are, in our opinion,
necessary for a fair presentation of results for the respective interim
period. Certain prior year information has been reclassified to be
comparable to the current year presentation.
Note 2: Interim Results
The foregoing interim results are not necessarily indicative of the results
of operations for the full fiscal year ending April 27, 2002.
Note 3: 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) 7/28/01 7/29/00
---------------------- ------------- --------------
Weighted average common
Shares outstanding (basic) 60,772 61,077
Effect of options 249 203
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Weighted average common
Shares outstanding (diluted) 61,021 61,280
============= ==============
Note 4: Accounting Change
Beginning with this first quarter ended July 28, 2001 we implemented
Financial Accounting Standards Board Statement (SFAS) No. 133 "Accounting
for Derivative and Hedging Activities," as amended. Interest rate swap
arrangements have been formally designated as hedges and the effect of
marking these contracts to market has been recorded in "Accum. other
comprehensive loss" on the balance sheet in the amount of $1.2 million, net
Page 6 of 14
of taxes, at April 29, 2001. The adoption of SFAS No. 133, as amended, has
not had a material effect on our financial position or results of
operations.
Note 5: Segment Information
Our reportable operating segments are the Upholstery Group and the
Casegoods Group. These segments are different than the segments used in our
fiscal 2001 annual report. The new segments reflect the organizational
restructuring announced July 23, 2001 that realigned our top management
team to streamline and strengthen La-Z-Boy Incorporated.
The La-Z-Boy Incorporated Upholstery Group president, John J. Case, reports
directly to Gerald L. Kiser, president and chief executive officer. The
major operating divisions that comprise the Upholstery Group are Bauhaus,
Centurion, Clayton Marcus, England, HickoryMark, La-Z-Boy, La-Z-Boy
Contract Furniture Group and Sam Moore. Almost all of the sales in this
group are from products produced in our manufacturing plants in North
America. That is, only a small portion of the products are imported or
bought from other suppliers, then resold. The primary products produced and
sold in the Upholstery Group are recliners, sofas, occasional chairs and
reclining sofas. These products are mostly or fully covered with fabric,
leather or vinyl, although exposed wood and other materials are used as
well.
The La-Z-Boy Incorporated Casegoods Group president, Don L. Mitchell, also
directly reports to Mr. Kiser. The major operating divisions that comprise
the Casegoods Group are Alexvale, American Drew, American of Martinsville,
Hammary, Kincaid, Lea, Pennsylvania House and Pilliod. Most of the products
are produced from our plants in the United States. The rest is either
imported or bought from domestic suppliers, then either resold directly to
customers or sent to our plants to have additional value added
manufacturing performed before being resold. The primary products produced
or sold in the Casegoods Group are casegoods, business furniture and
upholstered furniture. Casegoods include dining room tables and chairs,
chinas, beds, dressers, chests, youth furniture and other case pieces for
both the dining room and bedroom, as well as coffee tables, end tables, and
entertainment centers for the living room and great room area. Casegoods
products are more than 70% of Casegoods Group sales. Business furniture
includes contract furniture of many types for the hospitality, assisted
living and government markets. Upholstery includes the types of products in
the Upholstery Group. Often the upholstery products are correlated with the
casegoods products as part of a primarily casegoods gallery. Upholstery
products are less than 10% of Casegoods Group sales.
Other sales are intercompany sales between segments. Other operating loss
primarily contains expenses for corporate functions such as executive
management, information technology, legal, tax, internal audit, accounting
and human resources.
Page 7 of 14
The financial results of our operating segments were as follows:
(Amounts in thousands)
Unaudited Quarter Ended
------------------------------------------------- Unaudited
FY02 FY01 Year
-------------------------------------- Ended
7/28/01 7/29/00 10/28/00 1/27/01 4/28/01 4/28/01
-------- -------- -------- -------- -------- ---------
Sales
Upholstery Group $309,614 $323,443 $389,115 $372,443 $407,510 $1,492,511
Casegoods Group 149,513 193,442 203,631 180,275 188,117 765,465
Other (146) (178) (46) (699) (856) (1,779)
-------- -------- -------- -------- -------- ---------
Consolidated $458,981 $516,707 $592,700 $552,019 $594,771 $2,256,197
======== ======== ======== ======== ======== ==========
Operating profit
Upholstery Group $11,966 $21,462 $39,148 $30,767 $35,501 $126,878
Casegoods Group (27) 8,221 11,014 1,441 (6,345) 14,331
Other (4,962) (5,103) (5,326) (4,989) (4,997) (20,415)
-------- -------- -------- -------- -------- ----------
Consolidated $6,977 $24,580 $44,836 $27,219 $24,159 $120,794
======== ======== ======== ======== ======== ==========
(Amounts in thousands)
Unaudited Quarter Ended
--------------------------------------- Unaudited
FY00 Year
--------------------------------------- Ended
7/24/99 10/23/99 1/22/00 4/29/00 4/29/00
---------- -------- ------- -------- ---------
Sales
Upholstery Group $284,384 $348,399 $337,024 $426,627 $1,396,434
Casegoods Group 50,624 54,249 54,279 228,044 387,196
Other (116) (212) (211) (174) (713)
----------- --------- -------- --------- ---------
Consolidated $334,892 $402,436 $391,092 $654,497 $1,782,917
=========== ========= ======== ========= =========
Operating profit
Upholstery Group $21,303 $38,337 $33,916 $43,938 $137,494
Casegoods Group 5,236 4,674 3,697 12,112 25,719
Other (5,090) (5,313) (4,977) (4,985) (20,365)
----------- -------- -------- --------- ---------
Consolidated $21,449 $37,698 $32,636 $51,065 $142,848
=========== ======== ======== ========= =========
Note 6: Restructuring
At April 28, 2001, a liability of $3.9 million existed relating to
restructuring. This amount consisted of $1.2 million for severance and
benefit related expenses and $2.7 million for other restructuring related
costs. At July 28, 2001, the liability was $3.0 million. This amount
consists of severance and benefit related costs of $0.8 million and other
restructuring related costs of $2.2 million. No restructuring charges or
credits were recognized in the income statement in the first quarter ended
July 28, 2001. We believe the existing restructuring liability will be
adequate to cover future severance, benefits, fixed assets or other
restructuring costs relating to the restructuring actions announced on
April 19, 2001.
Page 8 of 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
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
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 and industry conditions (for
example, changes in interest rates, changes in currency exchange rates, changes
in demographics and consumer preferences, e-commerce developments, oil price
changes 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, and changes in regulatory environment); and
factors relating to recent or future 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 28, 2001 Compared to First Quarter Ended July 29, 2000.
See page 4 for the consolidated statement of income with analysis of percentages
and calculations.
Unaudited First Quarter Ended
----------------------------------------------------
Sales Operating Profit
------------------------- -------------------------
FY02 FY02
Over Percent of Total Over Percent of Sales
(Under) ---------------- (Under) ----------------
FY01 FY02 FY01 FY01 FY02 FY01
------ ----- ----- ------ ------ ------
Upholstery Group -4% 67% 63% -44% 3.9% 6.6%
Casegoods Group -23% 33% 37% -100% 0.0% 4.2%
Other N/A 0% 0% 3% N/A N/A
------ ----- ----- ------ ------ ------
Consolidated -11% 100% 100% -72% 1.5% 4.8%
====== ===== ===== ====== ====== ======
Page 9 of 14
First quarter sales declined 11% from the prior year's first quarter primarily
due to continued weak furniture industry demand and impacts of retailers going
out of business or experiencing financial difficulties. Our Casegoods Group
sales were impacted much more than our Upholstery Group segment due to these
retailers because a greater percentage of their sales are to non-proprietary
retailers. The Upholstery Group has a higher percent of its sales to proprietary
dealers. Casegoods Group sales were also impacted by stronger competition from
imported products, primarily from the Far East. The strong U.S. dollar relative
to many of these countries' currencies also contributed to the 23% sales decline
in the Casegoods Group.
Gross profit as a percent of sales decreased to 21.3% from 22.5% in last year's
first quarter. The primary reason for the drop was the 11% decline in sales
volume and production declines to control inventory levels. We took various
actions to reduce costs as volume decreased, but those actions could not
entirely offset the effects on our fixed costs caused by the decline in sales.
Through attrition, a hiring freeze and layoffs our number of employees dropped
about 10% from last year. We took measurable down time and reduced production at
many plants. We also improved capacity utilization by closing or combining parts
of our plant production facilities. With less production there was less overhead
absorption and lower gross margins. In addition, health care costs were higher
than planned at some divisions.
Selling, General & Administrative (S, G & A) expenses actually declined 1% or
about $0.9 million as a result of our spending control efforts. But as a percent
of sales, SG&A increased from 17.7% to 19.8%. One reason for the increase in
SG&A as a percent of sales was a sales training and support event for our
La-Z-Boy proprietary dealers and others that generally occurs once every two
years and was budgeted for this quarter. (This event did not occur in any
quarter last fiscal year.) Another reason for the increase was our decision to
continue most of our advertising expenses at levels necessary to support full
year marketing objectives. Research and development expenses were also up as a
percent of sales.
Operating profit as a percent of sales decreased from 4.8% last year to 1.5% in
this year's first quarter. In general, sales volumes being below plan and below
last year caused the drop in margins.
Interest expense declined 32% and as a percent of sales declined from 0.8% last
year to 0.6%. This decline was due to reduced debt and declining interest rates.
Liquidity and Capital Resources
See pages 3 through 5 for our Consolidated Balance Sheet, Consolidated Statement
of Income and Consolidated Statement of Cash Flows.
Cash flows from operations amounted to $42 million in the first three months of
fiscal year 2002 compared to $18 million in the prior year. In the aggregate,
capital expenditures, dividends and stock repurchases totaled approximately $12
million during the first quarter, which is down from about $24 million in the
Page 10 of 14
first three months of fiscal 2001. Cash and cash equivalents increased by $19
million during the three-month period compared to an increase of $4 million in
the prior year.
Receivables declined more in this year's first quarter than last year. FY02's
decline from the end of April to the end of July was $76 million compared to a
$46 million decline last year. The primary cause of this larger decline was
weaker sales in June and July of this year than the prior year.
Our financial strength is reflected in three commonly used calculations. Our
current ratio (current assets divided by current liabilities) was 3.0:1 at July
28, 2001, 2.8:1 at April 28, 2001 and 3.3:1 at July 29, 2000. Our total
debt-to-capitalization percentage (total debt divided by shareholders' equity
plus total debt plus net deferred taxes) was 21.4% at July 28, 2001, 23.2% at
April 28, 2001, and 26.8% at July 29, 2000. Our interest coverage ratio (the
rolling twelve months net income plus income tax expense plus interest expense
divided by interest expense) was 6.8 times at July 28, 2001, 7.2 times at April
28, 2001 and 12.1 times at July 29, 2000.
As of July 28, 2001, we had line of credit availability of approximately $294
million under several credit agreements.
Capital expenditures were $6 million during the quarter ended July 28, 2001
compared to last year's $7 million.
As of July 28, 2001, approximately 1.3 million of the 12 million La-Z-Boy shares
authorized for purchase on the open market were still available for purchase by
us.
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 recent and projected 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.
Nevertheless, current consumer sentiment remains highly unsettled, and we
anticipate a very challenging second fiscal quarter. Our sales could decline 5%
- - 10% in the second quarter compared to last year's second quarter.
We expect interest expense to continue to be less next quarter than the prior
year quarter.
In last year's second quarter, we recognized a favorable one time $4.9 million
insurance recovery in other income. We do not expect any similar type gain in
this year's second quarter.
We are anticipating our full year income tax rate to be similar to last year's
39.0%. This year's second, third and fourth quarter rates are expected to also
Page 11 of 14
be close to the 39.0% prior full year rate. Last year the second quarter rate
was 37.8%, the third quarter rate was 36.9% and the fourth quarter rate was
44.9%.
We estimate that our diluted net income per share for the second quarter ending
October 2001 will be between $0.22-$0.27 compared to $0.43 last year. Last
year's $0.43 has been adjusted to exclude a one time $.05 insurance recovery.
(Unadjusted reported earnings per share in the second quarter last year were
$0.48 per share). We are tentatively looking for $1.00 - $1.15 for our full
fiscal year ending April 2002. This compares to earnings per share in FY 2001 of
$1.19 after adjusting for one time restructuring and other items. (Unadjusted
reported earnings per share in 2001 were $1.13).
We expect capital expenditures of approximately $35 million for fiscal 2002,
down from the $45 million we estimated on May 30, 2001. This compares to $37
million actual capital expenditures in fiscal 2001. We have a commitment to
purchase about $7 million of equipment by the end of 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.
We expect to meet our cash needs for capital expenditures, stock repurchases and
dividends during fiscal year 2002 from cash generated by operations and
borrowings under available lines of credit.
Recently the Financial Accounting Standards Board issued SFAS No. 141 "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". Both
new standards must be implemented no later than the beginning of 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 $100 million borrowed at July 28, 2001. 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 .475% to .800%. Management
estimates that a 1% change in interest rates would not have a material impact on
the results of operations for fiscal 2002 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
Page 12 of 14
our use of foreign currency forward contracts. Substantially all of our imported
purchased parts are denominated in U.S. dollars. Thus, we believe that gains or
loses resulting from changes in the value of foreign currencies will not be
material to our results from operations in fiscal year 2002.
PART II - OTHER INFORMATION
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
The Annual Meeting of Shareholders of La-Z-Boy Incorporated was held on July 30,
2001. The shareholders elected three directors for three-year terms expiring in
2004.
Shares Voted Percent Shares Shares
Election of Directors: In Favor In Favor Withheld
-------- -------- --------
David K. Hehl 53,914,842 99% 338,848
Rocque E. Lipford 52,047,036 96% 2,206,654
Jack L. Thompson 53,852,117 99% 401,573
The shareholders voted to approve a further amendment and restatement of our
1993 Performance-Based Stock Plan.
Percent Percent Percent
Shares Voted Shares Shares Voted Shares Shares Shares
In Favor In Favor Against Against Abstained Abstained
-------- -------- ------- ------- --------- ---------
52,173,591 96% 900,717 2% 1,179,382 2%
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement of Computation of Earnings
See note 3 to the financial statements included in this
report.
(b) Reports on Form 8-K
We filed a Form 8-K on May 31, 2001 containing a press release and
financial information about our fourth quarter and full fiscal year
2001 financial results.
On June 1, 2001 we filed a Form 8-K announcing details relating to the
retirement of a board member and his replacement.
Page 13 of 14
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
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(Registrant)
Date: September 7, 2001 /s/ James J. Korsnack
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James J. Korsnack
Chief Accounting Officer
