Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended October 24, 1998, for LA-Z-BOY INC, a manufacturer of furniture. The report includes unaudited financial data for the three and six months ended October 24, 1998, compared to the same periods in 1997. The company notes that due to the cyclical nature of its business, quarter-over-quarter comparisons may be misleading.
Key Financial Metrics
| Metric | 3 Months Ended Oct 24, 1998 | 6 Months Ended Oct 24, 1998 |
|---|---|---|
| Net Income | $18,447,000 | $25,631,000 |
| Cash from Operating Activities | $(5,831,000) | $30,237,000 |
| Cash from Investing Activities | $(4,577,000) | $(10,367,000) |
| Cash from Financing Activities | $(12,209,000) | $(25,258,000) |
| Cash and Equivalents (End of Period) | $22,721,000 | $22,721,000 |
| Capital Expenditures | $(4,128,000) | $(8,233,000) |
| Stock Repurchases | $(11,160,000) | $(18,763,000) |
| Debt to Capital Ratio | 15% | 15% |
| Current Ratio | 3.1 to 1 | 3.1 to 1 |
Note: Revenue figures are not explicitly stated in the provided text; the Consolidated Statement of Income is incorporated by reference.
Material Changes vs. Prior Period
- Net Income: Increased to $18.4 million for the quarter (from $16.8 million in 1997) and $25.6 million for the six-month period (from $18.5 million in 1997).
- Operating Cash Flow: Turned negative for the quarter at $(5.8) million compared to $(0.4) million in the prior year, primarily driven by a significant increase in receivables ($(60.0) million change vs. $(52.9) million). However, operating cash flow for the six-month period remained positive at $30.2 million.
- Financing Activities: The company significantly increased stock repurchases, spending $11.2 million in the quarter compared to $7.0 million in the prior year quarter.
- Liquidity: Cash and equivalents decreased to $22.7 million at period end, down from $45.6 million at the beginning of the quarter.
Guidance, Outlook, and Risks
Management Commentary: Management highlights a strong financial position with a debt-to-capital percentage of 15% and a current ratio of 3.1 to 1. Approximately $116 million in unused lines of credit remains available. The company continues its stock repurchase program, with approximately 18% of the authorized 12 million shares still available for purchase.
Year 2000 (Y2K) Contingency: A significant portion of the filing addresses Y2K compliance. The company estimates total related costs between $12 million and $16 million, with approximately $5 million spent to date. Remediation for IT systems is expected by February 1999, with critical systems compliant by September 1999. Management identifies the most likely worst-case scenario as business interruptions caused by third-party failures.
Risks: Forward-looking statements are subject to risks including fluctuations in interest rates, changes in consumer confidence, and the success of product introductions. There is no guarantee against Y2K system failures, which could materially adversely affect operations and liquidity.
Investor Verification Checklist
- Revenue Data: Verify total revenue figures in the referenced "Financial Information Release dated November 4, 1998" as they are not explicitly detailed in this text.
- Receivables Growth: Investigate the $60 million increase in receivables during the quarter to understand if this indicates aggressive sales recognition or collection issues.
- Y2K Cost Accuracy: Monitor the final Y2K expenditure against the $12-$16 million estimate and verify the completion of third-party testing.
- Stock Repurchase Impact: Assess the impact of the $18.8 million in stock buybacks over six months on future liquidity and capital allocation.