Business Context and Reporting Period
Company: LA-Z-BOY INCORPORATED
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended April 25, 1998
Industry: Residential and Business Furniture Manufacturing
La-Z-Boy operates in the furniture industry with no differing segments. The company ranks third in the U.S. in dollar volume of sales within the Residential furniture industry. During fiscal 1998, the company acquired all outstanding stock of Sam Moore Furniture Industries, Inc. and the remaining 25% of Centurion Furniture plc. The company employs 12,155 persons and operates 31 manufacturing plants in the U.S., plus facilities in Canada, the U.K., and Mexico.
Key Financial Metrics
Note: Specific revenue, net income, cash flow, and debt figures are incorporated by reference from the 1998 Annual Report to Shareholders and are not explicitly detailed in the provided text. The following metrics are available from the filing text:
- Market Value: $983.7 million (aggregate market value of common stock held by nonaffiliates as of June 19, 1998).
- Shares Outstanding: 17,804,571 (as of June 19, 1998).
- Research & Development: $9.5 million (fiscal 1998), compared to $8.3 million in 1997.
- Backlog: Approximately $93 million as of May 31, 1998 (representing less than five weeks of sales).
- Export Sales: Approximately 2% of total sales.
- Allowance for Doubtful Accounts: $20,639,000 (ending balance for fiscal 1998).
- Accrued Warranties: $12,025,000 (ending balance for fiscal 1998).
Material Changes vs. Prior Period
- Acquisitions: Completed acquisition of Sam Moore Furniture Industries, Inc. and full ownership of Centurion Furniture plc.
- Employee Count: Increased from 11,236 (April 26, 1997) to 12,155 (April 25, 1998).
- R&D Spending: Increased by $1.2 million year-over-year.
- Backlog: Increased from $81 million (May 31, 1997) to $93 million (May 31, 1998).
- Reserves: Allowance for doubtful accounts increased by $1.7 million; Accrued warranties increased by $1.25 million.
Outlook, Risks, and Management Commentary
Seasonality: Sales are typically lowest in the first quarter. Production is scheduled to maintain uniform activity, with mid-summer shutdowns.
Raw Materials: Costs historically represent about 38% of sales in upholstery operations. Purchased fabric is the largest single cost (39% of upholstery material costs). Polyurethane foam is sensitive to oil prices. Lumber prices are volatile, though the company is less affected than casegoods manufacturers due to its high volume of upholstered goods.
Competitive Position: The company competes on quality, dealer support, and a lifetime warranty on mechanisms. It holds patents on reclining and rocking chair mechanisms but believes the loss of any single patent would not materially affect the business.
Risks and Contingencies:
- Legal Proceedings: Details are incorporated by reference from the Annual Report to Shareholders (Note 11).
- Environmental Compliance: Details are incorporated by reference (Note 11 and MD&A pages 28-29).
- Customer Concentration: No single customer accounts for 10% or more of consolidated sales.
Investor Verification Checklist
- Verify the full consolidated financial statements (Revenue, Net Income, Cash Flow, Debt) in the 1998 Annual Report to Shareholders, as they are incorporated by reference and not listed in this text.
- Review Note 11 of the Consolidated Financial Statements for details on Legal Proceedings and Environmental Compliance.
- Confirm the impact of the Sam Moore and Centurion Furniture acquisitions on future earnings and integration costs.
- Monitor raw material costs, specifically polyurethane (oil sensitivity) and lumber, which impact gross margins.
- Assess the $93 million backlog as a leading indicator, noting the company's caution that it represents less than five weeks of sales and may not predict future performance.