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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 27, 1996 Commission File No. 1-9656
LA-Z-BOY CHAIR COMPANY
(Exact name of registrant as specified in its charter)
MICHIGAN 38-0751137
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1284 N. Telegraph Road, Monroe, Michigan 48162-3390
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number - Area Code (313) 242-1444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES, $1.00 Par Value
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of June 21, 1996 was $528,023,294.
The number of common shares of the registrant outstanding on June 21,
1996 was 18,286,521.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1996 Annual Report to Shareholders for the year ended
April 27, 1996 are incorporated by reference into Parts I, II and IV.
Portions of the Annual Proxy Statement filed with the Securities and
Exchange Commission June 27, 1996 are incorporated by reference into Part
III.
PART I
Item 1. Business
The information required in Part I, Item 1, section (a) is contained
in the Registrant's 1996 Annual Report to Shareholders in the
England/Corsair section on page 12 and in Note 2 to the Registrant's
consolidated financial statements contained in the Annual Report on page 22,
and is incorporated herein by reference.
(b)-(c) (1) (i) Principal Products
The Registrant operates in the furniture industry and as such does not
have differing segments. "Residential" dealers are those who resell to
individuals for their home use. "Business Furniture" dealers are those
who resell seating and casegood products to commercial dealers.
Additional information regarding products and market share data is
contained in the Registrant's 1996 Annual Report on page 27 in the
Background section of the Management Discussion and Analysis and is
incorporated herein by reference.
(c) (1) (ii) Status of New Products or Segments
During fiscal year 1996, the Registrant introduced the Reclina-Glider,
a line of swivel recliners that glide in a horizontal plane. Consumer
response and sales have performed to the Registrant's expectations.
(c) (1) (iii) Raw Materials
The principal raw materials used by the Registrant in the manufacture
of its products are hardwoods for solid wood dining room and bedroom
furniture, casegoods, occasional tables and for the frame components of
seating units; plywood and chipwood for internal parts; veneers for dining
room furniture, wall units, and occasional tables; water-based and liquid
finishes (stains, sealants, lacquers) for external wood; steel for the
mechanisms; leather, cotton, wool, synthetic and vinyl fabrics for covers;
and polyester batting and non-chlorofluorocarbonated polyurethane foam for
cushioning. Steel and wood products are generally purchased from a number of
sources, usually in the vicinity of the particular plant, and product-
covering fabrics and polyurethane are purchased from a substantial number of
sources on a mostly centralized basis. The Registrant fabricates many of
the parts in its products, largely because quality parts made to its exact
specifications are not obtainable at reasonable cost from outside sources.
Raw materials costs historically have been about 37 percent of sales
in the upholstery operations and a somewhat higher percentage in the
casegoods operations. Purchased fabric (which includes leather) is the
largest single raw material cost representing about 42 percent of total
upholstery product material costs. Polyurethane (poly) foam for cushions
and padding and lumber are the next two largest types of upholstery raw
material costs. Both fabric and poly are highly sensitive to changes in the
price of oil. Price increases for raw materials excluding lumber have kept
pace with the inflation rate in recent years and are expected to continue to
do so. Lumber prices have decreased slightly during the past year
Lumber, like most commodities, historically has had sharp changes in
prices over the short term and long term. The Registrant is usually not as
affected by these changes as much as many other furniture manufacturers due
to the large percentage of upholstered goods manufactured that do not
require as much lumber as casegoods. Also, wood substitutes, (e.g. steel,
plastic) can be used to some degree in upholstered products.
(c) (1) (iv) Patents, Licenses and Franchises or Concessions
The Registrant has a number of patents on its reclining chair and
rocking chair mechanisms which it believes were important to the early
success of the Registrant and to its present competitive position. It
believes, however, that since it is so firmly established in the industry,
the loss of any single or small group of patents would not materially or
adversely affect the Registrant's business. The Registrant has no material
licenses, franchises or concessions.
(c) (1) (v) Seasonal Business
The Registrant generally experiences its lowest level of sales during
its first quarter. When possible, the scheduling of production is designed
to maintain generally uniform manufacturing activity throughout the year,
except for mid summer plant shutdowns to coincide with slower sales.
(c) (1) (vi) Practices Regarding Working Capital Items
The Registrant does not carry significant amounts of upholstered
finished goods inventory to meet rapid delivery requirements of customers or
to assure itself of a continuous allotment of goods from suppliers. Normal
customer terms provide for one payment due within 45 days with a 1 percent
discount within 30 days (one installment, 1 percent discount 30 net 45).
Extended dating is often offered on sales promotions.
Most casegoods finished goods inventories are built to provide for
quicker delivery requirements of customers without installment credit terms,
therefore, resulting in higher levels of finished product on hand at any
period in time than the upholstered products. Kincaid and Hammary divisions
primarily sell casegood products. Casegoods are also sold through the
Business Furniture Group.
(c) (1) (vii) Customers
The Registrant distributes to over 13,000 locations. The Registrant
does not have any customer whose sales amount to 10 percent or more of the
Registrant's consolidated sales for fiscal year 1996. The Registrant's
approximate dealer mix consisted of 38 percent proprietary, 16 percent to
major dealers (Montgomery Ward and other department stores) and 46 percent
to general dealers.
Proprietary stores consist of stores dedicated to the sale of La-Z-Boy
products and in-store dedicated galleries. The dedicated stores include
La-Z-Boy Furniture Galleries stores and Showcase Shoppes. In-store
dedicated galleries have been established for each of the Company's
divisions.
(c) (1) (viii) Orders and Backlog
It has been determined that the majority of the Registrant's
Residential Division orders are for dealer stock, with approximately 35
percent of orders being requested directly by customers. Furthermore,
about 20 percent of units produced at all divisions are built for the
Registrant's inventory. The remainder are "built-to-order" for dealers.
As of June 29, 1996 and July 1, 1995 backlogs were approximately $67
million. This represents less than five weeks of sales. On average, orders
are shipped in approximately five weeks. Any measure of backlog at a point
in time may not be indicative of future sales performance. The Registrant
does not rely on backlogs to predict future sales since the sales cycle is
only five weeks and backlog can change from week to week.
The cancellation policy for La-Z-Boy Chair Company, in general, is
that an order cannot be canceled after it has been selected for production.
Orders from prebuilt stock, though, may be canceled up to the time of
shipment.
(c) (1) (ix) Renegotiation Contracts
The Registrant does not have any material portion of business which
may be subject to renegotiation of profits or termination of contracts or
subcontracts at the election of the Government.
(c) (1) (x) Competitive Conditions
The Registrant believes that it ranks third in the U.S. in dollar
volume of sales within the Residential furniture industry, which includes
manufacturers of bedroom, dining room and living room furniture.
The Registrant competes primarily by emphasis on quality of its
products, dealer support and a lifetime warranty on the reclining and
legrest mechanisms.
The Registrant has approximately fifteen major competitors in the U.S.
reclining or motion chair field and a substantially larger number of
competitors in the upholstery business as a whole and in the casegoods and
Business Furniture businesses.
(c) (1) (xi) Research and Development Activities
The Registrant spent $8.0 million in fiscal 1996 for new product
development, existing product improvement, quality control, improvement of
current manufacturing operations and research into the use of new materials
in the construction of its products. The Registrant spent $7.9 million in
fiscal 1995 on such activities and $6.4 million on such activities in fiscal
1994. The Registrant's customers generally do not engage in research with
respect to the Registrant's products.
(c) (1) (xii) Compliance with Environmental Regulations
Information relating to Compliance with Environmental Regulations
(Note 11 of the Consolidated Financial Statements appearing on page 25 and
the environmental discussion contained within the Management Discussion and
Analysis appearing on page 29 of La-Z-Boy Chair Company's Annual Report to
Shareholders for 1996) is incorporated herein by reference.
(c) (1) (xiii) Number of Employees
The Registrant and its subsidiaries employed 10,733 persons as of
April 27, 1996 and 11,149 persons as of April 29, 1995.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
The Registrant does not make any material amount of sales of
upholstered furniture to foreign customers. The Registrant sells
upholstered furniture to Canadian customers through its Canadian subsidiary,
La-Z-Boy Canada Limited.
The Registrant also derives a small amount of royalty revenues from
the sale and licensing of its trademarks, tradenames and patents to certain
foreign manufacturers.
Export sales are increasing, and are less than 2% of sales.
Item 2. Properties
In the United States, the Registrant operates twenty-nine
manufacturing plants (most with warehousing space), has an automated fabric
processing center and has divisional and corporate offices. The Registrant
has one manufacturing plant in Canada. Some locations listed below have
more than one plant.
The location of these plants, the approximate floor space, principal
operations conducted, the average age and the approximate number of
employees at such locations as of April 27, 1996 are as follows:
Floor Space Average Number of
Location (square feet) Operations Conducted Age Employees
Clearfield, 48,000 Upholstering and -- 45
Utah assembly of upholstery
Dayton, 909,320 Manufacture, assembly 13 1,773
Tennessee and warehousing of
upholstery
Florence, 416,249 Manufacture, assembly 26 464
South Carolina and warehousing of
upholstery
Florence, 48,400 Fabric processing 19 17
South Carolina center
Grand Rapids, 440,000 Manufacture and assembly 81 96
Michigan of Business
furniture/systems
Hudson area, 1,040,745 Manufacture, assembly, 30 1,263
North Carolina and warehousing of
(Kincaid) casegoods and division
office
Leland, 311,990 Manufacture, assembly and 20 345
Mississippi warehousing of Business
Furniture casegoods
and upholstery
Lenoir area, 654,688 Manufacture, assembly & 28 491
North Carolina warehousing of primarily
(Hammary) casegoods and some
upholstered products and
division office
Lincolnton, 375,823 Manufacture, warehousing, 28 348
North Carolina and assembly of upholstery
Monroe, 242,235 Corporate office, Residential 46 505
Michigan and Business Furniture Group
offices and R & D
Neosho, 560,640 Manufacture, assembly 20 1,089
Missouri and warehousing of
upholstery
New Tazewell, 696,484 Manufacture, assembly 6 1,374
Tennessee and warehousing of primarily
(England/Corsair) upholstery and division office
Newton, 640,707 Manufacture, assembly and 19 1,142
Mississippi leather cutting, plywood
cutting and warehousing of
upholstery
Redlands, 189,125 Upholstering, assembly 26 292
California and warehousing of
upholstery
Siloam Springs, 399,616 Upholstering, warehousing, 1 336
Arkansas and assembly of upholstery
Tremonton, 672,770 Manufacture, assembly 11 791
Utah and warehousing of
upholstery
Waterloo, 257,340 Manufacture, assembly, 26 362
Ontario and warehousing of
(La-Z-Boy upholstery and division office
Canada Ltd.) _________ __ ______
7,904,132 23 10,733
========= == ======
The Monroe, Michigan; Redlands, California; Dayton, Tennessee;
Waterloo, Ontario, Canada; Lincolnton, North Carolina; Grand Rapids,
Michigan; Lenoir, North Carolina; Hudson, North Carolina; New Tazewell,
Tennessee and the Newton, Mississippi woodworking plants are owned by the
Registrant. The Florence, South Carolina; Neosho, Missouri; Newton,
Mississippi; Siloam Springs, Arkansas and Tremonton, Utah plants as well as
the automated Fabric Processing Center were financed by the issuance of
industrial revenue bonds and are occupied under long-term leases with
government authorities. The Leland, Mississippi plant is under a long-term
lease between the Board of Supervisors of Washington County, Mississippi
(lessor) and La-Z-Boy Chair Company (lessee). These leases are capitalized
on the Registrant's books. The Clearfield, Utah plant is under a long term
lease.
The Registrant believes that its plants are well maintained, in good
operating condition and will be adequate to meet its present and near future
business requirements.
Item 3. Legal Proceedings
Information relating to certain legal proceedings (Note 11 of the
Consolidated Financial Statements appearing on page 25 of La-Z-Boy Chair
Company's Annual Report to Shareholders for 1996) is incorporated herein by
reference.
Item 4. Submission of Matters to a Vote of Security
Not applicable.
PART II
The information required in Part II (Items 5 through 8) is contained in
the La-Z-Boy Chair Company's Annual Report to Shareholders for 1996, in
the Financial Report pages 17 through 31, and is incorporated herein by
reference.
Item 9. Changes in and disagreements with accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
The information required in Part III (Items 10 through 13) is
contained in the Registrant's proxy statement dated June 27, 1996 on pages 1
through 12 and 17, and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
Listed below are all the documents filed as part of this report:
(a) Index to Financial Statements
(1) Financial Statements:
Page in Exhibit I
Report of Independent Accountants on Financial
Statement Schedule...............................................S-2
(2) Financial Statement Schedule:
II Valuation and Qualifying Accounts............................ S-3
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits
(3)(a) Articles of Incorporation filed on Form 10-K dated July, 20
1993 (Commission File No. 1-9656) is incorporated herein by
reference.
(b) By-laws filed on Form 10-K dated July 20, 1993 (Commission File
No. 1-9656) is incorporated herein by reference.
(4) Form of certificate for Common Stock $1.00 par value (filed as
an exhibit to registrant's Form S-8 Registration Statement
(Commission File No. 33-50318) and incorporated herein by
reference).
(b) Instruments defining the rights of holders of long-term debt
are not filed herewith, pursuant to paragraph (4)(iii) of
Regulation S-K Item 601. The Registrant will furnish all such
documents to the Securities and Exchange Commission upon its
request.
*(10)(a) La-Z-Boy Chair Company 1993 Performance-Based Stock plan (filed
as Exhibit A to registrant's proxy statement dated June 25 1993
(Commission File No. 1-9656) and incorporated herein by
reference).
*(b) La-Z-Boy Chair Company Restricted Stock Plan for Non-Employee
Directors (filed as Exhibit B to registrant's proxy statement
dated July 6, 1989 (Commission File No. 1-9656) and
incorporated herein by reference).
*(c) La-Z-Boy Chair Company Executive Incentive Compensation Plan
Description (filed as an exhibit to registrant's Current
Report on Form 8-K dated February 6, 1995 (Commission File No.
1-9656) and incorporated herein by reference).
*(d) La-Z-Boy Chair Company Supplemental Executive Retirement Plan
dated May 1, 1991 (filed as an exhibit to registrant's Current
Report on Form 8-K dated February 6, 1995 (Commission File No.
1-9656) and incorporated herein by reference).
*(e) La-Z-Boy Chair Company 1986 Restricted Share Plan (filed as an
exhibit to registrant's proxy statement dated June 26, 1986
(Commission File No. 1-9656) and incorporated herein by
reference).
*(f) La-Z-Boy Chair Company Amended and Restated 1989 Restricted
Share Plan (filed as Exhibit A to registrant's proxy statement
dated July 6, 1989 (Commission File No. 1-9656) and
incorporated herein by reference).
*(g) La-Z-Boy Chair Company 1986 Incentive Stock Option Plan (filed
as Exhibit B to registrant's proxy statement dated June 26,
1986 (Commission File No. 1-9656) and incorporated herein by
reference).
*(h) Form of Change in Control Agreement, accompanied by list of
employees party thereto (filed as an exhibit to registrant's
Current Report on Form 8-K dated February 6, 1995 (Commission
File No. 1-9656) and incorporated herein by reference).
*(i) Form of Indemnification Agreement and list of Registrant's
directors who are parties thereto (filed as an exhibit to
Form 8, Amendment No. 1 dated November 3, 1989 (Commission File
No. 1-9656) and incorporated herein by reference).
(j) La-Z-Boy Chair Company 1979 Key Employee Stock Option Plan
(filed as an exhibit to Form S-8 Registration Statement
effective February 15, 1980 (Commission File No. 2-66510) and
incorporated herein by reference).
(k) Amended and Restated Reorganization Agreement with
England/Corsair, Inc. (filed as Annex A to registrant's Form
S-4 Registration Statement dated April 7, 1995 (Commission File
No. 33-57623) and incorporated herein by reference).
(13) 1996 Annual Report to Shareholders (With the exception of the
information incorporated in Part I and II, this document is not
deemed to be filed as part of the report on Form 10-K).
(21) List of subsidiaries of La-Z-Boy Chair Company (filed
herewith).
(23) Consent of Price Waterhouse LLP (filed herewith).
(27) Financial Data Schedule (Edgar only)
* Indicates a contract or benefit plan under which one or more executive
officers or directors may receive benefits.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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 CHAIR COMPANY
/s/C. T. Knabusch
BY ------------------------ July 15, 1996
C. T. Knabusch
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/E. J. Shoemaker
- --------------------- Executive Vice President of July 15, 1996
E. J. Shoemaker Engineering, Director and Vice
Chairman of the Board
/s/C. T. Knabusch
- --------------------- Chairman of the Board, President July 15, 1996
C. T. Knabusch and Chief Executive Officer
/s/G. M. Hardy
- --------------------- Secretary and Treasurer, Principal July 15, 1996
G. M. Hardy Accounting Officer and Director
/s/F. H. Jackson
- --------------------- Vice President Finance, Principal July 15, 1996
F. H. Jackson Financial Officer and Director
/s/P. H. Norton
- --------------------- Senior Vice President Sales and July 15, 1996
P. H. Norton Marketing and Director
- --------------------- Director July 15, 1996
L. G. Stevens
/s/J. F. Weaver
- --------------------- Director July 15, 1996
J. F. Weaver
/s/D. K. Hehl
- --------------------- Director July 15, 1996
D. K. Hehl
/s/R. E. Lipford
- --------------------- Director July 15, 1996
R. E. Lipford
/s/W. W. Gruber
- ---------------------- Director July 15, 1996
W. W. Gruber
- ---------------------- Director, Mr. Johnston is the July 15, 1996
J.W. Johnston son-in-law of
E. J. Shoemaker
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) and ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEARS ENDED APRIL 27, 1996, APRIL 29, 1995, AND APRIL 30, 1994
LA-Z-BOY CHAIR COMPANY
MONROE, MICHIGAN
INDEX TO FINANCIAL STATEMENTS
The financial statements, together with the report thereon of Price
Waterhouse LLP dated May 30, 1996 appearing on pages 17 through 31 of the
accompanying 1996 Annual Report to Shareholders are incorporated by
reference in this Form 10-K Annual Report. With the exception of the
aforementioned information, and the information incorporated in Part II, the
1996 Annual Report to Shareholders is not to be deemed filed as part of this
report. The following financial statements schedule should be read in
conjunction with the financial statements in such 1996 Annual Report to
Shareholders. Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
FINANCIAL STATEMENT SCHEDULE
1996, 1995, AND 1994
Report of Independent Accountants on Financial
Statement Schedule
Schedule II Valuation and Qualifying Accounts
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
La-Z-Boy Chair Company
Our audits of the consolidated financial statements referred to in our
report dated May 30, 1996 appearing on Page 17 of the 1996 Annual Report to
Shareholders of La-Z-Boy Chair Company (which report and consolidated
financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement
Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
Toledo, Ohio
May 30, 1996
LA-Z-BOY CHAIR COMPANY AND SUBSIDIARIES SCHEDULE II VALUATION
AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Trade
accounts
Additions receivable
Balance at charged to Acquisition "written off" Balance
beginning costs and of operating net of at end of
of period expenses division recoveries period
Description
Year ended
April 27, 1996:
Allowance for
doubtful accounts
& long-term
notes $17,829 $5,530 $5,326 $18,033
Accrued
Warranties $8,450 $1,127 $9,577
Year ended
April 29, 1995:
Allowance for
doubtful accounts
& long-term
notes $14,795 $5,847 $92 $2,905 $17,829
Accrued
Warranties $6,650 $1,350 $450 $8,450
Year ended
April 30, 1994:
Allowance for
doubtful accounts
& long-term
notes $11,670 $7,578 $4,453 $14,795
Accrued
Warranties $6,250 $400 $6,650