20549 ______ Michigan (I.R.S. Employer Identification No.) Michigan (Address of principal executive offices) (Zip Code) ☐ ☐ ☐ Common Quarter Ended (Unaudited, amounts in thousands, except per share data) 1/27/18 1/28/17 Sales $ 413,638 $ 389,992 Cost of sales 251,140 233,185 Gross profit 162,498 156,807 Selling, general and administrative expense 129,403 123,235 Operating income 33,095 33,572 Interest expense 113 562 Interest income 444 241 Income from Continued Dumping and Subsidy Offset Act, net — 273 Other income (expense), net (1,094 ) (52 ) Income before income taxes 32,332 33,472 Income tax expense 20,047 9,830 Net income 12,285 23,642 Net income attributable to noncontrolling interests (176 ) (356 ) Net income attributable to La-Z-Boy Incorporated $ 12,109 $ 23,286 Basic weighted average common shares 47,234 48,914 Basic net income attributable to La-Z-Boy Incorporated per share $ 0.26 $ 0.47 Diluted weighted average common shares 47,757 49,384 Diluted net income attributable to La-Z-Boy Incorporated per share $ 0.25 $ 0.47 Dividends declared per share $ 0.12 $ 0.11 Nine Months Ended (Unaudited, amounts in thousands, except per share data) 1/27/18 1/28/17 Sales $ 1,163,922 $ 1,107,354 Cost of sales 707,369 666,942 Gross profit 456,553 440,412 Selling, general and administrative expense 372,891 350,524 Operating income 83,662 89,888 Interest expense 430 794 Interest income 1,163 679 Income from Continued Dumping and Subsidy Offset Act, net — 273 Gain on conversion of investment 2,204 — Other income (expense), net (2,475 ) (1,783 ) Income before income taxes 84,124 88,263 Income tax expense 36,889 29,508 Net income 47,235 58,755 Net income attributable to noncontrolling interests (579 ) (830 ) Net income attributable to La-Z-Boy Incorporated $ 46,656 $ 57,925 Basic weighted average common shares 47,852 49,057 Basic net income attributable to La-Z-Boy Incorporated per share $ 0.97 $ 1.17 Diluted weighted average common shares 48,325 49,532 Diluted net income attributable to La-Z-Boy Incorporated per share $ 0.96 $ 1.16 Dividends declared per share $ 0.34 $ 0.31 Quarter Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 Net income $ 12,285 $ 23,642 Other comprehensive income (loss) Currency translation adjustment 3,585 (441 ) Change in fair value of cash flow hedges, net of tax 445 (404 ) Net unrealized gain (loss) on marketable securities, net of tax 109 (17 ) Net pension amortization, net of tax 552 509 Total other comprehensive income (loss) 4,691 (353 ) Total comprehensive income before allocation to noncontrolling interests 16,976 23,289 Comprehensive income attributable to noncontrolling interests (865 ) (298 ) Comprehensive income attributable to La-Z-Boy Incorporated $ 16,111 $ 22,991 Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 Net income $ 47,235 $ 58,755 Other comprehensive income (loss) Currency translation adjustment 5,754 (770 ) Change in fair value of cash flow hedges, net of tax 182 (740 ) Net unrealized gain on marketable securities, net of tax 46 39 Net pension amortization, net of tax 1,586 1,527 Total other comprehensive income 7,568 56 Total comprehensive income before allocation to noncontrolling interests 54,803 58,811 Comprehensive income attributable to noncontrolling interests (1,773 ) (671 ) Comprehensive income attributable to La-Z-Boy Incorporated $ 53,030 $ 58,140 BALANCE SHEET (Unaudited, amounts in thousands, except par value) 1/27/18 4/29/17 Current assets Cash and equivalents $ 135,266 $ 141,860 Restricted cash 2,354 8,999 Receivables, net of allowance of $2,665 at 1/27/18 and $2,563 at 4/29/17 146,498 150,846 Inventories, net 186,319 175,114 Other current assets 43,242 40,603 Total current assets 513,679 517,422 Property, plant and equipment, net 174,877 169,132 Goodwill 75,765 74,245 Other intangible assets, net 18,510 18,489 Deferred income taxes — long-term 28,823 40,131 Other long-term assets, net 81,848 69,436 Total assets $ 893,502 $ 888,855 Current liabilities Current portion of long-term debt $ 231 $ 219 Accounts payable 66,672 51,282 Accrued expenses and other current liabilities 131,166 147,175 Total current liabilities 198,069 198,676 Long-term debt 249 296 Other long-term liabilities 92,346 88,778 Contingencies and commitments Shareholders’ equity Preferred shares — 5,000 authorized; none issued — — Common shares, $1 par value — 150,000 authorized; 47,068 outstanding at 1/27/18 and 48,472 outstanding at 4/29/17 47,068 48,472 Capital in excess of par value 297,408 289,632 Retained earnings 271,912 284,698 Accumulated other comprehensive loss (26,509 ) (32,883 ) Total La-Z-Boy Incorporated shareholders’ equity 589,879 589,919 Noncontrolling interests 12,959 11,186 Total equity 602,838 601,105 Total liabilities and equity $ 893,502 $ 888,855 STATEMENT OF CASH FLOWS Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 Cash flows from operating activities Net income $ 47,235 $ 58,755 Adjustments to reconcile net income to cash provided by (used for) operating activities Gain on disposal of assets (1,849 ) (103 ) Gain on conversion of investment (2,204 ) — Deferred income tax expense 10,543 3,214 Provision for doubtful accounts 198 (64 ) Depreciation and amortization 23,671 21,311 Equity-based compensation expense 7,929 7,571 Pension plan contributions (2,000 ) (2,300 ) Change in receivables 5,057 (576 ) Change in inventories (9,142 ) (5,929 ) Change in other assets (3,304 ) (4,415 ) Change in payables 12,529 6,359 Change in other liabilities 2,537 9,191 Net cash provided by operating activities 91,200 93,014 Cash flows from investing activities Proceeds from disposals of assets 620 273 Proceeds from property insurance 1,807 — Capital expenditures (24,138 ) (15,529 ) Purchases of investments (24,124 ) (20,778 ) Proceeds from sales of investments 17,109 13,899 Acquisitions, net of cash acquired (16,495 ) (35,878 ) Net cash used for investing activities (45,221 ) (58,013 ) Cash flows from financing activities Payments on debt (203 ) (217 ) Payments for debt issuance costs (220 ) — Stock issued for stock and employee benefit plans, net of shares withheld for taxes 1,418 1,739 Excess tax benefit on stock option exercises — 1,924 Purchases of common stock (46,074 ) (25,062 ) Dividends paid (16,343 ) (15,270 ) Net cash used for financing activities (61,422 ) (36,886 ) Effect of exchange rate changes on cash and equivalents 2,204 (139 ) Change in cash, cash equivalents and restricted cash (13,239 ) (2,024 ) Cash, cash equivalents and restricted cash at beginning of period 150,859 121,335 Cash, cash equivalents and restricted cash at end of period $ 137,620 $ 119,311 Supplemental disclosure of non-cash investing activities Capital expenditures included in payables $ 3,926 $ 1,012 (Unaudited, amounts in thousands) Common Capital in Retained Accumulated Non- Total At April 30, 2016 $ 49,331 $ 279,339 $ 252,472 $ (34,000 ) $ 10,070 $ 557,212 Net income 85,922 1,062 86,984 Other comprehensive income 1,117 54 1,171 Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 504 2,992 (1,747 ) 1,749 Purchases of 1,363 shares of common stock (1,363 ) (3,300 ) (31,294 ) (35,957 ) Stock option and restricted stock expense 8,864 8,864 Tax benefit from exercise of options 1,737 1,737 Dividends paid (20,655 ) (20,655 ) At April 29, 2017 48,472 289,632 284,698 (32,883 ) 11,186 601,105 Net income 46,656 579 47,235 Other comprehensive income 6,374 1,194 7,568 Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 239 2,507 (1,328 ) 1,418 Purchases of 1,643 shares of common stock (1,643 ) (2,660 ) (41,771 ) (46,074 ) Stock option and restricted stock expense 7,929 7,929 Dividends paid (16,343 ) (16,343 ) At January 27, 2018 $ 47,068 $ 297,408 $ 271,912 $ (26,509 ) $ 12,959 $ 602,838 29, 2023. (Unaudited, amounts in thousands) 1/27/18 1/28/17 Cash and cash equivalents $ 135,266 $ 110,320 Restricted cash 2,354 8,991 Total cash, cash equivalents and restricted cash $ 137,620 $ 119,311 (Unaudited, amounts in thousands) 1/27/18 4/29/17 Raw materials $ 85,226 $ 83,371 Work in process 11,669 11,320 Finished goods 110,445 101,444 FIFO inventories 207,340 196,135 Excess of FIFO over LIFO (21,021 ) (21,021 ) Total Inventories $ 186,319 $ 175,114 as follows: (Unaudited, amounts in thousands) Goodwill Balance at April 29, 2017 $ 74,245 Translation adjustment 1,520 Balance at January 27, 2018 $ 75,765 (Unaudited, amounts in thousands) Trade Names Reacquired Other Total Other Balance at April 29, 2017 $ 1,155 $ 13,747 $ 3,587 $ 18,489 Acquisition — 255 — 255 Amortization — (533 ) (307 ) (840 ) Translation adjustment — 293 313 606 Balance at January 27, 2018 $ 1,155 $ 13,762 $ 3,593 $ 18,510 assets might be impaired. (Unaudited, amounts in thousands) 1/27/18 4/29/17 Short-term investments: Available-for-sale investments $ 12,737 $ 15,040 Trading securities 12 6 Held-to-maturity investments 3,358 1,867 Total short-term investments 16,107 16,913 Long-term investments: Available-for-sale investments 33,983 31,264 Cost basis investments 10,954 5,500 Total long-term investments 44,937 36,764 Total investments $ 61,044 $ 53,677 Investments to enhance returns on cash $ 35,401 $ 33,087 Investments to fund compensation/retirement plans $ 14,689 $ 13,690 Other investments $ 10,954 $ 6,900 investments: (Unaudited, amounts in thousands) Gross Gross Fair Value Equity securities $ 2,565 $ (25 ) $ 19,094 Fixed income 38 (309 ) 37,479 Mutual funds — — 12 Other 77 — 4,459 Total securities $ 2,680 $ (334 ) $ 61,044 (Unaudited, amounts in thousands) Gross Gross Fair Value Equity securities $ 1,796 $ (83 ) $ 13,610 Fixed income 729 (72 ) 37,580 Mutual funds — — 6 Other 1 (8 ) 2,481 Total securities $ 2,526 $ (163 ) $ 53,677 type: Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Proceeds from sales $ 5,580 $ 4,142 $ 17,109 $ 13,899 Gross realized gains 870 866 1,288 913 Gross realized losses (284 ) (366 ) (512 ) (404 ) maturity: Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Service cost $ 328 $ 320 $ 986 $ 958 Interest cost 1,147 1,170 3,441 3,510 Expected return on plan assets (1,204 ) (1,245 ) (3,612 ) (3,735 ) Net amortization 780 764 2,340 2,292 Net periodic pension cost $ 1,051 $ 1,009 $ 3,155 $ 3,025 Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Balance as of the beginning of the period $ 21,606 $ 20,902 $ 21,870 $ 20,511 Accruals during the period 4,654 5,168 14,155 15,022 Settlements during the period (4,954 ) (4,846 ) (14,719 ) (14,309 ) Balance as of the end of the period $ 21,306 $ 21,224 $ 21,306 $ 21,224 Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Equity-based awards expense $ 1,519 $ 1,691 $ 7,929 $ 7,571 Liability-based awards expense 386 1,383 694 1,653 Total stock-based compensation expense $ 1,905 $ 3,074 $ 8,623 $ 9,224 (Unaudited) Fiscal 2018 Risk-free interest rate 1.84 % Dividend rate 1.61 % Expected life in years 5.00 Stock price volatility 32.12 % Fair value per share $ 7.16 (Unaudited) Fiscal 2014 Risk-free interest rate 1.50 % Dividend rate 1.49 % Expected life in years 0.38 Stock price volatility 28.09 % Fair value per share $ 13.02 years, with continued vesting upon retirement with respect to the fiscal 2023 grants. The vesting date for retirement-eligible employees is the later of the date they meet the criteria for retirement or ten months after the grant date. We accelerate the expense for restricted stock granted to retirement-eligible employees over the vesting period, with expense recognized from the grant date through their retirement eligibility date or over the ten months following the grant date, whichever period is longer. We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur. The weighted-average fair value of the restricted stock that was awarded in the first nine months of fiscal 2023 was $24.58 per share, the market value of our common shares on the dates of grant. $26.19. to pay shareholders before the shares vest. For shares that vest based on market conditions, we use a Monte Carlo valuation model to estimate each share’s fair value as of the date of $36.63. (Unaudited, amounts in thousands) Translation Change in Unrealized Net pension Accumulated other Balance at October 28, 2017 $ 737 $ (189 ) $ 1,689 $ (32,748 ) $ (30,511 ) Changes before reclassifications 2,896 495 671 — 4,062 Amounts reclassified to net income — 22 (585 ) 835 272 Tax effect — (72 ) 23 (283 ) (332 ) Other comprehensive income attributable to La-Z-Boy Incorporated 2,896 445 109 552 4,002 Balance at January 27, 2018 $ 3,633 $ 256 $ 1,798 $ (32,196 ) $ (26,509 ) (Unaudited, amounts in thousands) Translation Change in fair value Unrealized Net pension Accumulated Balance at October 29, 2016 $ (673 ) $ (622 ) $ 1,114 $ (33,309 ) $ (33,490 ) Changes before reclassifications (383 ) (1,414 ) 472 — (1,325 ) Amounts reclassified to net income — 762 (500 ) 822 1,084 Tax effect — 248 11 (313 ) (54 ) Other comprehensive income (loss) attributable to La-Z-Boy Incorporated (383 ) (404 ) (17 ) 509 (295 ) Balance at January 28, 2017 $ (1,056 ) $ (1,026 ) $ 1,097 $ (32,800 ) $ (33,785 ) (Unaudited, amounts in thousands) Translation Change in fair value Unrealized Net pension Accumulated Balance at April 29, 2017 $ (927 ) $ 74 $ 1,752 $ (33,782 ) $ (32,883 ) Changes before reclassifications 4,560 256 1,409 — 6,225 Amounts reclassified to net income — (164 ) (1,425 ) 2,506 917 Tax effect — 90 62 (920 ) (768 ) Other comprehensive income attributable to La-Z-Boy Incorporated 4,560 182 46 1,586 6,374 Balance at January 27, 2018 $ 3,633 $ 256 $ 1,798 $ (32,196 ) $ (26,509 ) (Unaudited, amounts in thousands) Translation Change in fair value Unrealized Net pension Accumulated Balance at April 30, 2016 $ (445 ) $ (286 ) $ 1,058 $ (34,327 ) $ (34,000 ) Changes before reclassifications (611 ) (2,893 ) 572 — (2,932 ) Amounts reclassified to net income — 1,698 (509 ) 2,467 3,656 Tax effect — 455 (24 ) (940 ) (509 ) Other comprehensive income (loss) attributable to La-Z-Boy Incorporated (611 ) (740 ) 39 1,527 215 Balance at January 28, 2017 $ (1,056 ) $ (1,026 ) $ 1,097 $ (32,800 ) $ (33,785 ) Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Balance as of the beginning of the period $ 12,094 $ 10,443 $ 11,186 $ 10,070 Net income 176 356 579 830 Other comprehensive income (loss) 689 (58 ) 1,194 (159 ) Balance as of the end of the period $ 12,959 $ 10,741 $ 12,959 $ 10,741 Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Sales Upholstery segment: Sales to external customers $ 262,874 $ 246,650 $ 739,429 $ 715,357 Intersegment sales 58,084 56,273 160,697 150,771 Upholstery segment sales 320,958 302,923 900,126 866,128 Casegoods segment: Sales to external customers 23,887 20,499 68,821 64,651 Intersegment sales 3,328 2,760 11,969 9,534 Casegoods segment sales 27,215 23,259 80,790 74,185 Retail segment sales 125,815 122,121 353,068 325,206 Corporate and Other: Sales to external customers 1,062 722 2,604 2,140 Intersegment sales 2,818 1,978 6,839 4,751 Corporate and Other sales 3,880 2,700 9,443 6,891 Eliminations (64,230 ) (61,011 ) (179,505 ) (165,056 ) Consolidated sales $ 413,638 $ 389,992 $ 1,163,922 $ 1,107,354 Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Operating Income (Loss) Upholstery segment $ 31,699 $ 35,669 $ 88,422 $ 104,388 Casegoods segment 2,792 1,593 8,833 6,587 Retail segment 7,076 6,325 12,746 11,515 Corporate and Other (8,472 ) (10,015 ) (26,339 ) (32,602 ) Consolidated operating income 33,095 33,572 83,662 89,888 Interest expense 113 562 430 794 Interest income 444 241 1,163 679 Income from Continued Dumping and Subsidy Offset Act, net — 273 — 273 Gain on conversion of investment — — 2,204 — Other income (expense), net (1,094 ) (52 ) (2,475 ) (1,783 ) Income before income taxes $ 32,332 $ 33,472 $ 84,124 $ 88,263 Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 1/27/18 1/28/17 Numerator (basic and diluted): Net income attributable to La-Z-Boy Incorporated $ 12,109 $ 23,286 $ 46,656 $ 57,925 Income allocated to participating securities (62 ) (115 ) (234 ) (287 ) Net income available to common shareholders $ 12,047 $ 23,171 $ 46,422 $ 57,638 Denominator: Basic weighted average common shares outstanding 47,234 48,914 47,852 49,057 Add: Contingent common shares 178 155 176 155 Stock option dilution 345 315 297 320 Diluted weighted average common shares outstanding 47,757 49,384 48,325 49,532 Refer to Note 1, Basis of Presentation, for additional information. Fair Value Measurements (Unaudited, amounts in thousands) Level 1 (a) Level 2 (a) Level 3 (b) Assets Available-for-sale investments $ 1,223 $ 38,171 $ — Trading securities — 12 — Held-to-maturity investments 3,358 — — Cost basis investments — — 10,954 Total assets $ 4,581 $ 38,183 $ 10,954 Liabilities Contingent consideration liability $ — $ — $ 354 Fair Value Measurements (Unaudited, amounts in thousands) Level 1 (c) Level 2 (c) Level 3 (d) Assets Available-for-sale investments $ 1,217 $ 36,638 $ 1,400 Trading securities — 6 — Held-to-maturity investments 1,866 — — Cost basis investment — — 5,500 Total assets $ 3,083 $ 36,644 $ 6,900 Liabilities Contingent consideration liability $ — $ — $ 1,248 for any of the periods presented. (Unaudited, amounts in thousands) Level 3 Assets Balance at April 29, 2017 $ 6,900 Purchases 2,500 Realized gain 2,204 Unrealized gain reclassified to net income (650 ) Balance at January 27, 2018 $ 10,954 Liabilities Balance at April 29, 2017 $ 1,248 Fair value adjustment (951 ) Translation adjustment 57 Balance at January 27, 2018 $ 354 feet worldwide. all our consumer brands. 2022 Third Quarter (Unaudited, amounts Quarter Quarter Ended % Nine Months Nine Months % Sales $ 413,638 $ 389,992 6.1 % $ 1,163,922 $ 1,107,354 5.1 % Operating income 33,095 33,572 (1.4 )% 83,662 89,888 (6.9 )% Operating margin 8.0 % 8.6 % 7.2 % 8.1 % (Unaudited, amounts Quarter Quarter % Nine Months Nine Months % Sales $ 320,958 $ 302,923 6.0 % $ 900,126 $ 866,128 3.9 % Operating income 31,699 35,669 (11.1 )% 88,422 104,388 (15.3 )% Operating margin 9.9 % 11.8 % 9.8 % 12.1 % Other (Unaudited, amounts Quarter Quarter % Nine Months Nine Months % Sales $ 27,215 $ 23,259 17.0 % $ 80,790 $ 74,185 8.9 % Operating income 2,792 1,593 75.3 % 8,833 6,587 34.1 % Operating margin 10.3 % 6.8 % 10.9 % 8.9 % (Unaudited, amounts Quarter Quarter % Nine Nine % Sales $ 125,815 $ 122,121 3.0 % $ 353,068 $ 325,206 8.6 % Operating income 7,076 6,325 11.9 % 12,746 11,515 10.7 % Operating margin 5.6 % 5.2 % 3.6 % 3.5 % (Unaudited, amounts Quarter Quarter % Nine Months Nine Months % Sales $ 3,880 $ 2,700 43.7 % $ 9,443 $ 6,891 37.0 % Eliminations (64,230 ) (61,011 ) (5.3 )% (179,505 ) (165,056 ) (8.8 )% Operating loss (8,472 ) (10,015 ) 15.4 % (26,339 ) (32,602 ) 19.2 % segment. primarily driven by higher interest rates. taxes. 2022 to repurchase 0.2 million shares. As of January 28, 2023, 7.3 million shares remained available for repurchase pursuant to this authorization. Nine Months Ended (Unaudited, amounts in thousands) 1/27/18 1/28/17 Cash Flows Provided By (Used For) Net cash provided by operating activities $ 91,200 $ 93,014 Net cash used for investing activities (45,221 ) (58,013 ) Net cash used for financing activities (61,422 ) (36,886 ) Exchange rate changes 2,204 (139 ) Change in cash, cash equivalents and restricted cash $ (13,239 ) $ (2,024 ) 10-K for the fiscal year ended April 30, 2022. We do not expect our continuing compliance with existing federal, state and local statutes dealing with protection of the environment to have a material effect on our capital expenditures, earnings, competitive position or liquidity. ended January 28, 2023. restricted shares. (Unaudited, amounts in thousands, except per Total Average Total number Maximum Fiscal November (October 29 — December 2, 2017) 288 $ 27.33 288 7,274 Fiscal December (December 3 — December 30, 2017) 151 $ 31.70 151 7,123 Fiscal January (December 31, 2017 — January 27, 2018) 86 $ 31.65 86 7,037 Fiscal Third Quarter of 2018 525 $ 29.30 525 7,037 28, 2023: Description (101.INS) Inline XBRL Instance Document (101.SCH) Inline XBRL Taxonomy Extension Schema Document (101.CAL) Inline XBRL Taxonomy Extension Calculation Linkbase Document (101.LAB) Inline XBRL Taxonomy Extension Label Linkbase Document (101.PRE) Inline XBRL Taxonomy Extension Presentation Linkbase Document (101.DEF) Inline XBRL Taxonomy Extension Definition Linkbase Document 
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549-1004FORM 10-QQuarterly Report Pursuant(Mark One)☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended January 28, 2023or☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to Section 13 or 15(d) of the Securities Exchange Act of 1934FOR QUARTERLY PERIOD ENDED JANUARY 27, 2018COMMISSION FILE NUMBER 1-9656LA-Z-BOY INCORPORATED(Exact name of registrant as specified in its charter)MICHIGAN38-075113738-0751137 (State or other jurisdiction of incorporation or organization) One La-Z-Boy Drive, Monroe, MichiganMonroe, 48162-5138 Registrant’sRegistrant's telephone number, including area code (734) 242-1444None(Former name, former address and former fiscal year, if changed since last report.)Securities registered pursuant to Section 12(b) of the Act:Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $1.00 Par Value LZB New York Stock Exchange Indicate by check mark whether the Registrantregistrant (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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x☒ No oIndicate by check mark whether the Registrantregistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).Yes x☒ No oIndicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “emerging growth“smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company oLarge accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o☐ No xThe☒Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:ClassClass Outstanding at February 13, 201814, 2023Shares,Stock, $1.00 par value46,993,564LA-Z-BOY INCORPORATEDTABLE OF CONTENTSPageNumber(s)Page
Number56781010101112121313141819202326262729343737383838383840402LA-Z-BOY INCORPORATEDCONSOLIDATED STATEMENT OF INCOMEQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except per share data) 1/28/2023 1/22/2022 1/28/2023 1/22/2022 Sales $ 572,723 $ 571,573 $ 1,788,146 $ 1,672,245 Cost of sales 326,296 352,208 1,039,523 1,027,503 Gross profit 246,427 219,365 748,623 644,742 Selling, general and administrative expense 203,587 179,878 591,257 516,771 Operating income 42,840 39,487 157,366 127,971 Interest expense (136) (160) (414) (713) Interest income 2,012 806 3,624 1,029 Other income (expense), net (1,062) (1,460) (834) (522) Income before income taxes 43,654 38,673 159,742 127,765 Income tax expense 12,077 9,591 42,446 33,059 Net income 31,577 29,082 117,296 94,706 Net (income) loss attributable to noncontrolling interests 149 (615) (1,005) (2,157) Net income attributable to La-Z-Boy Incorporated $ 31,726 $ 28,467 $ 116,291 $ 92,549 Basic weighted average common shares 43,137 43,701 43,111 44,342 Basic net income attributable to La-Z-Boy Incorporated per share $ 0.74 $ 0.65 $ 2.70 $ 2.09 Diluted weighted average common shares 43,137 43,968 43,111 44,640 Diluted net income attributable to La-Z-Boy Incorporated per share $ 0.74 $ 0.65 $ 2.70 $ 2.07 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.3LA-Z-BOY INCORPORATEDCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEQuarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022 Net income $ 31,577 $ 29,082 $ 117,296 $ 94,706 Other comprehensive income (loss) Currency translation adjustment 5,441 (651) (72) (1,902) Net unrealized gain (loss) on marketable securities, net of tax 287 (140) 84 (190) Net pension amortization, net of tax 36 56 109 175 Total other comprehensive income (loss) 5,764 (735) 121 (1,917) Total comprehensive income before noncontrolling interests 37,341 28,347 117,417 92,789 Comprehensive (income) loss attributable to noncontrolling interests (1,278) (716) (1,509) (1,708) Comprehensive income attributable to La-Z-Boy Incorporated $ 36,063 $ 27,631 $ 115,908 $ 91,081 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.4LA-Z-BOY INCORPORATEDCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME(Unaudited, amounts in thousands, except par value) 1/28/2023 4/30/2022 Current assets Cash and equivalents $ 280,763 $ 245,589 Restricted cash 3,282 3,267 Receivables, net of allowance of $4,228 at 1/28/2023 and $3,406 at 4/30/2022 137,593 183,747 Inventories, net 303,553 303,191 Other current assets 123,803 215,982 Total current assets 848,994 951,776 Property, plant and equipment, net 267,606 253,144 Goodwill 204,781 194,604 Other intangible assets, net 39,180 33,971 Deferred income taxes – long-term 11,199 10,632 Right of use lease assets 399,807 405,755 Other long-term assets, net 74,788 82,207 Total assets $ 1,846,355 $ 1,932,089 Current liabilities Accounts payable $ 86,882 $ 104,025 Lease liabilities, short-term 77,142 75,271 Accrued expenses and other current liabilities 345,360 496,393 Total current liabilities 509,384 675,689 Lease liabilities, long-term 350,144 354,843 Other long-term liabilities 70,323 81,935 Shareholders' equity Preferred shares – 5,000 authorized; none issued — — Common shares, $1.00 par value – 150,000 authorized; 43,140 outstanding at 1/28/23 and 43,089 outstanding at 4/30/22 43,140 43,089 Capital in excess of par value 350,406 342,252 Retained earnings 518,732 431,181 Accumulated other comprehensive loss (6,180) (5,797) Total La-Z-Boy Incorporated shareholders' equity 906,098 810,725 Noncontrolling interests 10,406 8,897 Total equity 916,504 819,622 Total liabilities and equity $ 1,846,355 $ 1,932,089 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.5LA-Z-BOY INCORPORATEDCONSOLIDATED BALANCE SHEETNine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 Cash flows from operating activities Net income $ 117,296 $ 94,706 Adjustments to reconcile net income to cash provided by operating activities (Gain)/loss on disposal and impairment of assets 6,161 (3,149) (Gain)/loss on sale of investments 155 (340) Provision for doubtful accounts 945 (1,070) Depreciation and amortization 29,357 27,146 Amortization of right-of-use lease assets 57,548 53,949 Lease impairment 1,347 — Equity-based compensation expense 8,456 8,887 Change in deferred taxes (2,629) 214 Change in receivables 42,474 (20,317) Change in inventories 4,560 (83,109) Change in other assets 16,478 (22,486) Change in payables (10,624) 23,690 Change in lease liabilities (58,651) (54,400) Change in other liabilities (85,821) 21,471 Net cash provided by operating activities 127,052 45,192 Cash flows from investing activities Proceeds from disposals of assets 121 3,999 Capital expenditures (57,439) (58,585) Purchases of investments (6,970) (28,058) Proceeds from sales of investments 18,178 30,457 Acquisitions (11,855) (24,849) Net cash used for investing activities (57,965) (77,036) Cash flows from financing activities Payments on debt and finance lease liabilities (92) (91) Holdback payments for acquisition purchases (5,000) (23,000) Stock issued for stock and employee benefit plans, net of shares withheld for taxes (1,771) (1,670) Repurchases of common stock (5,004) (75,646) Dividends paid to shareholders (22,027) (20,621) Dividends paid to minority interest joint venture partners (1)— (1,260) Net cash used for financing activities (33,894) (122,288) Effect of exchange rate changes on cash and equivalents (4) (593) Change in cash, cash equivalents and restricted cash 35,189 (154,725) Cash, cash equivalents and restricted cash at beginning of period 248,856 394,703 Cash, cash equivalents and restricted cash at end of period $ 284,045 $ 239,978 Supplemental disclosure of non-cash investing activities Capital expenditures included in payables $ 2,828 $ 4,564 (1)Includes dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.6LA-Z-BOY INCORPORATEDCONSOLIDATED STATEMENT OF CASH FLOWSCHANGES IN EQUITY(Unaudited, amounts in thousands) Common
SharesCapital in Excess of
Par ValueRetained
EarningsAccumulated Other
Comprehensive
LossNon-Controlling
InterestsTotal At April 30, 2022 $ 43,089 $ 342,252 $ 431,181 $ (5,797) $ 8,897 $ 819,622 Net income — — 38,488 — 452 38,940 Other comprehensive loss — — — (1,519) (519) (2,038) Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 151 (194) (1,660) — — (1,703) Repurchases of 204 shares of common stock (204) — (4,800) — — (5,004) Stock option and restricted stock expense — 1,417 — — — 1,417 Dividends declared and paid ($0.165/share) — — (7,097) — — (7,097) Dividends declared not paid ($0.165/share) — — (45) — — (45) At July 30, 2022 $ 43,036 $ 343,475 $ 456,067 $ (7,316) $ 8,830 $ 844,092 Net income — — 46,077 — 702 46,779 Other comprehensive loss — — — (3,201) (404) (3,605) Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 100 (101) (7) — — (8) Stock option and restricted stock expense — 3,662 — — — 3,662 Dividends declared and paid ($0.165/share) — — (7,064) — — (7,064) Dividends declared not paid ($0.165/share) — — (70) — — (70) At October 29, 2022 $ 43,136 $ 347,036 $ 495,003 $ (10,517) $ 9,128 $ 883,786 Net income — — 31,726 — (149) 31,577 Other comprehensive income (loss) — — — 4,337 1,427 5,764 Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 4 (7) (57) — — (60) Stock option and restricted stock expense — 3,377 — — — 3,377 Dividends declared and paid ($0.1815/share) — — (7,866) — — (7,866) Dividends declared not paid ($0.1815/share) — — (74) — — (74) At January 28, 2023 $ 43,140 $ 350,406 $ 518,732 $ (6,180) $ 10,406 $ 916,504 7Table of Contents(Unaudited, amounts in thousands) Common
SharesCapital in Excess of
Par ValueRetained
EarningsAccumulated Other
Comprehensive
Income (Loss)Non-Controlling
InterestsTotal At April 24, 2021 $ 45,361 $ 330,648 $ 399,010 $ (1,521) $ 8,648 $ 782,146 Net income — — 24,566 — 700 25,266 Other comprehensive loss — — — (302) (430) (732) Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 181 291 (2,700) — — (2,228) Repurchases of 919 shares of common stock (919) (530) (34,191) — — (35,640) Stock option and restricted stock expense — 2,460 — — — 2,460 Dividends declared and paid ($0.15/share) — — (6,777) — — (6,777) Dividends declared not paid ($0.15/share) — — (46) — — (46) At July 24, 2021 $ 44,623 $ 332,869 $ 379,862 $ (1,823) $ 8,918 $ 764,449 Net income — — 39,516 — 842 40,358 Other comprehensive income — — — (330) (120) (450) Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 11 353 (6) — — 358 Repurchases of 434 shares of common stock (434) (196) (14,370) — — (15,000) Stock option and restricted stock expense — 3,894 — — — 3,894 Dividends declared and paid ($0.15/share) (1) — — (6,621) — (1,260) (7,881) Dividends declared not paid ($0.15/share) — — (46) — — (46) At October 23, 2021 $ 44,200 $ 336,920 $ 398,335 $ (2,153) $ 8,380 $ 785,682 Net income — — 28,467 — 615 29,082 Other comprehensive income (loss) — — — (836) 101 (735) Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 8 204 (12) — — 200 Repurchases of 703 shares of common stock (703) (363) (23,940) — — (25,006) Stock option and restricted stock expense — 2,533 — — 2,533 Dividends declared and paid ($0.165/share) — — (7,223) — — (7,223) Dividends declared not paid ($0.165/share) — — (50) — — (50) At January 22, 2022 $ 43,505 $ 339,294 $ 395,577 $ (2,989) $ 9,096 $ 784,483 (1)Non-controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.8LA-Z-BOY INCORPORATEDCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Shares
Excess of
Par Value
Earnings
Other
Comprehensive
Loss
Controlling
InterestsThe accompanying Notes to Consolidated Financial Statements are an integral part of these statements.LA-Z-BOY INCORPORATEDThe accompanying consolidated financial statements include the consolidated accounts of La-Z-Boy Incorporated and our majority-owned subsidiaries.subsidiaries (collectively, the "Company"). We derived the April 29, 2017,30, 2022 balance sheet from our audited financial statements. We prepared the interim financial information in conformity with generally accepted accounting principles, which we applied on a basis consistent with those reflected in our fiscal 20172022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), but the information does not include all of the disclosures required by generally accepted accounting principles. In management’s opinion, the interim financial information includes all adjustments and accruals, consisting only of normal recurring adjustments (except as otherwise disclosed), that are necessary for a fair statement of results for the respective interim periods. The interim results reflected in the accompanying financial statements are not necessarily indicative of the results of operations that will occur for the full fiscal year ending April 28, 2018.At January 27, 2018,28, 2023, we owned preferred shares ofinvestments in two privately-held companies and a warrantconsisting of non-marketable preferred shares, warrants to purchase common shares, and convertible notes. Each of one of thethese companies both of which areis a variable interest entities. Weentity and we have not consolidated their results in our financial statements because we do not have the power to direct those activities that most significantly impact their economic performance and, therefore, are not the primary beneficiary.During the first nine months ofAccounting pronouncements adopted in fiscal 2017, we recorded a benefit related to legal settlements as part of cost of sales. The legal settlements increased gross margin by 0.3 percentage points2023We did not adopt any Accounting Standards Updates ("ASUs") in the first nine months of fiscal 2017,2023.Accounting pronouncements not yet adoptedThe following table summarizes additional accounting pronouncements which we have not yet adopted, but had nowe believe will not have a material impact on our accounting policies or our consolidated financial statements and related disclosures.ASU Description Adoption Date ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities From Contracts With Customers Fiscal 2024 Torreón ClosureDuring the third quarter of fiscal 2017.Upholstery2023, we made the decision to close our manufacturing facility in Torreón, Mexico as part of our initiative to drive improved efficiencies through optimized staffing levels within our plants. Torreón was the last facility to begin operating as part of our broader Mexico manufacturing expansion in fiscal 2021 and 2022 and accounted for approximately 3% of our La-Z-Boy branded production. As a result of this action, charges were recorded within the Wholesale segment acquisitionsAs we previously reported in our fiscal 2017 Annual Report on Form 10-K, we acquired the La-Z-Boy wholesale business in the United Kingdom and Ireland in the third quarter of fiscal 2017. Per2023 of $9.2 million in selling, general, and administrative expense for the termsimpairment of various assets, primarily long-lived assets, and $0.9 million in cost of sales, primarily related to severance.To determine the impairment of our long-lived assets, which included fixed assets utilized by the facility and the right-of-use-lease asset, we calculated the fair value of the Torreón asset group using the income approach based on the expected future cash flows associated with the facility, primarily those associated with an assumed sublease. Based on this evaluation, we recorded an impairment charge as the difference between the asset group's fair value and its carrying value.Note 2: AcquisitionsNone of the below acquisitions were significant to our consolidated financial statements, and, therefore, pro-forma financial information is not presented. All of our provisional purchase agreement, paymentaccounting estimates for the business was due 90 business daysacquisitions completed in fiscal 2023 are based on the information and data available to us as of the time of the issuance of these financial statements, and in accordance with Accounting Standard Codification Topic 805-10-25-15, are subject to change within the first 12 months following the dateacquisition as we gain additional data.Each of the following Retail acquisitions completed in fiscal 2023 and 2022 reflect a core component of our strategic priorities, which is to grow our company-owned retail business and leverage our integrated retail model (where we earn a combined profit on both the wholesale and retail sales) in suitable geographic markets, alongside the existing La-Z-Boy Furniture Galleries® network.9Barboursville, West Virginia acquisitionOn December 12, 2022, we completed our acquisition of the Barboursville, West Virginia business that operates one independently owned La-Z-Boy Furniture Galleries® store. This acquisition did not have a meaningful impact on our consolidated financial statements.Spokane, Washington acquisitionOn September 26, 2022, we completed our acquisition of the Spokane, Washington business that operates one independently owned La-Z-Boy Furniture Galleries® store and accordingly, weone distribution center for $4.7 million, subject to customary adjustments. We paid $15.9total cash of $4.0 million induring the firstsecond quarter of fiscal 2018.Retail segment acquisitionsDuring2023 and the third quarterremaining consideration includes forgiveness of fiscal 2018,accounts receivable and payments based on working capital adjustments.Prior to this acquisition, we acquiredlicensed to the assets of an independent operator of one La-Z-Boy Furniture Galleries® store in Grand Rapids, Michigan for $0.6 million of cash. We began including this store in our Retail segment results upon acquisition. The assets that we acquired includedcounterparty the exclusive right that we previously licensed to the operator to own and operate La-Z-Boy Furniture Galleries® stores (and to use the associated trademarks and trade name) in this market.the Spokane, Washington market, and we reacquired these rights when we consummated the transaction. The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual agreements that have no specific expiration date and no renewal options. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. We recorded an indefinite-lived intangible asset of $0.3$1.2 million related to thethese reacquired right.rights. We recorded this intangible assetalso recognized $3.0 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired store and future benefits of these synergies. For federal income tax purposes, we will amortize and appropriately deduct itall of the indefinite-lived intangible assets and goodwill assets over 15 years.Denver, Colorado acquisitionOn July 18, 2022, we completed our acquisition of the Denver, Colorado business that operates five independently owned La-Z-Boy Furniture Galleries® stores and one distribution center for $10.1 million, subject to customary adjustments. We paid total cash of $7.7 million in the first and second quarters of fiscal 2023 and the remaining consideration includes forgiveness of accounts receivable and payments based on working capital adjustments.Prior to this acquisition, we licensed to the counterparty the exclusive right to own and operate La-Z-Boy Furniture Galleries® stores (and to use the associated trademarks and trade name) in the Denver, Colorado market, and we reacquired these rights when we consummated the transaction. The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual agreements that have no specific expiration date and no renewal options. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. We recorded an indefinite-lived intangible asset of $4.3 million related to these reacquired rights. We also recognized $7.6 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired stores and future benefits of these synergies. For federal income tax purposes, we will amortize and appropriately deduct all of the indefinite-lived intangible assets and goodwill assets over 15 years.Prior Year AcquisitionsAlabama and Chattanooga, Tennessee acquisitionOn December 6, 2021, we completed our acquisition of the Alabama and Chattanooga, Tennessee businesses that operate four independently owned La-Z-Boy Furniture Galleries® stores in Alabama and one in Chattanooga, Tennessee, for $8.3 million, subject to customary adjustments. We paid total cash of $8.0 million in the third quarter of fiscal 2022 and the remaining consideration includes forgiveness of accounts receivable and payments based on working capital adjustments.Prior to this acquisition, we licensed to the counterparty the exclusive right to own and operate La-Z-Boy Furniture Galleries® stores (and to use the associated trademarks and trade name) in the Alabama and Chattanooga, Tennessee markets, and we reacquired these rights when we consummated the transaction. The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual agreements that have no specific expiration date and no renewal options. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. We recorded an indefinite-lived intangible asset of $4.1 million related to these reacquired rights. We also recognized $7.4 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired stores and future benefits of these synergies. For federal income tax purposes, we will amortize and appropriately deduct all of the indefinite-lived intangible assets and goodwill assets over 15 years.10Furnico (La-Z-Boy United Kingdom Manufacturing) acquisitionOn October 25, 2021, we completed the acquisition of Furnico Furniture Ltd ("Furnico"), an upholstery manufacturing business in the U.K for approximately $13.3 million, subject to customary adjustments and in the third and fourth quarters of fiscal 2022, we paid $13.9 million of cash for the purchase of the Furnico business. Furnico produces La-Z-Boy branded product for the La-Z-Boy U.K. business and also operates a wholesale business, selling white label products to key U.K. retailers. With this acquisition, we expect to realize production synergies, cost savings through materials procurement, and increases in production capacity to support growth in the La-Z-Boy U.K business.We recognized $9.2 million of goodwill in our Wholesale segment related primarily to synergies we expect from the integration of the acquired business and future benefits of these synergies. The goodwill asset for Furnico is not deductible for federal income tax purposes.Long Island, New York acquisitionOn August 16, 2021, we completed our acquisition of the Long Island, New York business that operates three independently owned La-Z-Boy Furniture Galleries® stores for $4.5 million, subject to customary adjustments. We paid $4.4 million of cash during the second quarter of fiscal 2022 and the remaining consideration includes forgiveness of accounts receivable and payments based on working capital adjustments.Prior to this acquisition, we licensed to the counterparty the exclusive right to own and operate La-Z-Boy Furniture Galleries® stores (and to use the associated trademarks and trade name) in the Long Island, New York market, and we reacquired these rights when we consummated the transaction. The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual agreements that have no specific expiration date and no renewal options. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. We recorded an indefinite-lived intangible asset of $0.8 million related to these reacquired rights. We also recognized $4.4 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired stores and future benefits of these synergies. For federal income tax purposes, we will amortize and appropriately deduct all of the indefinite-lived intangible assets and goodwill assets over 15 years.Note 3: Cash and Restricted CashWe have not presented pro-forma financial information or purchase price allocations for this Retail acquisition as it was not material to our results of operations or our consolidated balance sheet.We haverestricted cash on deposit with a bank as collateral for certain letters of credit. All of our letters of credit have maturity dates within the next twelve months, but we expect to renew some of these letters of credit when they mature.(Unaudited, amounts in thousands) 1/28/2023 1/22/2022 Cash and cash equivalents $ 280,763 $ 236,712 Restricted cash 3,282 3,266 Total cash, cash equivalents and restricted cash $ 284,045 $ 239,978 A summary of inventories is as follows:(Unaudited, amounts in thousands) 1/28/2023 4/30/2022 Raw materials $ 137,042 $ 146,896 Work in process 25,119 36,834 Finished goods 198,680 185,870 FIFO inventories 360,841 369,600 Excess of FIFO over LIFO (57,288) (66,409) Total inventories $ 303,553 $ 303,191 11We have goodwill reacquired rights,on our consolidated balance sheet as follows:Reportable Segment/Unit Reporting Unit Related Acquisition Wholesale Segment La-Z-Boy United Kingdom Wholesale business in the United Kingdom and Ireland Wholesale Segment La-Z-Boy United Kingdom Manufacturing La-Z-Boy United Kingdom Manufacturing (Furnico) Retail Segment Retail La-Z-Boy Furniture Galleries® storesCorporate & Other Joybird Joybird The following table summarizes changes in the carrying amount of our goodwill by reportable segment:(Unaudited, amounts in thousands) Wholesale
SegmentRetail
SegmentCorporate
and OtherTotal
GoodwillBalance at April 30, 2022 (1)$ 20,207 $ 118,951 $ 55,446 $ 194,604 Acquisitions — 10,598 — 10,598 Translation adjustment (295) (126) — (421) Balance at January 28, 2023 (1)$ 19,912 $ 129,423 $ 55,446 $ 204,781 (1)Includes $26.9 million of accumulated impairment losses in Corporate and otherOther.We have intangible assets on our consolidated balance sheet relate to our acquisitions of La-Z-Boy Furniture Galleries® stores over the past several fiscal years and our international business acquisition last fiscal year. Our other intangible assets also include a trade name for American Drew.Reportable Segment/Unit Intangible Asset Useful Life Wholesale Segment Primarily acquired customer relationships from our acquisition of the wholesale business in the United Kingdom and Ireland Amortizable over useful lives that do not exceed 15 years Wholesale Segment American Drew® trade nameIndefinite-lived Retail Segment Reacquired rights to own and operate La-Z-Boy Furniture Galleries® storesIndefinite-lived Corporate & Other Joybird® trade nameAmortizable over eight-year useful lifeThe following is a roll-forward ofsummarizes changes in our intangible assets:(Unaudited, amounts in thousands) Indefinite-
Lived Trade
NamesFinite-Lived
Trade NameIndefinite-
Lived
Reacquired
RightsOther
Intangible
AssetsTotal
Intangible
AssetsBalance at April 30, 2022 $ 1,155 $ 3,392 $ 27,319 $ 2,105 $ 33,971 Acquisitions — — 6,093 — 6,093 Amortization — (599) — (155) (754) Translation adjustment — — (95) (35) (130) Balance at January 28, 2023 $ 1,155 $ 2,793 $ 33,317 $ 1,915 $ 39,180 We test indefinite-lived intangibles and goodwill for impairment on an annual basis in the nine months ended January 27, 2018:The following is a roll-forwardfourth quarter of our othereach fiscal year, and more frequently if events or changes in circumstances indicate that an asset might be impaired. We test amortizable intangible assets for impairment if events or changes in circumstances indicate that the nine months ended January 27, 2018:
Rights
Intangible
Assets
Intangible
AssetsWe have current and long-term investments intended to enhance returns on our cash as well as to fund future obligations of our non-qualified defined benefit retirement plan, our executive deferred compensation plan, and our performance compensation retirement plan. We also hold other investments which at January 27, 2018, included cost-basis preferred shares of two privately-held companies and at April 29, 2017, included an available-for-sale convertible debt security and cost-basisconsisting of non-marketable preferred shares, of a privately-held company.warrants to purchase common shares, and convertible notes (refer to Note 15, Fair Value Measurements). Our short-term investments are included in other current assets and our long-term investments are included in other long-term assets on our consolidated balance sheet.12The following summarizes our investments at January 27, 2018, and April 29, 2017:(Unaudited, amounts in thousands) 1/28/2023 4/30/2022 Short-term investments: Marketable securities $ 10,911 $ 16,022 Held-to-maturity investments 1,404 1,337 Total short-term investments 12,315 17,359 Long-term investments: Marketable securities 19,756 26,599 Cost basis investments 7,579 7,579 Total long-term investments 27,335 34,178 Total investments $ 39,650 $ 51,537 Investments to enhance returns on cash $ 15,793 $ 27,239 Investments to fund compensation/retirement plans 13,542 14,219 Other investments 10,315 10,079 Total investments $ 39,650 $ 51,537 The following is a summary of the unrealized gains, unrealized losses, and fair value by investment type at January 27, 2018, and April 29, 2017:At January 27, 2018
Unrealized Gains
Unrealized LossesAt April 29, 2017
Unrealized Gains
Unrealized Losses1/28/2023 4/30/2022 (Unaudited, amounts in thousands) Gross
Unrealized
GainsGross
Unrealized
LossesFair Value Gross
Unrealized
GainsGross
Unrealized
LossesFair Value Equity securities $ 1,316 $ (94) $ 14,213 $ 1,448 $ (86) $ 13,905 Fixed income 45 (715) 21,201 28 (809) 33,521 Other 1,210 — 4,236 1,250 — 4,111 Total securities $ 2,571 $ (809) $ 39,650 $ 2,726 $ (895) $ 51,537 The following table summarizes sales of available-for-salemarketable securities:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022 Proceeds from sales $ 5,514 $ 7,784 $ 18,178 $ 29,437 Gross realized gains 3 142 52 696 Gross realized losses (81) (20) (207) (356) The following is a summary of the fair value of fixed income marketable securities, classified as available-for-sale securities, by contractual maturity was $12.8 million within one year, $22.5 million within two to five years, $1.5 million within six to ten years, and $0.7 million thereafter.(Unaudited, amounts in thousands) 1/28/2023 Within one year $ 10,907 Within two to five years 7,836 Within six to ten years 572 Thereafter 1,886 Total $ 21,201 13Note 7: DebtWe maintain a revolving credit facility secured primarily by allAccrued Expenses and Other Current Liabilities(Unaudited, amounts in thousands) 1/28/2023 4/30/2022 Payroll and other compensation $ 59,534 $ 62,373 Accrued product warranty, current portion 18,517 16,436 Customer deposits 129,019 183,233 Deferred revenue 60,986 139,006 Other current liabilities 77,304 95,345 Accrued expenses and other current liabilities $ 345,360 $ 496,393 Customer deposits and deferred revenue decreased during the first nine months of our accounts receivable, inventory, and cash deposit and securities accounts. Availability underfiscal 2023 as we continue to work down the agreement fluctuates accordingbacklog built up in prior periods back to a borrowing base calculated on eligible accounts receivable and inventory. We amended this agreement on December 19, 2017, extending its maturity date to December 19, 2022. The credit agreement includes affirmative and negative covenants that apply under certain circumstances, including a fixed-charge coverage ratio requirement that applies when excess availability under the line is less than certain thresholds. At January 27, 2018, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the agreement, and had excess availability of $148.1 million of the $150.0 million credit commitment.Net periodic pension costs were as follows:The components of net periodic pension cost other than the service cost are included in other income (expense), net in our consolidated statement of income. Service cost is recorded in cost of sales in our consolidated statement of income.We accrue an estimated liability for product warranties when we recognize revenue on the sale of warrantedwarrantied products. We estimate future warranty claims on product sales based on our historical claims experience and any additional anticipated future costs on previously sold products.periodically adjust the provision to reflect changes in actual experience. We incorporate repair costs into our liability estimates, including materials, labor and overhead amounts necessary to perform repairs, and any costs associated with delivering repaired product to our customers. Approximately 95%Over 90% of our warranty liability relates to our UpholsteryWholesale reportable segment as we generally warrant our products against defects for one year to three years on fabric and leather, from one to ten years on cushions and padding, and provide a limited lifetime warranty on certain mechanisms and frames. Ourframes, unless otherwise noted in the warranty. Additionally, our Wholesale segment warranties cover labor costs relating to our parts for one year. OurWe provide a limited lifetime warranty against defects on a majority of Joybird products, which are a part of our Corporate and Other results. For all our manufacturer warranties, the warranty period begins when the consumer receives our product. We use considerable judgment in making our estimates, and we record differences between our actual and estimated costs when the differences are known.A reconciliation of the changes in our product warranty liability is as follows:As of January 27, 2018, and April 29, 2017, we included $12.7Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 (1) 1/22/2022 Balance as of the beginning of the period $ 28,357 $ 25,068 $ 27,036 $ 23,636 Acquisitions — 634 — 634 Accruals during the period 8,663 7,271 24,942 21,158 Settlements during the period (7,722) (6,612) (22,680) (19,067) Balance as of the end of the period $ 29,298 $ 26,361 $ 29,298 $ 26,361 (1)$18.5 million and $13.2$16.4 million respectively, of our product warranty liabilityis recorded in accrued expenses and other current liabilities on our consolidated balance sheet,as of January 28, 2023, and includedApril 30, 2022, respectively, while the remainder is included in other long-term liabilities.We recorded accruals during the periods presented in the table above, primarily to reflect charges that relate to warranties issued during the respective periods.Note 10: Contingencies and CommitmentsWe have been a party to a civil lawsuit over a contract that the other party claimed required us to make payments in respect of certain power units. Following a verdict in the civil lawsuit during fiscal 2016, we recognized expense of $5.5 million in our consolidated statement of income. Subsequent to that verdict, we accrued $3.9 million of expense for royalties and interest related to this matter in our consolidated statement of income, for sales of certain power units from February 2016 through October 2017.During the third quarter of fiscal 2018, we entered into a settlement agreement and release that settled the legal dispute. Under the terms of the settlement agreement, the parties settled the legal dispute with no admission of liability, wrongdoing or responsibility by any of the parties, released each other from all future and past claims under the contract at issue in the lawsuit, including resolving all associated future royalty obligations, and agreed to dismiss all claims with prejudice, and we agreed to pay the other party $13.5 million. With the announced settlement, we recognized an additional charge of $4.1 million in the third quarter of fiscal 2018. We paid the settlement in the third quarter of fiscal 2018 and recorded the majority of the $13.5 million charge in our consolidated statement of income, in selling, general and administrative expense.The table below summarizes the total stock-based compensation expense we recognized for all outstanding grants in our consolidated statement of income:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022 Equity-based awards expense $ 3,377 $ 2,533 $ 8,456 $ 8,887 Liability-based awards expense (1)(54) (73) 92 (696) Total stock-based compensation expense $ 3,323 $ 2,460 $ 8,548 $ 8,191 (1)Liability-based awards are comprised primarily of deferred stock units granted to non-employee directors. Compensation expense for these awards is based on the market price of our common stock on the grant date and is remeasured each reporting period based on the market value of our common shares on the last day of the reported period.14Stock Options.We granted 573,591318,411 stock options to employees during the first quarter of fiscal 2018,2023 and we have stock options outstanding from previous grants. We account for stock options as equity-based awards because when they are exercised, they will be settled in common shares. We recognize compensation expense for stock options over the vesting period equal to the fair value on the date the Compensation and Talent Oversight Committee of our compensation committeeboard of directors approved the awards. The vesting period for our stock options ranges from one to four years, with accelerated vesting upon retirement. The vesting date for retirement-eligible employees is the later of the date they meet the criteria for retirement or ten months after the grant date. We accelerate the expense for options granted to retirement-eligible employees immediately.over the vesting period, with expense recognized from the grant date through their retirement eligibility date or over the ten months following the grant date, whichever period is longer. We estimate forfeiture rates based on our employees’ forfeiture history and believe they will approximate future results. have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur.We estimate the fair value of the employee stock options at the grant date of grant using the Black-Scholes option-pricing model, which requires management to make certain assumptions. We estimate expected volatility based on the historical volatility of our common shares. We base the average expected life on the contractual term of the stock option and expected employee exercise trends. We base the risk-free rate on U.S. Treasury issues with a term equal to the expected life assumed at the date of the grant.We calculated theThe fair value of stock options granted during the first quarter of fiscal 20182023 was calculated using the following assumptions:
grant(Unaudited) Fiscal 2023 grant Assumption Risk-free interest rate 2.87% U.S. Treasury issues with term equal to expected life at grant date Dividend rate 2.70% Estimated future dividend rate and common share price at grant date Expected life 5.0 years Contractual term of stock option and expected employee exercise trends Stock price volatility 42.78% Historical volatility of our common shares Fair value per option $ 7.90 Restricted Stock Appreciation Rights (“SARs”). We did not grant any SARsgranted 256,128 shares of restricted stock units to employees during the first nine months of fiscal 2018, but2023 and we also have SARs outstanding from previous grants. SARs will be paid in cash upon exercise and, accordingly, we account for SARs as liability-based awards that we re-measure to reflect the fair value at the end of each reporting period. These awards vest at 25% per year, beginning one year from the grant date for a term of four years, with accelerated vesting upon retirement. We expense SARs granted to retirement-eligible employees immediately. We estimate the fair value of SARs at the end of each reporting period using the Black-Scholes option-pricing model, which requires management to make certain assumptions. We base the average expected life on the contractual term of the SARs and expected employee exercise trends (which is consistent with the expected life of our option awards). We base the risk-free rate on U.S. Treasury issues with a term equal to the expected life assumed at the end of the reporting period.In fiscal 2013, we granted SARs as described in our Annual Report on Form 10-K for the fiscal year ended April 27, 2013. These awards have exceeded their expected life and are re-measured based on their intrinsic value, which is the market value of our common stock on the last day of the reporting period less the exerciseprice, until the earlier of the exercise date or the contractual term date. At January 27, 2018, the intrinsic value per share of these awards was $20.18.In fiscal 2014, we granted SARs as described in our Annual Report on Form 10-K for the fiscal year ended April 26, 2014. At January 27, 2018, we measured the fair value of these SARs using the following assumptions:
grantRestricted Stock. We granted 102,662 shares of restricted stock to employees during the first quarter of fiscal 2018. We also have shares of restricted stockawards outstanding from previous grants. We issue restricted stock at no cost to the employees and the shares are held in an escrow account until the vesting period ends. If a recipient’s employment ends during the escrow period (other than through death or disability), the shares are returned at no cost to the company. We account for restricted stock awards as equity-based awards because when they vest, they will be settled in common shares. The fair value of the restricted stock awarded in the first quarter of fiscal 2018 was $27.25 per share, the market value of our common shares on the date of grant. We estimate forfeiture rates based on our employees’ forfeiture history and believe they will approximate future results. We recognize compensation expense for restricted stock over the vesting period equal to the fair value on the date the Compensation and Talent Oversight Committee of our compensation committeeboard of directors approved the awards. Restricted stock awards generally vest at 25% per year, beginning one year from the grant date forover a term of four years.Restricted Stock Units. Units Issued to Directors. Restricted stock units granted to our non-employee directors are offered at no cost to the directors and vest the earlier of the date a director ceases to be a member of the board (for any reason other than the termination of service for cause) or the-one year anniversary of the grant date. During the second quarter of fiscal 2018,2023, we granted 29,52036,656 restricted stock units to our non-employee directors. These restricted stock units vest when the director leaves the board. We account for these restricted stock units as equity-based awards because when they vest, they will be settled in shares of our common stock. We measure and recognize compensation expense for these awards based on the market price of our common shares on the date of grant, which was $23.85.Performance Shares. During the first quarter of fiscal 2018,2023, we granted 177,805240,833 performance-based shares. Weshares and we also have performance-based share awards outstanding from previous grants. PayoutPayouts of these grants dependsdepend on our financial performance (80%(50%) and a market-based condition based on the total return our shareholders receive on their investment in our stock relative to returns earned through investments in other public companies (20%(50%). The performance share opportunity ranges from 50% of the employee’s target award if minimum performance requirements are met to a maximum of 200% of the target award based on the attainment of certain financial and shareholder-return goals over a specific performance period, which is generally three fiscal years.We account for performance-based shares as equity-based awards because when they vest, they will be settled in common shares. We estimate forfeiture rates based on our employees’ forfeiture historyIn the event of an employee's termination during the vesting period, the potential right to earn shares under this program is generally forfeited and believe they will approximate future results.we have elected to recognize forfeitures as an adjustment to compensation expense in the same period in which the forfeitures occur. For shares that vest based on our results relative to the performance goals, we expense as compensation cost the fair value of the shares as of the day we granted the awards recognized over the performance period,15taking into account the probability that we will satisfy the performance goals. The fair value of each share of the awards we granted in fiscal 20182023 that vest based on attaining performance goals was $25.93,$22.43, the market value of our common shares on the date we granted the awards less the value of the dividends we expectgrant, and, similargrant. The Monte Carlo valuation model uses multiple simulations to the way in which we expense awardsevaluate our probability of achieving various stock options,price levels to determine our expected performance ranking relative to our peer group. For shares that vest based on market conditions, we expense compensation cost over the vesting period regardless of whether the value that award recipientsmarket condition is ultimately receive.satisfied. Based on the Monte Carlo model, the fair value as of the grant date of the fiscal 20182023 grant of shares that vest based on market conditions was $36.24.The activity in accumulated other comprehensive lossincome (loss) for the quarterquarters ended January 27, 2018,28, 2023, and January 28, 2017,22, 2022, is as follows:
adjustment
fair value
of cash
flow hedge
gain on
marketable
securities
amortization
and net
actuarial
loss
comprehensive
loss
adjustment
of cash
flow hedge
gain on
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amortization
and net
actuarial
loss
other
comprehensive
loss(Unaudited, amounts in thousands) Translation adjustment Unrealized gain (loss) on marketable securities Net pension amortization and net actuarial loss Accumulated other comprehensive income (loss) Balance at October 29, 2022 $ (6,551) $ (501) $ (3,465) $ (10,517) Changes before reclassifications 4,014 303 — 4,317 Amounts reclassified to net income — 78 49 127 Tax effect — (94) (13) (107) Other comprehensive income (loss) attributable to La-Z-Boy Incorporated 4,014 287 36 4,337 Balance at January 28, 2023 $ (2,537) $ (214) $ (3,429) $ (6,180) Balance at October 23, 2021 $ 2,340 $ 320 $ (4,813) $ (2,153) Changes before reclassifications (752) (201) — (953) Amounts reclassified to net income — 16 75 91 Tax effect — 45 (19) 26 Other comprehensive income (loss) attributable to La-Z-Boy Incorporated (752) (140) 56 (836) Balance at January 22, 2022 $ 1,588 $ 180 $ (4,757) $ (2,989) The activity in accumulated other comprehensive lossincome (loss) for the nine months ended January 27, 2018,28, 2023 and January 28, 2017,22, 2022, is as follows:
adjustment
of cash
flow hedge
gain on
marketable
securities
amortization
and net
actuarial
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comprehensive
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lossIn our consolidated statement(Unaudited, amounts in thousands) Translation adjustment Unrealized gain (loss) on marketable securities Net pension amortization and net actuarial loss Accumulated other comprehensive income (loss) Balance at April 30, 2022 $ (1,961) $ (298) $ (3,538) $ (5,797) Changes before reclassifications (576) (87) — (663) Amounts reclassified to net income — 199 145 344 Tax effect — (28) (36) (64) Other comprehensive income (loss) attributable to La-Z-Boy Incorporated (576) 84 109 (383) Balance at January 28, 2023 $ (2,537) $ (214) $ (3,429) $ (6,180) Balance at April 24, 2021 $ 3,041 $ 370 $ (4,932) $ (1,521) Changes before reclassifications (1,453) (270) — (1,723) Amounts reclassified to net income — 18 225 243 Tax effect — 62 (50) 12 Other comprehensive income (loss) attributable to La-Z-Boy Incorporated (1,453) (190) 175 (1,468) Balance at January 22, 2022 $ 1,588 $ 180 $ (4,757) $ (2,989) 16We reclassified both the unrealized gain (loss) on marketable securities and the net pension amortization from accumulated other comprehensive loss to net income through other income (expense), net, reclassified the change in fair value of cash flow hedges to net income through cost of sales, and reclassified the net pension amortization to net income through other income (expense), net.The components of non-controlling interest were as follows:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022 Balance as of the beginning of the period $ 9,128 $ 8,380 $ 8,897 $ 8,648 Net income (loss) (149) 615 1,005 2,157 Other comprehensive loss 1,427 101 504 (449) Dividends distributed to joint venture minority partners — — — (1,260) Balance as of the end of the period $ 10,406 $ 9,096 $ 10,406 $ 9,096 Note 11: Revenue RecognitionOur revenue is primarily derived from product sales. We report product sales net of discounts and recognize them when control (rights and obligations associated with the product) passes to the customer. For sales to furniture retailers or distributors, control typically transfers when we ship the product. In cases where we sell directly to the end consumer, control of the product is generally transferred upon delivery.For shipping and handling activities, we have elected to apply the accounting policy election permitted in ASC 606-10-25-18B, which allows an entity to account for shipping and handling activities as fulfillment activities (rather than as a promised good or service) when the activities are performed even if those activities are performed after the control of the good has been transferred. We expense shipping and handling costs at the time we recognize revenue in accordance with this election.For sales tax, we have elected to apply the accounting policy election permitted in ASC 606-10-32-2A, which allows an entity to exclude from the measurement of the transaction price all taxes imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales taxes). This allows us to present revenue net of these certain types of taxes.We have elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to recognize the promised amount of consideration without adjusting for the quartereffects of a significant financing component if the contract has a duration of one year or less. As our contracts typically are less than one year in length and do not have significant financing components, we have not adjusted consideration.17The following table presents our revenue disaggregated by product category and by segment or unit:Quarter Ended January 28, 2023 Quarter Ended January 22, 2022 (Unaudited, amounts in thousands) Wholesale Retail Corporate
and OtherTotal Wholesale Retail Corporate
and OtherTotal Motion Upholstery Furniture $ 224,726 $ 153,194 $ 5 $ 377,925 $ 238,119 $ 113,767 $ 288 $ 352,174 Stationary Upholstery Furniture 97,736 52,497 35,248 185,481 94,216 46,938 55,971 197,125 Bedroom Furniture 9,853 2,189 3,121 15,163 6,723 1,598 3,674 11,995 Dining Room Furniture 6,926 3,300 1,025 11,251 5,562 2,802 1,063 9,427 Occasional Furniture 11,550 9,567 875 21,992 7,396 6,672 1,153 15,221 Delivery 50,008 6,881 1,654 58,543 45,168 6,342 2,097 53,607 Other (1)6,804 23,529 (8,418) 21,915 26,097 18,933 (14,267) 30,763 Total $ 407,603 $ 251,157 $ 33,510 $ 692,270 $ 423,281 $ 197,052 $ 49,979 $ 670,312 Eliminations (119,547) (98,739) Consolidated Net Sales $ 572,723 $ 571,573 Nine Months Ended January 28, 2023 Nine Months Ended January 22, 2022 (Unaudited, amounts in thousands) Wholesale Retail Corporate
and OtherTotal Wholesale Retail Corporate
and OtherTotal Motion Upholstery Furniture $ 683,809 $ 444,110 $ 64 $ 1,127,983 $ 699,433 $ 326,251 $ 538 $ 1,026,222 Stationary Upholstery Furniture 307,128 162,452 132,869 602,449 284,318 133,449 153,590 571,357 Bedroom Furniture 30,145 6,590 12,361 49,096 30,030 5,386 10,524 45,940 Dining Room Furniture 21,778 9,343 3,864 34,985 20,941 9,462 3,270 33,673 Occasional Furniture 34,957 25,300 3,065 63,322 31,746 19,659 2,966 54,371 Delivery 162,783 20,727 5,657 189,167 128,318 20,007 5,629 153,954 Other (1) 55,052 70,808 (32,003) 93,857 61,086 57,105 (37,891) 80,300 Total $ 1,295,652 $ 739,330 $ 125,877 $ 2,160,859 $ 1,255,872 $ 571,319 $ 138,626 $ 1,965,817 Eliminations (372,713) (293,572) Consolidated Net Sales $ 1,788,146 $ 1,672,245 (1)Primarily includes revenue for advertising, royalties, parts, accessories, after-treatment products, surcharges, discounts and allowances, rebates and other sales incentives.Motion Upholstery Furniture - Includes gross revenue for upholstered furniture, such as recliners, sofas, loveseats, chairs, sectionals, and modulars that have a mechanism that allows the back of the product to recline or the product's footrest to extend. This gross revenue includes sales to La-Z-Boy Furniture Galleries® stores (including company-owned stores), operators of La-Z-Boy Comfort Studio® locations, England Custom Comfort Center locations, other major dealers, independent retailers, and the end consumer.Stationary Upholstery Furniture - Includes gross revenue for upholstered furniture, such as sofas, loveseats, chairs, sectionals, modulars, and ottomans that do not have a mechanism for reclining or extension. This gross revenue includes sales to La-Z-Boy Furniture Galleries® stores (including company-owned stores), operators of La-Z-Boy Comfort Studio® locations, England Custom Comfort Center locations, other major dealers, independent retailers, and the end consumer.Bedroom Furniture - Includes gross revenue for casegoods furniture typically found in a bedroom, such as beds, chests, dressers, nightstands and benches. This gross revenue includes sales to La-Z-Boy Furniture Galleries® stores (including company-owned stores), independent retailers, and the end consumer.Dining Room Furniture - Includes gross revenue for casegoods furniture typically found in a dining room, such as dining tables, dining chairs, storage units and stools. This gross revenue includes sales to La-Z-Boy Furniture Galleries® stores (including company-owned stores), independent retailers, and the end consumer.Occasional Furniture - Includes gross revenue for casegoods furniture found throughout the home, such as cocktail tables, chairsides, sofa tables, end tables, and entertainment centers. This gross revenue includes sales to La-Z-Boy Furniture Galleries® stores (including company-owned stores), independent retailers, and the end consumer.18Contract Assets and Liabilities. We receive customer deposits from end consumers before we recognize revenue and in some cases we have the unconditional right to collect the remaining portion of the order price before we fulfill our performance obligation, resulting in a contract asset and a corresponding deferred revenue liability. In our consolidated balance sheet, customer deposits and deferred revenue (collectively, the "contract liabilities") are reported in accrued expenses and other current liabilities while contract assets are reported as other current assets. The following table presents our contract assets and liabilities:(Unaudited, amounts in thousands) 1/28/2023 4/30/2022 Contract assets $ 60,986 $ 139,006 Customer deposits $ 129,019 $ 183,233 Deferred revenue 60,986 139,006 Total contract liabilities (1)$ 190,005 $ 322,239 (1)During the nine months ended January 27, 2018, and January 28, 2017, were as follows:areinclude the Upholstery segment, the CasegoodsWholesale segment and the Retail segment.UpholsteryWholesale Segment. Our UpholsteryWholesale segment is our largest business segment and consists primarily of twothree operating units:segments: La-Z-Boy, our largest operating unit,segment, our England subsidiary, and our England subsidiary.casegoods operating segment that sells furniture under three brands: American Drew®, Hammary® and Kincaid®. The UpholsteryWholesale segment also includes our international wholesale and manufacturing businesses. We aggregate these operating segments into one reportable segment because they are economically similar and meet the other aggregation criteria for determining reportable segments. Our UpholsteryWholesale segment manufactures and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas.sofas and imports casegoods (wood) furniture, such as bedroom sets, dining room sets, entertainment centers and occasional pieces. The UpholsteryWholesale segment sells directly to La-Z-Boy Furniture Galleries® stores, operators of La-Z-Boy Comfort Studio® locations, and England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.Casegoods Segment. Our Casegoods segment consists of three brands: American Drew, Hammary, and Kincaid. The Casegoods segment sells directly to major dealers, as well as La-Z-Boy Furniture Galleries® stores, and a wide cross-section of other independent retailers. Our Casegoods segment is an importer, marketer, and distributor of casegoods/wood furniture such as bedroom sets, dining room sets, entertainment centers and occasional pieces, and also manufactures some coordinated upholstered furniture.Retail Segment. Our Retail segment consists of 147one operating segment comprised of our 167 company-owned La-Z-Boy Furniture Galleries® stores. The Retail segment sells primarily sells upholstered furniture, in addition to some casegoods and other accessories, to end consumers through these stores.Corporate & Other. Corporate & Other includes the shared costs for corporate functions, including human resources, information technology, finance and legal, in addition to revenue generated through royalty agreements with companies licensed to use the La-Z-Boy® brand name on various products. We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segments, including our global trading company in Hong Kong and Joybird, an e-commerce retailer that manufactures upholstered furniture, such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports casegoods (wood) furniture, such as occasional tables and other accessories. Joybird sells to the end consumer primarily online through its website, www.joybird.com. None of the operating segments included in Corporate & Other meet the requirements of reportable segments.19Table of ContentsThe following table presents sales and operating income (loss) by segment:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022 Sales Wholesale segment: Sales to external customers $ 291,170 $ 328,533 $ 934,511 $ 973,973 Intersegment sales 116,433 94,748 361,141 281,899 Wholesale segment sales 407,603 423,281 1,295,652 1,255,872 Retail segment sales 251,157 197,052 739,330 571,319 Corporate and Other: Sales to external customers 30,396 45,988 114,305 126,953 Intersegment sales 3,114 3,991 11,572 11,673 Corporate and Other sales 33,510 49,979 125,877 138,626 Eliminations (119,547) (98,739) (372,713) (293,572) Consolidated sales $ 572,723 $ 571,573 $ 1,788,146 $ 1,672,245 Operating Income (Loss) Wholesale segment $ 16,940 $ 27,639 $ 81,558 $ 89,098 Retail segment 44,203 24,102 123,855 68,502 Corporate and Other (18,303) (12,254) (48,047) (29,629) Consolidated operating income 42,840 39,487 157,366 127,971 Interest expense (136) (160) (414) (713) Interest income 2,012 806 3,624 1,029 Other income (expense), net (1,062) (1,460) (834) (522) Income before income taxes $ 43,654 $ 38,673 $ 159,742 $ 127,765 Note 14:13: Income TaxesWe determine our tax provision using an estimated annual effective tax rate and adjusting for discrete taxable events that occur during the quarter. We recognize the effects of tax legislation in the period in which the law is enacted. We re-measure our deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse.On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. Most of its provisions are effective for tax years beginning on or after January 1, 2018. Because we are a fiscal year U.S. taxpayer, the majority of the provisions, such as eliminating the domestic manufacturing deduction, new taxes on certain foreign-sourced income and new limitations on certain business deductions, will begin applying to us in our fiscal 2019. For fiscal 2018, the most significant impacts include: a lower U.S. federal corporate income tax rate, a different calculation of certain net deferred taxes, and a new transition tax on the deemed repatriation of certain foreign earnings. The phasing in of the lower corporate income tax rate resulted in a blended federal rate of 30.4% for our fiscal 2018, compared with the previous 35% rate. The federal tax rate will be reduced to 21% in subsequent fiscal years.We recorded a charge of $9.5 million in the third quarter of fiscal 2018, reflecting the net effect of the Tax Act. This included a $9.8 million charge for the provisional re-measurement of certain deferred taxes and related amounts, a provisional $1.9 million of income tax expense for the estimated effects of the transition tax, and a benefit of $2.2 million primarily related to the lower blended federal tax rate.As described above we made reasonable estimates, based on our current interpretation of the Tax Act, to record provisional adjustments during the third quarter of fiscal 2018. We may alter our estimates during the fourth quarter of fiscal 2018 as we continue to accumulate and process data to finalize the underlying calculations and review further guidance that we expect regulators to issue. We are also analyzing other provisions of the Tax Act to determine if they will impact our effective tax rate in fiscal 2018 or in the future. We will continue to refine our adjustments through the permissible measurement period, which is not to extend beyond one year of the enactment date.Our effective tax rate was 27.7% and 26.6% for the third quarter and nine months ended January 28, 2023, respectively, compared with 24.8% and 25.9% for the third quarter and nine months ended January 22, 2022, respectively. The effective tax rate in the third quarter and first nine months of fiscal 2018,2022 was 62.0%lower partially due to non-taxable gains on corporate owned life insurance and 43.9%, respectively. For the third quarter and first nine months of fiscal 2017, our effective tax rate was 29.4% and 33.4%, respectively.state taxes. Our effective tax rate in fiscal 2018 was higher than in the prior year, primarily due tocharges related to the Tax Act, as described above. Additionally, our effective tax rate in both years varies from the 21% federal statutory rate in effect for the respective periods primarily due to state taxes, less the benefittaxes.20The following is a reconciliation of the numerators and denominators we used in our computations of basic and diluted earnings per share:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands, except per share data) 1/28/2023 1/22/2022 1/28/2023 1/22/2022 Numerator (basic and diluted): Net income attributable to La-Z-Boy Incorporated $ 31,726 $ 28,467 $ 116,291 $ 92,549 Income allocated to participating securities (1)— — — (6) Net income available to common Shareholders $ 31,726 $ 28,467 $ 116,291 $ 92,543 Denominator: Basic weighted average common shares outstanding 43,137 43,701 43,111 44,342 Contingent common shares — 55 — 59 Stock option dilution — 212 — 239 Diluted weighted average common shares outstanding 43,137 43,968 43,111 44,640 Earnings per Share: Basic $ 0.74 $ 0.65 $ 2.70 $ 2.09 Diluted $ 0.74 $ 0.65 $ 2.70 $ 2.07 (1)Prior to receive non-forfeitable dividends prior to vesting are considered participating securities. We grantfiscal 2019, we granted restricted stock awards that containcontained non-forfeitable rights to dividends on unvested shares, and we are required to include these participating securities in calculating our basic earnings per common share, using the two-class method.The following is a reconciliation of the numerators and denominators we used in our computations of basic and diluted earnings per share:The above values for contingent common shares set forth above reflect the dilutive effect of common shares that we would have issued to employees under the terms of performance-based share awards if the relevant performance period for the award had been the reporting period.We did not exclude any outstandingthe effect of options from theour diluted share calculation forwhen the quarter and nine months ended January 27, 2018, or forweighted average exercise price of the options is higher than the average market price, since including the options' effect would be anti-dilutive. For the third quarter and nine months ended January 28, 2017.2023, we excluded options to purchase 1.5 million shares from the diluted share calculation. For the third quarter and nine months ended January 22, 2022, we excluded options to purchase 0.2 million shares from the diluted share calculation.Accounting standards require that we put financial assets and liabilities into one of three categories based on the inputs we use to value them:·•Level 1 — Financial assets and liabilities, the values of which are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.·•Level 2 — Financial assets and liabilities, the values of which are based on quoted prices in markets that are not active or on model inputs that are observable for substantially the full term of the asset or liability.·•Level 3 — Financial assets and liabilities, the values of which are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.Accounting standards require that in making fair value measurements, we use observable market data when available. When inputs used to measure fair value fall within different levels of the hierarchy, we categorize the fair value measurement as being in the lowest level that is significant to the measurement. We recognize transfers between levels of the fair value hierarchy at the end of the reporting period in which they occur.In addition to assets and liabilities that we record at fair value on a recurring basis, we are required to record assets and liabilities at fair value on a non-recurring basis. We measure non-financial assets such as other intangible assets, goodwill, and other long-lived assets at fair value when there is an indicator of impairment, and we record them at fair value only when we recognize an impairment loss.21The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at January 27, 2018,28, 2023 and April 29, 2017:At January 27, 2018(a) There were no transfers between Level 1 and Level 2 during the first nine months of fiscal 2018.(b)30, 2022. There were no transfers into or out of Level 3 during the first nine months of fiscal 2018.At April 29, 2017(c) There were no transfers between Level 1, and Level 2, during fiscal 2017.(d) There were no transfers into or out of Level 3 during fiscal 2017.At January 28, 2023 Fair Value Measurements (Unaudited, amounts in thousands) Level 1 Level 2 Level 3 NAV(1) Total Assets Marketable securities $ — $ 21,044 $ 2,737 $ 6,886 $ 30,667 Held-to-maturity investments 1,404 — — — 1,404 Cost basis investments — — 7,579 — 7,579 Total assets $ 1,404 $ 21,044 $ 10,316 $ 6,886 $ 39,650 At April 30, 2022 Fair Value Measurements (Unaudited, amounts in thousands) Level 1 Level 2 Level 3 NAV(1) Total Assets Marketable securities $ — $ 33,578 $ 2,500 $ 6,543 $ 42,621 Held-to-maturity investments 1,337 — — — 1,337 Cost basis investment — — 7,579 — 7,579 Total assets $ 1,337 $ 33,578 $ 10,079 $ 6,543 $ 51,537 Liabilities Contingent consideration liability $ — $ — $ 800 $ — $ 800 (1)Certain marketable securities investments are measured at fair value using net asset value per share under the practical expedient methodology.At January 27, 2018,28, 2023 and April 29, 2017,30, 2022, we held available-for-sale marketable securities intended to enhance returns on our cash and to fund future obligations of our non-qualified defined benefit retirement plan, as well as trading securities to fund future obligations of our executive deferred compensation plan and our performance compensation retirement plan. We also held other fixed income and cost basis investments.The fair value measurements for our Level 1 and Level 2 securities are based on quoted prices in active markets, as well as through broker quotes and independent valuation providers, multiplied by the number of shares owned exclusive of any transaction costs.At January 27, 2018,28, 2023 and April 30, 2022, our Level 3 assets included investments included preferred shares ofin two privately-held companies and a warrantconsisting of non-marketable preferred shares, warrants to purchase common shares, and convertible notes. The fair value of these equity investments (preferred shares and warrants) is not readily determinable and therefore, we estimate the fair value as cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for identical or similar investments with the same issuer. The convertible notes are recorded at fair value with the net unrealized gains and losses (that are deemed to be temporary) reported as a component of other comprehensive income, consistent with our other available-for-sale debt securities. During the third quarter of fiscal 2023, we invested an additional $0.2 million in convertible notes in one of these privately-held start-up companies. We initially valuedThere were no other changes to the fair value of our Level 3 investments at their cost basisassets during the nine months ended January 28, 2023.Our Level 3 liability includes our contingent consideration liability resulting from the Joybird acquisition. The fair value is determined using a variation of the income approach, known as the real options method, whereby revenue and earnings are simulated over the earnout periods in a risk-neutral framework using Geometric Brownian Motion. For each simulation path, the potential earnout payments were calculated based on management’s probability estimates for achievement of the revenue and earnings milestones and then were discounted to the valuation date using a discount rate of 6.8%.The fair value of our contingent consideration liability as of January 28, 2023 reflects our expectation that no additional consideration will be owed based on our most recent financial projections and the dateterms of purchase, because the cost basis wasearnout agreement. As a result, during the best estimatesecond quarter of their fair value on the date of acquisition. During fiscal 2017,2023, we recorded a $0.7 million unrealized gain in other comprehensive income related to a change inreduced the fair value of the available-for-sale convertible debt security. During the first quarter of fiscal 2018, the available-for-sale convertible debt security converted to $3.0 million of cost-basis preferred shares of a privately-held company, and we recorded a gain of $2.2 million in other income (expense), net in our consolidated statement of income related to the conversion. We also invested another $2.5 million in the same privately-held company during the first quarter of fiscal 2018. Our Level 3 liability is a contingent consideration liability and we estimate the fairby its full carrying value of this liability based on the present value of the probability-weighted future cash flows,$0.8 million which are unobservable inputs that are not supported by market activity. During the first nine months of fiscal 2018, we reversed a portion of the contingent consideration liability, andwas recorded the benefit as a component offavorable impact to selling, general and administrative expense in ourthe consolidated statement of income, because we determined it was not probable that a portion ofincome. There were no other changes to the contingent consideration would be earned.The following table is a reconciliationfair value of our Level 3 assets and liabilities recorded at fair value using significant unobservable inputs:Our asset leveling presented above does not include certain available-for-sale investments that are measured at fair value using net asset value per share under the practical expedient methodology. These investments are still included in the total fair value column of the table in our investment footnote (see Note 6). The fair value of the investments measured using net asset value at January 27, 2018, and April 29, 2017, was $7.3 million and $7.1 million, respectively.Note 17: Recent Accounting PronouncementsAccounting pronouncements adopted in fiscal 2018In March 2016, the FASB issued a new accounting standard focused on simplifying the accounting for share-based payments, including accounting for income taxes, estimating forfeitures, and classifying certain share-based transactions in the consolidated statement of cash flows. We adopted this standard in the first quarter of fiscal 2018. Our adoption of this standard did not have a material impact on our consolidated financial statements. We did not record a cumulative-effect adjustment as we had no unrecognized excess tax benefits as of the end of fiscal 2017. We elected to continue estimating forfeiture rates on our share-based awards. We adjusted the consolidated statement of cash flows for the first nine months of fiscal 2017 to conform to the current fiscal year presentation by reclassifying $1.8 million of cash paid related to shares swapped for taxes from a financing activity to an operating activity.In August 2016, the FASB issued a new accounting standard that provides guidance on the classification of eight cash receipts and cash payments issues on the statement of cash flows. The intent of this standard was to help reduce diversity in practice regarding cash flow presentation. We early adopted this standard in fiscal 2018. Adoption of this standard did not have a material impact on our consolidated statement of cash flows and although the guidance requires retrospective treatment, we did not have any cash receipts or payments during the prior year that needed to be reclassified.In November 2016, the FASB issued a new accounting standard that requires the statement of cash flows to explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash. Amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statementof cash flows. We early adopted this standard in fiscal 2018 with retrospective application. For the nine months ended January 28, 2017, this change resulted in a $9.0 million increase in cash, cash equivalents and restricted cash at both the beginning and end2023.22Table of the period on our consolidated statement of cash flows. In addition, removing the change in restricted cash from the consolidated statement of cash flows resulted in a decrease of less than $0.1 million in our net cash used for investing activities for the nine months ended January 28, 2017.In March 2017, the FASB issued a new accounting standard that changed the presentation of pension costs in our consolidated statement of income. We elected to early adopt this standard in fiscal 2018, and it requires retrospective application. All components of pension costs other than service costs will now be presented in other income (expense), net rather than operating income in our consolidated statement of income. Adoption of this standard did not have a material impact on our consolidated statement of income for any periods presented. For the third quarter and first nine months of fiscal 2017, we reclassified pension costs of $0.7 million and $2.1 million, respectively, from operating income to other income (expense), net to conform to the current-year presentation.Accounting pronouncements not yet adoptedIn May 2014, the FASB issued a new accounting standard that requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard supersedes virtually all existing authoritative accounting guidance on revenue recognition and requires additional disclosures and greater use of estimates and judgments. During July 2015, the FASB deferred the effective date of the revenue recognition standard by one year, thus making the new accounting standard effective beginning with our fiscal 2019. We have reviewed substantially all of our contracts and other revenue streams and determined that the application of the new standard will not have a material change in the amount of or timing for recognizing revenue. We will apply the modified retrospective approach when we implement the new standard in fiscal 2019. We are still assessing the standard’s impact on our financial statement disclosures and the need to expand disclosures, particularly related to the new disaggregated revenue disclosures.In January 2016, the FASB issued a new accounting standard that requires equity investments to be measured at fair value with the fair value changes to be recognized through net income. This standard does not apply to investments that are accounted for using the equity method of accounting, or that result in consolidation of the invested entity. We currently hold equity investments that we measure at fair value at the end of each reporting period, and we recognize changes in fair value through other comprehensive income (loss) as unrealized gains (losses). We are required to adopt this standard for our fiscal 2019 financial statements. Based on the fair value of our net unrealized gain as of January 27, 2018, adopting this standard would be immaterial to our consolidated financial statements. When we adopt this standard, we will reclassify our current net unrealized gains from accumulated other comprehensive income to retained earnings and record a cumulative-effect adjustment, which we expect, based on current fair value, will be immaterial to our consolidated financial statements.In February 2016, the FASB issued a new accounting standard requiring all operating leases that a lessee enters into to be recorded on its balance sheet. Under this standard, the lessee is required to record an asset for the right to use the underlying asset for the lease term and a corresponding liability for the contractual lease payments. This standard will be effective beginning with our fiscal 2020. We are currently reviewing our leases and gathering the necessary information to adopt this standard when it becomes effective. We anticipate that adoption of this standard will have a material impact on our consolidated balance sheet as we have a significant number of operating leases.In June 2016, the FASB issued a new accounting standard that amends current guidance on other-than-temporary impairments of available-for-sale debt securities. This amended standard requires the use of an allowance to record estimated credit losses on these assets when the fair value is below the amortized cost of the asset. This standard also removes the evaluation of the length of time that a security has been in a loss position to avoid recording a credit loss. We are required to adopt this standard for our fiscal 2021 and apply it through a cumulative-effect adjustment to retained earnings. We are still assessing the impact this standard will have on our consolidated financial statements and related disclosures.In October 2016, the FASB issued a new accounting standard that requires entities to recognize the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. This standard will be applicable beginning with our fiscal 2019. Our current assessment is that this standard will have no impact on our current practices because intra-entity transfers, as the standard defines them, are unlikely to occur.In January 2017, the FASB issued a new accounting standard clarifying the definition of a business with the objective of adding guidance to entities evaluating whether a transaction should be accounted for as an acquisition. This standard will be applicable for our fiscal 2019. Our current assessment is that this standard will not affect our accounting for past or future acquisitions.In January 2017, the FASB issued a new accounting standard simplifying the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity should now perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This standard will be applicable to us beginning with our fiscal 2021. We are still assessing the impact this standard will have on our consolidated financial statements and related disclosures.In August 2017, the FASB issued a new accounting standard designed to improve and simplify the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This standard is intended to better align the recognition and presentation of the effects of hedging instruments with the hedged item in the financial statements, and requires additional disclosures on hedging instruments. This standard will be effective for our fiscal 2020. Based on our current hedging activity, we do not expect this standard to have a material impact on our consolidated financial statements or disclosures.In February 2018, the FASB issued a new accounting standard that allows entities to reclass stranded income tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings in their consolidated financial statements. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate. This standard may be early adopted in any interim period and should be applied either in the period of adoption or retrospectively to each period that was effected by the change in the federal corporate tax rate under the Tax Act. This standard will be effective for our fiscal 2020. We are still assessing the impact this standard will have on our consolidated financial statements and related disclosures.We have prepared this Management’s Discussion and Analysis as an aid to understanding our financial results. It should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes to Consolidated Financial Statements. After a cautionary note aboutregarding forward-looking statements, we begin with an introduction to our key businesses and then provide discussions of our results of operations, liquidity and capital resources, and critical accounting policies.La-Z-Boy Incorporated and its subsidiaries (individually and collectively, “we,” “our”"we," "our," "us," "La-Z-Boy" or the “Company”"Company") make forward-looking"forward-looking" statements in this report, and its representatives may make oral forward-looking statements from time to time. Generally, forward-looking statements include information concerning possible or assumed future actions, events or resultswithin the meaning of operations. More specifically, forward-looking statements may include information regarding:· future income, margins and cash flows· future economic performance· future sales· industry and importing trends· adequacy and cost of financial resources· management plans and strategic initiativesForward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “estimates,” “hopes,” “plans,” “could,” “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.Actual Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results couldof operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, business and industry and the effect of the coronavirus ("COVID") pandemic on our business operations and financial results.Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may include words such as "anticipates," "believes," "continues," "estimates," "expects," "feels," "forecasts," "hopes," "intends," "plans," "projects," "likely," "seeks," "short-term," "non-recurring," "one-time," "outlook," "target," "unusual," or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," or "may." A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak to our views only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial performance.Our actual future results and trends may differ materially from those we anticipate or project due todepending on a numbervariety of factors, including: (a) changesincluding, but not limited to, the risks and uncertainties discussed in consumer confidenceour Annual Report for the fiscal year ended April 30, 2022, under Item 1A, "Risk Factors" and demographics; (b) the possibilityItem 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Given these risks and uncertainties, you should not rely on forward-looking statements as a recession; (c) changes in the real estate and credit markets and their effects on our customers, consumers and suppliers; (d) international political unrest, terrorismprediction of actual results. Any or war; (e) volatility in energy and other commodities prices; (f) the impact of logistics on imports and exports; (g) tax rate, interest rate, and currency exchange rate changes; (h) operating factors, such as supply, labor or distribution disruptions (e.g. port strikes); (i) changes in legislation, including the tax code, or changes in the domestic or international regulatory environment, including new or increased duties and termination or renegotiationall of the North American Free Trade Agreement; (j) adoption of new accounting principles; (k) fires, severe weather or other natural events such as hurricanes, earthquakes, flooding, tornadoes and tsunamis; (l) our ability to procure or transport fabric rolls, leather hides or cut-and-sewn fabric and leather sets domestically or abroad; (m) information technology conversions or system failures and our ability to recover from a system failure; (n) effects of our brand awareness and marketing programs; (o) the discovery of defectsforward-looking statements contained in our products resulting in delays in manufacturing, recall campaigns, reputational damage, or increased warranty costs; (p) litigation arising out of alleged defects in our products; (q) unusual or significant litigation; (r) our ability to locate new La-Z-Boy Furniture Galleries® stores (or store owners) and negotiate favorable lease terms for new or existing locations; (s) the ability to increase volume through our e-commerce initiatives; (t) the impact of potential goodwill or intangible asset impairments; and (u) those matters discussed in Item 1A of our fiscal 2017 Annual Report on Form 10-Kfor the fiscal year ended April 30, 2022 or any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and other factors identified from time to time in our reports filed withtake advantage of the safe harbor provisions of the Private Securities and Exchange Commission.Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether to reflectas a result of new information, or new developmentsfuture events or for any other reason.Our BusinessWe manufacture, market, import, export, distribute and retail upholstery furniture products. In addition, we import, distribute and retail accessories and casegoods (wood) furniture products. We are the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the United States. The La-Z-Boy Furniture Galleries® stores retail network is the third largest retailer of single-branded furniture in the United States. We have sevenmanufacture, market, import, export, distribute and retail upholstery furniture products under the La-Z-Boy®, England, Kincaid®, and Joybird® tradenames. In addition, we import, distribute and retail accessories and casegoods (wood) furniture productsunder the Kincaid®, American Drew®, Hammary®, and Joybird® tradenames.As of January 28, 2023, our supply chain operations included the following:•Five major manufacturing locations and sixten regional distribution centers in the United States and one facilityfour facilities in Mexico to support our speed-to-market and customization strategy. strategy•A logistics company that distributes a portion of our products in the United States•A wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland•An upholstery manufacturing business in the United Kingdom•A global trading company in Hong Kong which helps us manage our Asian supply chain by establishing and maintaining relationships with our Asian suppliers, as well as identifying efficiencies and savings opportunities23During the third quarter of fiscal 2023, we made the decision to close our manufacturing facility in Torreón, Mexico as part of our initiative to drive improved efficiencies through optimized staffing levels within our plants. Torreón was the last facility to begin operating as part of our broader Mexico manufacturing expansion in fiscal 2021 and 2022 and accounted for approximately 3% of our La-Z-Boy branded production. As a result of this action, charges were recorded within the Wholesale segment in the third quarter of fiscal 2023 of $9.2 million in selling, general, and administrative expense for the impairment of various assets, primarily long-lived assets, and $0.9 million in cost of sales, primarily related to severance.We also participate in atwo consolidated joint ventureventures in Thailand that support our international businesses: one that operates a manufacturing facility in Thailandand another that supports our international business.operates a wholesale sales office. Additionally, we have contracts with several suppliers in Asia to produce products that support our pure import model for casegoods.We sell our products through multiple channels: to furniture retailers or distributors in the United States, Canada, and approximately 6055 other countries, including the United Kingdom, China, Australia, South Korea and New Zealand, directly to consumers through retail stores that we own and operate, and through our website, la-z-boy.com. websites, www.la-z-boy.com and www.joybird.com.•The centerpiece of our retail distribution strategy is our network of 350346 La-Z-Boy Furniture Galleries® stores and 532519 La-Z-Boy Comfort Studio® locations, each dedicated to marketing our La-Z-Boy branded products. We consider this dedicated space to be “proprietary.” We own 147 of the ◦La-Z-Boy Furniture Galleries® stores. The remainder of the La-Z-Boy Furniture Galleries® stores, as well as all 532 La-Z-Boy Comfort Studio® locations, are independently owned and operated. La-Z-Boy Furniture Galleries® stores help consumers furnish their homes by combining the style, comfort, and quality of La-Z-Boy furniture with our available design services. We own 167 of the La-Z-Boy Furniture Galleries® stores, while the remainder are independently owned and operated.◦La-Z-Boy Comfort Studio® locations are defined spaces within larger independent retailers that are dedicated to displaying and selling La-Z-Boy branded products. All 519 La-Z-Boy Comfort Studio® locations are independently owned and operated.◦In total, we have approximately 7.6 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded products in North America.◦We also have approximately 3.0 million square feet of floor space outside of the United States and Canada dedicated to selling La-Z-Boy branded products.•Our other brands, England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets, with approximatelyslightly over half of Hammary’s sales originating through the La-Z-Boy Furniture Galleries® store network.◦Kincaid and England have their own dedicated proprietary in-store programs with 534630 outlets and approximately 1.71.9 million square feet of proprietary floor space.◦In total, our proprietary floor space includes approximately 9.412.5 million square feet.•Joybird sells product primarily online and has a limited amount of proprietary retail showroom floor space including seven small-format stores in key urban markets.Our goal is to deliver value to our shareholders with improved sales and earnings over the long term through executing our strategic initiatives. The foundation of our strategic initiatives is driving profitable sales growth in all areas of our business, but most importantlybusiness.We plan to drive growth in the following ways:•Leveraging and reinvigorating our flagshipbrand with a consumer focus and expanded omni-channel presence. Our strategic initiatives to leverage and reinvigorate our iconic La-Z-Boy brand.brand center on a renewed focus on leveraging the compelling La-Z-Boy comfort message, accelerating our omni-channel offering, and identifying additional consumer-base growth opportunities. Our marketing platform featuring celebrity brand ambassador Kristen Bell is designed to drive brand recognition and inject youthful style and sensibility into our marketing campaign, which is intended to enhance the appeal of our brand with a younger consumer base. Further, our goal is to connect with consumers along their purchase journey through multiple means, whether online or in person. We are planning for this growth in several ways:· We are expandingdriving change throughout our digital platforms to improve the user experience, with a specific focus on the ease with which customers browse through our broad product assortment, customize products to their liking, find stores to make a purchase, or purchase at www.la-z-boy.com.•Expanding the reach of our branded distribution channels, which include the La-Z-Boy Furniture Galleries® store network and the La-Z-Boy Comfort Studio® locations, our store-within-a-store format. Our target is 1,000 proprietary locations, composedformat. While the consumer’s purchase24journey may start digitally, our consumers also demonstrate an affinity for visiting our stores to shop, allowing us to frequently deliver the flagship La-Z-Boy Furniture Galleries® stores and 600 store, or La-Z-Boy Comfort Studio® locations., experience and provide design services. We expect our strategic initiatives in this initiativearea to generate growth in our Retail segment through an increased company-owned store count and to generate growth in our wholesale UpholsteryWholesale segment as our proprietary distribution network expands.· We are not only focused on growing the sizenumber of locations, but also on upgrading existing store locations to our new concept designs.•Growing our company-owned retail business. We are focused on growing this business by increasing same-store sales through improved execution at the store level and by opportunistically acquiring existing La-Z-Boy Furniture Galleries® stores and opening new La-Z-Boy Furniture Galleries® stores, primarily in markets that can be serviced through our regional distribution centers, where we see opportunity for growth, or where we believe we have opportunities for further market penetration.·•Accelerating the growth of the Joybird brand. During fiscal 2019, we purchased Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture with a direct-to-consumer model. We are attemptingbelieve that Joybird is a brand with significant potential and our strategic initiatives in this area focus on fueling profitable growth through an increase in digital marketing spend to responsibly increasedrive awareness and customer acquisition, ongoing investments in technology, an expansion of product assortment, and providing additional small-format stores in key urban markets to enhance our market share by taking advantageconsumers' omni-channel experience.•Enhancing our enterprise capabilities to support the growth of our unique multi-channel distribution network. consumer brands and enable potential acquisitions for growth. In addition to our branded distribution channels, over 1,800approximately 2,200 other dealers sell La-Z-Boy products, providing us the benefit of multi-channel distribution. These outlets include some of the best knownbest-known names in the industry, including Art Van,Slumberland, Nebraska Furniture Mart, andSlumberland. Our other brands, England, American Drew, Hammary,Mathis Brothers and Kincaid, enjoy distribution through many of the same outlets.Raymour & Flanagan. We believe there is significant growth potential for our consumer brands through these retail channels.· We also aim Our strategic initiatives focus on enhancing our enterprise capabilities to increase our market share in stationary upholstered furniture through a combinationsupport the growth of our Live Life Comfortably® marketing campaignconsumer brands and our innovative and on-trend product. While we are known for our iconic recliners, they account for less than halfimproving the agility of our sales in dollars, and we believe we have the potential to expand sales of our other products. To stimulate growth, we are focusing on expanding our digital marketing and e-commerce capabilities to build traffic across our multiple digital and physical properties. We are driving change throughout our digital platforms to improve the user experience, with a specific focus on the ease by which customers browse through our broad assortment, customize products to their liking, find stores to make a purchase, or purchase at la-z-boy.com.· We are bringing innovative products to market, including stain-resistant iCleanTM fabric and our power products, some of which include dual mechanisms and articulating headrests. Most recently we introduced duoTM, a revolutionary new product line that features the look of stationary furniture with the power to recline at the push of a button. We are committed to innovation throughout our business, and to support these efforts we are building a new state-of-the-art Innovation Center at our Dayton, Tennessee campus. We expect the Innovation Center to be completed by the end of fiscal 2018.In addition to the strategies above, we recognize that online furniture sales are growing rapidly. In response to this changing landscape, we have developed a multi-faceted strategy to participate in and leverage this growth opportunity. This strategy has three components: increase online sales of La-Z-Boy furniture through la-z-boy.com and other digital players, such as Wayfair and Amazon; leverage the strength of our world-class global supply chain toso that it can more broadly support other e-commerce brands; and invest in new online companies. We believe this three-pronged approach will position us for growth in the ever-changing online selling environment, and we will continue developing these strategies throughout the fiscal year.Our reportable operating segments areinclude the Upholstery segment, the CasegoodsWholesale segment and the Retail segment.·Upholstery•Wholesale Segment. Our UpholsteryWholesale segment is our largest business segment and consists primarily of twothree operating units:segments: La-Z-Boy, our largest operating unit,segment, our England subsidiary, and our England subsidiary.casegoods operating segment that sells furniture under three brands: American Drew®, Hammary® and Kincaid®. The UpholsteryWholesale segment also includes our international wholesale and manufacturing businesses. We aggregate these operating segments into one reportable segment because they are economically similar and meet the other aggregation criteria for determining reportable segments. Our UpholsteryWholesale segment manufactures and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas.sofas and imports casegoods (wood) furniture, such as bedroom sets, dining room sets, entertainment centers and occasional pieces. The UpholsteryWholesale segment sells directly to La-Z-Boy Furniture Galleries® stores, operators of La-Z-Boy Comfort Studio® locations, and England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.·Casegoods Segment. Our Casegoods segment is an importer, marketer, and distributor of casegoods/wood furniture such as bedroom sets, dining room sets, entertainment centers and occasional pieces, and also manufactures some coordinated upholstered furniture. The Casegoods segment consists of three brands: American Drew, Hammary, and Kincaid. The Casegoods segment sells directly to major dealers, as well as La-Z-Boy Furniture Galleries® stores, and a wide cross-section of other independent retailers.·•Retail Segment. Our Retail segment consists of 147one operating segment comprised of our 167 company-owned La-Z-Boy Furniture Galleries® stores. The Retail segment sells primarily sells upholstered furniture, in addition to some casegoods and other accessories, to end consumers through these stores.•Corporate & Other. Corporate & Other includes the shared costs for corporate functions, including human resources, information technology, finance and legal, in addition to revenue generated through royalty agreements with companies licensed to use the La-Z-Boy® brand name on various products. We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segments, including our global trading company in Hong Kong and Joybird, an e-commerce retailer that manufactures upholstered furniture, such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports casegoods (wood) furniture, such as occasional tables and other accessories. Joybird sells to the end consumer primarily online through these stores.its website, www.joybird.com. None of the operating segments included in Corporate & Other meet the requirements of reportable segments.25Fiscal 20182023 Third Quarter and Nine Months Compared with Fiscal 2017 Comparable PeriodsLa-Z-Boy Incorporated
in thousands,
except percentages)
Ended
1/27/18
1/28/17
Change
Ended
1/27/18
Ended
1/28/17
ChangeQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change Sales $ 572,723 $ 571,573 0.2% $ 1,788,146 $ 1,672,245 6.9 % Operating income 42,840 39,487 8.5% 157,366 127,971 23.0 % Operating margin 7.5% 6.9% 8.8% 7.7% SalesOur consolidatedConsolidated sales increased $23.6$1.2 million, or 0.2%, and $56.6$115.9 million, or 7% in the third quarter and first nine months of fiscal 2018,2023, respectively, compared with the same periods a year ago. ThisThe increase was driven byin sales growth in all threefor both periods reflects the realization of our operating segments. Our Upholstery segment benefited from the acquisition of the La-Z-Boy wholesale business in the United Kingdompricing and Irelandsurcharge actions taken to counteract rising raw material and freight costs, along with a favorable changeimpact from product and channel mix as sales in our product mix. Our Casegoods segment increasedRetail business grew. These increases in sales by expanding our floor space with existing retailers, resultingmore than offset a decline in higherdelivered unit volume. Our Retail segmentOperating MarginOperating margin, which is calculated as operating income as a percentage of sales, increased due to the addition of new stores that were not open in the prior-year periods and from acquisitions we completed in the last 12 months.Operating MarginOur operating margin decreased 0.6 percentage60 basis points and 0.9 percentage110 basis points in the third quarter and first nine months of fiscal 2018,2023, respectively, compared with the same periods a year ago.· Our•Gross margin, which is calculated as gross margin decreased 0.9profit as a percentage of sales, increased 460 basis points and 0.6 percentage330 basis points duringin the third quarter and first nine months of fiscal 2018,2023, respectively, compared with the same periods a year ago.· The decreases for both◦Changes in our consolidated mix improved gross margin by 290 basis points and 240 basis points in the third quarter and first nine months were primarily the result of a decline in our Upholstery segment’s gross margin due to increased raw material prices for our three core raw material components of steel, polyurethane foam and wood.· The benefit from a legal settlement in the first nine months of fiscal 2017 negatively impacted2023, respectively, compared with the comparison of our gross marginsame periods a year ago, driven by 0.3 percentage points. This impact was offset in the first nine months of fiscal 2018 by a 0.3 percentage point benefit from changes in our consolidated sales mix, reflecting the growth of our Retail segment, which has a higher gross margin than our wholesale segments.· Our selling,Wholesale segment.◦Compared with the same periods a year ago, gross margin in the third quarter and first nine months of fiscal 2023 benefited from pricing and surcharge actions taken in prior periods.◦The gross margin in the first nine months of fiscal 2023 was negatively impacted by higher freight and raw material costs driven by global supply chain challenges. These costs have decreased during the fiscal year, resulting in in a gross margin benefit in the third quarter of fiscal 2023 compared with the same period last year.•Selling, general and administrative (“("SG&A”&A") expenses as a percentage of sales were 0.3 percentageincreased 400 basis points lowerand 220 basis points in the third quarter and first nine months of fiscal 20182023, respectively, compared with the same periodperiods a year ago.· Our ◦Changes in our consolidated mix increased SG&A expense as a percentage of sales by 80 basis points and 150 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, driven by growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.◦Charges related to the closure of our Torreón, Mexico manufacturing facility resulted in a 160 basis point and 50 basis point increase in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.◦SG&A expense as a percentage of sales was lowerimpacted during the third quarter and first nine months of fiscal 2023 by increased investments in marketing, to pre-pandemic levels as a percentage of sales, to drive written sales. The third quarter of fiscal 2023 was further impacted by higher selling expenses, as a percentage of sales, primarily driven by higher written sales in our Retail segment.We discuss each segment’s results in the following section.26Retail SegmentQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change Sales $ 251,157 $ 197,052 27.5% $ 739,330 $ 571,319 29.4 % Operating income 44,203 24,102 83.4% 123,855 68,502 80.8 % Operating margin 17.6% 12.2% 16.8% 12.0% SalesThe Retail segment’s sales increased $54.1 million, or 27%, and $168.0 million, or 29% in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, led by a 23% and 24% increase in delivered same-store sales for each respective period. Additionally, the Retail segment benefited from a $14.3 million and a $44.1 million increase in the third quarter and first nine months of fiscal 2023, respectively, from sales related to our retail store acquisitions that occurred in fiscal 2022 and fiscal 2023.Written same-store sales increased 3% but decreased 8% in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago. The decrease in the first nine months of fiscal 2023 reflects softer demand across the industry driven by economic uncertainty and weaker consumer sentiment relative to the prior period which saw significant increases in consumer furniture demand. Although these challenging industry trends continued through the third quarter of fiscal 2023, the benefit of pricing actions taken in prior periods and strong store-level execution with improved conversion drove an increase in written sales compared with the same period last year.Same-store sales include the sales of all currently active stores which have been open and company-owned for each comparable period.Operating MarginThe Retail segment's operating margin increased 540 basis points and 480 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.•Gross margin increased 110 basis points and 40 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, primarily due to our improved absorption of fixed pricing actions taken by the Retail business to offset increases in product costs.•SG&A expense as a percentage of sales decreased 430 basis points and 440 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, primarily due to higher delivered sales relative to selling expenses and fixed costs, onmainly occupancy expenses.Wholesale SegmentQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change Sales to external customers $ 291,170 $ 328,533 $ 934,511 $ 973,973 Intersegment sales 116,433 94,748 361,141 281,899 Total Sales 407,603 423,281 (3.7)% 1,295,652 1,255,872 3.2 % Operating income 16,940 27,639 (38.7)% 81,558 89,098 (8.5) % Operating margin 4.2% 6.5% 6.3% 7.1% SalesThe Wholesale segment’s sales decreased $15.7 million, or 4% but increased $39.8 million, or 3% in the higherthird quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago. Over the same periods, intercompany sales dollarsfrom our Wholesale segment to our Retail segment increased 23% and 28%, respectively. Total sales in both periods benefited from the realization of pricing and surcharge actions taken in response to rising manufacturing costs, combined with favorable channel and product mix reflecting the shift to our La-Z-Boy Furniture Galleries® network. These benefits more than offset a reductiondecline in discretionary SG&A spendingdelivered volume in the first nine months of fiscal 2023, as we continue to work down the backlog built up in prior periods back to pre-pandemic levels, but only partially offset lower delivered volume in the third quarter of fiscal 2023.27Operating MarginThe Wholesale segment's operating margin decreased 230 basis points and 80 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.•Gross margin increased 300 basis points and 200 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.◦Gross margin increased 250 basis points and 520 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, from pricing and surcharge actions taken in response to rising raw material costs resulting from global supply challenges in prior periods.◦Declining freight costs drove an 80 basis point and 40 basis point increase in gross margin during the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.◦Higher raw material costs led to a 160 basis point decrease in gross margin during the first nine months of fiscal 2023 compared with same period a year ago.◦Gross margin decreased 100 basis points in the first nine months of fiscal 2023, compared with the same period a year ago.· Incentive compensationago, due to higher costs related to plant inefficiencies during the first half of fiscal 2023.•SG&A expense as a percentage of sales was 0.2 percentageincreased 530 basis points lowerand 280 basis points in the third quarter and first nine months of fiscal 2018. Several of our share-based compensation awards are liability-based2023, respectively, compared with the same periods a year ago◦Reduced fixed cost leverage and the cumulativean increase in marketing expense to date is adjusted at the endpre-pandemic levels, as a percentage of each period based on the share price on the last day of the reporting period. The increase in our share price during the third quarter of fiscal 2018 was smaller than in the third quarter of fiscal 2017, and we had fewer liability-based compensation awards outstanding than at the end of the third quarter of fiscal 2017.· Partially offsetting these improvements was the previously announced legal settlement of a civil dispute, which increased oursales, contributed to higher SG&A expense as a percentage of sales in the third quarter of fiscal 2018 by 1.0 percentage point.· SG&A expense as2023 and, to a percentage of sales increased 0.3 percentage pointslesser extent, in the first nine months of fiscal 20182023, compared with the same periodperiods a year ago.· Our SG&A expense increased 0.4 percentage points◦Additionally, charges related to the closure of our Torreón, Mexico manufacturing facility in the first nine months due to the growththird quarter of our Retail segment asfiscal 2023, resulted in a percentage of our total sales. Our Retail segment has a higher level of SG&A expense as a percentage of sales than our wholesale segments.· The previously announced legal settlement of a civil dispute increased our230 basis point and 70 basis point increase in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2018 by 0.3 percentage points.· Partially offsetting these items was incentive compensation expense that was 0.2 percentage points lower in2023, respectively, compared with the first nine months of fiscal 2018 due to our consolidated financial performance against our incentive-based targets being lower than the first nine months of fiscal 2017.We explain these items further when we discuss each segment’s results later in this Management’s Discussionsame periods a year ago.Corporate and Analysis.Upholstery Segment
in thousands,
except percentages)
Ended
1/27/18
Ended
1/28/17
Change
Ended
1/27/18
Ended
1/28/17
ChangeQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change Sales $ 33,510 $ 49,979 (33.0)% $ 125,877 $ 138,626 (9.2) % Intercompany eliminations (119,547) (98,739) (21.1)% (372,713) (293,572) (27.0) % Operating loss (18,303) (12,254) (49.4)% (48,047) (29,629) (62.2) % SalesOur Upholstery segment’sCorporate and Other sales increased $18.0decreased $16.5 million and $34.0$12.7 million in the third quarter and first nine months of fiscal 2018,2023, respectively, compared with the same periods a year ago. The acquisition of the La-Z-Boy wholesale businesschange in the United Kingdom and Ireland added sales of $8.2was primarily led by Joybird sales which decreased 35% to $28.9 million and $20.211% to $109.7 million in the third quarter and first nine months of fiscal 2018,2023, respectively. Changes in our product mix resulted in an additional 2.9%While Joybird sales benefited from increased online conversion, overall delivered volume declined due to lower written sales from the prior sequential quarter combined with slowing online traffic and 2.2% increase indemand challenges consistent with those recently experienced across the e-commerce home furnishings industry. Written sales for Joybird were down 21% and 14% in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods in the prior year. Our product mix in the third quarter and first nine months of fiscal 2018 shifted from non-powered fabric units to more leather units with power that have a higher average selling price. These increases were somewhat offset by lower overall unit volume, which resulted in a 0.5% decrease and a 1.8% decrease in sales in the third quarter and first nine months, respectively, when compared with the same periods a year ago.Operating MarginOur Upholstery segment’s operating margin decreased 1.9 percentage points and 2.3 percentage points in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· The segment’s gross margin decreased 1.3 percentage points and 1.5 percentage points during the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· Increased raw material prices, primarily for our three core raw material components of steel, polyurethane foam and wood, decreased the segment’s gross margin by 1.0 percentage point and 0.8 percentage points in the third quarter and first nine months of fiscal 2018, respectively. The inflationary pressure we experienced from these raw materials was higher than we had expected, and during the second quarter we implemented a price increase that we expect will offset the negative impact on our margins as we move into the fourth quarter of our fiscal year.· Lower absorption of fixed costs in our manufacturing facilities, driven primarily by a decline in production volume, decreased the segment’s gross margin by 0.4 percentage points in both the third quarter and first nine months.· The benefit from a legal settlement in the first nine months of fiscal 2017 negatively impacted the comparison of the segment’s gross margin by 0.3 percentage points.· The segment’s SG&A expense as a percentage of sales increased 0.6 percentage points and 0.8 percentage points during the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· The segment’s SG&A expense as a percentage of sales was higher in the third quarter and first nine months by 1.3 percentage points and 0.5 percentage points, respectively, due to the previously announced legal settlement of a civil dispute. With the announced settlement, which resolved all of our past and future obligations at issue in the litigation, we recognized an additional charge of $4.1 million in the third quarter of fiscal 2018.· Partially offsetting the above increase was lower SG&A expense as a percentage of sales due to our improved absorption of fixed SG&A costs on the higher sales dollars, and a reduction in discretionary SG&A spending compared with the same periods a year ago.Casegoods Segment
in thousands,
except percentages)
Ended
1/27/18
Ended
1/28/17
Change
Ended
1/27/18
Ended
1/28/17
ChangeSalesOur Casegoods segment’s sales increased $4.0 million and $6.6 million in the third quarter and first nine months of fiscal 2018,2023, respectively, compared with the same periods a year ago, primarily due to higher volume we achieved through improved product styling, expanding our floor space with existing retailers, and a consistent in-stock position.Operating MarginOur Casegoods segment’s operating margin improved 3.5 percentage points and 2.0 percentage points inreflecting the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· The segment’s gross margin increased 1.0 percentage point and 0.4 percentage points in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago, due to increased volume and a shift in our product mix to newer, higher-margin collections. This was somewhat offset by increased freight expense on imported product.· The segment’s SG&A expense as a percentage of sales decreased 2.5 percentage points and 1.6 percentage points during the third quarter and first nine months of fiscal 2018, respectively,compared with the same periods a year ago, due primarily to our improved absorption of fixed SG&A costs on the higher sales volume, and a reduction in discretionary SG&A spending.Retail Segment
in thousands,
except percentages)
Ended
1/27/18
Ended
1/28/17
Change
Months
Ended
1/27/18
Months
Ended
1/28/17
ChangeSalesOur Retail segment’s sales increased $3.7 million and $27.9 million in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago. In the third quarter and first nine months of fiscal 2018, we increased the segment’s sales from new stores that were not open in the prior-year period by $4.0 million and $10.7 million, respectively, and our acquired stores added $0.9 million and $19.9 million, respectively. Partially offsetting these items was a $1.3 million and a $2.8 million decrease, respectively, in sales from stores that have been open for at least 12 months, a decline of 1.1% and 0.8%, respectively. This decrease was primarily driven by lower store traffic, the impact of which was somewhat offset by an increase in average ticket that resulted from increased design services and custom orders.Operating MarginOur Retail segment’s operating margin increased 0.4 percentage points and 0.1 percentage point in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· The segment’s gross margin increased 0.1 percentage point in the third quarter of fiscal 2018 compared with the same period a year ago due to an increase in design services and custom orders. The segment’s SG&A expense as a percentage of sales was 0.3 percentage points lower in the third quarter of fiscal 2018 compared with the same period a year ago because we reduced our discretionary SG&A spending to better align with our current sales volume.· The segment’s gross margin increased 0.4 percentage points in the first nine months of fiscal 2018 compared with the same period a year ago due to an increase in design services and custom orders. This increase was somewhat offset by an increase in the segment’s SG&A expense as a percentage of sales of 0.3 percentage points in the first nine months of fiscal 2018 compared with the same period a year ago primarily because our sales at stores that have been open for a minimum of 12 months declined and we were not able to leverage our fixed costs (primarily occupancy and administrative costs) to the same extent as in the prior-year period.Corporate and Other
in thousands,
except percentages)
Ended
1/27/18
Ended
1/28/17
Change
Ended
1/27/18
Ended
1/28/17
ChangeSalesSalesnoted above.Intercompany eliminations increased in the third quarter and first nine months of fiscal 2018 compared with the same periods a year ago due to an increase in intercompany commission revenue charged to our reportable segments by our global trading company in Hong Kong.Eliminations increased in the third quarter and first nine months of fiscal 20182023 compared with the same periods a year ago due to higher sales from our Upholstery and Casegoods segmentsWholesale segment to our Retail segment, mainly because of new store openings and store acquisitions.Operating LossOur Corporate and Other operating loss was $1.5increased $6.0 million and $6.3$18.4 million lower in the third quarter and first nine months of fiscal 2018,2023, respectively, compared with the same periods a year ago.· This wasago, primarily due to improved profitability associated with our global trading companyJoybird's operating loss resulting from lower sales volume and higher input costs. Additionally, operating loss was impacted in Hong Kong. The profitabilitythe first nine months of our global trading companyfiscal 2023 by increased investments in marketing to drive customer acquisition and awareness.28Non-Operating Income (Expense)Interest IncomeInterest income was $1.2 million and $2.6 million higher in the third quarter and first nine months of fiscal 20182023, respectively, compared with the same periods a year ago, due to the increased intercompany commission revenue we charged to our reportable segments.· Additionally, the operating loss in the first nine months of fiscal 2018 was lower than the prior periods due to a $1.7 million insurance gain we recorded during the second quarter of fiscal 2018. The gain occurred because the insurance proceeds we expect to receive as a result of the fire in our England subsidiary’s corporate office building during the first quarter of fiscal 2018 exceed the building’s net book value.Gain on Conversion of InvestmentIn the first nine months of fiscal 2018, we recorded a $2.2 million gain on investments when our available-for-sale convertible debt security converted to preferred shares of a privately-held company.Other Income (Expense), NetOther income (expense), net was $1.1 million of expense in the third quarter of fiscal 2018 compared with $0.1and $0.8 million of expense in the third quarter of fiscal 2017. The increase in expense was primarily due to higher realized losses on exchange rates. The third quarter of both fiscal 2018 and fiscal 2017 included $0.9 million for pension and retirement-related expenses.Other income (expense), net was $2.5 million of expense in the first nine months of fiscal 2018 compared with $1.8 million of expense in the first nine months of fiscal 2017. The increase in expense was primarily due to higher realized losses on exchange rates. The first nine months of fiscal 2018 and the first nine months of fiscal 2017 included $2.8 million and $2.7 million, respectively, for pension and retirement-related expenses.Income TaxesOn December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. Most of its provisions are effective for tax years beginning on or after January 1, 2018. Because we are a fiscal year U.S. taxpayer, the majority of the provisions, such as elimination of the domestic manufacturing deduction, new taxes on certain foreign-sourced income, and new limitations on certain business deductions, will begin applying to us for our fiscal 2019. For fiscal 2018, the most significant impacts include a lower U.S. federal corporate income tax rate, a different calculation of certain net deferred taxes, and a new transition tax on the deemed repatriation of certain foreign earnings. The phasing in of the lower corporate income tax rate resulted in a blended federal rate of 30.4% for fiscal 2018, compared with the previous 35% rate. The federal tax rate will be reduced to 21% in subsequent fiscal years.We recorded a charge of $9.5 million in the third quarter of fiscal 2018, reflecting the net effect of the Tax Act. This included a $9.8 million charge for the provisional re-measurement of certain deferred taxes and related amounts, a provisional $1.9 million of income tax expense for the estimated effects of the transition tax, and a benefit of $2.2 million primarily related to the lower blended federal tax rate.Our effective tax rate for the third quarter and first nine months of fiscal 2018,2023, respectively, primarily due to exchange rate losses. Other income (expense), net was 62.0%$1.5 million and 43.9%, respectively. For$0.5 million of expense in the third quarter and first nine months of fiscal 2017, our2022, respectively, primarily due to unrealized losses on investments and exchange rate losses, respectively.Income TaxesOur effective tax rate was 29.4%27.7% and 33.4%,26.6% for the third quarter and nine months ended January 28, 2023, respectively, compared with 24.8% and 25.9% for the third quarter and nine months ended January 22, 2022, respectively. The effective tax rate in the third quarter and first nine months of fiscal 2022 was lower partially due to non-taxable gains on corporate owned life insurance and state taxes. Our effective tax rate in fiscal 2018 was higher than in the prior year, primarily due to charges related to the Tax Act, as described above. Additionally, our effective tax rate in both years varies from the 21% federal statutory rate in effect for the respective periods primarily due to state taxes, less the benefit of the U.S. manufacturing deduction and foreign earnings in jurisdictions with lower tax rates than the U.S.As described above we made reasonable estimates, based on our current interpretation of the Tax Act, to record provisional adjustments during the third quarter of fiscal 2018. We may alter our estimates during the fourth quarter of fiscal 2018 as we continue to accumulate and process data to finalize the underlying calculations and review further guidance that we expect regulators to issue. We are also analyzing other provisions of the Tax Act to determine if they will impact our effective tax rate in fiscal 2018 or in the future. We will continue to refine our adjustments through the permissible measurement period, which is not to extend beyond one year of the enactment date.Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash from operations, and amounts available under our credit facility. We believe these sources remain adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, and fulfill other cash requirements for day-to-day operations dividends to shareholders and capital expenditures. We had cash, cash equivalents and restricted cash of $137.6$284.0 million at January 27, 2018,28, 2023, compared with $150.9$248.9 million at April 29, 2017.30, 2022. In addition, we had investments to enhance our returns on cash of $35.4$15.8 million at January 27, 2018,28, 2023, compared with $33.1$27.2 million at April 29, 2017.We maintain a revolving credit facility secured primarily by all30, 2022.The following table illustrates the main components of our accounts receivable, inventory, and cash deposit and securities accounts. Availability under the agreement fluctuates according to a borrowing base calculated on eligible accounts receivable and inventory. We amended this agreement on December 19, 2017, extending its maturity date to December 19, 2022. The credit agreement includes affirmative and negative covenants that apply under certain circumstances, including a fixed-charge coverage ratio requirement that applies when excess availability under the line is less than certain thresholds. At January 27, 2018, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the agreement, and had excess availability of $148.1 million of the $150.0 million credit commitment.Our capital expenditures forflows:Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 Cash Flows Provided By (Used For) Net cash provided by operating activities $ 127,052 $ 45,192 Net cash used for investing activities (57,965) (77,036) Net cash used for financing activities (33,894) (122,288) Exchange rate changes (4) (593) Change in cash, cash equivalents and restricted cash $ 35,189 $ (154,725) Operating ActivitiesDuring the first nine months of fiscal 2018 were $24.12023, net cash provided by operating activities was $127.1 million. Our cash provided by operating activities was primarily attributable to net income, adjusted for non-cash items and a $42.5 million decrease in receivables. This was partially offset by a $61.2 million decrease in customer deposits, as we continue to work down our backlog to pre-pandemic levels.Investing ActivitiesDuring the first nine months of fiscal 2023, net cash used for investing activities was $58.0 million, primarily due to the following:•Cash used for capital expenditures in the period was $57.4 million compared with $15.5$58.6 million during the first nine months of fiscal 2017.2022, which primarily related to improvements to our retail stores, new store openings, and plant upgrades to our upholstery manufacturing and distribution facilities in Neosho, Missouri. Spending on these items will continue in fiscal 2023 with full year fiscal 2023 capital expenditures expected to be in the range of $75 to $80 million. We have no material contractual commitments outstanding for future capital expenditures. We expect capital expenditures to be in the range29•Cash used for acquisitions was $11.9 million, for all of fiscal 2018. We started construction on our new Innovation Center and other upgrades to our largest manufacturing campus in Dayton, Tennessee in the fourth quarter of fiscal 2017 and expect that construction will continue into fiscal 2020. We currently estimate that we will incur approximately $15 million in capital expendituresprimarily related to the acquisition of the Denver, Colorado and Spokane, Washington retail businesses.•Proceeds from the sale of investments, net of investment purchases, was $11.2 million.Financing ActivitiesOn October 15, 2021, we entered into a five-year $200.0 million unsecured revolving credit facility (the “Credit Facility”). Borrowings under the Credit Facility may be used by the Company for general corporate purposes. We may increase the size of the facility, either in the form of additional revolving commitments or new Innovation Centerterm loans, subject to the discretion of each lender to participate in such an increase, up to an additional amount of $100 million. The Credit Facility will mature on October 15, 2026 and provides us the ability to extend the maturity date for two additional one-year periods, subject to the satisfaction of customary conditions. As of January 28, 2023, we have no borrowings outstanding under the Credit Facility.The Credit Facility contains certain restrictive loan covenants, including, among others, financial covenants requiring a maximum consolidated net lease adjusted leverage ratio and a minimum consolidated fixed charge coverage ratio, as well as customary covenants limiting our ability to incur indebtedness, grant liens, make acquisitions, merge or consolidate, and dispose of certain assets. As of January 28, 2023, we were in compliance with our financial covenants under the Credit Facility. We believe our cash on hand, in addition to our available Credit Facility, will provide adequate liquidity for our business operations over the next 12 months.During the first nine months of fiscal 2018. Additionally,2023, net cash used for financing activities was $33.9 million, primarily due to the following:•Our board of directors has authorized the repurchase of company stock and we currently estimate that we will incur approximately $2spent $5.0 million in capital expenditures in fiscal 2018 related to the new corporate office building and expansion of the manufacturing facility for our England subsidiary, both of which we currently anticipate being completed by the endfirst nine months of fiscal 2019.•Cash paid to our shareholders in quarterly dividends was $22.0 million. Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. We expect the board to continue declaring regular quarterly cash dividends for the foreseeable future, but it may discontinue doing so at any time.The following table illustrates•Cash paid for holdback payments made on prior-period acquisitions was $5.0 million for the main componentsguaranteed payments related to the acquisition of our cash flows:Operating ActivitiesDuringJoybird.Exchange Rate ChangesFrom the first nine monthsend of fiscal 2018, net cash provided by operating activities was $91.2 million. Our cash provided by operating activities foryear 2022 to the period was primarily attributable to net income we generated during the first nine monthsend of fiscal 2018, a $12.5 million increase in accounts payable that was primarily a result of timing related to ensuring that our inventories are at appropriate levels to better serve our customers, and $5.1 million from a reduction in accounts receivable. This was somewhat offset by an increase in inventories of $9.1 million and a $2.0 million discretionary pension contribution. Additionally, as previously announced, during the third quarter of fiscal 2018 we paid $13.5 million to settle2023, changes in exchange rates had a civil lawsuit.During the first nine months of fiscal 2017, net cash provided by operating activities was $93.0 million. Our cash provided by operating activities for the period was primarily attributable to net income we generated during the first nine months of fiscal 2017, and was somewhat offset by an increase in inventories of $5.9 million and a $2.3 million discretionary pension contribution.Investing ActivitiesDuring the first nine months of fiscal 2018, net cash used for investing activities was $45.2 million, which included $15.9 million to fund the acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland, $24.1 million for capital expenditures, and $7.0 million for net investment increases. Our capital expenditures during the period primarily related to spendingde minimis impact on manufacturing machinery and equipment, our continued ERP system implementation, and construction on our new Innovation Center. Additionally, under theterms of the purchase agreement for the La-Z-Boy wholesale business in the United Kingdom and Ireland, payment for the business was due 90 business days following the date of acquisition, and accordingly, we made that payment during the first quarter of fiscal 2018.During the first nine months of fiscal 2017, net cash used for investing activities was $58.0 million, which included $35.9 million for acquisitions of retail stores, $15.5 million for capital expenditures, and $6.9 million in purchases of investments, net of sales. Capital expenditures during the period primarily related to spending on manufacturing machinery and equipment and our continued ERP system implementation.Financing ActivitiesDuring the first nine months of fiscal 2018, net cash used for financing activities was $61.4 million, including $46.1 million used to purchase our common stock and $16.3 million paid to our shareholders in quarterly dividends.During the first nine months of fiscal 2017, net cash used for financing activities was $36.9 million, including $25.1 million that we used to purchase our common stock and $15.3 million that we paid to our shareholders in quarterly dividends.Our board of directors has authorized the purchase of company stock. As of January 27, 2018, 7.0 million shares remained available for purchase pursuant to this authorization. The authorization has no expiration date. We purchased 1.6 million shares during the first nine months of fiscal 2018, for a total of $46.1 million. We expect to continue being opportunistic in purchasing company stock with the cash flows we anticipate generating in fiscal 2018.Exchange Rate ChangesDuring the first nine months of fiscal 2018, our cash, cash equivalents, and restricted cash, increased by $2.2 million due to changes in the exchange rates since the end of fiscal 2017, which positively impactedslightly impacting our cash balances held in Canada, Thailand, and the United Kingdom.During the first nine months of fiscal 2017, our cash, cash equivalents and restricted cash decreased by $0.1 million due to changes in the exchanges since the end of fiscal 2016, which negatively impacted our cash balances held in Thailand.OtherOur consolidated balance sheet at the end of the third quarter of fiscal 2018 reflected a $1.1 million net liability for uncertain income tax positions. We do not expect that the net liability for uncertain income tax positions will significantly change within the next 12 months. We will pay or release the liability for uncertain income tax positions as tax audits are completed or settled, statutes of limitation expire or other new information becomes available.During the third quarter of fiscal 2018,2023, there were no material changes to the information about our contractual obligations and commitments shown in the table contained in our fiscal 2017 Annual Report on Form 10-K.We disclosed our critical accounting policies in our fiscal 2017 Annual Report on Form 10-K.10-K for the fiscal year ended April 30, 2022. There were no material changes to our critical accounting policies or estimates during the first nine months of fiscal 2018.Recent Accounting PronouncementsIn May 2014, the FASB issued a new accounting standard that requires an entity to recognize the amountSee Note 1, Basis of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard supersedes virtually all existing authoritative accounting guidance on revenue recognition and requires additional disclosures and greater use of estimates and judgments. During July 2015, the FASB deferred the effective date of the revenue recognition standard by one year, thus making the new accounting standard effective beginning with our fiscal 2019. We have reviewed substantially all of our contracts and other revenue streams and determined that the application of the new standard will not have a material change in the amount of or timing for recognizing revenue. We will apply the modified retrospective approach when we implement the new standard in fiscal 2019. We are still assessing the standard’s impact on our financial statement disclosures and the need to expand disclosures, particularly relatedPresentation, to the new disaggregated revenue disclosures.In February 2016, the FASB issued a new accounting standard requiring all operating leases that a lessee enters into to be recorded on its balance sheet. Under this standard, the lessee is required to record an asset for the right to use the underlying asset for the lease term and a corresponding liability for the contractual lease payments. This standard will be effective beginning with our fiscal 2020. We are currently reviewing our leases and gathering the necessary information to adopt this standard when it becomes effective. We anticipate that adoption of this standard will have a material impact on our consolidated balance sheet as we have a significant number of operating leases.In June 2016, the FASB issued a new accounting standard that amends current guidance on other-than-temporary impairments of available-for-sale debt securities. This amended guidance requires the use of an allowance to record estimated credit losses on these assets when the fair value is below the amortized cost of the asset. This standard also removes the evaluation of the length of time that a security has been in a loss position to avoid recording a credit loss. We are required to adopt this standard for our fiscal 2021 and apply it through a cumulative-effect adjustment to retained earnings. We are still assessing the impact this guidance will have on our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting standards and related disclosures.In January 2017, the FASB issued aother new accounting standard simplifying the subsequent measurementstandards.30Table of goodwill by eliminating Step 2 from the goodwill impairment test. An entity should now perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This standard will be applicable to us beginning with our fiscal 2021. We are still assessing the impact this standard will have on our consolidated financial statements and related disclosures.In February 2018, the FASB issued a new accounting standard that allows entities to reclass stranded income tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings in their consolidated financial statements. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate. This standard may be early adopted in any interim period and should be applied either in the period of adoption or retrospectively to each period that was effected by the change in the federalcorporate tax rate under the Tax Act. This standard will be effective for our fiscal 2020. We are still assessing the impact this standard will have on our consolidated financial statements and related disclosures.During the third quarterfirst nine months of fiscal 2018,2023, there were no material changes from the information contained in Item 7A of our Annual Report on Form 10-K for the fiscal 2017.year ended April 30, 2022.Disclosure Controls and Procedures.As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’sSEC’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.Changes in Internal Control over Financial Reporting.We have been implementing an enterprise resource planning (“ERP”) system in our largest operating unit, and we deployed the sales order management component of that system during the fourth quarter of fiscal 2018. This deployment was the last phase of our ERP implementation. ERP systems affect the processes that constitute our internal control over financial reporting and this final deployment will require testing for effectiveness in the fourth quarter of fiscal 2018. No other There were no changes in our internal controls over financial reporting that occurred during the third quarter of fiscal quarter ended January 27, 2018,2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.31We disclosed our risk factors in our Annual Report on Form 10-K for the fiscal year ended April 29, 2017.30, 2022. There have been no material changes to our risk factors during the third quarterfirst nine months of fiscal 2018.2023.Our board of directors has authorized the purchaserepurchase of company stock. As of January 27, 2018, 7.028, 2023, 7.3 million shares remained available for purchaserepurchase pursuant to thisthe board authorization. We purchased 1.6 million sharesThere were no share repurchases under the authorized plan during the first nine months of fiscal 2018, for a total of $46.1 million. During the third quarter of fiscal 2018, pursuant to the existing board authorization, we adopted a plan to purchase company stock pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The plan was effective January 6, 2018. Under this plan, our broker has the authority to purchase company shares on our behalf, subject to SEC regulations and the price, market volume and timing constraints specified2023. Amounts in the plan. The plan expires at the closetable below include shares purchased from employees to satisfy their withholding tax obligations upon vesting of business on March 30, 2018. With the cash flows we anticipate generating in fiscal 2018, we expect to continue being opportunistic in purchasing company stock.The following table summarizes our purchasesrepurchases of company stock during the quarter ended January 27, 2018:
share data)
number of
shares
purchased
(1)
price
paid per
share
of shares
purchased as
part of
publicly
announced
plan
number of
shares that
may yet be
purchased
under the
plan(Unaudited, amounts in thousands, except per share data) Total number of
shares repurchased (1)Average price paid per share Total number of shares repurchased as part of publicly announced plan (2) Maximum number of shares that may yet be repurchased under the plan Fiscal November (October 30 – December 3, 2022) — $ — — 7,262 Fiscal December (December 4 – December 31, 2022) — $ — — 7,262 Fiscal January (January 1 – January 28, 2023) 2 $ — — 7,262 Fiscal Third Quarter of 2023 2 — 7,262 (1) In addition to the 524,716 There were no shares we purchasedrepurchased during the quarter as part of our publicly announced, board-authorized plan described above, this column includes 527above. During the quarter ended January 28, 2023, 2,204 shares we purchasedwere repurchased from employees to satisfy their withholding tax obligations when theirupon vesting of restricted shares vested.with an average share price of $26.86.(2) On October 28, 1987, our board of directors announced the authorization of the plan to repurchase company stock. The plan originally authorized 1.0 million shares, and since October 1987, 33.5 million shares have been added to the plan for repurchase. The authorization has no expiration date.Exhibit NumberDescriptionExhibit
Number(4.1) (31.1) (104) The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2023, formatted in Inline XBRL (included in Exhibit 101) SIGNATURE32Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.LA-Z-BOY INCORPORATED(Registrant)Date: February 20, 2018BY: /s/ Lindsay A. BarnesLindsay A. BarnesDate: February 21, 2023 BY: /s/ Jennifer L. McCurry Jennifer L. McCurry
Vice President, Corporate Controller and Chief Accounting Officer33