20549 ______ 38-0751137 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Michigan (Address of principal executive offices) (Zip Code) ☐ ☐ ☐ Outstanding at February 13, 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 27, 2024. 2024, we made a voluntary change to the presentation of costs directly attributable to our distribution activities conducted through our distribution centers in the United States. Our policy has changed from presenting these costs within selling, general and administrative ("SG&A") expense to presenting them as cost of sales. We believe this presentation is preferable because it will enhance the comparability of our financial statements with those of our industry peers and align with how we internally manage supply chain costs and margin. $6.0 million, inclusive of and subject to further to customary adjustments. We paid total cash of $5.6 million during the first and second quarters of fiscal 2024 and the remaining consideration included forgiveness of accounts receivable and payments based on working capital adjustments. As part of the acquisition, we recorded an indefinite-lived intangible asset of $2.1 million related to the reacquired rights described above. We also recognized $2.2 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. (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 ) 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 reported period. $30.80 per share. to pay 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 $34.15. (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 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. provide design services. In addition to our branded distribution channels, approximately 2,200 other dealers sell La-Z-Boy products, providing us the capabilities with a consumer-first focus. its website, www.joybird.com. None of the operating segments included in Corporate and Other meet the requirements of reportable segments. 2023 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 % (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 % company-owned for each comparable period. compared with the same periods a year ago. expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively. (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 % segment. (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 % cash balances. state taxes. shareholders in quarterly dividends was $24.2 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 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 ) Joybird. 10-K for the fiscal year ended April 29, 2023. 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 27, 2024. repurchasing Company stock, subject to market conditions and other factors as deemed relevant by our board of directors. (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 2024 and includes shares purchased from employees to satisfy their withholding tax obligations upon vesting of restricted shares: 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 (Registrant) Jennifer L. McCurry
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 27, 2024or☐ 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)MICHIGANMichigan 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:Class 2018Shares,Stock, $1.00 par value46,993,564LA-Z-BOY INCORPORATEDTABLE OF CONTENTSPage Number(s)
Number567810101011121213131416181921Note 17. Recent Accounting Pronouncements2326262729343737383838383840402LA-Z-BOY INCORPORATEDCONSOLIDATED STATEMENT OF INCOMEQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except per share data) 1/27/2024 1/28/2023 1/27/2024 1/28/2023 Sales $ 500,406 $ 572,723 $ 1,493,492 $ 1,788,146 Cost of sales 287,152 337,142 851,905 1,072,051 Gross profit 213,254 235,581 641,587 716,095 Selling, general and administrative expense 180,693 192,741 540,888 558,729 Operating income 32,561 42,840 100,699 157,366 Interest expense (106) (136) (329) (414) Interest income 4,124 2,012 11,222 3,624 Other income (expense), net (639) (1,062) 21 (834) Income before income taxes 35,940 43,654 111,613 159,742 Income tax expense 7,256 12,077 27,309 42,446 Net income 28,684 31,577 84,304 117,296 Net (income) loss attributable to noncontrolling interests (44) 149 (986) (1,005) Net income attributable to La-Z-Boy Incorporated $ 28,640 $ 31,726 $ 83,318 $ 116,291 Basic weighted average common shares 42,767 43,137 43,005 43,111 Basic net income attributable to La-Z-Boy Incorporated per share $ 0.67 $ 0.74 $ 1.94 $ 2.70 Diluted weighted average common shares 43,195 43,137 43,344 43,111 Diluted net income attributable to La-Z-Boy Incorporated per share $ 0.66 $ 0.74 $ 1.92 $ 2.70 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) 1/27/2024 1/28/2023 1/27/2024 1/28/2023 Net income $ 28,684 $ 31,577 $ 84,304 $ 117,296 Other comprehensive income (loss) Currency translation adjustment 2,262 5,441 (306) (72) Net unrealized gain on marketable securities, net of tax 342 287 475 84 Net pension amortization, net of tax 23 36 70 109 Total other comprehensive income 2,627 5,764 239 121 Total comprehensive income before noncontrolling interests 31,311 37,341 84,543 117,417 Comprehensive (income) attributable to noncontrolling interests (159) (1,278) (577) (1,509) Comprehensive income attributable to La-Z-Boy Incorporated $ 31,152 $ 36,063 $ 83,966 $ 115,908 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) 1/27/2024 4/29/2023 Current assets Cash and equivalents $ 329,324 $ 343,374 Restricted cash 3,855 3,304 Receivables, net of allowance of $4,399 at 1/27/2024 and $4,776 at 4/29/2023 119,383 125,536 Inventories, net 276,833 276,257 Other current assets 120,996 106,129 Total current assets 850,391 854,600 Property, plant and equipment, net 284,407 278,578 Goodwill 209,526 205,008 Other intangible assets, net 45,633 39,375 Deferred income taxes – long-term 8,716 8,918 Right of use lease assets 460,403 416,269 Other long-term assets, net 59,216 63,515 Total assets $ 1,918,292 $ 1,866,263 Current liabilities Accounts payable $ 86,819 $ 107,460 Lease liabilities, short-term 77,601 77,751 Accrued expenses and other current liabilities 275,522 290,650 Total current liabilities 439,942 475,861 Lease liabilities, long-term 418,149 368,163 Other long-term liabilities 72,315 70,142 Shareholders' equity Preferred shares – 5,000 authorized; none issued — — Common shares, $1.00 par value – 150,000 authorized; 42,613 outstanding at 1/27/2024 and 43,318 outstanding at 4/29/2023 42,613 43,318 Capital in excess of par value 365,111 358,891 Retained earnings 575,376 545,155 Accumulated other comprehensive loss (4,880) (5,528) Total La-Z-Boy Incorporated shareholders' equity 978,220 941,836 Noncontrolling interests 9,666 10,261 Total equity 987,886 952,097 Total liabilities and equity $ 1,918,292 $ 1,866,263 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) 1/27/2024 1/28/2023 Cash flows from operating activities Net income $ 84,304 $ 117,296 Adjustments to reconcile net income to cash provided by operating activities (Gain)/loss on disposal and impairment of assets (15) 6,161 (Gain)/loss on sale of investments (1,169) 155 Provision for doubtful accounts (267) 945 Depreciation and amortization 36,493 29,357 Amortization of right-of-use lease assets 56,660 57,548 Lease impairment/(settlement) (1,175) 1,347 Equity-based compensation expense 11,048 8,456 Change in deferred taxes 1,911 (2,629) Change in receivables 4,277 42,474 Change in inventories 5,968 4,560 Change in other assets (6,314) 16,478 Change in payables (15,420) (10,624) Change in lease liabilities (57,385) (58,651) Change in other liabilities (13,562) (85,821) Net cash provided by operating activities 105,354 127,052 Cash flows from investing activities Proceeds from disposals of assets 4,836 121 Capital expenditures (38,034) (57,439) Purchases of investments (17,869) (6,970) Proceeds from sales of investments 23,337 18,178 Acquisitions (26,299) (11,855) Net cash used for investing activities (54,029) (57,965) Cash flows from financing activities Payments on debt and finance lease liabilities (346) (92) Holdback payments for acquisitions (5,000) (5,000) Stock issued for stock and employee benefit plans, net of shares withheld for taxes 6,241 (1,771) Repurchases of common stock (40,022) (5,004) Dividends paid to shareholders (24,177) (22,027) Dividends paid to minority interest joint venture partners (1) (1,172) — Net cash used for financing activities (64,476) (33,894) Effect of exchange rate changes on cash and equivalents (348) (4) Change in cash, cash equivalents and restricted cash (13,499) 35,189 Cash, cash equivalents and restricted cash at beginning of period 346,678 248,856 Cash, cash equivalents and restricted cash at end of period $ 333,179 $ 284,045 Supplemental disclosure of non-cash investing activities Capital expenditures included in payables $ 3,008 $ 2,828 (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 reinvestedThe 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, except per share data) Common
SharesCapital in Excess of
Par ValueRetained
EarningsAccumulated Other
Comprehensive
Income (Loss)Non-Controlling
InterestsTotal At April 29, 2023 $ 43,318 $ 358,891 $ 545,155 $ (5,528) $ 10,261 $ 952,097 Net income — — 27,479 — 447 27,926 Other comprehensive income (loss) — — — 1,330 (40) 1,290 Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 149 (221) (1,906) — — (1,978) Repurchases of 357 shares of common stock (357) (4,512) (5,138) — — (10,007) Stock option and restricted stock expense — 2,526 — — — 2,526 Dividends declared and paid ($0.1815/share) — — (7,852) — — (7,852) Dividends declared not paid ($0.1815/share) — — (72) — — (72) At July 29, 2023 $ 43,110 $ 356,684 $ 557,666 $ (4,198) $ 10,668 $ 963,930 Net income — — 27,199 — 495 27,694 Other comprehensive income (loss) — — — (3,194) (484) (3,678) Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 91 32 (4) — — 119 Repurchases of 326 shares of common stock (326) (118) (9,561) — — (10,005) Stock option and restricted stock expense — 4,811 — — — 4,811 Dividends declared and paid ($0.1815/share) (1) — — (7,780) — (1,172) (8,952) Dividends declared not paid ($0.1815/share) (129) — — (129) At October 28, 2023 $ 42,875 $ 361,409 $ 567,391 $ (7,392) $ 9,507 $ 973,790 Net income — — 28,640 — 44 28,684 Other comprehensive income — — — 2,512 115 2,627 Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 305 7,894 (99) — — 8,100 Repurchases of 567 shares of common stock (567) (7,903) (11,871) — — (20,341) Stock option and restricted stock expense — 3,711 — — — 3,711 Dividends declared and paid ($0.20/share) — — (8,545) — — (8,545) Dividends declared not paid ($0.20/share) — — (140) — — (140) At January 27, 2024 $ 42,613 $ 365,111 $ 575,376 $ (4,880) $ 9,666 $ 987,886 (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.7Table of Contents(Unaudited, amounts in thousands, except per share data) 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 — — — 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 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, 2017,2023 balance sheet from our audited financial statements. We prepared the interim financial information in conformity with generally accepted accounting principles ("US GAAP"), which we applied on a basis consistent with those reflected in our fiscal 20172023 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.US GAAP. 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, 2018,2024, 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 2024The following table summarizes Accounting Standards Updates ("ASUs") which were adopted in fiscal 2017, we recorded2024, but did not have a benefit related to legal settlements as part of cost of sales. The legal settlements increased gross margin by 0.3 percentage points in the first nine months of fiscal 2017, but had nomaterial impact on the third quarter of fiscal 2017.Upholstery segment acquisitionsAsour 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 Accounting Pronouncements not yet AdoptedThe following table summarizes additional accounting pronouncements which we previously reportedhave not yet adopted, but we believe will not have a material impact on our accounting policies or our consolidated financial statements and related disclosures.ASU Description Adoption Date ASU 2023-09 Income Taxes - Improvements to Income Tax Disclosures Fiscal 2026 ASU 2023-07 Segment Reporting - Improvements to Reportable Segment Disclosures Fiscal 2025 ASU 2023-05 Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement Fiscal 2025 ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method Fiscal 2025 Change 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. Per the terms of the purchase agreement, payment for the business was due 90 business days following the date of acquisition, and accordingly, we paid $15.9 million inAccounting Policy - Distribution Center CostsIn the first quarter of fiscal 2018.In accordance with US GAAP, the period presented below has been retrospectively adjusted to reflect the change to cost of sales and SG&A expense. This change had no impact to sales, income from operations, net income, earnings per share, retained earnings or other components of equity or net assets.9(Unaudited, amounts in thousands) For the Quarter Ended January 28, 2023 For the Nine Months Ended January 28, 2023 Previously Reported Effect of Change As Adjusted Previously Reported Effect of Change As Adjusted Cost of sales $ 326,296 $ 10,846 $ 337,142 $ 1,039,523 $ 32,528 $ 1,072,051 Gross profit 246,427 (10,846) 235,581 748,623 (32,528) 716,095 Selling, general and administrative expense 203,587 (10,846) 192,741 591,257 (32,528) 558,729 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 accounting estimates for the acquisitions completed in fiscal 2024 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 acquisition as we gain additional data.Each of the following Retail segment acquisitionsDuring completed in fiscal 2024 and 2023 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 third quarter of fiscal 2018, we acquiredwholesale and retail sales) in suitable geographic markets, alongside the assets of an independent operator of oneexisting La-Z-Boy Furniture Galleries store network.Prior to each Retail acquisition completed in Grand Rapids, Michigan for $0.6 million of cash. We began including this store in our Retail segment results upon acquisition. The assets thatfiscal 2024 and 2023, we acquired includedlicensed to the counterparty the exclusive right that we previously licensed to the operator to own and operate the La-Z-Boy Furniture Galleries® stores (and to use the associated trademarks and trade name) in this market.each of their respective markets, and we reacquired these rights when we consummated the transaction. These required rights are indefinite-lived because our retailer agreements are perpetual agreements that have no specific expiration date and no renewal options. The effective settlement date of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. For federal income tax purposes, we amortize and deduct these indefinite-lived intangible assets and goodwill, if any, over 15 years.Illinois and Indiana AcquisitionOn December 11, 2023, we completed our acquisition of the Illinois and Indiana businesses that operate six independently owned La-Z-Boy Furniture Galleries® stores and one distribution center for $18.4 million, inclusive of and subject to further customary adjustments. The acquisition also included the purchase of buildings and land for five of the stores. We paid total cash of $18.1 million during the third quarter of fiscal 2024 and the remaining consideration included forgiveness of accounts receivable and payments based on working capital adjustments. As part of the acquisition, we recorded an indefinite-lived intangible asset of $0.3$4.2 million related to the reacquired right.rights described above.Lafayette, Louisiana AcquisitionOn October 23, 2023, we completed our acquisition of the Lafayette, Louisiana business that operates one independently owned La-Z-Boy Furniture Galleries® store and one distribution center for $2.8 million, inclusive of and subject to further customary adjustments. We paid total cash of $2.6 million during the second and third quarters of fiscal 2024 and the remaining consideration included forgiveness of accounts receivable and payments based on working capital adjustments. As part of the acquisition, we recorded thisan indefinite-lived intangible asset of $0.7 million related to the reacquired rights described above. We also recognized $2.1 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired store and will amortizefuture benefits of these synergies.Colorado Springs, Colorado AcquisitionOn July 17, 2023, we completed our acquisition of the Colorado Springs, Colorado business that operates two independently owned La-Z-Boy Furniture Galleries® stores and deduct itone distribution center for federal income tax purposes over 15 years.10Prior Year AcquisitionsBarboursville, 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 one distribution center for $4.7 million, inclusive of customary adjustments. We paid total cash of $4.0 million during the second quarter of fiscal 2023 and the remaining consideration included forgiveness of accounts receivable and payments based on working capital adjustments. As part of the acquisition, we recorded an indefinite-lived intangible asset of $1.2 million related to the reacquired rights described above. We also 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.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, inclusive of customary adjustments. We paid total cash of $7.7 million during the first and second quarters of fiscal 2023 and the remaining consideration included forgiveness of accounts receivable and payments based on working capital adjustments. As part of the acquisition, we recorded an indefinite-lived intangible asset of $4.3 million related to the reacquired rights described above. 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.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) 1/27/2024 1/28/2023 Cash and cash equivalents $ 329,324 $ 280,763 Restricted cash 3,855 3,282 Total cash, cash equivalents and restricted cash $ 333,179 $ 284,045 A summary of inventories is as follows:(Unaudited, amounts in thousands) 1/27/2024 4/29/2023 Raw materials $ 138,143 $ 116,440 Work in process 19,796 24,328 Finished goods 164,806 181,401 FIFO inventories 322,745 322,169 Excess of FIFO over LIFO (45,912) (45,912) Total inventories $ 276,833 $ 276,257 11We have goodwill reacquired rights,on our consolidated balance sheet as follows:Reportable Segment/Unit Reporting Unit Related Acquisition Wholesale Segment United Kingdom Wholesale business in the United Kingdom and Ireland Wholesale Segment United Kingdom La-Z-Boy United Kingdom Manufacturing (Furnico) Retail Segment Retail La-Z-Boy Furniture Galleries® storesCorporate and 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 29, 2023 (1)$ 20,202 $ 129,360 $ 55,446 $ 205,008 Acquisitions — 4,275 — 4,275 Translation adjustment 217 26 — 243 Balance at January 27, 2024 (1)$ 20,419 $ 133,661 $ 55,446 $ 209,526 (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 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 and 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 29, 2023 $ 1,155 $ 2,594 $ 33,739 $ 1,887 $ 39,375 Acquisitions — 6,983 — 6,983 Amortization — (599) — (163) (762) Translation adjustment — — 19 18 37 Balance at January 27, 2024 $ 1,155 $ 1,995 $ 40,741 $ 1,742 $ 45,633 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-basis preferred shares of a privately-held company. 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) 1/27/2024 4/29/2023 Short-term investments: Marketable securities $ 6,533 $ 5,043 Held-to-maturity investments 1,304 1,351 Total short-term investments 7,837 6,394 Long-term investments: Marketable securities 12,998 18,509 Total investments $ 20,835 $ 24,903 Investments to enhance returns on cash $ 7,748 $ 11,617 Investments to fund compensation/retirement plans 13,087 13,286 Total investments $ 20,835 $ 24,903 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 Losses1/27/2024 4/29/2023 (Unaudited, amounts in thousands) Gross
Unrealized
GainsGross
Unrealized
LossesFair Value Gross
Unrealized
GainsGross
Unrealized
LossesFair Value Equity securities $ 358 $ — $ 3,906 $ 1,338 $ (103) $ 6,853 Fixed income 174 (120) 13,045 42 (620) 14,039 Other 804 (8) 3,884 1,171 — 4,011 Total securities $ 1,336 $ (128) $ 20,835 $ 2,551 $ (723) $ 24,903 The following table summarizes sales of available-for-salemarketable securities:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/2024 1/28/2023 1/27/2024 1/28/2023 Proceeds from sales $ 1,381 $ 5,514 $ 21,849 $ 18,178 Gross realized gains 33 3 1,909 52 Gross realized losses — (81) (740) (207) 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.We maintain a revolving credit facility secured primarily by all 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.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.(Unaudited, amounts in thousands) 1/27/2024 Within one year $ 6,445 Securities not due at a single maturity date 6,600 Total $ 13,045 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. Our We 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, the13warranty 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) 1/27/2024 1/28/2023 1/27/2024 (1) 1/28/2023 Balance as of the beginning of the period $ 31,127 $ 28,357 $ 30,984 $ 27,036 Accruals during the period 6,272 8,663 19,894 24,942 Settlements during the period (6,093) (7,722) (19,572) (22,680) Balance as of the end of the period $ 31,306 $ 29,298 $ 31,306 $ 29,298 (1)$19.8 million and $13.2$19.9 million respectively, of our product warranty liabilityis recorded in accrued expenses and other current liabilities on our consolidated balance sheet,as of January 27, 2024, and includedApril 29, 2023, 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:Stock Options. We granted 573,591Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/2024 1/28/2023 1/27/2024 1/28/2023 Equity-based awards expense $ 3,711 $ 3,377 $ 11,048 $ 8,456 Liability-based awards expense (1)131 (54) 184 92 Total stock-based compensation expense $ 3,842 $ 3,323 $ 11,232 $ 8,548 (1)Includes stock optionsappreciation rights, deferred stock units issued to employees during the first quarter of fiscal 2018,Directors, restricted stock units, 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 compensationperformance-based units. Compensation expense for stock options over the vesting period equal to the fair value on the date our compensation committee approved the awards. The vesting period for our stock options ranges from one to four years, with accelerated vesting upon retirement. We expense options granted to retirement-eligible employees immediately. We estimate forfeiture rates based on our employees’ forfeiture history and believe they will approximate future results. We estimate the fair value of the employee stock options at the date of grant using the Black-Scholes option-pricing model, which requires management to make certain assumptions. We estimate expected volatilitythese awards is based on the historical volatilitymarket price of our common shares. We base the average expected lifestock 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 the fair value of stock options granted during the first quarter of fiscal 2018 using the following assumptions:
grantStock Appreciation Rights (“SARs”). We did not grant any SARs to employees during the first nine months of fiscal 2018, but we 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 ofand is remeasured 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 stockshares 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 duringDuring the first quarter of fiscal 2018. We also have2024, we granted 330,140 shares of restricted stock units to employees and we also have restricted stock awards 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 our compensation committeeCompensation and Talent Oversight Committee of our board of directors approved the awards. Restricted stock awards vest at 25% per year, beginning one year from the grant date for a term of four years.Restricted Stock Units. Duringyears, with continued vesting upon retirement with respect to the secondfiscal 2023 and fiscal 2024 grants. 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 quarter of fiscal 2018,2024 was $27.66 per share, the market value of our common shares on the date of grant.Restricted Stock Units Issued to Directors. During the first nine months of fiscal 2024, we granted 29,52035,736 restricted stock units to our non-employee directors. TheseRestricted stock units granted to our non-employee directors are offered at no cost to the directors and restricted stock units granted following August 2022 vest whenon the earlier of the date a director leavesceases to be a member of the board.board (for any reason other than the termination of service for cause) or the-one year anniversary of the grant date. 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, whichgrant. The weighted-average fair value of the restricted stock units granted to our non-employee directors in the first nine months of fiscal 2024 was $23.85.Performance Shares. During the first quarter of fiscal 2018,2024, we granted 177,805219,154 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 the14target 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, taking into account the probability that we will satisfy the performance goals. The fair value of each share of the awards we granted in fiscal 20182024 that vest based on attaining performance goals was $25.93,$25.48, the market value of our common shares on the date we granted the awards less 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 20182024 grant of shares that vest based on market conditions was $36.24.Stock Options. We did not grant stock options to employees during fiscal 2024, but we have stock options outstanding from grants from prior years. 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 our Compensation and Talent Oversight Committee of our board 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 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. Granted options outstanding under the former long-term equity award plan remain in effect and have a term of 10 years. We estimated the fair value of the employee stock options granted in prior years at their respective grant date using the Black-Scholes option-pricing model, which requires management to make certain assumptions.Activity in accumulated other comprehensive lossincome (loss) for the quarterquarters ended January 27, 2018,2024, and January 28, 2017,2023, 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
marketable
securities
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 28, 2023 $ (4,696) $ (12) $ (2,684) $ (7,392) Changes before reclassifications 2,147 454 — 2,601 Amounts reclassified to net income — — 31 31 Tax effect — (112) (8) (120) Other comprehensive income attributable to La-Z-Boy Incorporated 2,147 342 23 2,512 Balance at January 27, 2024 $ (2,549) $ 330 $ (2,661) $ (4,880) 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 attributable to La-Z-Boy Incorporated 4,014 287 36 4,337 Balance at January 28, 2023 $ (2,537) $ (214) $ (3,429) $ (6,180) 15Table of ContentsThe activityActivity in accumulated other comprehensive lossincome (loss) for the nine months ended January 27, 2018,2024 and January 28, 2017,2023, is as follows:
adjustment
of cash
flow hedge
gain on
marketable
securities
amortization
and net
actuarial
loss
other
comprehensive
loss
adjustment
of cash
flow hedge
gain on
marketable
securities
amortization
and net
actuarial
loss
other
comprehensive
lossIn our consolidated statement of income, we(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 29, 2023 $ (2,652) $ (145) $ (2,731) $ (5,528) Changes before reclassifications 103 300 — 403 Amounts reclassified to net income — 331 93 424 Tax effect — (156) (23) (179) Other comprehensive income attributable to La-Z-Boy Incorporated 103 475 70 648 Balance at January 27, 2024 $ (2,549) $ 330 $ (2,661) $ (4,880) 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) We 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-controllingnoncontrolling interest were as follows:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/2024 1/28/2023 1/27/2024 1/28/2023 Balance as of the beginning of the period $ 9,507 $ 9,128 $ 10,261 $ 8,897 Net income (loss) 44 (149) 986 1,005 Other comprehensive income (loss) 115 1,427 (409) 504 Dividends distributed to joint venture minority partners — — (1,172) — Balance as of the end of the period $ 9,666 $ 10,406 $ 9,666 $ 10,406 Note 10: 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.16The following table presents our revenue disaggregated by product category and by segment or unit:Quarter Ended January 27, 2024 Quarter Ended January 28, 2023 (Unaudited, amounts in thousands) Wholesale Retail Corporate
and OtherTotal Wholesale Retail Corporate
and OtherTotal Upholstered Furniture $ 300,568 $ 168,473 $ 46,187 $ 515,228 $ 322,461 $ 206,959 $ 35,253 $ 564,673 Casegoods Furniture 19,483 11,021 3,677 34,181 28,330 16,804 5,021 50,155 Delivery 39,633 8,430 1,773 49,836 50,008 8,105 1,654 59,767 Other (1) (3,309) 16,772 (13,505) (42) 6,804 19,289 (8,418) 17,675 Total $ 356,375 $ 204,696 $ 38,132 $ 599,203 $ 407,603 $ 251,157 $ 33,510 $ 692,270 Eliminations (98,797) (119,547) Consolidated Net Sales $ 500,406 $ 572,723 Nine Months Ended January 27, 2024 Nine Months Ended January 28, 2023 (Unaudited, amounts in thousands) Wholesale Retail Corporate
and OtherTotal Wholesale Retail Corporate
and OtherTotal Upholstered Furniture $ 898,757 $ 512,176 $ 135,617 $ 1,546,550 $ 990,936 $ 610,989 $ 132,933 $ 1,734,858 Casegoods Furniture 60,211 35,796 12,633 108,640 86,881 44,677 19,290 150,848 Delivery 123,331 25,542 5,430 154,303 162,783 24,293 5,657 192,733 Other (1) (27,482) 53,734 (39,255) (13,003) 55,052 59,371 (32,003) 82,420 Total $ 1,054,817 $ 627,248 $ 114,425 $ 1,796,490 $ 1,295,652 $ 739,330 $ 125,877 $ 2,160,859 Eliminations (302,998) (372,713) Consolidated Net Sales $ 1,493,492 $ 1,788,146 (1)Primarily includes discounts and allowances, revenue for advertising, royalties, parts, accessories, after-treatment products, surcharges, rebates and other sales incentives. In fiscal 2024, certain amounts that were previously charged as surcharges in fiscal 2023 are now included in the base product pricing and reflected in the amounts by product category.Upholstered Furniture - Includes gross revenue for upholstered furniture, such as recliners, sofas, loveseats, chairs, sectionals, modulars, and ottomans. 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.Casegoods Furniture - Includes gross revenue for casegoods furniture typically found in a bedroom, such as beds, chests, dressers, nightstands and benches; furniture typically found in the dining room, such as dining tables, storage units, and stools; and furniture typically 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.Contract 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) 1/27/2024 4/29/2023 Contract assets $ 43,259 $ 44,939 Customer deposits $ 102,438 $ 105,766 Deferred revenue 43,259 44,939 Total contract liabilities (1)$ 145,697 $ 150,705 (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 184 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 and Other. Corporate and 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 and Other meet the requirements of reportable segments.18Table of ContentsThe following table presents sales and operating income (loss) by segment:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands) 1/27/2024 1/28/2023 1/27/2024 1/28/2023 Sales Wholesale segment: Sales to external customers $ 260,542 $ 291,170 $ 760,531 $ 934,511 Intersegment sales 95,833 116,433 294,286 361,141 Wholesale segment sales 356,375 407,603 1,054,817 1,295,652 Retail segment sales 204,696 251,157 627,248 739,330 Corporate and Other: Sales to external customers 35,168 30,396 105,713 114,305 Intersegment sales 2,964 3,114 8,712 11,572 Corporate and Other sales 38,132 33,510 114,425 125,877 Eliminations (98,797) (119,547) (302,998) (372,713) Consolidated sales $ 500,406 $ 572,723 $ 1,493,492 $ 1,788,146 Operating Income (Loss) Wholesale segment $ 22,711 $ 16,940 $ 67,664 $ 81,558 Retail segment 22,313 44,203 79,512 123,855 Corporate and Other (12,463) (18,303) (46,477) (48,047) Consolidated operating income 32,561 42,840 100,699 157,366 Interest expense (106) (136) (329) (414) Interest income 4,124 2,012 11,222 3,624 Other income (expense), net (639) (1,062) 21 (834) Income before income taxes $ 35,940 $ 43,654 $ 111,613 $ 159,742 Our effective tax rate was 20.2% 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 rate24.5% for the third quarter and first nine months of fiscal 2018, was 62.0%ended January 27, 2024, respectively, compared with 27.7% and 43.9%, respectively. For26.6% for the third quarter and first nine months of fiscal 2017, ourended January 28, 2023, respectively. The reduced effective tax rate was 29.4% and 33.4%, respectively. 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 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.Our consolidated balance sheet at the end of the third quarter of fiscal 2018 reflected a $1.1 million net liability2024 was primarily the result of favorable return to provision adjustments from the prior year. Absent these discrete items, the effective tax rate would have been 25.6% for uncertain incomethe third quarter of fiscal 2024. Our effective tax positions. We do not expect this net liabilityrate varies from the 21% federal statutory rate primarily due to change significantly in the next 12 months. We will either pay or release the liability for uncertain income tax positions as tax audits are completed or settled, statutesstate taxes.19Note 15:13: Earnings per ShareCertain share-based compensation awards that entitle their holders to receive non-forfeitable dividends prior to vesting are considered participating securities. We grant restricted stock awards that contain 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:Quarter Ended Nine Months Ended (Unaudited, amounts in thousands, except per share data) 1/27/2024 1/28/2023 1/27/2024 1/28/2023 Numerator (basic and diluted): Net income available to common Shareholders $ 28,640 $ 31,726 $ 83,318 $ 116,291 Denominator: Basic weighted average common shares outstanding 42,767 43,137 43,005 43,111 Contingent common shares 256 — 238 — Stock option dilution 172 — 101 — Diluted weighted average common shares outstanding 43,195 43,137 43,344 43,111 Earnings per Share: Basic $ 0.67 $ 0.74 $ 1.94 $ 2.70 Diluted (1)$ 0.66 $ 0.74 $ 1.92 $ 2.70 (1)Diluted earnings per share was computed using the treasury stock method.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 weighted 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 27, 2018, or for2024, we excluded options to purchase 0.2 million shares and 0.5 million shares, respectively, from the diluted share calculation. 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.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.20The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at January 27, 2018,2024 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)2023. 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 27, 2024 Fair Value Measurements (Unaudited, amounts in thousands) Level 1 Level 2 Level 3 NAV(1) Total Assets Marketable securities $ — $ 9,026 $ — $ 10,505 $ 19,531 Held-to-maturity investments 1,304 — — — 1,304 Total assets $ 1,304 $ 9,026 $ — $ 10,505 $ 20,835 At April 29, 2023 Fair Value Measurements (Unaudited, amounts in thousands) Level 1 Level 2 Level 3 NAV(1) Total Assets Marketable securities $ — $ 16,557 $ — $ 6,995 $ 23,552 Held-to-maturity investments 1,351 — — — 1,351 Total assets $ 1,351 $ 16,557 $ — $ 6,995 $ 24,903 (1)Certain marketable securities investments are measured at fair value using net asset value per share under the practical expedient methodology.At January 27, 2018,2024 and April 29, 2017,2023, 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, our Level 3 investments included preferred shares21Table of two privately-held companies, and a warrant to purchase common shares of one of these privately-held companies. We initially valued our Level 3 investments at their cost basis as of the date of purchase, because the cost basis was the best estimate of their fair value on the date of acquisition. During fiscal 2017, we recorded a $0.7 million unrealized gain in other comprehensive income related to a change in 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 fair value of this liability based on the present value of the probability-weighted future cash flows, 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, and recorded the benefit as a component of selling, general, and administrative expense in our consolidated statement of income, because we determined it was not probable that a portion of the contingent consideration would be earned.ContentsThe following table is a reconciliation 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 end 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, and our business and industry.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 "aim," "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) changes in consumer confidenceincluding, but not limited to, the risks and demographics; (b) the possibility of a recession; (c) changes in the real estate and credit markets and their effects on our customers, consumers and suppliers; (d) international political unrest, terrorism 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 renegotiation 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 defectsuncertainties discussed in our products resulting in delays in manufacturing, recall campaigns, reputational damage, or increased warranty costs; (p) litigation arising outAnnual Report for the fiscal year ended April 29, 2023, under Item 1A, "Risk Factors" and Item 7, "Management’s Discussion and Analysis of alleged defectsFinancial Condition and Results of Operations" and 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-K and other factors identified from time to time in our reports filedfilings with the Securities and Exchange Commission.Commission ("SEC"). Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in our Annual Report for the fiscal year ended April 29, 2023 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 take advantage of the safe harbor provisions of the Private Securities 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 27, 2024, our supply chain operations included the following:•Five major manufacturing locations and six regional15 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 opportunities22During 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. As a result of this action, charges were recorded within the Wholesale segment in the third and fourth quarters of fiscal 2023, totaling $9.2 million in selling, general and administrative ("SG&A") expense for the impairment of various assets, primarily long-lived assets, and $1.6 million in cost of sales, primarily related to severance. During the first quarter of fiscal 2024, we terminated our lease on the Torreón facility and recognized a $1.2 million gain in SG&A expense within the Wholesale segment related to the settlement of our lease obligation on the previously impaired long-lived assets.During the second quarter of fiscal 2024, we announced further actions intended to drive efficiencies and optimize our manufacturing capacity in our global supply chain operations. As part of this initiative, we made the decision to shift upholstery production from our Ramos, Mexico operations to our other upholstery plants and relocate our cut and sew operations back to Ramos, Mexico, resulting in the permanent closure of our leased cut and sew facility in Parras, Mexico. As a result of these actions, charges were recorded within the Wholesale segment in the second and third quarters of fiscal 2024, totaling $3.8 million in cost of sales, primarily related to severance, and $3.0 million in SG&A expense for the accelerated depreciation of fixed assets.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 6050 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 350353 La-Z-Boy Furniture Galleries® stores and 532524 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 184 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 524 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 2.6 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 534642 outlets and approximately 1.71.9 million square feet of proprietary floor space.•In total, our proprietary floor space includes approximately 9.412.1 million square feet.•Joybird sells product primarily online and also has limited retail showroom floor space through 12 small-format stores in key urban markets.Century Vision StrategyOur goal is to deliver value to our shareholders with improved sales and earnings over the long term throughby executing our Century Vision, our strategic initiatives.plan for growth to our centennial year in 2027, in which we aim to grow sales and market share and strengthen our operating margins. The foundation of our strategic initiativesplan is driving profitable salesto drive disproportionate growth of our two consumer brands, La-Z-Boy and Joybird, by delivering the transformational power of comfort with a consumer-first approach. We plan to drive growth in all areasthe following ways:23Expanding the La-Z-Boy Furniture Galleries® store networkbrand reach•Leveraging our connection to comfort and reinvigorating our brand with a consumer focus and expanded omni-channel presence. Our strategic initiatives to leverage and reinvigorate our iconic La-Z-Boy brand center on a renewed focus on leveraging the compelling La-Z-Boy Comfort Studio® locations,comfort message, accelerating our store-within-a-store format. Our target is 1,000 proprietary locations, composedomni-channel offering, and identifying additional consumer-base growth opportunities. We launched our new brand campaign and marketing platform in fiscal 2024, Long Live the Lazy, with compelling messaging designed to increase recognition and consideration of 400 La-Z-Boy Furniture Galleries® stores and 600 La-Z-Boy Comfort Studio® locations.the brand. We expect this initiative to generate growth in our Retail segment through an increased company-owned store count, and to generate growth in our wholesale Upholstery segment as our proprietary distribution network expands.· We are growingnew messaging will enhance the sizeappeal of our company-owned retail business by opening new La-Z-Boy Furniture Galleries® stores, primarilybrand with a broader consumer base. Further, our goal is to connect with consumers along their purchase journey through multiple means, whether online or 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.· We are attempting to responsibly increase our market share by taking advantage of our unique multi-channel distribution network. In addition to our branded distribution channels, over 1,800 other dealers sell La-Z-Boy products, providing us the benefit of multi-channel distribution. These outlets include some of the best known names in the industry, including Art Van, Nebraska Furniture Mart, andSlumberland. Our other brands, England, American Drew, Hammary, and Kincaid, enjoy distribution through many of the same outlets. We believe there is significant growth potential for our brands through these retail channels.· We also aim to increase our market share in stationary upholstered furniture through a combination of our Live Life Comfortably® marketing campaign and our innovative and on-trend product. While we are known for our iconic recliners, they account for less than half 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.person. We are driving change throughout our digital platforms to improve the user experience, with a specific focus on the ease bywith which customers browse through our broad product assortment, customize products to their liking, find stores to make a purchase, or purchase at la-z-boy.com.·www.la-z-boy.com.•Growing our La-Z-Boy Furniture Galleries® store network. We expect our strategic initiatives in this area to generate growth in our Retail segment through an increased company-owned store count and in our Wholesale segment as our proprietary distribution network expands. We are bringing innovative productsnot only focused on growing the number of locations, but also on upgrading existing store locations to our new concept designs. We are prioritizing growth of our company-owned Retail business 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 distribution centers, where we see opportunity for growth, or where we believe we have opportunities for further market penetration. Additionally, we are testing potential store formats to expand our reach to value-seeking consumers and currently operate two Outlet by La-Z-Boy stores.•Expanding the reach of our wholesale distribution channels. Consumers experience the La-Z-Boy brand in many channels including stain-resistant iCleanTM fabricthe La-Z-Boy Furniture Galleries® store network and the La-Z-Boy Comfort Studio® locations, 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 furniturestore-within-a-store format. While consumers increasingly interact with the powerbrand digitally, our consumers also demonstrate an affinity for visiting our stores to recline atshop, allowing us to frequently deliver the push of a button. We are committed to innovation throughout our business,flagship La-Z-Boy Furniture Galleries® store, or La-Z-Boy Comfort Studio®, experience 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.strategies above,benefit of multi-channel distribution. These outlets include some of the best-known names in the industry, including Slumberland, Nebraska Furniture Mart, Mathis Brothers and Raymour & Flanagan. We believe there is significant growth potential for our consumer brands through these retail channels.Profitably growing the Joybird brand•Profitably growing the Joybird brand with a digital-first consumer experience. During fiscal 2019, we recognizepurchased Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture with a direct-to-consumer model. We believe that online furniture sales are growing rapidly. In responseJoybird 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 this changing landscape,drive 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 consumers' omni-channel experience.Enhancing our enterprise capabilities•Enhancing our enterprise capabilities to support the growth of our consumer brands and enable potential acquisitions for growth. Key to successful growth is ensuring we have developed a multi-faceted strategythe capabilities to participate in and leverage thissupport that 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 globalincluding an agile supply chain, to support other e-commerce brands;modern technology for consumers and invest in new online companies. We believe this three-pronged approach will position us for growth in the ever-changing online selling environment,employees, and by delivering a human-centered employee experience. Through our Century Vision strategic plan, we will continue developinghave several initiatives focused on enhancing these strategies throughout the fiscal year.Reportable SegmentsOur reportable operating segments areinclude the Upholstery segment, the CasegoodsRetail segment and the Wholesale segment.•Retail segment.·Upholstery SegmentUpholsteryRetail segment isconsists of one operating segment comprised of our largest business184 company-owned La-Z-Boy Furniture Galleries® stores. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other accessories, to end consumers through these stores.•Wholesale Segment. Our Wholesale segment 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 three24brands: 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•Corporate and Other. Corporate and 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 importer, marketer, and distributor of casegoods/woode-commerce retailer that manufactures upholstered furniture, such as bedroom sets, dining room sets, entertainment centerssofas, loveseats, chairs, ottomans, sleeper sofas and occasional pieces,beds, 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,imports casegoods (wood) furniture, such 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 147 company-owned La-Z-Boy Furniture Galleries® stores. The Retail segment primarily sells upholstered furniture, in addition to some casegoodsoccasional tables and other accessories,accessories. Joybird sells to the end consumer primarily online through these stores.Fiscal 20182024 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) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change Sales $ 500,406 $ 572,723 (12.6)% $ 1,493,492 $ 1,788,146 (16.5) % Operating income 32,561 42,840 (24.0)% 100,699 157,366 (36.0) % Operating margin 6.5% 7.5% 6.7% 8.8% SalesOur consolidatedConsolidated sales decreased $72.3 million, or 13%, and $294.7 million, or 16%, in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago. Sales in the first nine months of fiscal 2023 were fueled by the delivery of a significant backlog resulting from heightened demand in prior periods. As a result, the decrease in sales during the third quarter and first nine months of fiscal 2024 reflects a return to industry-wide seasonal trends relative to a historically high comparative period combined with a challenging consumer environment. Additionally, volume in the third quarter of fiscal 2024 was negatively impacted by winter weather events in January, which caused temporary shutdowns of our U.S. manufacturing facilities, delivery delays, and reduced store traffic throughout much of the central U.S. To a lesser extent, sales also decreased in the third quarter and first nine months of fiscal 2024, as a result of selective pricing on products and delivery services, along with promotional actions, taken to maintain competitiveness.Operating MarginOperating margin, which is calculated as operating income as a percentage of sales, decreased 100 basis points and 210 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.•Gross margin, which is calculated as gross profit as a percentage of sales, increased $23.6150 basis points and 300 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.◦Lower input costs, led by improved sourcing and reduced commodity prices, drove an increase in gross margin in the third quarter and first nine months of fiscal 2024, compared with the same periods a year ago.◦Gross margin in the third quarter and first nine months of fiscal 2024 further benefited from a shift in product mix within our Joybird business toward higher margin products.◦Partially offsetting the items above, plant inefficiencies resulting from winter weather events in January of fiscal 2024, which caused temporary shutdowns of our U.S. manufacturing facilities, and transition costs25related to our supply chain optimization initiative in Mexico drove a decline in gross margin during the third quarter and first nine months of fiscal 2024, compared with the same periods a year ago.◦Gross margin decreased further from selective pricing and promotional actions taken in the third quarter and first nine months of fiscal 2024 to maintain competitiveness.•SG&A expenses as a percentage of sales increased 250 basis points and 510 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.◦During the third quarter and first nine months of fiscal 2023, we recognized charges of $9.2 million related to the closure of our Torreón, Mexico manufacturing facility. During the first nine months of fiscal 2024 we recognized $3.0 million in accelerated depreciation related to long-lived assets at our Ramos, Mexico facility. Additionally, the first nine months of fiscal 2024 includes a $1.2 million gain related to the settlement of our Torreón, Mexico lease obligation on previously impaired long-lived assets. Together, these items resulted in a 160 basis point and 40 basis point decrease in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively.◦Absent the items above, while SG&A expenses were down $2.8 million and $56.6$10.5 million in the third quarter and first nine months of fiscal 2018,2024, respectively, compared with the same periods a year ago. Thisago, lower delivered sales relative to selling expenses and fixed costs drove an increase was driven byin SG&A expense as a percentage of sales growth in all three of our operating segments. Our Upholstery segment benefited fromover the acquisition of the La-Z-Boy wholesale businesssame respective periods.We discuss each segment’s results in the United Kingdomfollowing section.Retail SegmentQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change Sales $ 204,696 $ 251,157 (18.5)% $ 627,248 $ 739,330 (15.2) % Operating income 22,313 44,203 (49.5)% 79,512 123,855 (35.8) % Operating margin 10.9% 17.6% 12.7% 16.8% SalesThe Retail segment’s sales decreased $46.5 million, or 18%, and Ireland and a favorable change in our product mix. Our Casegoods segment increased sales by expanding our floor space with existing retailers, resulting in higher volume. Our Retail segment 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 percentage points and 0.9 percentage points$112.1 million, or 15%, in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· Our gross margin decreased 0.9 percentage points and 0.6 percentage points during the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· The decreases for both 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 impacted the comparison of our gross margin 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, general, and administrative (“SG&A”) expenses as a percentage of sales were 0.3 percentage points lower in the third quarter of fiscal 2018 compared with the same period a year ago.· Our SG&A expense as a percentage of sales was lower in the third quarter 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 period a year ago.· Incentive compensation expense as a percentage of sales was 0.2 percentage points lower in the third quarter of fiscal 2018. Several of our share-based compensation awards are liability-based and the cumulative expense to date is adjusted at the end 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 our SG&A expense as a percentage of sales in the third quarter of fiscal 2018 by 1.0 percentage point.· SG&A expense as a percentage of sales increased 0.3 percentage points in the first nine months of fiscal 2018 compared with the same period a year ago.· Our SG&A expense increased 0.4 percentage points in the first nine months due to the growth of our Retail segment as 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 our SG&A expense as a percentage of sales in the 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 in 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 Discussion 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
ChangeSalesOur Upholstery segment’s sales increased $18.0 million and $34.0 million in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago. The acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland added sales of $8.2 million and $20.2 million in the third quarter and first nine months of fiscal 2018, respectively. Changes in our product mix resulted in an additional 2.9% and 2.2% increase in sales 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 2018,2024, respectively, compared with the same periods a year ago, primarily due to higher volume we achieved through improved product styling, expandinga decline in delivered same-store sales resulting from the adverse comparison to historic sales levels in the prior year, which were fueled by the delivery of previously built COVID-related backlog. Additionally, sales in the third quarter of fiscal 2024 were negatively impacted by winter weather events in January which caused delivery delays and reduced store traffic throughout much of the central U.S. The decrease in delivered same-store sales was partially offset by a $7.3 million and $18.7 million increase in sales during the third quarter and first nine months of fiscal 2024, respectively, from our floor spaceretail store acquisitions that occurred in fiscal 2023 and fiscal 2024.Written same-store sales were down 8% and 2% in the third quarter and first nine months of fiscal 2024, respectively, compared with existing retailers,the same periods a year ago, due in part to the winter weather events noted above, which negatively impacted our retail store traffic across much of the central U.S., combined with an overall challenging consumer environment. Same-store sales include the sales of all currently active stores which have been open and a consistent in-stock position.Operating MarginOur Casegoods segment’sThe Retail segment's operating margin improved 3.5 percentagedecreased 670 basis points and 2.0 percentage410 basis points in the third quarter and first nine months of fiscal 2018,2024, respectively, compared with the same periods a year ago.· The segment’s gross•Gross margin increased 1.0 percentage point110 basis points and 0.4 percentage120 basis points in the third quarter and first nine months of fiscal 2018,2024, respectively, compared with the same periods a year ago, primarily due to increased volume andprior period pricing actions which were realized as products were delivered to consumers, combined with a favorable shift in our product mix to newer, higher-margin collections. This was somewhat offset by increased freight expense on imported product.· The segment’stowards higher margin products.•While SG&A expenseexpenses were down in the third quarter and first nine months of fiscal 2024 compared with the same periods a year ago, SG&A expenses as a percentage of sales decreased 2.5 percentageincreased 780 basis points and 1.6 percentage530 basis points over the26same respective periods, primarily due to lower delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses.Wholesale SegmentQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change Sales to external customers $ 260,542 $ 291,170 $ 760,531 $ 934,511 Intersegment sales 95,833 116,433 294,286 361,141 Total Sales 356,375 407,603 (12.6)% 1,054,817 1,295,652 (18.6) % Operating income 22,711 16,940 34.1% 67,664 81,558 (17.0) % Operating margin 6.4% 4.2% 6.4% 6.3% SalesThe Wholesale segment’s sales decreased $51.2 million, or 13%, and $240.8 million, or 19%, in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago. Over the same periods, intercompany sales from our Wholesale segment to our Retail segment decreased 18% and 19%, respectively. The decrease in sales primarily reflects a decline in delivered unit volume as the significant backlog built up in prior periods returns to pre-pandemic levels and the industry returns to typical seasonality. Additionally, volume in the third quarter of fiscal 2024 was negatively impacted by winter weather events in January, which caused temporary shutdowns of our U.S. manufacturing facilities. To a lesser extent, sales also decreased in the third quarter and first nine months of fiscal 2024, as a result of selective pricing on products and delivery services, along with promotional actions, taken to maintain competitiveness.Operating MarginThe Wholesale segment's operating margin increased 220 basis points and 10 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.•Gross margin increased 170 basis points and 300 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.◦Lower input costs, led by improved sourcing and reduced commodity prices, drove a 490 basis point and 440 basis point increase in gross margin during the third quarter and first nine months of fiscal 2018,2024, respectively,◦Gross margin in the first nine months of fiscal 2024 also benefited 50 basis points from a favorable shift in product mix towards higher margin products.◦Partially offsetting the items above, plant inefficiencies resulting from winter weather events which caused temporary shutdowns of our U.S. manufacturing facilities and transition costs related to our supply chain optimization initiative in Mexico led to a 190 basis point and 90 basis point decrease in gross margin during the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.◦Gross margin further decreased 110 basis points and 130 basis points, in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, due primarilyfrom selective pricing and promotional actions taken to our improved absorption of fixed maintain competitiveness.•SG&A costsexpense as a percentage of sales decreased 50 basis points and increased 290 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.◦During the third quarter and first nine months of fiscal 2023, we recognized charges of $9.2 million related to the closure of our Torreón, Mexico manufacturing facility. During the first nine months of fiscal 2024, we recognized $3.0 million in accelerated depreciation related to long-lived assets at our Ramos, Mexico facility. Additionally, the first nine months of fiscal 2024 includes a $1.2 million gain related to the settlement of our Torreón, Mexico lease obligation on the higher sales volume,previously impaired long-lived assets. Together, these items resulted in an 230 basis point and a reduction50 basis point decrease in discretionary SG&A spending.◦Reduced fixed cost leverage contributed to higher SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.27◦Higher marketing expense in support of our Long Live the Lazy campaign launch drove a 120 basis point and 140 basis point increase in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago. Investments in this campaign support all La-Z-Boy branded products, including those sold through our 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
ChangeCorporate and OtherQuarter Ended Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change Sales $ 38,132 $ 33,510 13.8% $ 114,425 $ 125,877 (9.1) % Intercompany eliminations (98,797) (119,547) 17.4% (302,998) (372,713) 18.7 % Operating loss (12,463) (18,303) 31.9% (46,477) (48,047) 3.3 % SalesOur Retail segment’sCorporate and Other sales increased $3.7$4.6 million and $27.9decreased $11.5 million in the third quarter and first nine months of fiscal 2018,2024, respectively, compared with the same periods a year ago. Inago, primarily led by Joybird sales. Joybird sales increased $5.2 million to $34.0 million in the third quarter andof fiscal 2024, primarily due to a favorable shift in product mix towards higher priced products but decreased $7.8 million to $101.9 million during the first nine months of fiscal 2018, we increased2024, largely due to demand challenges experienced over the segment’slast 12 months. Compared with the respective periods a year ago, written sales from new stores thatfor Joybird were not open in the prior-year period by $4.0 milliondown 14% 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 point10% 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
ChangeSalesSales increased2024, respectively.Intercompany eliminations decreased in the third quarter and first nine months of fiscal 20182024 compared with the same periods a year ago due to an increase in intercompany commission revenue chargedlower sales from our Wholesale segment to our reportable segments by our global trading company in Hong Kong.Eliminations increasedRetail segment.Operating LossOur Corporate and Other operating loss decreased $5.8 million and $1.6 million in the third quarter and first nine months of fiscal 2018 compared with2024, respectively, primarily from improved Joybird operating performance partially offset by unfavorable intercompany inventory profit elimination adjustments. Additionally, the same periods a year ago due to higher sales from our Upholstery and Casegoods segments to our Retail segment, mainly because of new store openings and store acquisitions.Operating LossOur Corporate and Other operating loss was $1.5 million and $6.3 million lower in the third quarter and first nine months of fiscal 2018, respectively, compared with the same periods a year ago.· This was primarily due to improved profitability associated with2024 experienced lower operating profit from our global trading company in Hong Kong. The profitability of our global trading companyNon-Operating Income (Expense)Interest IncomeInterest income was $2.1 million and $7.6 million higher in the third quarter and first nine months of fiscal 20182024, 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.Gainprimarily driven by higher interest rates 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 $0.1 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 was 20.2% and 24.5% for the third quarter and first nine months of fiscal 2018, was 62.0%2024, respectively, compared with 27.7% and 43.9%, respectively. For26.6% for the third quarter and first nine months of fiscal 2017, our2023, respectively. The reduced effective tax rate was 29.4% and 33.4%, respectively. 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 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 during2024 was primarily the fourthresult of favorable return to provision adjustments from the prior year. Absent these discrete items, the effective tax rate would have been 25.6% for the third 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 our2024. Our effective tax rate in fiscal 2018 or invaries from the future. We will continue21% federal statutory rate primarily due 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. expenditures, including fiscal 2024 contractual obligations.We had cash, cash equivalents and restricted cash of $137.6$333.2 million at January 27, 2018,2024, compared with $150.9$346.7 million at April 29, 2017.2023. In addition, we had investments to enhance our returns on cash of $35.4$7.7 million at January 27, 2018,2024, compared with $33.1$11.6 million at April 29, 2017.We maintain a revolving credit facility secured primarily by all2023.28The 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) 1/27/2024 1/28/2023 Cash Flows Provided By (Used For) Net cash provided by operating activities $ 105,354 $ 127,052 Net cash used for investing activities (54,029) (57,965) Net cash used for financing activities (64,476) (33,894) Exchange rate changes (348) (4) Change in cash, cash equivalents and restricted cash $ (13,499) $ 35,189 Operating ActivitiesDuring the first nine months of fiscal 2018 were $24.12024, net cash provided by operating activities was $105.4 million, a decrease of $21.7 million compared with $15.5the prior year, mainly due to lower net income and a smaller reduction in receivables, partially offset by a smaller reduction in customer deposits, reflecting a reduced backlog. Our cash provided by operating activities in fiscal 2024 was primarily attributable to net income, adjusted for non-cash items, partially offset by a $13.6 million decrease in other liabilities, mainly due to the payout of our fiscal 2023 incentive compensation awards during the first quarter of fiscal 2024, along with an $8.0 million decrease in customer deposits reflecting the reduced backlog.Investing ActivitiesDuring the first nine months of fiscal 2024, net cash used for investing activities was $54.0 million, a decrease of $3.9 million compared with the prior year primarily due to lower capital expenditures and higher proceeds from asset sales, partially offset by increased spend on acquisitions. Cash used for investing activities in fiscal 2024 included the following:•Cash used for capital expenditures in the period was $38.0 million compared with $57.4 million during the first nine months of fiscal 2017.2023, which was primarily related to La-Z-Boy Furniture Galleries® (new stores and remodels) and upgrades at our manufacturing and distribution facilities. We anticipate that spending on these items will continue in fiscal 2024 with full year fiscal 2024 capital expenditures expected to be in the range of $50 to $60 million. We have no material contractual commitments outstanding for future capital expenditures. We expect capital expenditures to be in the range of $45 to $50•Cash used for acquisitions was $26.3 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 Illinois and Indiana, Colorado Springs, Colorado and Lafayette, Louisiana retail businesses.•Proceeds from the sale of investments, net of investment purchases was $5.5 million.Financing ActivitiesOn October 15, 2021, we entered into a five-year $200 million unsecured revolving credit facility (as amended, 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 27, 2024, 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 27, 2024, we were in compliance with our financial covenants under the Credit Facility. We believe our cash and cash equivalents, short-term investments, and cash from operations, 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 2024, net cash used for financing activities was $64.5 million, an increase of $30.6 million compared with the prior year, primarily due to higher share repurchases, partially offset by proceeds from exercised stock options. Cash used for financing activities in fiscal 2018. Additionally,2024 included the following:•Our board of directors has authorized the repurchase of company stock and we currently estimate that we will incur approximately $2spent $40.0 million in capital expendituresthe first nine months of fiscal 2024 to repurchase 1.3 million shares. As of January 27, 2024, 6.0 million shares remained available for repurchase pursuant to this authorization. With the operating cash flows we anticipate generating in fiscal 2018 related2024, we29expect to the new corporate office buildingcontinue repurchasing Company stock subject to market conditions and expansionother factors as deemed relevant by our board of the manufacturing facility fordirectors.•Cash paid to our England subsidiary, both of which we currently anticipate being completed by the end of fiscal 2019.time.The following table illustratestime at the main componentsboard's discretion.•Proceeds from exercised stock options, net of stock issued and taxes withheld as part of our cash flows:Operating ActivitiesDuring the first nine months of fiscal 2018, net cash provided by operating activitiesemployee benefit plans, was $91.2$6.2 million. Our cash provided by operating activities•Cash paid for the periodholdback payments made on prior-period acquisitions was primarily attributable to net income we generated during the first nine months of fiscal 2018,$5.0 million for a $12.5 million increase in accounts payable that was primarily a result of timingguaranteed payment 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 settle 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 spending 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,Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increaseddecreased by $2.2$0.3 million due tofor the nine months ended January 27, 2024. These changes in the exchange rates since the end of fiscal 2017, which positively impacted 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 2018,2024, there were no material changes to the information about our contractual obligations and commitments showndisclosed 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 29, 2023. 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 2018,2024, 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 29, 2023.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, 2018,2024 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, 2017.2023. There have been no material changes to our risk factors during the third quarterfirst nine months of fiscal 2018.2024.Our board of directors has authorized the purchaserepurchase of companyCompany stock. As of January 27, 2018, 7.0 million shares remained available for purchase pursuantWith respect to this authorization. We purchased 1.6 million shares during the first nine months of fiscal 2018, for a total of $46.1 million. During the third quarter of fiscal 2018,2024, pursuant to the existing board authorization, we adopted a plan to purchaserepurchase company stock pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The plan was effective January 6, 2018.October 30, 2023. Under this plan, our broker hashad the authority to purchase companyrepurchase Company shares on our behalf, subject to SEC regulations and the price, market volume and timing constraints specified in the plan. The plan expiresexpired at the close of business on March 30, 2018.January 26, 2024. We spent $20.0 million in the third quarter of fiscal 2024 to repurchase 0.6 million shares, pursuant to the plan and as discretionary purchases. As of January 27, 2024, 6.0 million shares remained available for repurchase pursuant to the board authorization. With the operating cash flows we anticipate generating in fiscal 2018,2024, we expect to continue being opportunistic in purchasing company stock.The following table summarizes our purchasesrepurchases of companyCompany 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 29 – December 2, 2023) 125 $ 30.89 125 6,453 Fiscal December (December 3 – December 30, 2023) 356 $ 36.72 356 6,097 Fiscal January (December 31 – January 27, 2024) 88 $ 35.82 86 6,011 Total (Fiscal Third Quarter of 2024) 569 567 6,011 (1) In addition to the 524,716566,669 shares we purchasedrepurchased during the quarter as part of our publicly announced, board-authorized plan described above, this column includes 5272,820 shares we purchasedrepurchased from employees to satisfy their withholding tax obligations when theirupon vesting of restricted shares.(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, vested.and since October 1987, 33.5 million shares have been added to the plan for repurchase. The authorization has no expiration date.ITEM 5. OTHER INFORMATIONSecurities Trading Plans of Directors and OfficersDuring the quarter ended January 27, 2024, none of our directors or officers adopted or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as each term is defined in Item 408(a) of Regulation S-K).32Exhibit
Number(104) The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended January 27, 2024, formatted in Inline XBRL (included in Exhibit 101) SIGNATURE33Pursuant 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 Date: February 20, 2018BY: /s/ Lindsay A. BarnesDate: February 20, 2024 Lindsay A. BarnesBY: /s/ Jennifer L. McCurry
Vice President, Corporate Controller and Chief Accounting Officer34