FinanceLooker

Excrept from filing document 2024-04-27

Based on the closing sales price as reported on the New York Stock Exchange on October 27 2023 the aggregate market value of the registrant s common stock held by non affiliates of the registrant on that date was approximately 1 207 million
Portions of the registrant s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for its 2024 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10 K
Note The responses to Items 10 through 14 of Part III will be included in the La Z Boy Incorporated definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for the 2024 Annual Meeting of Shareholders and are incorporated by reference herein
In this Annual Report on Form 10 K Annual Report La Z Boy Incorporated and its subsidiaries individually and collectively we our us La Z Boy or the Company make forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 Generally forward looking statements include information concerning expectations projections or trends relating to our results of 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 Annual 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 depending on a variety of factors including but not limited to the risks and uncertainties discussed in this Annual Report under Item 1A Risk Factors and Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations Given these risks and uncertainties you should not rely on forward looking statements as a prediction of actual results Any or all of the forward looking statements contained in this Annual Report 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 as a result of new information future events or for any other reason
Edward M Knabusch and Edwin J Shoemaker started Floral City Furniture in 1927 and in 1928 the newly formed company introduced its first recliner In 1941 we were incorporated in the state of Michigan as La Z Boy Chair Company and in 1996 we changed our name to La Z Boy Incorporated Today our La Z Boy brand is one of the most recognized brands in the furniture industry
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 opportunities
We also participate in two consolidated joint ventures in Thailand that support our international businesses one that operates a manufacturing facility and another that 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 50 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 websites www la z boy com and www joybird com
Our other brands England American Drew Hammary and Kincaid enjoy distribution through many of the same outlets with slightly over half of Hammary s sales originating through the La Z Boy Furniture Galleries
Our reportable operating segments include the Retail segment and the Wholesale segment Our Retail segment primarily sells upholstered furniture in addition to some casegoods and other home furnishing accessories to end consumers through our company owned La Z Boy Furniture Galleries
The principal raw materials and parts used for manufacturing that are purchased are cover primarily fabrics and leather polyester batting and polyurethane foam for cushioning and padding lumber and plywood for frames steel for motion mechanisms electrical components for power units and various other metal components for fabrication of product We purchase most of our polyurethane foam from three suppliers which have several facilities across the United States We purchase cover from a variety of sources but we rely on a limited number of major suppliers We purchase more than half of our cover in a raw state fabric rolls or leather hides from suppliers in multiple countries including China the United States and Brazil then cut and sew it into cover in our cut and sew facilities in Mexico We purchase the remainder of our cut and sewn leather and fabric kits from three main suppliers primarily from China and Vietnam We use these suppliers primarily for their product design capabilities and to balance our mix of in sourced and out sourced production If any of these suppliers experience financial or other difficulties we could experience temporary disruptions in our manufacturing process until we find alternative sources of supply
We manage our Asian supply chain through our global trading company in Hong Kong which works to identify efficiencies and savings opportunities while verifying La Z Boy quality standards are being adhered to and managing the relationships with our Asian suppliers
During fiscal 2024 the cost of materials and parts used for manufacturing moderated and began to stabilize relative to the volatility experienced in prior years as a result of the supply chain disruptions created by the COVID 19 pandemic As we begin fiscal 2025 we anticipate that prices of such materials and parts will remain relatively consistent with those seen at the end of fiscal 2024 with potential increases due to economic volatility and price and wage inflation related to our core materials To the extent that we experience changes in our cost of materials and parts we may adjust our selling prices or assess material surcharges accordingly However in the event of rising costs increases in selling prices or implementation of surcharges may not fully mitigate the impact of raw material cost increases which could adversely impact operating profits
Imported finished goods represented 6 and 7 of our consolidated sales in fiscal 2024 and 2023 respectively In fiscal 2024 we purchased approximately 75 of this imported product from six suppliers based in Vietnam We use these suppliers primarily to leverage our buying power to control quality and product flow and because their capabilities align with our product design needs If any of these suppliers experience financial or other difficulties we could experience disruptions in our product flow until we obtain alternate suppliers which could be lengthy due to the longer lead time required for sourced wood furniture from Asian manufacturers
The prices we paid for imported products including associated transportation costs decreased throughout most of 2024 compared with fiscal 2023 While ocean freight costs decreased during the first half of the year rates rose near the end of our fiscal year as a result of supply challenges in global shipping routes In fiscal 2025 while we anticipate our product costs will be relatively flat overall we expect slight increases in ocean freight costs due to continued container transit challenges in these global shipping routes
Our business has historically displayed seasonal patterns driven by consumer behavior with demand highest in the winter months as discretionary spend tends to shift toward travel and leisure activities during the summer months For our wholesale
business our fiscal fourth quarter has historically had the highest volume of delivered sales relative to other quarters For our retail businesses which includes our company owned retail stores our fiscal third quarter typically has the highest volume of delivered sales relative to other quarters
In a typical year we schedule production to maintain consistent manufacturing activity throughout the year whenever possible During the summer months the furniture industry generally experiences weaker demand and as such we typically shut down our domestic plants for one week each fiscal year to perform routine maintenance on our equipment Accordingly for our wholesale business the first quarter is usually the Company s weakest quarter in terms of sales and earnings Also driven by the seasonal slowdown in the summer each of our retail businesses typically experience their lowest sales in our fiscal first quarter
During fiscal 2024 we experienced our largest sales in the fourth quarter for both our wholesale and retail businesses which we believe was consistent with overall trends in the furniture industry We therefore do not believe that this is an indicator that our seasonal trends are changing for our retail businesses and anticipate typical seasonality for both our wholesale and retail businesses in fiscal 2025
Our sales are impacted by the overall growth of the furniture industry which is primarily influenced by economic growth existing and new housing activity and consumer discretionary spending In addition consumer confidence employment rates inflation and interest rates consumer savings levels international trade policies and other factors could affect demand
Upholstered furniture has a shorter life cycle than casegoods furniture because upholstered furniture is typically more fashion and design oriented and is often purchased one or two pieces at a time Purchases and demand for consumer goods including upholstered furniture fluctuate based on consumer confidence Casegoods products in contrast are longer lived and frequently purchased in groupings or suites resulting in a much larger cost to the consumer As a result casegoods sales are more sensitive to economic conditions including growth or a slowdown in the housing market whereas upholstered furniture normally exhibits a less volatile sales pattern over an economic cycle
For our upholstery business within our Wholesale segment we maintain raw materials and work in process inventory at our manufacturing locations Finished goods inventory is maintained at our 14 distribution centers as well as our manufacturing locations Our distribution centers allow us to streamline the warehousing and distribution processes for our La Z Boy Furniture Galleries
store network including both company owned stores and independently owned stores Our distribution centers also allow us to reduce the number of individual warehouses needed to supply our retail outlets and help us reduce inventory levels at our manufacturing and retail locations
For our casegoods business within our Wholesale segment we import wood furniture from Asian vendors resulting in long lead times on these products To address these long lead times and meet our customers delivery requirements we typically maintain higher levels of finished goods inventory in our warehouses as a percentage of sales of our casegoods products than our upholstery products
Our Joybird business maintains raw materials and work in process inventory at its manufacturing location Joybird finished goods inventory is maintained at our distribution centers at its manufacturing and warehouse locations or in transit to the end consumer
Our inventory decreased 13 0 million as of year end fiscal 2024 compared with year end fiscal 2023 as we continue to stabilize inventory levels and align production with incoming order trends We actively manage our inventory levels on an ongoing basis to ensure they are appropriate relative to our sales volume while maintaining our focus on service to our customers
Our accounts receivable increased 13 7 million as of year end fiscal 2024 compared with year end fiscal 2023 primarily reflecting higher sales from our Wholesale business to external dealers during the fourth quarter of fiscal 2024 compared with same period a year ago
Additionally our allowance for receivable credit losses was 0 3 million higher at the end of fiscal 2024 compared with the end of fiscal 2023 reflecting a higher receivable balance We monitor our customers accounts limit our credit exposure to certain independent dealers and strive to decrease our days sales outstanding where possible
We collect a deposit from our customers at the time a customer order is placed in one of our company owned retail stores or through our websites www la z boy com and www joybird com Customer deposits decreased 17 0 million as of fiscal year end 2024 compared with fiscal year end 2023 primarily due to a slight reduction in backlog
stores that make up our Retail segment our small format Joybird stores and our websites www la z boy com and www joybird com Sales in our Wholesale segment are primarily to third party furniture retailers While mainly located throughout the United States and Canada we also have customers located in various other countries including the United Kingdom China Australia South Korea and New Zealand
We have formal agreements with many furniture retailers for them to display and merchandise products from one or more of our operating units and sell them to consumers in dedicated retail space either in stand alone stores or dedicated proprietary galleries studios or branded spaces within their stores We consider this dedicated space to be proprietary For our Wholesale segment our fiscal 2024 customer mix based on sales was approximately 60 proprietary 10 major dealers large regional retailers and 30 other independent retailers
The success of our product distribution model relies heavily on having retail floor space that is dedicated to displaying and marketing our products Maintaining updating and when appropriate expanding our proprietary distribution network is a key part of our overall sales and marketing strategy We intend over the long term to not only increase the number of stores in the network but also to continue to improve their quality including upgrading old format stores to our new concept design through remodels and relocations We continue to maintain and update our current stores to improve the quality of the network During fiscal 2024 the La Z Boy Furniture Galleries
store network further plans to open 12 to 15 stores and relocate or remodel 25 to 35 stores all of which will feature our latest store designs Additionally during fiscal 2025 we plan to open or update approximately 100 La Z Boy Comfort Studio
store network provide distribution in specific geographical areas and enable us to concentrate our marketing to a dedicated product line across the entire network benefitting La Z Boy these dealers and our consumers It also allows dealers in this proprietary group to take advantage of best practices with which other proprietary dealers have succeeded and we facilitate forums for these dealers to share them These La Z Boy Furniture Galleries
We typically build upholstery units based on specific orders either for dealer stock or to fill consumers custom orders We import casegoods product primarily to fill our internal orders rather than customer or consumer orders resulting in higher finished goods inventory on hand as a percentage of sales We define backlog as any written order that has not yet been delivered whether to an independent furniture retailer an independently owned La Z Boy Furniture Galleries
Historically the size of our backlog at a given time varies and may not be indicative of our future sales and therefore we do not rely entirely on backlogs to predict future sales Our wholesale backlog was 136 6 million as of April 27 2024 This represents a 10 decrease from a fiscal 2023 year end backlog of 151 3 million which was revised to reflect an adjustment to the dollar impact of cancellations that occurred during fiscal 2023 At the end of fiscal 2023 backlog and lead times had generally returned to pre pandemic levels and the slight decrease in fiscal 2024 was mainly due to shipments outpacing incoming orders as a result of lower industry wide demand We anticipate our backlog will remain relatively stable in fiscal 2025
The home furnishings industry competes primarily on the basis of product styling and quality comfort customer service product availability and delivery price and location We compete by emphasizing our brand and the comfort quality styling customization value of our products and our available design services In addition we remain committed to innovation while striving to provide outstanding customer service exceptional dealer support and efficient on time delivery Maintaining updating and expanding our proprietary distribution system including identifying desirable retail locations is a key strategic initiative for us in striving to remain competitive We compete in the mid to upper mid price point and a shift in consumer taste and trends to lower priced products could negatively affect our competitive position Additionally our wholesale business faces increased market pressures from foreign manufacturers entering the United States market and increased direct purchases from foreign suppliers by large United States retailers
stores operate in the retail furniture industry in the United States and Canada and different stores have different competitors based on their geographic locations In addition alternative distribution channels have increasingly affected our retail markets Direct to consumer brands bypass brick and mortar retailers entirely or in some cases have developed a product that can be shipped more easily than traditional upholstered furniture thus increasing competition for our products The increased ability of consumers to purchase furniture through various furniture manufacturers and digital only retailers internet websites has also increased competition in the industry Although digital retailers operate with lower overhead costs than a brick and mortar retailer customer acquisition costs and advertising spend are typically much higher Department stores and big box retailers with an online presence also offer products that compete with some of our product lines
We own the La Z Boy trademark which is essential to the Wholesale and Retail segments of our business We also own the Joybird trademark which along with the La Z Boy trademark is essential to our e commerce business Additionally we own a number of other trademarks that we utilize in marketing our products We consider our La Z Boy trademark to be among our most valuable assets and we have registered that trademark and others in the United States and various other countries where our products are sold These trademarks have a perpetual life subject to renewal We license the use of the La Z Boy trademark to certain international partners and dealers outside of North America We also license the use of the La Z Boy trademark on contract office furniture outdoor furniture and non furniture products as these arrangements enhance our brand awareness broaden the perceptions of La Z Boy and create visibility of the La Z Boy brand in channels outside of the residential furniture industry In addition we license to our branded dealers the right to use our La Z Boy trademark in connection with the sale of our products and related services on their signs and in other ways which we consider to be a key part of our marketing strategies We provide more information about those dealers under Customers
We hold a number of United States and foreign patents that we actively enforce We have followed a policy of filing patent applications for the United States and select foreign countries on inventions designs and improvements that we deem valuable but these patents do expire at various times
While our intellectual property rights in the aggregate are important to the operation of our business we do not believe that any existing patent license trademark or other intellectual property right other than the La Z Boy trademark is of such importance that its loss or termination would have a material adverse effect on our business taken as a whole We vigorously protect our trademarks and patents against third party infringement
Our manufacturing operations involve the use and disposal of certain substances regulated under environmental protection laws and regulations and from time to time we may be involved in a small number of remediation actions and site investigations concerning these substances Based on a review of all currently known facts and our experience with previous environmental matters we currently do not believe it is probable that we will have any additional loss for environmental matters that would be material to our consolidated financial statements
We employed approximately 10 200 full time equivalent employees at the end of fiscal 2024 compared with approximately 10 500 employees at the end of fiscal 2023 The decrease in headcount was primarily due to the initiative to drive improved efficiencies through optimized staffing levels at our Mexico operations As of the end of fiscal 2024 we employed approximately 7 800 employees in our Wholesale segment 1 600 in our Retail segment 500 in our Joybird business with the remaining employees being corporate personnel We employ the majority of our employees on a full time basis
At La Z Boy we believe in the transformational power of comfort We provide an excellent consumer experience create high quality products and empower people to transform rooms homes and communities with comfort Our teams are committed to our core values of Courage Curiosity and Compassion We are not afraid to try new things we are relentless in our mission to understand our business and consumers and we honor our almost 100 year legacy that was built on family
As we build the La Z Boy of tomorrow our goal is to make the world a better place through the transformational power of comfort Aligned with our core values we embrace curiosity for sustainable design operate with compassion for a sustainable planet and empower courage for a sustainable culture
We embrace curiosity and our inquisitiveness helps us identify innovative opportunities for our products that uphold our commitment to quality rely on sustainable materials and drive best practices in our supplier partnerships
We strive to operate La Z Boy with compassion for the environment We are committed to responsible stewardship and integrate environmentally sound and sustainable practices into our daily decisions We work to reduce emissions increase recycling efforts and conserve water in all areas of our business
At La Z Boy we support our employees so they can make courageous choices and help our business thrive Our people practices are linked to our sustainability initiatives The sustainable culture we are building is designed to empower employees to do what is right in the workplace and in our communities From supporting our employees careers and providing a safe and ethical work environment to giving back to the communities where we live and work people are always at the heart of our brand
La Z Boy is dedicated to upholding the highest ethical standards and working with honesty and integrity in all aspects of our business operations Our Code of Conduct provides a clear and thorough ethics standard for all employees officers and directors with respect to interactions with customers vendors and other staff Employees also undergo annual training on ethics and the Code of Conduct We also maintain an Ethics Hotline to make it easy for employees and suppliers to report any concerns This line is available 24 hours a day and is operated by a third party Reports are taken by trained professionals and promptly forwarded to our Corporate Compliance team Employees may also communicate any concerns through a dedicated online portal
We believe in creating and fostering a workplace in which all our employees feel valued included and empowered to do their best work and contribute their ideas and perspectives We are committed to recruiting and retaining diverse talent so that our workforce better reflects the communities in which we operate our business globally We recognize that our employees unique backgrounds experiences and perspectives enable us to create the optimal work environment and deliver on our mission
Aligning with our purpose and values we intend to continue to be curious courageous and compassionate in our efforts to foster an environment that attracts the best talent values diversity of life experiences and perspectives and encourages innovation to accelerate the transformational power of comfort
Leveraging our Diversity Inclusion and Belonging Council to provide enterprise wide leadership focused on supporting all our employees developing training and learning opportunities for our employees on diversity unconscious bias and other topics and creating sustainable plans to increase diversity in talent acquisition
Expanding our support of employee resource groups ERGs which include groups focused on Multicultural Pride LGBTQ Working Parents Caregivers Women and Salute Armed Forces Our ERGs provide learning and mentorship experiences for our diverse employees supporting our objective of creating diversity awareness across our organization and helping our employees use their collective voices to positively impact our Company and the communities in which we operate our business and live
Creating space for individuals to share their perspective values and voice to our global population through employee written articles our internal podcast and multiple video series on our internal communications platform and
Demonstrating our Company s commitment at the highest levels of leadership including having our President and Chief Executive Officer sign the CEO Action for Diversity Inclusion pledge to advance diversity and inclusion in the workplace
As the largest industrial manufacturer in many regions where we do business we recognize our potential impact on surrounding communities We actively partner with local agencies in these communities to build proactive emergency and contingency plans for any major incidents that may occur at our facilities and any natural disasters that may impact the region
We work to forge relationships with agencies such as the Occupational Safety and Health Administration OSHA to understand how we can best adhere to health and safety practices Additionally the National Safety Council NSC has recognized La Z Boy with multiple awards for safety performance and leadership throughout the Company s history This includes our recognition as a seven time recipient of the Corporate Culture of Safety Award
effective in both current and future roles This includes training in the operations and retail environment to maintain high quality standards as we make and sell our products We strive to promote employees internally and to provide new managers with the skills necessary to succeed Further we have a leadership development program to train employees who are new to managing teams
LZB Live our quarterly global town hall and other employee town halls are held in person and streamed to give our employees an opportunity to ask questions of our Chief Executive Officer Chief Financial Officer and other senior executive leaders and to continue to build and support our mission purpose and values Additionally the Company provides opportunities for employee recognition from peers and leaders through our BRAVO program and also periodically administers employee engagement surveys
Throughout our 97 year history giving back to our communities has been woven through La Z Boy s culture following the example set by our founders When it comes to giving our vision is to improve the lives of others by developing exceptional
programs based on partnerships where employees feel a sense of connection and pride in their communities and our mission is to enhance the quality of life in the communities in which we live and serve through leadership financial contributions and volunteer efforts
Our philanthropic initiatives include the La Z Boy Foundation local community involvement disaster relief and our signature charity Ronald McDonald House Charities La Z Boy is honored to be the official furniture provider for Ronald McDonald House Charities Throughout fiscal 2024 La Z Boy has continued our support of providing furniture and financial contributions to non profit organizations with special emphasis on arts culture humanities community enrichment education and health and human services
Our employees further exemplify the spirit of giving through leadership and volunteer efforts in their own communities and for numerous non profit organizations which include the United Way Relay for Life Habitat for Humanity and others The Company participates in the
Our Forms 10 K 10 Q 8 K proxy statements on Schedule 14A and amendments to those reports are available free of charge through links on our internet website www la z boy com as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission SEC Copies of any materials we file or furnish to the SEC can also be obtained free of charge through the SEC s website at www sec gov The information on our website is not incorporated by reference into this report or any other reports we file with or furnish to the SEC
Our business is subject to a variety of risks Any of the following risks could materially and adversely affect our business results of operations financial condition or future prospects The risks discussed below should be carefully considered together with the other information provided in this Annual Report on Form 10 K including in Management s Discussion and Analysis of Financial Condition and Results of Operations Item 1C Cybersecurity and our financial statements including the related notes These risk factors do not identify all risks that we face There may be additional risks that are presently unknown to us or that we currently believe to be immaterial that could affect us Investors should carefully consider all risks including those disclosed before making an investment decision
Declines in certain economic and market conditions that impact consumer confidence and consumer spending or cause further disruption in our business could negatively impact our sales results of operations and liquidity
The furniture industry and our business are particularly sensitive to cyclical variations in the general economy and to uncertainty regarding future economic conditions because our principal products are consumer goods that may be considered postponable discretionary purchases Economic downturns and prolonged negative economic conditions have affected and could continue to affect general consumer spending resulting in a decrease in the overall demand for such discretionary items including home furnishings
general economic conditions consumer disposable income recession and fears of recession United States government default or shutdown or the risk of such default or shutdown inflation unemployment war and fears of war availability of consumer credit consumer debt levels consumer confidence conditions in the housing market fuel prices interest rates sales tax rates civil disturbances and terrorist activities natural disasters adverse weather and health epidemics or pandemics We are unable to identify and predict to what extent such factors may further impact consumer spending on our products in the short and long term
During the COVID 19 pandemic like many businesses we experienced significant disruption in our supply chain resulting in unprecedented increases in material and freight costs as well as significant unavailability or delay of parts or finished goods Future significant disruptions of this nature in our supply chain in the furniture industry within our independent dealer network or third party wholesalers or other unusual developments could cause significant disruption to our business and negatively affect our results
The residential furniture industry is highly competitive and fragmented We currently compete with many other manufacturers and retailers including online retailers Some of these competitors offer widely advertised products or are large retail furniture dealers offering their own store branded products Competition in the residential furniture industry is based on among other factors quality style of products perceived value price promotional activities service to the customer and advertising Changes in pricing and promotional activities of competitors may adversely affect our performance In addition due to the large number of competitors and their wide range of product offerings we may not be able to differentiate our products through styling finish and other construction techniques from those of our competitors The highly competitive nature of the industry means we are constantly subject to the risk of losing market share which would likely decrease our future sales earnings and liquidity
A majority of our sales are to distribution channels that rely on physical stores to merchandise and sell our products and a significant shift in consumer preference toward purchasing products online could have a material adverse effect on our sales and operating margin Over the past several years the furniture industry in general has experienced a shift to more online purchasing We are attempting to meet consumers where they prefer to shop by expanding our online capabilities and improving the user experience at www la z boy com to drive more traffic to both our online site and our physical stores We also own Joybird a leading e commerce retailer and manufacturer of upholstered furniture Joybird sells product primarily online where there is significant competition for customer attention among online and direct to consumer brands
These and other competitive pressures could cause us to lose market share revenue and customers increase expenditures or reduce prices any of which could have a material adverse effect on our results of operations or liquidity
Cyber attacks designed to gain access to and extract sensitive information or otherwise affect or compromise the confidentiality integrity and availability of information including phishing attempts denial of service attacks and malware or ransomware incidents have occurred over the last several years at a number of major U S companies and have resulted in among other things the unauthorized release of confidential information material business disruptions and negative brand and reputational impacts Despite widespread recognition of the cyber attack threat and improved data protection methods cyber attacks on organizations continue to be sophisticated persistent and ever changing making it difficult to prevent and detect these attacks Similar to many other retailers we receive process store use and share data about our customers consumers employees contractors suppliers vendors and others including payment information and personally identifiable information as well as other personal confidential and proprietary information Additionally we rely on third party service providers to execute certain business processes and maintain certain information technology systems and infrastructure and we supply such third party providers with the data required for those services
During fiscal 2024 we were subject and in the future we will likely continue to be subject to attempts to breach the security of our networks and IT infrastructure through cyber attack malware ransomware computer viruses phishing attempts social engineering and other means of unauthorized access A breach of our systems either internally through potential vulnerabilities of our employees home networks or at our third party technology service providers could adversely affect our business operations and result in the loss or misappropriation of and unauthorized access to sensitive information As a result of a breach involving the unauthorized release of sensitive information our reputation could be adversely affected resulting in a loss of our existing customers and potential future customers or we could face claims demands lawsuits regulatory investigations and could incur fines penalties or become subject to injunctive relief imposing additional compliance obligations An electronic security breach resulting in the unauthorized release of sensitive data from our information systems or those of our third party service providers could also materially increase the costs we already incur to protect against these risks including costs associated with insurance coverage and potential remediation measures We continue to balance the additional risk with the cost to protect us against a breach and have taken steps to ensure that losses arising from a breach would be covered in part by insurance that we carry although the costs potential monetary damages and operational consequences of responding to cyber incidents and implementing remediation measures may be in excess of our insurance coverage or be not covered by our insurance at all
We have implemented a hybrid work approach for certain employees Although we continue to implement strong physical and cybersecurity measures to ensure that our business operations remain functional and to ensure uninterrupted service to our
customers our systems and our operations remain vulnerable to cyberattacks and other disruptions due to the fact that a portion of our employees work remotely and we cannot be certain that our mitigation efforts will be effective
We rely extensively on information technology systems to process transactions summarize results and manage our business and that of certain independent dealers Disruptions in both our primary and back up systems could adversely affect our business and results of operations
Our primary and back up information technology systems are subject to damage or interruption from power outages telecommunications failures hardware and software failures computer hacking cybersecurity breaches computer viruses phishing attempts cyber attacks malware and ransomware attacks errors by employees natural disasters adverse weather and similar events We also rely on technology systems and infrastructure provided by third party service providers who are subject to these same cyber and other risks Interruptions of our critical business information technology systems or failure of our back up systems could result in longer production times or negatively impact customers resulting in damage to our reputation and a reduction in sales If our critical information technology systems or back up systems were damaged or ceased to function properly we might have to make a significant investment to repair or replace them If a ransomware attack or other cybersecurity breach occurs either internally or at our third party technology service providers it is possible we could be prevented from accessing our data which may cause interruptions or delays in our business cause us to incur remediation costs or require us to pay ransom to a hacker which takes over our systems or damage our reputation While we carry insurance that would mitigate losses from certain damage interruption or breach of our information technology systems insurance may be insufficient to compensate us fully for potential significant losses
Further information systems of our suppliers or service providers may be vulnerable to attacks by hackers and other security breaches including computer viruses and malware through the internet email attachments and persons with access to these information systems If our suppliers or service providers were to experience a system disruption attack or security breach that impacts a critical function it could result in disruptions in our supply chain the loss of sales and customers potential liability for damages to our customers reputational damage and incremental costs which could adversely affect our business results of operations and profitability
Inability to maintain and enhance our brand and respond to changes in our current and potential consumers tastes and trends in a timely manner could adversely affect our business and results of operations
The success of our business depends on our ability to maintain and enhance our brands to increase our business by retaining consumers and attracting new ones Furniture product is fashion oriented so changes in consumers tastes and trends and the resultant change in our product mix as well as failure to offer our consumers multiple avenues for purchasing our products could adversely affect our business and results of operations As mentioned above there is significant competition for customer attention among online and direct to consumer brands We attempt to minimize these risks by maintaining strong advertising and marketing campaigns promoting our brands We also attempt to minimize our risk by updating our current product designs styles quality prices and options to purchase our products in store or online If these efforts are unsuccessful or require us to incur substantial costs our business results of operations and financial or competitive condition could be adversely affected
Fluctuations in the price availability and quality of raw materials could cause delays that could result in our inability to timely provide goods to our customers Such fluctuations have increased and could continue to increase our cost and therefore decrease our earnings
In manufacturing furniture we use various types of wood fabrics leathers upholstered filling material including polyurethane foam steel other raw materials and metal components Additionally our manufacturing processes and plant operations use various electrical equipment and components and tooling Because we are dependent on outside suppliers for these items fluctuations in their price availability and quality have had and could continue to have a negative effect on our cost of sales and our ability to meet our customers demands We have a higher concentration in upholstery sales including motion furniture than many of our competitors and the effects of price and wage inflation related to steel polyurethane foam wood electrical components for power units leather and fabric or quantity shortages of such materials or parts have had and could continue to have a significant negative impact on our business Competitive and marketing pressures may prevent us from passing along price increases to our customers and the inability to meet our customers demands could cause us to lose sales
Further most of our polyurethane foam comes from three suppliers These suppliers have several facilities across the United States but adverse weather natural or man made disasters or public health crises such as pandemics or epidemics could result in delays in shipments of polyurethane foam to our plants Similarly adverse weather including increased risk of catastrophic events as a result of climate change natural or man made disasters public health crises such as pandemics or
epidemics labor disputes possible acts of terrorism port and canal blockages and congestion and availability of shipping containers have and could in the future result in delays in shipments or the absence of required raw materials or components from any of our suppliers
A change in the financial condition of our domestic and foreign fabric suppliers could impede their ability to provide products to us in a timely manner Upholstered furniture is fashion oriented and if we are unable to acquire sufficient fabric variety or to predict or respond to changes in fashion trends we might lose sales and have to sell excess inventory at reduced prices Doing so would have a negative effect on our sales and earnings
Changes in the availability and cost of foreign sourcing and economic and political uncertainty in countries outside of the United States in which we operate or from which we purchase product could adversely affect our business and results of operations
We have operations in countries outside the United States some of which are located in emerging markets Long term economic and political uncertainty in some of the countries in which we operate such as the United Kingdom Mexico and Thailand could result in the disruption of markets and negatively affect our business Our casegoods business imports products manufactured by foreign sources mainly in Vietnam and our Wholesale segment purchases cut and sewn fabric and leather sets electronic component parts and some finished goods from Chinese and other foreign vendors Our cut and sewn leather sets are primarily purchased from suppliers that operate in China and the majority of our fabric products are also purchased from suppliers that operate in China One of these primary suppliers provides both cut and sewn leather sets and fabric products As a result of factors outside of our control at times our sourcing partners have not been able to and in the future may not be able to produce or deliver goods in a timely fashion or the quality of their product may lead us to reject it causing disruptions in our domestic operations and delays in shipments to our customers
Our current retail markets and other markets that we may enter in the future may not achieve the growth and profitability we anticipate We could incur charges for the impairment of long lived assets goodwill or other intangible assets if we fail to meet our earnings expectations for these markets
stores or other retail businesses such as Joybird We also plan to remodel and relocate existing stores and experiment with new store formats and may close underperforming stores Our assets include goodwill and other intangible assets acquired in connection with these acquisitions Profitability of acquired remodeled relocated and new format stores will depend on lease rates for stores we lease and retail sales and profitability justifying the costs of acquisition remodeling and relocation If we do not meet our sales or earnings expectations for these stores or businesses we have in the past incurred and may in the future incur charges for the impairment of long lived assets the impairment of right of use lease assets the impairment of goodwill or the impairment of other intangible assets
We also operate a wholesale sales office that is responsible for distributing La Z Boy products in the United Kingdom and Ireland as well as a manufacturing business in the United Kingdom which was acquired in fiscal 2022 Our assets include goodwill and other intangible assets including acquired customer relationships in connection with our acquisition of the wholesale business If we do not meet our sales or earnings expectations for these operations we may incur charges for the impairment of goodwill or the impairment of our intangible assets
We may require funding from external sources which may not be available at the levels we require or may cost more than we expect and as a result our expenses and results of operations could be negatively affected
We regularly review and evaluate our liquidity and capital needs We believe that our cash and cash equivalents short term investments cash from operations and amounts available under our credit facility will be sufficient to finance our operations and expected capital requirements for at least the next 12 months
In the event that we draw on our credit facility outstanding amounts may become immediately due and payable upon certain events of default including a failure to comply with the financial covenants in the credit agreement a consolidated net lease adjusted leverage ratio requirement and a consolidated fixed charge coverage ratio requirement or with certain other affirmative and negative covenants in the credit agreement If we are unable to access additional credit at the levels we require or the cost of credit is greater than expected it could adversely affect our results of operations or financial condition
We grant payment terms to most wholesale customers ranging from 15 to 60 days Some of our customers have experienced and may in the future experience cash flow and credit related issues If a major event with negative economic effects were to occur and such effects have occurred in the past we may not be able to collect amounts owed to us or such payment may only occur after significant delay While we perform credit evaluations of our customers those evaluations may not prevent uncollectible trade accounts receivable Credit evaluations involve significant management diligence and judgment especially in the current environment Should more customers than we anticipate experience liquidity issues if payment is not received on a timely basis or if a customer declares bankruptcy or closes stores we may have difficulty collecting amounts owed to us by these customers which could adversely affect our sales earnings financial condition and liquidity
Our business and our reputation could be adversely affected by the failure to comply with or the cost of compliance with evolving regulations relating to our obligation to protect sensitive employee customer consumer vendor or Company data
We receive process store use and share data about our customers consumers employees contractors suppliers vendors and others including payment information and personally identifiable information as well as other personal confidential and proprietary information There are numerous federal state local and foreign laws and regulations regarding privacy data protection and data security including those related to the collection storage handling use disclosure transfer and security of personal data Regulatory focus on data privacy and security concerns continues to increase globally and laws and regulations concerning the collection use and disclosure of personal information are expanding and becoming more complex while being subject to uncertain and differing interpretations that may be inconsistent among countries or conflict with other rules For example the European General Data Protection Regulation GDPR applies to us and creates a range of requirements and compliance obligations regarding the treatment of personal data including the public disclosure of significant data breaches and imposes significant penalties for non compliance Several state laws include additional requirements with respect to disclosure and deletion of personal information of residents as well as civil penalties for violations and a private right of action for data breaches These privacy and data protection laws may increase our costs of compliance and risks of non compliance which could result in substantial penalties negative publicity and harm to our brand These risks may be heightened by our online marketing and customer engagement activities It is possible that these laws may be interpreted or applied in a manner that is adverse to us unforeseen or otherwise inconsistent from one jurisdiction to another or with our practices or that we may not adequately adapt our internal policies and or procedures to evolving regulations any of which could result in litigation regulatory investigations enforcement actions fines penalties and potential legal liability require us to change our practices in a manner adverse to our business or limit access to our products and services in certain countries As a result our reputation and brand which are critical to our business operations may be harmed we could incur substantial costs including costs related to litigation or we could lose both customers and revenue
We are subject to numerous laws and regulations including those relating to labor and employment customs sanctions truth in advertising consumer protection e commerce privacy health and safety real estate environmental and zoning and occupancy intellectual property and other laws and regulations that regulate retailers manufacturers or otherwise govern our business
Changes in laws and regulations in the United States or internationally may require us to modify our current business practices or otherwise increase our costs of compliance which could adversely affect our results of operations
Because we manufacture components and finished goods in Mexico and the United Kingdom purchase components and finished goods manufactured in foreign countries including China and Vietnam participate in consolidated joint ventures in Thailand and operate a wholesale and retail business in Canada we are subject to risks relating to changes in the domestic or international regulatory environment or trade policies including new or increased duties tariffs retaliatory tariffs trade limitations and termination or renegotiation of bilateral and multilateral trade agreements impacting our business The United States has enacted certain tariffs on many items sourced from China including certain furniture accessories furniture parts and raw materials which are imported into the United States and that we use in our domestic operations We may not be able to fully or substantially mitigate the impact of these tariffs pass price increases on to our customers or secure adequate alternative sources of products or materials The tariffs along with any additional tariffs or retaliatory trade restrictions implemented by other countries could negatively impact customer sales including potential delays in product received from our vendors our cost of goods sold and results of operations Conversely if certain tariffs are eliminated or reduced we may face additional competition from foreign manufacturers entering the United States market and from domestic retailers who rely on imported goods putting pressure on our prices and margins which could adversely affect our results of operations Finally our business
Our operations outside of the United States and sale of product in various countries subject us to U S and foreign laws and regulations including but not limited to the UK Bribery Act 2010 the U S Foreign Corrupt Practices Act the U S Export Administration Act and other anti bribery and anti corruption statutes These laws and regulations include prohibitions on improper payments to government officials restrictions on where we can do business what products we can supply to certain countries and what information we can provide to certain governments Violations of these laws which are complex frequently changing and are often subject to varying interpretation and enforcement may result in civil or criminal penalties or sanctions that could have a significant adverse effect on our business and results of operations It is possible that our employees contractors or agents could violate our policies and procedures or otherwise fail to comply with these laws and regulations
Millions of our products sold over many years are currently used by consumers We have voluntarily recalled products in the past and while none of those recalls has resulted in a material expense or other significant adverse effect a significant product recall or other product related litigation could result in future additional expense penalties and injury to our brands and reputation and adversely affect our business and results of operations In addition we are involved in lawsuits claims and proceedings incident to the ordinary course of our business Litigation is inherently unpredictable Any claims against us whether meritorious or not could result in costly litigation that could adversely affect our business and results of operations
Although we maintain liability insurance in amounts that we believe are reasonable in most cases we are responsible for large self insured retentions and defense costs We may not be able to maintain such insurance on acceptable terms if at all in the future or that product liability or other claims will not exceed the amount of insurance coverage or that all such matters would be covered by our insurance As a result product liability and other claims could have a material adverse effect on our business results of operations and financial condition
Our operations are subject to risks of unsettled political conditions natural or man made disasters adverse weather climate change acts of war terrorism organized crime pandemics and other public health concerns any one of which could adversely affect our business and results of operations
Our operations are subject to risks of unsettled political conditions natural or man made disasters adverse weather climate change acts of war terrorism organized crime pandemics and other public health concerns If any of these events cause disruptions or damage in our manufacturing plants distribution facilities company owned La Z Boy Furniture Galleries
stores or corporate headquarters or the facilities of our vendors or if such events impact the availability of raw materials or cause disruption in our supply chain that could make servicing our customers more difficult or result in the potential loss of sales and customers In addition we may incur costs in repairing any damage beyond our applicable insurance coverage Any of these outcomes could have an adverse affect on our business and results of operations
Certain assumptions judgments and estimates impact amounts reported in our consolidated financial statements including but not limited to inventories goodwill intangible assets product warranty liabilities insurance and legal related liabilities and income taxes To derive our assumptions judgments and estimates we use historical experience and various other factors that we believe are reasonable as of the date we prepare our consolidated financial statements Our goodwill resulting from certain acquisitions is based on the expected future performance of the operations acquired and at least annually we reassess the goodwill for impairment Changes in business conditions or other events could materially change the projection of future cash flows or the discount rate we used in the fair value calculation of the goodwill Actual results could differ materially from our estimates and such differences may impact our financial results
We may not be able to recruit and retain key employees and skilled workers in a competitive labor market or we could experience continued increases in labor costs which could adversely affect our business and results of operations
If we cannot successfully recruit and retain key employees and skilled workers or we experience the unexpected loss of those employees our operations may be negatively impacted A shortage of qualified personnel along with continued labor cost inflation may require us to further enhance our compensation in order to compete effectively in the hiring and retention of qualified employees
Changes in United States or international income tax laws and regulations may have an adverse effect on our business in the future We are subject to income taxes in the United States and numerous foreign jurisdictions Our effective income tax rate in the future could be adversely affected by a number of factors including changes in the mix of earnings in countries with differing statutory tax rates changes in tax laws the outcome of income tax audits in various jurisdictions and any repatriation of non U S earnings for which the Company has not previously provided for U S taxes We regularly assess these matters to determine the adequacy of our tax provision which is subject to significant judgement
There has been increased focus from our stakeholders including consumers employees and investors on our ESG practices We have established goals and other objectives related to ESG matters These goals reflect our current plans and are not guarantees that we will be able to achieve them Our efforts to accomplish and accurately report on these goals and objectives present numerous operational reputational financial legal and other risks any of which could have a material negative impact including on our reputation stock price and results of operation We could also incur additional costs and require additional resources to implement various ESG practices to make progress against our public goals and to monitor and track our performance with respect to such goals
The standards for tracking and reporting on ESG matters are relatively new and continue to evolve Collecting measuring and reporting ESG information and metrics can be difficult and time consuming Our selected disclosure framework or standards may need to be changed from time to time which may result in a lack of consistent or meaningful comparative data from period to period In addition our interpretation of reporting frameworks or standards may differ from those of others and such frameworks or standards may change over time any of which could result in significant revisions to our goals or reported progress in achieving such goals
Our ability to achieve any ESG related goal or objective is subject to numerous risks many of which are outside of our control including the availability and cost of low or non carbon based energy sources and technologies evolving regulatory requirements affecting ESG standards or disclosures the availability of vendors and suppliers that can meet our sustainability diversity and other standards and the availability of raw materials that meet and further our sustainability goals If our ESG practices do not meet evolving consumer employee investor or other stakeholder expectations and standards or our publicly stated goals then our reputation our ability to attract or retain employees and our competitiveness including as an investment and business partner could be negatively impacted Furthermore if our competitors ESG performance is perceived to be better than ours potential or current customers and investors may elect to do business with our competitors instead and our ability to attract or retain employees could be negatively impacted Our failure or perceived failure to pursue or fulfill our goals targets and objectives or to satisfy various reporting standards within the timelines we announce or at all could also expose us to government enforcement actions and private litigation
The Company has developed an information security program to address risks from cybersecurity threats The program includes policies and procedures that identify how security measures and controls are developed implemented and maintained A risk assessment is conducted annually The risk assessment along with risk based analysis and judgment are used to select security controls to address risks During this process the following factors among others are considered likelihood and severity of
risk impact on the Company and others if a risk materializes feasibility and cost of controls and impact of controls on operations and others Specific controls that are used to some extent by the Company include endpoint threat detection and response EDR identity and access management IAM privileged access management PAM logging and monitoring involving the use of security information and event management SIEM multi factor authentication MFA firewalls and intrusion detection and prevention and vulnerability and patch management
Third party security firms are used by the Company in different capacities to provide or operate some of these controls and technology systems Third parties are also used to conduct assessments such as vulnerability scans and penetration testing of the Company and its systems The Company uses a variety of processes to address cybersecurity threats related to the use of third party technology and services
The Company has a written incident response plan IRP and conducts tabletop exercises to enhance incident response preparedness Business continuity and disaster recovery plans are used to prepare for the potential for a disruption in technology we rely on The Company is a member of an industry cybersecurity intelligence and risk sharing organization Certain employees including those with access to Company provided e mail accounts undergo security awareness training when hired and annually
The Company has an enterprise risk management committee comprised of key business and functional leaders to address enterprise risks and cybersecurity is a risk category addressed by that group In addition to assessing major risks management identifies and monitors such risks At least annually the Company s executive leadership reviews with the Board of Directors the major risks identified in the enterprise risk management process as well as the steps identified to mitigate such risks Each of the business and functional leaders responsible for the management of these identified risks also regularly discuss with the Board changes in assessment of these risks and mitigation plans
The Company or third parties it relies on may not be able to fully continuously and effectively implement security controls as intended As described above we utilize a risk based approach and judgment to determine the security controls to implement and it is possible we may not implement appropriate controls if we do not recognize or underestimate a particular risk In addition security controls no matter how well designed or implemented may only mitigate and not fully eliminate risks And events when detected by security tools or third parties may not always be immediately understood or acted upon
The Company is not aware of any cybersecurity threat or any material cybersecurity incident to date including as a result of any previous cybersecurity incidents that has materially affected or is reasonably likely to materially affect us including our business strategy results of operations or financial condition
Additionally in Item 1A Risk Factors under the heading of Operational Risk Factors forward looking cybersecurity threats that could have a material impact on the Company are discussed Those sections of Item 1A should be read in conjunction with this Item 1C
The Chief Information Officer CIO is the management position with primary oversight responsibility for the team responsible for the development operation and maintenance of our information security program Pursuant to the Company s written IRP the CIO is a member of the executive incident response team and severity classifications in the IRP are used to escalate matters to the executive incident response team The CIO has more than 20 years of comprehensive IT experience across a breadth of technologies The CIO is also a member of the Company s executive leadership team and meets regularly with the CEO CFO and other members of the executive leadership team
The CIO reports directly to the Board at least twice a year on cybersecurity risks and strategy and attends Board meetings to be available to discuss cybersecurity matters with the Board Oversight of the information security program at the Board level sits with the Audit Committee The CIO reports to the Audit Committee on risks and internal controls related to cybersecurity and information technology and systems at least annually and attends quarterly Committee meetings to be available to discuss such matters with the Audit Committee
Our active facilities and retail locations are located across the United States and in Mexico Thailand Canada China Hong Kong and the United Kingdom We own our world headquarters building in Monroe Michigan and all of our domestic manufacturing plants with the exception of our Newton Mississippi facility which is leased A joint venture in which we participate owns our Thailand plant We lease the majority of our retail stores and showrooms warehouses and distribution centers certain office space and our manufacturing facilities in Mexico and the United Kingdom For information on operating lease terms for our properties refer to Note 6 Leases to our consolidated financial statements which is included in Item 8 Financial Statements and Supplementary Data of this report
We are involved in various legal proceedings arising in the ordinary course of our business Based on a review of all currently known facts and our experience with previous legal matters we have recorded expense in respect of probable and reasonably estimable losses arising from legal matters and we currently do not believe it is probable that we will have any additional loss that would be material to our consolidated financial statements
Listed below are the names ages and current positions of our executive officers and if they have not held those positions for at least five years their former positions during that period All executive officers serve at the pleasure of the board of directors
Although we expect to continue to pay quarterly dividends the payment of future cash dividends is within the discretion of our board of directors and will depend on our earnings capital requirements and operating and financial condition as well as excess availability under the credit agreement among other factors
Our common stock trades on the New York Stock Exchange under the trading symbol LZB We had approximately 1 568 registered holders of record of La Z Boy s common stock as of June 10 2024 A substantially greater number of holders of La Z Boy common stock are street name or beneficial holders whose shares of record are held by banks brokers and other financial institutions
The graph below shows the cumulative total return for our last five fiscal years that would have been realized assuming reinvestment of dividends by an investor who invested 100 on April 27 2019 in our shares of common stock in the S P 500 Composite Index and in the Dow Jones U S Furnishings Index
Our board of directors has authorized the repurchase of Company stock We spent 12 8 million on discretionary repurchases in the fourth quarter of fiscal 2024 to repurchase 0 3 million shares During fiscal 2024 we spent 52 8 million to repurchase 1 6 million shares and as of April 27 2024 5 7 million shares remained available for repurchase pursuant to the board authorization With the operating cash flows we anticipate generating in fiscal 2025 we expect to continue repurchasing Company stock subject to market conditions and other factors as deemed relevant by our board of directors
The following table summarizes our repurchases of Company stock during the quarter ended April 27 2024 and includes shares purchased from employees to satisfy their withholding tax obligations upon vesting of restricted shares
In addition to the 346 463 shares we repurchased during the quarter as part of our publicly announced board authorized plan described above this column includes 911 shares we repurchased from employees to satisfy their withholding tax obligations upon vesting of restricted shares with an average share price of 34 21
On October 28 1987 our board of directors announced the authorization of the plan to repurchase Company stock The plan originally authorized 1 0 million shares and since October 1987 33 5 million shares have been added to the plan for repurchase The authorization has no expiration date
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 It also includes management s analysis of past financial results and certain potential factors that may affect future results potential future risks and approaches that may be used to manage those risks Refer to Cautionary Note Regarding Forward Looking Statements at the beginning of this report for a discussion of factors that may cause results to differ materially Note that our 2024 and 2023 fiscal years included 52 weeks whereas fiscal year 2022 included 53 weeks
Our goal is to deliver value to our shareholders over the long term by executing Century Vision our strategic plan for growth to our centennial year in 2027 and beyond in which we aim to grow sales and market share and strengthen our operating margins The foundation of our strategic plan is to 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 the following ways
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 message accelerating our omni channel offering and identifying additional consumer base growth opportunities We leverage our consumer insights to develop and deliver
with compelling consumer inspired messaging designed to increase recognition and consideration of the brand We expect this new messaging will enhance the appeal of our brand with a broader consumer base Further our goal is to connect with consumers along their purchase journey through multiple means whether online or in person We are driving change throughout our digital platforms to improve the user experience with a specific focus on the ease with which customers browse through our broad product assortment customize products to their liking find stores to make a purchase or purchase at www la z boy com
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 not 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 where we see opportunity for growth or where we believe we have opportunities for further market penetration Over the last five years as a result of opening new company owned stores and acquiring independent La Z Boy Furniture Galleries
locations our store within a store format While consumers increasingly interact with the brand digitally our consumers also demonstrate an affinity for visiting our stores to shop allowing us to frequently deliver the flagship La Z Boy Furniture Galleries
experience and provide design services In addition to our branded distribution channels approximately 2 200 other dealers sell La Z Boy products which include some of the best known names in the industry providing us the benefit of multi channel distribution We believe there is significant growth potential for our consumer brands through these retail channels
During fiscal 2019 we purchased Joybird a leading e commerce retailer and manufacturer of upholstered furniture with a direct to consumer model We believe that Joybird is a brand with significant potential and our strategic initiatives in this area focus on fueling profitable growth through an increase in digital marketing spend to 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
Key to successful growth is ensuring we have the capabilities to support that growth including an agile supply chain modern technology for consumers and employees and by delivering a human centered employee experience Through our Century Vision strategic plan we have several initiatives focused on enhancing these capabilities with a consumer first focus
Our Wholesale segment consists primarily of four operating segments La Z Boy our largest operating segment our England subsidiary our casegoods operating segment that sells furniture under three brands American Drew
and our international operating segment which 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 Wholesale segment manufactures and imports upholstered furniture such as recliners and motion
furniture sofas loveseats chairs sectionals modulars ottomans and sleeper sofas and imports casegoods wood furniture such as bedroom sets dining room sets entertainment centers and occasional pieces The Wholesale segment sells directly to La Z Boy Furniture Galleries
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 and through small format stores in key urban markets None of the operating segments included in Corporate and Other meet the requirements of reportable segments
The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal year 2024 as compared with fiscal year 2023 Refer to Results of Operations in Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations in the Company s 2023 Annual Report on Form 10 K filed with the SEC on June 20 2023 for an analysis of the fiscal year 2023 results as compared to fiscal year 2022
During 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 which is expected to be completed by the end of the first quarter of fiscal 2025 As a result of these actions charges were recorded within the Wholesale segment in the second third and fourth quarters of fiscal 2024 totaling 4 3 million in cost of sales primarily related to severance and 4 2 million in SG A expense for the accelerated depreciation and impairment of fixed assets
Consolidated sales in fiscal 2024 decreased 302 4 million or 13 compared with the prior year Sales in fiscal 2023 were fueled by the delivery of a significant backlog resulting from heightened demand in prior periods Absent this backlog sales were relatively flat in fiscal 2024 compared with fiscal 2023 as incremental sales from our Retail acquisitions and the addition of new major wholesale dealers were essentially offset by selective pricing taken on products and delivery services along with promotional actions to maintain competitiveness
Partially offsetting the benefits above plant inefficiencies resulting from lower production volume and transition costs related to our supply chain optimization initiative in Mexico drove a decline in gross margin during fiscal 2024 compared with the prior year
While selling general and administrative SG A expenses were down 22 4 million in fiscal 2024 compared with the prior year SG A expenses as a percentage of sales increased 360 basis points over the same period primarily due to lower delivered sales relative to fixed costs
The Retail segment s sales decreased 126 9 million or 13 in fiscal 2024 compared with fiscal 2023 primarily due to the adverse comparison to historic sales levels in fiscal 2023 which were fueled by the delivery of previously built backlog This decrease in sales was partially offset by a 25 2 million increase in sales related to our fiscal 2024 retail store acquisitions and the full year impact of our fiscal 2023 retail store acquisitions
Written same store sales decreased 3 in fiscal 2024 compared with fiscal 2023 primarily due to softer industry wide demand as a result of a challenging macroeconomic environment Same store sales include the sales of all currently active stores which have been open and company owned for each comparable period
While SG A expenses decreased during fiscal 2024 compared with the prior year SG A expenses as a percentage of sales increased 460 basis points over the same period primarily due to lower delivered sales relative to selling expenses and fixed costs mainly occupancy expenses
The Wholesale segment s sales decreased 14 or 243 0 million in fiscal 2024 compared with fiscal 2023 The decrease in sales primarily reflects a decline in delivered unit volume reflecting the absence of the significant backlog built from prior periods that delivered throughout fiscal 2023 combined with lower furniture demand across the entire industry due to a challenging macroeconomic environment To a lesser extent sales also decreased in fiscal 2024 compared with fiscal 2023 as a result of selective pricing on products and delivery services along with promotional actions taken to maintain competitiveness
Partially offsetting the item above plant inefficiencies resulting from lower production volume and transition costs related to our supply chain optimization initiative in Mexico led to a 90 basis point decrease in gross margin during fiscal 2024 compared with the prior year
campaign launch drove a 60 basis point increase in SG A expense as a percentage of sales in fiscal 2024 compared with the prior year Investments in this campaign support all La Z Boy branded products including those sold through our Retail segment
Corporate and Other sales decreased 12 4 million in fiscal 2024 compared with fiscal 2023 primarily due to a 7 8 million or 5 decrease from Joybird which contributed 138 6 million in sales in fiscal 2024 Joybird s overall delivered volume declined in fiscal 2024 largely due to softer demand in the furniture and home furnishings industry experienced over the last year Written sales for Joybird were down 8 in fiscal 2024 compared with fiscal 2023 reflecting the industry wide demand challenges noted above
Our Corporate and Other operating loss decreased 5 1 million in fiscal 2024 compared with fiscal 2023 primarily from improved Joybird operating performance This was partially offset by unfavorable intercompany inventory profit elimination adjustments lower operating profit from our global trading company in Hong Kong and a comparative decrease in fiscal 2024 related to an 0 8 million gain recognized in fiscal 2023 to reduce the fair value of the Joybird contingent consideration liability based on our projections at that time
Other income expense net was 0 1 million of expense in fiscal 2024 compared with 11 8 million of expense in fiscal 2023 The expense in fiscal 2023 was primarily due to a 10 3 million impairment of our investments in a privately held start up company combined with exchange rate losses
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 and capital expenditures including fiscal 2025 contractual obligations
We had cash cash equivalents and restricted cash of 341 1 million at April 27 2024 compared with 346 7 million at April 29 2023 Included in our cash cash equivalents and restricted cash at April 27 2024 is 80 7 million held by foreign subsidiaries the majority of which we have determined to be permanently reinvested In addition we had investments to enhance our returns on cash of 6 8 million at April 27 2024 compared with 11 6 million at April 29 2023
During fiscal 2024 net cash provided by operating activities was 158 1 million a decrease of 47 0 million compared with the prior year mainly due to lower net income and less favorable changes in working capital relative to the prior year partially
offset by 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 and a 19 9 million decrease in inventory This was partially offset by a 22 7 million decrease in customer deposits reflecting the reduced backlog and a 16 8 million increase in receivables reflecting higher sales from our Wholesale business to external dealers during the fourth quarter of fiscal 2024 compared with same period a year ago
Cash used for capital expenditures in the period was 53 6 million compared with 68 8 million during fiscal 2023 which is primarily related to upgrades at our manufacturing and distribution facilities La Z Boy Furniture Galleries
new stores and remodels and Joybird store projects We expect capital expenditures to be in the range of 70 to 80 million for fiscal 2025 primarily related to improvements and expansion of our Retail stores replacement of machinery and equipment for various manufacturing and distribution facilities and technology upgrades We have no material contractual commitments outstanding for future capital expenditures
On 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 term loans subject to the discretion of each lender to participate in such 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 April 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 April 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 fiscal 2024 net cash used for financing activities was 81 2 million an increase of 44 1 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 2024 included the following
Our board of directors has authorized the repurchase of Company stock and we spent 52 8 million during fiscal 2024 to repurchase 1 6 million shares As of April 27 2024 5 7 million shares remained available for repurchase pursuant to this authorization With the operating cash flows we anticipate generating in fiscal 2025 we expect to continue repurchasing Company stock
Cash paid to our shareholders in quarterly dividends was 32 7 million Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms We expect the board to continue declaring regular quarterly cash dividends for the foreseeable future but it may discontinue doing so at any time at the board s discretion
Due to changes in exchange rates our cash cash equivalents and restricted cash decreased by 0 9 million from the end of fiscal year 2023 to the end of fiscal year 2024 These changes impacted our cash balances held in Canada Thailand and the United Kingdom
We lease real estate for retail stores distribution centers warehouses plants showrooms and office space and also have equipment leases for tractors trailers IT and office equipment and vehicles As of April 27 2024 we had operating and finance lease payment obligations of 557 8 million and 2 0 million respectively with 94 6 million and 0 7 million payable within 12 months respectively Refer to Note 6 Leases for additional information
We had purchase obligations of 181 7 million all payable within 12 months related to open purchase orders primarily with foreign and domestic casegoods leather and fabric suppliers which are generally cancellable if production has not begun Open purchase orders also include contracts for indirect services which are generally cancellable before services commence
Our consolidated balance sheet as April 27 2024 reflected a 1 2 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 The remaining balance will be settled or released as tax audits are effectively settled statutes of limitation expire or other new information becomes available
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
We prepare our consolidated financial statements in conformity with U S generally accepted accounting principles US GAAP In some cases these principles require management to make difficult and subjective judgments regarding uncertainties and as a result such estimates and assumptions may significantly impact our financial results and disclosures We base our estimates on currently known facts and circumstances prior experience and other assumptions we believe to be reasonable We use our best judgment in valuing these estimates and may as warranted use external advice Actual results could differ from these estimates assumptions and judgments and these differences could be significant We make frequent comparisons throughout the year of actual experience to our assumptions to reduce the likelihood of significant adjustments We record adjustments when differences are known We consider the following accounting estimates to be critical as they require us to make assumptions that are uncertain at the time the estimate was made and changes to the estimate would have a material impact on our financial statements
stores and to use the associated trademarks and trade name in those markets to the dealers whose assets we acquired and we reacquired these rights when we purchased the dealers other assets The reacquired rights to own and operate La Z Boy Furniture Galleries
stores are indefinite lived because our retailer agreements are perpetual agreements that have no specific expiration date and no renewal options A retailer agreement remains in effect as long as the independent retailer is not in default under the terms of the agreement
an e commerce retailer and manufacturer of upholstered furniture The reporting unit for goodwill arising from retail store acquisitions is our Retail operating segment Goodwill arising from the acquisition of
We test indefinite lived intangibles and goodwill for impairment on an annual basis in the fourth quarter of our fiscal year or more frequently if events or changes in circumstances indicate that the carrying value may be impaired We have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of our intangible assets or reporting units are greater than their carrying value If the qualitative assessment leads to a determination that the intangible asset reporting unit s fair value may be less than its carrying value or if we elect to bypass the qualitative assessment altogether we are required to perform a quantitative impairment test by calculating the fair value of the intangible asset reporting unit and comparing the fair value with its associated carrying value When we perform the quantitative test for indefinite lived intangible assets we establish the fair value of our indefinite lived trade names and reacquired rights based upon the relief from royalty method which requires the use of significant estimates and assumptions including forecasted sales growth and royalty rates When we perform the quantitative test for goodwill we establish the fair value for the reporting unit based on the income approach in which we utilize a discounted cash flow model the market approach in which we utilize market multiples of comparable companies or a combination of both approaches The income approach requires the use of significant estimates and assumptions including forecasted sales growth operating income projections and discount rates and changes in these assumptions may materially impact our fair value assessment
The Joybird reporting unit which has goodwill of 55 4 million at April 27 2024 has an estimated fair value that exceeds is carrying value by approximately 6 We determined the fair value of this reporting unit by applying a combination of the income approach based on its future cash flows and the market approach based on the guideline public company method weighted 75 and 25 respectively The key assumptions that factored into the valuation under the income approach were the projections of revenue and operating income of the business as well as the terminal growth rate tax rate and discount rate used to present value these future cash flows We performed a sensitivity analysis on the discount rate and terminal growth rate and using a range of reasonable inputs the fair value of the Joybird reporting unit either exceeded its carrying value or did not exceed its carrying value by an immaterial amount for each of the various scenarios analyzed The key assumption that factored into the valuation under the market approach was the market multiples applied to revenue
The United Kingdom reporting unit which has goodwill of 20 1 million at April 27 2024 has an estimated fair value that exceeds is carrying value by approximately 28 We determined the fair value of this reporting unit using the income approach based on its future cash flows The key assumptions that factored into the valuation were the projections of revenue and operating income of the business as well as the terminal growth rate tax rate and discount rate used to present value these future cash flows
We account for product warranties by accruing an estimated liability when we recognize revenue on the sale of warrantied product We estimate future warranty claims on product sales based on sales volume and claim experience and periodically make adjustments to reflect changes in actual experience We incorporate repair costs in our liability estimates including materials labor and overhead amounts necessary to perform repairs and any costs associated with delivering repaired product to our customers and consumers We use considerable judgment in making our estimates and record differences between our estimated and actual costs when the differences are known
We measure stock based compensation cost for both equity based awards and liability based awards on the grant date based on the awards fair value and recognize expense over the vesting period For liability based awards we remeasure the liability for these awards and adjust their fair value at the end of each reporting period until paid We recognize compensation cost for stock based awards that vest based on performance conditions ratably over the vesting periods when the vesting of such awards becomes probable Determining the probability of award vesting requires judgment including assumptions about future operating performance While the assumptions we use to calculate and account for stock based compensation awards represent management s best estimates these estimates involve inherent uncertainties and the application of our management s best
If we grant options we estimate the fair value of each option grant using a Black Scholes option pricing model We estimate expected volatility based on the historic volatility of our common shares We estimate the average expected life using the contractual term of the stock option and expected employee exercise and post vesting employment termination 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 grant We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur
We estimate the fair value of each performance award grant that vests based on a market condition using a Monte Carlo valuation model The Monte Carlo model incorporates more complex variables than closed form models such as the Black Scholes option valuation model used for option grants The Monte Carlo valuation model simulates a distribution of stock prices to yield an expected distribution of stock prices over the remaining performance period The stock paths are simulated using volatilities calculated with historical information using data from a look back period that is equal to the vesting period The model assumes a zero coupon risk free interest rate with a term equal to the vesting period The simulations are repeated many times and the mean of the discounted values is calculated as the grant date fair value for the award The final payout of the award as calculated by the model is then discounted back to the grant date using the risk free interest rate
While we had no variable rate borrowings at April 27 2024 we could be exposed to market risk from changes in risk free interest rates if we incur variable rate debt in the future Based on our current and expected levels of exposed liabilities management estimates that a one percentage point change in interest rates would not have had a material impact on our results of operations for fiscal 2024
We are exposed to market risk from changes in the value of foreign currencies primarily related to our manufacturing facilities in Mexico our wholesale and retail businesses in Canada our wholesale and manufacturing businesses in the United Kingdom and our majority owned joint ventures in Thailand In Mexico we pay wages and other local expenses in Mexican Pesos In our Canadian wholesale business we pay wages and other local expenses in Canadian Dollars We recognize sales and pay wages and other local expenses related to our wholesale and manufacturing businesses in the United Kingdom in Great British Pounds and our Canadian retail business in Canadian Dollars In Thailand we pay wages and other local expenses in the Thai Baht Nonetheless gains and losses resulting from market changes in the value of foreign currencies have not had and are not currently expected to have a material effect on our consolidated results of operations A decrease in the value of foreign currencies in relation to the U S Dollar could impact the profitability of some of our vendors and translate into higher prices from our suppliers but we believe that in that event our competitors would experience a similar impact
We are exposed to market risk with respect to commodity and transportation costs principally related to commodities we use in producing our products including steel wood and polyurethane foam in addition to transportation costs for delivering our products As commodity prices and transportation costs rise we determine whether a price increase to our customers to offset these costs is warranted To the extent that an increase in these costs would have a material impact on our results of operations we believe that our competitors would experience a similar impact
We are exposed to market risk with respect to duties and tariffs assessed on raw materials component parts and finished goods we import into countries where we operate Additionally we are exposed to duties and tariffs on our finished goods that we export from our assembly plants to other countries As these tariffs and duties increase we determine whether a price increase to our customers to offset these costs is warranted To the extent that an increase in these costs would have a material impact on our results of operations we believe that our competitors would experience a similar impact Conversely if certain tariffs are eliminated or reduced we may face additional competition from foreign manufacturers entering the United States market and from domestic retailers who rely on imported goods which could put pressure on our prices and may adversely impact our result of operations
Management is responsible for the consistency integrity and preparation of the information contained in this Annual Report on Form 10 K The consolidated financial statements and other information contained in this Annual Report on Form 10 K have been prepared in accordance with accounting principles generally accepted in the United States of America and include necessary judgments and estimates by management
To fulfill our responsibility we maintain comprehensive systems of internal control designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with established procedures The concept of reasonable assurance is based upon recognition that the cost of the controls should not exceed the benefit derived We believe our systems of internal control provide this reasonable assurance
The board of directors exercised its oversight role with respect to our systems of internal control primarily through its audit committee which is comprised of independent directors The committee oversees our systems of internal control accounting practices financial reporting and audits to assess whether their quality integrity and objectivity are sufficient to protect shareholders investments
In addition our consolidated financial statements have been audited by PricewaterhouseCoopers LLP an independent registered public accounting firm whose report also appears in this Annual Report on Form 10 K
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as that term is defined in Rule 13a 15 f of the Exchange Act Under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer we conducted an evaluation of the effectiveness of our internal controls over financial reporting based upon the framework in Internal Control Integrated Framework 2013 set forth by the Committee of Sponsoring Organizations of the Treadway Commission Based on that evaluation our management concluded that our internal control over financial reporting was effective as of April 27 2024 PricewaterhouseCoopers LLP an independent registered public accounting firm audited the effectiveness of the Company s internal control over financial reporting as of April 27 2024 as stated in its report which appears herein
and the related consolidated statements of income of comprehensive income of changes in equity and of cash flows for each of the three years in the period ended April 27 2024 including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended April 27 2024 appearing under Item 16 collectively referred to as the consolidated financial statements
cash flows for each of the three years in the period ended April 27 2024 in conformity with accounting principles generally accepted in the United States of America Also in our opinion the Company maintained in all material respects effective internal control over financial reporting as of April 27 2024 based on criteria established in
The Company s management is responsible for these consolidated financial statements for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express opinions on the Company s consolidated
financial statements and on the Company s internal control over financial reporting based on our audits We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audits also included performing such other procedures as we considered necessary in the circumstances We believe that our audits provide a reasonable basis for our opinions
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that i pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company ii provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company and iii provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that i relate to accounts or disclosures that are material to the
consolidated financial statements and ii involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matters below providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate
As described in Note 12 to the consolidated financial statements as of April 27 2024 the Company s consolidated accrued product warranties liability balance was 28 9 million of which the Wholesale reportable segment comprises a significant portion Management accrues an estimated liability for product warranties when revenue is recognized on the sale of warrantied products Management estimates future warranty claims on product sales based on sales volume and historical claims experience and periodically adjusts the provision to reflect changes in actual experience The liability estimate incorporates repair costs including materials labor and overhead amounts necessary to perform repairs and any costs associated with delivering the repaired product to customers
The principal considerations for our determination that performing procedures relating to the accrued product warranties for the Wholesale reportable segment is a critical audit matter are i the significant judgment by management when developing the accrual and ii a high degree of auditor judgment subjectivity and effort in performing procedures relating to the estimation methodology and the applicability of historical cost of materials and labor used in the methodology
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements These procedures included testing the effectiveness of controls relating to the accrued product warranties for the Wholesale reportable segment These procedures also included among others i testing management s process for developing the accrual ii evaluating the appropriateness of the estimation methodology applied in developing the accrual iii evaluating the applicability of the historical cost of materials and labor used in the methodology and iv testing the completeness and accuracy of the historical cost of materials and labor
As described in Notes 1 and 7 to the consolidated financial statements as of April 27 2024 the Company s consolidated goodwill balance was 214 5 million and the goodwill associated with the Corporate and Other reportable segment was 55 4 million which is inclusive of the Joybird reporting unit Management tests goodwill for impairment on an annual basis in the fourth quarter of the fiscal year or more frequently if events or changes in circumstances indicate that the carrying value may be impaired In situations where the fair value is less than the carrying value an impairment charge would be recorded for the shortfall To estimate the fair value of the Joybird reporting unit management applied a combination of the income approach and the market approach weighted 75 and 25 respectively The income approach used discounted future cash flows and the market approach used the guideline public company method which derives a valuation from market multiples based on revenue for comparable public companies and was adjusted for a control premium Management s cash flow projections for the Joybird reporting unit included assumptions relating to sales and operating income projections and terminal growth rate as well as other assumptions relating to discount rate and tax rate which are used in the discounted cash flow model
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Joybird reporting unit is a critical audit matter are i the significant judgment by management when developing the fair value estimate of the Joybird reporting unit ii a high degree of auditor judgment subjectivity and effort in performing procedures and evaluating management s significant assumptions related to sales and operating income projections and the discount rate used in the discounted cash flow model and the market multiples based on revenue for comparable public companies used in the market approach and iii the audit effort involved the use of professionals with specialized skill and knowledge
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements These procedures included testing the effectiveness of controls relating to
management s goodwill impairment assessment including controls over the valuation of the Joybird reporting unit which included controls over significant assumptions related to the sales and operating income projections the discount rate and the market multiples based on revenue for comparable public companies These procedures also included among others i testing management s process for developing the fair value estimate of the Joybird reporting unit ii evaluating the appropriateness of the discounted cash flow model and market approach used by management iii testing the completeness and accuracy of underlying data used in the discounted cash flow model and market approach and iv evaluating the reasonableness of the significant assumptions used by management related to the sales and operating income projections and the discount rate used in the discounted cash flow model and the market multiples based on revenue for comparable public companies used in the market approach Evaluating management s assumptions related to the sales and operating income projections involved evaluating whether the assumptions used by management were reasonable considering i the current and past performance of the Joybird reporting unit ii the consistency with external market and industry data and iii whether these assumptions were consistent with evidence obtained in other areas of the audit Professionals with specialized skill and knowledge were used to assist in evaluating i the appropriateness of the Company s discounted cash flow model and market approach and ii the reasonableness of the discount rate assumption used in the discounted cash flow model and market multiples based on revenue for comparable public companies assumption used in the market approach
Non controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested
The following is a summary of significant accounting policies followed in the preparation of La Z Boy Incorporated and its subsidiaries individually and collectively we our us La Z Boy or the Company consolidated financial statements Our fiscal year ends on the last Saturday of April Our 2024 and 2023 fiscal years included 52 weeks whereas our 2022 fiscal year included 53 weeks The additional week in fiscal 2022 was included in the fourth quarter
The accompanying consolidated financial statements include the consolidated accounts of La Z Boy Incorporated and our majority owned subsidiaries The portion of less than wholly owned subsidiaries is included as non controlling interest All intercompany transactions have been eliminated including any related profit on intercompany sales
At April 27 2024 we owned investments in two privately held companies consisting of non marketable preferred shares warrants to purchase common shares and convertible notes Each of these companies is a variable interest entity 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
The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America These principles require management to make estimates and assumptions that affect the reported amounts or disclosures of assets liabilities including contingent liabilities sales and expenses at the date of the financial statements Actual results could differ from those estimates
In the first quarter of fiscal 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
In accordance with US GAAP the periods presented below have 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
For purposes of the consolidated balance sheet and statement of cash flows we consider all highly liquid debt instruments purchased with initial maturities of three months or less to be cash equivalents
At April 29 2023 we had restricted cash on deposit with a bank as collateral for certain letters of credit that matured within 12 months During fiscal 2024 we renewed these letters of credit and as of April 27 2024 we are no longer required to hold restricted cash as collateral All of our letters of credit have maturity dates within the next 12 months and we expect to renew some of these letters of credit when they mature
Inventories are stated at the lower of cost or market Cost is determined using the last in first out LIFO basis for approximately 61 and 59 of our inventories at April 27 2024 and April 29 2023 respectively Cost is determined for all other inventories on a first in first out FIFO basis The majority of our La Z Boy Wholesale segment inventory uses the LIFO method of accounting while the FIFO method is used primarily in our Retail segment and Joybird business
Items capitalized including significant betterments to existing facilities are recorded at cost Capitalized computer software costs include internal and external costs incurred during the software s development stage Internal costs relate primarily to employee activities for coding and testing the software under development Computer software costs are depreciated over three to five years All maintenance and repair costs are expensed when incurred Depreciation is computed principally using straight line methods over the estimated useful lives of the assets
Retirement or dispositions of long lived assets are recorded based on carrying value and proceeds received Any resulting gains or losses are recorded as a component of selling general and administrative SG A expenses
We review the carrying value of our long lived assets which includes our right of use lease assets for impairment if events or changes in circumstances indicate that their carrying amounts may not be recoverable Our assessment of recoverability is based on our best estimates using either quoted market prices or an analysis of the undiscounted projected future cash flows by asset groups in order to determine if there is any indicator of impairment requiring us to further assess the fair value of our long lived assets Our asset groups consist of our operating segments in our Wholesale reportable segment each of our retail stores our Joybird operating segment and other corporate assets which are evaluated at the consolidated level
stores and to use the associated trademarks and trade name in those markets to the dealers whose assets we acquired and we reacquired these rights when we purchased the dealers other assets The reacquired rights to own and operate La Z Boy Furniture Galleries
stores are indefinite lived because our retailer agreements are perpetual agreements that have no specific expiration date and no renewal options A retailer agreement remains in effect as long as the independent retailer is not in default under the terms of the agreement
an e commerce retailer and manufacturer of upholstered furniture The reporting unit for goodwill arising from retail store acquisitions is our Retail operating segment Goodwill arising from the acquisition of
manufacturing business in the United Kingdom is combined into the United Kingdom reporting unit These two businesses are considered components of the International operating segment and are aggregated into one reporting unit for goodwill because they are economically similar and work in concert as they represent the manufacturing and selling entities within the United Kingdom The reporting unit for goodwill arising from the acquisition of Joybird is the Joybird operating segment
We test indefinite lived intangibles and goodwill for impairment on an annual basis in the fourth quarter of our fiscal year or more frequently if events or changes in circumstances indicate that the carrying value may be impaired We have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of our intangible assets or reporting units are greater than their carrying value If the qualitative assessment leads to a determination that the intangible asset reporting unit s fair value may be less than its carrying value or if we elect to bypass the qualitative assessment altogether we are required to perform a quantitative impairment test by calculating the fair value of the intangible asset reporting unit and comparing the fair value with its associated carrying value When we perform the quantitative test for indefinite lived intangible assets we establish the fair value of our indefinite lived trade names and reacquired rights based upon the relief from royalty method When we perform the quantitative test for goodwill we establish the fair value for the reporting unit based on the income approach in which we utilize a discounted cash flow model the market approach in which
we utilize market multiples of comparable companies or a combination of both approaches In situations where the fair value is less than the carrying value an impairment charge would be recorded for the shortfall
We have an amortizable intangible asset for acquired customer relationships related to the acquisition of the La Z Boy wholesale business in the United Kingdom and Ireland which is amortized on a straight line basis over its estimated useful life of 15 years We also have an amortizable intangible asset for the Joybird
trade name which is amortized on a straight line basis over its estimated useful life of eight years All intangible amortization expense is recorded as a component of SG A expense We test amortizable intangible assets for impairment if events or changes in circumstances indicate that the assets might be impaired If we determine an assessment for impairment is necessary we establish the fair value of these amortizable intangible assets based on the multi period excess earnings method a variant of the income approach and the relief from royalty method as applicable
Available for sale debt securities are recorded at fair value with the net unrealized gains and losses that are deemed to be temporary reported as a component of other comprehensive income loss Equity securities are recorded at fair value with unrealized gains and losses recorded in other income expense net We also hold investments in two privately held companies consisting of non marketable preferred shares warrants to purchase common shares and convertible notes The fair value of these equity investments preferred shares and warrants is not readily determinable and therefore we estimate the fair value as costs minus impairment if any plus or minus adjustments resulting from observable price changes in orderly transactions for identical or similar investments with the same issuer The convertible notes are recorded at fair value with the net unrealized gains and losses that are deemed to be temporary reported as a component of other comprehensive income consistent with our other available for sale debt securities
Realized gains and losses for all investments charges for other than temporary impairments of debt securities and charges for impairment on our equity investments without readily determinable values are included in determining net income with related purchase costs based on the first in first out method We evaluate our available for sale debt investments for possible other than temporary impairments by reviewing factors such as the extent to which an investment s fair value is below our cost basis the issuer s financial condition and our ability and intent to hold the investment for sufficient time for its market value to recover For impairments that are other than temporary an impairment loss is recognized in earnings equal to the difference between the investment s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made The fair value of the investment then becomes the new amortized cost basis of the investment and it is not adjusted for subsequent recoveries in fair value
There were no impairment charges recorded in fiscal 2024 or fiscal 2022 During fiscal 2023 we recognized a 10 3 million impairment charge for one of our investments which was recorded as a component of other income expense net in the consolidated statement of income
Life insurance policies are recorded at the amount that could be realized under the insurance contract as of the date of our consolidated balance sheet These assets are classified as other long term assets on our consolidated balance sheet and are used to fund our executive deferred compensation plan and performance compensation retirement plan The change in cash surrender or contract value is recorded as income or expense in other income expense net during each period
We collect a deposit on a portion of the total merchandise price at the time a customer order is placed in one of our company owned retail stores and through our website www la z boy com We record this as a customer deposit which is included in our accrued expenses and other current liabilities on our consolidated balance sheet The balance of the order is paid in full prior to delivery of the product At the time the customer places an order through www joybird com we collect the entire amount owed and record this as a customer deposit
Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services We generate revenues
stores or the end consumer Each unit of furniture is a separate performance obligation and we satisfy our performance obligation when control of our product is passed to our customer which is the point in time that our customers are able to direct the use of and obtain substantially all of the remaining economic benefit of the goods or services
The majority of our wholesale shipping agreements are freight on board shipping point and risk of loss transfers to our customer once the product is out of our control Accordingly revenue is recognized for product shipments on third party carriers at the point in time that our product is loaded onto the third party container or truck and that container or truck leaves our facility For our imported products we recognize revenue at the point in time that legal ownership is transferred which may not occur until after the goods have passed through U S Customs In all cases this revenue includes amounts we bill to customers for freight charges because we have elected to treat shipping activities that occur after the customer has obtained control of our product as a fulfillment cost rather than an additional promised service Because of this election we recognize revenue for shipping when control of our product passes to our customer and the shipping costs are accrued when the freight revenue is recognized Revenue for product shipments on company owned trucks is recognized for the product and freight at the point in time that our product is delivered to our customer s location
We recognize revenue for retail sales and online sales to the end consumer through our company owned retail stores www la z boy com or www joybird com once the end consumer has taken control of the furniture at which point legal title has passed to them This takes place when the product is delivered to the end consumer s home Home delivery is not a promised service to our customer and is not a separate performance obligation because home delivery is a fulfillment activity as the costs are incurred as part of transferring our product to the end consumer At the time the customer places an order through our company owned retail stores or www la z boy com we collect a deposit on a portion of the total merchandise price We record this as a customer deposit which is included in accrued expenses and other current liabilities on our consolidated balance sheet The balance of the order is paid in full prior to delivery of the product Once the order is taken through our company owned retail stores or www la z boy com we recognize a contract asset and a corresponding deferred revenue liability for the difference between the total order and the deposit collected The contract asset is included in other current assets on our consolidated balance sheet and the deferred revenue is included in accrued expenses and other current liabilities on our consolidated balance sheet At the time the customer places an order through www joybird com we collect the entire amount owed and record this as a customer deposit Because the entire amount owed is collected at the time of the order there is no contract asset recorded for Joybird sales
At the time we recognize revenue we make provisions for estimated refunds product returns and warranties as well as other incentives that we may offer to customers When estimating our incentives we utilize either the expected value method or the most likely amount to determine the amount of variable consideration We use either method depending on which method will provide the best estimate of the variable consideration and we only include variable consideration when it is probable that there will not be a significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is subsequently resolved Incentives offered to customers include cash discounts rebates advertising agreements and other sales incentive programs Our sales incentives including cash discounts and rebates are recorded as a reduction to revenues Service allowances are for a distinct good or service with our customers and are recorded as a component of SG A expense in our consolidated statement of income and are not recorded as a reduction of revenue and are not considered variable consideration We use substantial judgment based on the type of variable consideration or service allowance historical experience and expected sales volume when estimating these provisions The expected costs associated with our warranties and service allowances are recognized as expense when our products are sold For sales tax we elected 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
All orders are fulfilled within one year of order date therefore we do not have any unfulfilled performance obligations Additionally we elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component because at contract inception we expect the period between when we transfer our product to our customer and when the customer pays for the product to be one year or less
Trade accounts receivable arise from the sale of products on trade credit terms On a quarterly basis we review all significant accounts as to their past due balances as well as collectability of the outstanding trade accounts receivable for possible write off It is our policy to write off the accounts receivable against the allowance account when we deem the receivable to be
Our allowances for credit losses reflect our best estimate of losses inherent in the trade accounts receivable balance We determine the allowance based on known troubled accounts weighing probabilities of future conditions and expected outcomes and other currently available evidence
Our cost of sales consists primarily of the cost to manufacture or purchase our merchandise inspection costs internal transfer costs in bound freight costs outbound shipping costs as well as warehousing costs occupancy costs and depreciation expense related to our manufacturing facilities distribution centers and equipment
SG A expenses include the costs of selling our products and other general and administrative costs Selling expenses are primarily composed of commissions advertising warranty bad debt expense and compensation and benefits of employees performing various sales functions Additionally the occupancy costs of our retail facilities are included as a component of SG A Other general and administrative expenses included in SG A are composed primarily of compensation and benefit costs for administrative employees and other administrative costs
Other income expense net is made up primarily of foreign currency exchange net gain loss gain loss on the sale of investments and unrealized gain loss on equity securities Other income expense net for fiscal 2023 also includes a 10 3 million impairment of our investments in a privately held start up company
Research and development costs are charged to expense in the periods incurred Expenditures for research and development costs were 9 6 million 9 1 million and 9 0 million for the fiscal years ended April 27 2024 April 29 2023 and April 30 2022 respectively and are included as a component of SG A
Production costs of commercials programming and costs of other advertising promotion and marketing programs are charged to expense in the period in which the commercial or advertisement is first aired or released Gross advertising expenses were 150 9 million 159 0 million and 126 8 million for the fiscal years ended April 27 2024 April 29 2023 and April 30 2022 respectively
stores which reimburse us for approximately 25 of the cost of the program excluding company owned stores Because of this shared cost arrangement the advertising expense is reported as a component of SG A while the dealers reimbursement portion is reported as a component of sales
Income taxes are accounted for under the asset and liability method Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled
In periods when deferred tax assets are recorded we are required to estimate whether recoverability is more likely than not i e a likelihood of more than 50 based on among other things forecasts of taxable earnings in the related tax jurisdiction We consider historical and projected future results of operations the eligible carry forward period tax law changes tax planning opportunities and other relevant considerations when making judgments about realizing the value of our deferred tax assets
We recognize in our consolidated financial statements the benefit of a position taken or expected to be taken in a tax return when it is more likely than not that the position would be sustained upon examination by tax authorities A recognized tax position is then measured at the largest amount of benefit that is more likely than not to be realized upon settlement Changes in judgment that result in subsequent recognition derecognition or change in a measurement date of a tax position taken in a prior annual period including any related interest and penalties are recognized as a discrete item in the interim period in which the change occurs
Foreign currency transaction gains and losses associated with translating assets and liabilities denominated in a currency that is different than a subsidiaries functional currency are recorded in cost of sales and other income expense net in our consolidated statement of income Assets and liabilities of foreign subsidiaries whose functional currency is their local currency are translated at the year end exchange rates and revenues and expenses are translated at average exchange rates for the period with the corresponding translation effect included as a component of other comprehensive income
We estimate the fair value of equity based awards including option awards and stock based awards that vest based on market conditions on the date of grant using option pricing models The value of the portion of the equity based awards that are ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statement of income using a straight line single option method We measure stock based compensation cost for liability based awards based on the fair value of the award on the grant date and recognize it as expense over the vesting period The liability for these awards is remeasured and adjusted to its fair value at the end of each reporting period until paid We record compensation cost for stock based awards that vest based on performance conditions ratably over the vesting periods when the vesting of such awards become probable
We establish an accrued liability for legal matters when those matters present loss contingencies that are both probable and reasonably estimable As a litigation matter develops and in conjunction with any outside legal counsel handling the matter we evaluate on an ongoing basis whether such matter presents a loss contingency that is probable and reasonably estimable If at the time of evaluation the loss contingency related to a litigation matter is not both probable and reasonably estimable the matter will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable Once the loss contingency related to a litigation matter is deemed to be both probable and reasonably estimable we will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation related expense We continue to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established
We use a combination of insurance and self insurance for a number of risks including workers compensation general liability vehicle liability and the company funded portion of employee related health care benefits Liabilities associated with these risks are estimated in part by considering historic claims experience demographic factors severity factors and other assumptions We have various excess loss coverages for employee related health care benefits vehicle liability product liability and workers compensation liabilities Our deductibles generally do not exceed 2 5 million
The following table summarizes Accounting Standards Updates ASUs which were adopted in fiscal 2024 but did not have a material impact on our accounting policies or our consolidated financial statements and related disclosures
The following table summarizes additional accounting pronouncements which we have not yet adopted but we believe will not have a material impact on our accounting policies or our consolidated financial statements and related disclosures
None 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 acquisitions completed in fiscal 2024 2023 and 2022 reflect a core component of our strategic priorities which is to grow our company owned retail business and leverage our integrated retail model where we earn a combined profit on both the wholesale and retail sales in suitable geographic markets alongside the existing La Z Boy Furniture Galleries
stores and to use the associated trademarks and trade name in each of their respective markets and we reacquired these rights when we consummated the transaction These reacquired rights are indefinite lived because our retailer agreements are perpetual agreements that have no specific expiration date and no renewal options The effective settlement 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
stores for 15 7 million inclusive of and subject to further customary adjustments The acquisition also included the purchase of buildings and land for both stores We paid total cash of 14 3 million during the fourth 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 1 9 million related to the reacquired rights described above We also recognized 4 7 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
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 17 0 million during the third and fourth 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 4 2 million related to the reacquired rights described above We also recognized 0 6 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
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 an 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 future benefits of these synergies
stores and one distribution center for 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
store and one distribution center for 5 0 million inclusive of customary adjustments We paid total cash of 4 9 million during the fourth quarter of fiscal 2023 and the remaining consideration includes 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 5 million related to the reacquired rights described above
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 includes 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
stores and one distribution center for 10 1 million inclusive of customary adjustments We paid total cash of 7 7 million in the first and second quarters of fiscal 2023 and the remaining consideration includes forgiveness of accounts receivable and payments based on working capital adjustments 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
stores in Alabama and one in Chattanooga Tennessee for 8 3 million inclusive of customary adjustments We paid total cash of 8 0 million in the third quarter of fiscal 2022 and the remaining consideration includes forgiveness of accounts receivable and payments based on working capital adjustments As part of the acquisition we recorded an indefinite lived intangible asset of 4 1 million related to the reacquired rights described above We also recognized 7 4 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired stores and future benefits of these synergies
On October 25 2021 we completed the acquisition of Furnico Furniture Ltd Furnico an upholstery manufacturing business in the U K for approximately 13 3 million inclusive of customary adjustments and in the third and fourth quarters of fiscal 2022 we paid 13 9 million of cash for the purchase of the Furnico business Furnico produces La Z Boy branded product for the La Z Boy U K business and also operates a wholesale business selling white label products to key U K retailers With this acquisition we expect to realize production synergies cost savings through materials procurement and increases in production capacity to support growth in the La Z Boy U K business
As part of the acquisition we recognized 9 2 million of goodwill in our Wholesale segment related primarily to synergies we expect from the integration of the acquired business and future benefits of these synergies The goodwill asset for Furnico is not deductible for federal income tax purposes
stores for 4 5 million inclusive of customary adjustments We paid 4 4 million of cash during the second quarter of fiscal 2022 and the remaining consideration includes forgiveness of accounts receivable and payments based on working capital adjustments As part of the acquisition we recorded an indefinite lived intangible asset of 0 8 million related to the reacquired rights described above We also recognized 4 4 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired stores and future benefits of these synergies
The Company leases real estate for retail stores distribution centers warehouses manufacturing plants showrooms and office space We also have equipment leases for tractors trailers IT and office equipment and vehicles We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all the economic benefits from the use of that identified asset Most of our real estate leases include options to renew or terminate early We assess these options to determine if we are reasonably certain of exercising these options based on all relevant economic and financial factors Any options that meet these criteria are included in the lease term at lease commencement
Most of our leases do not have an interest rate implicit in the lease As a result for purposes of measuring our right of use ROU lease asset and lease liability we determine our incremental borrowing rate by applying a spread above the U S Treasury borrowing rates If an interest rate is implicit in a lease we will use that rate as the discount rate for that lease Some of our leases contain variable rent payments based on a Consumer Price Index or percentage of sales Due to the variable nature of these costs they are not included in the measurement of the ROU lease asset and lease liability
Under US GAAP we have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of one of our reporting units is greater than its carrying value Step 0 If the qualitative assessment leads to a determination that the reporting unit s fair value is less than its carrying value or if we elect to bypass the qualitative assessment altogether we are required to perform a quantitative impairment test Step 1 by calculating the fair value of the reporting unit and comparing the fair value with its associated carrying value
During our fiscal 2024 annual impairment test we first assessed goodwill recoverability qualitatively using the Step 0 approach for each of our reporting units For our qualitative assessment we considered the most recent quantitative analysis which was performed during the fourth quarter of fiscal 2023 for the United Kingdom and Joybird reporting units and during the fourth quarter of fiscal 2020 for the Retail reporting unit including assumptions used such as discount rates and tax rates indicated fair values and the amounts by which those fair values exceeded their carrying amounts Further we compared actual performance in fiscal 2024 along with future financial projections to the internal financial projections used in the prior quantitative analyses Additionally we considered various other factors including macroeconomic conditions relevant industry and market trends and factors specific to the Company that could indicate a potential change in the fair value of our reporting units Lastly we evaluated whether any events have occurred or any circumstances have changed since that time that would indicate that our goodwill may have become impaired since our last quantitative tests
Based on these qualitative assessments we determined that it is more likely than not that the fair value of our Retail reporting unit exceeded its carrying value and as such our goodwill for the Retail reporting unit was not considered impaired as of April 27 2024 and the Step 1 quantitative goodwill impairment analysis was not necessary However for our United Kingdom and Joybird reporting units we determined that the quantitative Step 1 goodwill impairment test was necessary as noted below
To estimate the fair value of this reporting unit we applied the income approach using discounted future cash flows Sales and operating income projections were based on assumptions driven by the current economic conditions and assumed a 2 0 terminal growth rate Other key assumptions used in the quantitative assessment of the reporting unit s goodwill were a discount rate of
reflecting a market participant weighted average cost of capital and a tax rate of 25 0 which was specific to the United Kingdom reporting unit Based on our testing the fair value of the United Kingdom reporting unit exceeded its carrying value
Due to a decline in Joybird s financial performance in fiscal 2024 we deemed it necessary to perform the quantitative Step 1 goodwill impairment test for the Joybird reporting unit To estimate the fair value of this reporting unit we applied a combination of the income approach and the market approach weighted 75 and 25 respectively The income approach used discounted future cash flows in which sales and operating income projections were based on assumptions driven by current economic conditions and assumed a 2 0 terminal growth rate Other key assumptions used in the discounted future cash flow model were a discount rate of 18 0 reflecting a market participant weighted average cost of capital assuming Joybird would be sold as a stand alone business and a tax rate of 24 2 which was specific to the Joybird reporting unit
The market approach used the guideline public company method which derives a valuation from market multiples based on revenue for comparable public companies and was adjusted for a control premium based on recent merger and acquisition transaction data of target companies similar to the Joybird reporting unit Based on our testing the fair value of the Joybird reporting unit exceeded its carrying value as of April 27 2024 by approximately 6 and no impairment was recorded
Further a sensitivity analysis was performed on key assumptions used in the valuation primarily the discount rate and terminal growth rate and using a range of reasonable inputs the fair value of the Joybird reporting unit either exceeded its carrying value or did not exceed its carrying value by an immaterial amount for each of the various scenarios analyzed However changes to other valuation inputs or failure to meet our forecasts in particular our sales and operating income projections could
We test indefinite lived intangible assets for impairment on an annual basis in the fourth quarter of our fiscal year or more frequently if events or changes in circumstances indicate that the assets might be impaired Similar to our goodwill testing we used the qualitative Step 0 approach to assess if it was more likely than not that the fair values of our indefinite lived intangible assets were greater than their carrying values Based on the same qualitative factors outlined above
we determined that it is more likely than not that the fair value of each of our indefinite lived intangible assets exceeded their respective carrying value and as such our indefinite lived intangible assets were not considered impaired as of
For our intangible assets recorded as of April 27 2024 we estimate annual amortization expense to be 1 0 million for each of the two succeeding fiscal years 0 4 million in the third succeeding fiscal year and 0 2 million in the fourth and fifth succeeding fiscal years
We 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 investments of two privately held companies consisting of non marketable preferred shares warrants to purchase common shares and convertible notes In the fourth quarter of fiscal 2023 we recognized an impairment of 10 3 million consisting of 7 6 million in cost basis investments and 2 7 million in convertible notes which in total represented the full cost basis value of the investment in one of these privately held start up companies The impairment loss is recognized in other income expense net on the consolidated statement of income
On 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 term loans subject to the discretion of each lender to participate in such 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 April 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 April 27 2024 we were in compliance with our financial covenants under the Credit Facility
A performance compensation retirement plan PCRP is maintained for eligible highly compensated employees Beginning in fiscal 2023 contributions into the plan are no longer being made Prior year contributions were based on achievement of performance targets Employees vest in these prior period contributions if they achieve certain age and years of service with the Company and can elect to receive benefit payments over a period ranging
We maintain an executive deferred compensation plan for eligible highly compensated employees an element of which may include Company contributions Further information related to the plan is as follows
We maintain a non qualified defined benefit retirement plan for certain former salaried employees We hold available for sale marketable securities to fund future obligations of this plan in a Rabbi trust refer to Note 8 Investments and Note 20 Fair Value Measurements for additional information on these investments We are not required to fund the non qualified defined benefit retirement plan in fiscal 2025 however we have the discretion to make contributions to the Rabbi trust Further information related to the plan is as follows
We accrue an estimated liability for product warranties when we recognize revenue on the sale of warrantied products We estimate future warranty claims on product sales based on sales volume and our historical claims experience and 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 Over 90 of our warranty liability relates to our Wholesale reportable segment as we generally warrant our products against defects for one to three years on fabric and leather from one to five years on cushions and padding and provide a limited lifetime warranty on certain mechanisms and frames unless otherwise noted in the warranty Additionally our Wholesale segment warranties cover labor costs relating to our parts for one year We provide a limited lifetime warranty against defects on a majority of the Joybird products which are a part of our Corporate and Other results For all our manufacturer warranties the warranty period begins when the consumer receives our product We use considerable judgment in making our estimates and we record differences between our actual and estimated costs when the differences are known
Accruals and settlements for fiscal 2023 have been revised The adjustments were offsetting and had no impact on the liability balance at the end of fiscal 2023 or the amount recognized in the consolidated statement of income for fiscal 2023
22 4 million and 19 9 million is recorded in accrued expenses and other current liabilities as of April 27 2024 and April 29 2023 respectively while the remainder is included in other long term liabilities
We have been named as a defendant in various lawsuits arising in the ordinary course of business and as a potentially responsible party at certain environmental clean up sites the effect of which are not considered significant Based on a review of all currently known facts and our experience with previous legal and environmental matters we have recorded expense in respect of probable and reasonably estimable losses arising from legal matters and we currently do not believe it is probable that we will have any additional loss for legal or environmental matters that would be material to our consolidated financial statements
In view of the inherent difficulty of predicting the outcome of litigation particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories we generally cannot predict the eventual outcome timing or related loss if any of pending matters
In fiscal 2023 our shareholders approved the La Z Boy Incorporated 2022 Omnibus Incentive Plan which provides for the grant of stock options stock appreciation rights restricted stock and restricted stock units unrestricted stock performance awards dividend equivalent rights and short term cash incentive awards Under this plan the aggregate number of common shares that may be issued through awards of any form is 2 8 million shares reduced by the number of shares subject to awards granted under the La Z Boy Incorporated 2017 Omnibus Incentive Plan after April 30 2022 and prior to the Annual Meeting of Shareholders of La Z Boy Incorporated held on August 30 2022
The table below summarizes the total stock based compensation expense we recognized for all outstanding grants Stock based compensation expense is recorded in SG A in the consolidated statement of income
Includes stock appreciation rights deferred stock units issued to Directors restricted stock units and performance based units Compensation expense for these awards is based on the market price of our common stock on the grant date and is remeasured each reporting period based on the market value of our common shares on the last day of the reported period
We granted 331 140 shares of restricted stock units to employees during fiscal 2024 and we also have restricted stock awards outstanding from previous grants We issue restricted stock at no cost to the employees and account for restricted stock awards as equity based awards because when they vest they will be settled in common shares We recognize compensation expense for restricted stock 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 Restricted stock awards vest at 25 per year beginning one year from the grant date for a term of four years with continued vesting upon retirement with respect to the fiscal 2023 and 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 fiscal 2024 fiscal 2023 and fiscal 2022 was 27 68 24 58 and 38 27 per share respectively the market value of our common shares on the date of grant
Unrecognized compensation cost related to non vested restricted shares was 7 9 million and is expected to be recognized over a weighted average remaining contractual term of all unvested awards of 1 6 years
Under the La Z Boy Incorporated 2022 Omnibus Incentive Plan the Compensation and Talent Oversight Committee of our board of directors is authorized to award common shares to certain employees based on the attainment of certain financial goals over a given performance period The awards are offered at no cost to the employees In the event of an employee s termination during the vesting period the potential right to earn shares under this program is generally forfeited
During the first quarter of fiscal 2024 we granted 219 154 performance based shares and we also have performance based share awards outstanding from grants in fiscal 2023 and fiscal 2022 Payout of these grants depend on our financial performance 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 50 The performance share opportunity ranges from 50 of the employee s target award if minimum performance requirements are met to a maximum of 200 of the target award based on the attainment of certain financial and shareholder return goals over a specific performance period which is generally three fiscal years
The number of awards that will vest as well as unearned and canceled awards depend on the achievement of certain financial and shareholder return goals over the three year performance periods and will be settled in shares if service conditions are met requiring employees to remain employed with the Company through the end of the three year performance periods
We account for performance based shares as equity based awards because when they vest they will be settled in common shares In the event of an employee s termination during the vesting period the potential right to earn shares under this program is generally forfeited and 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 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 grant The Monte Carlo valuation model uses multiple simulations to evaluate our probability of achieving various stock price levels to determine our expected performance ranking relative to our peer group We expense compensation cost over the vesting period regardless of whether the market condition is ultimately satisfied
Our unrecognized compensation cost at April 27 2024 related to performance based shares was 6 5 million based on the current estimates of the number of awards that will vest and is expected to be recognized over a weighted average remaining contractual term of all unvested awards of 1 3 years
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
The aggregate intrinsic value of options exercised was 1 0 million and 0 3 million in fiscal 2023 and fiscal 2022 respectively As of April 27 2024 our total unrecognized compensation cost related to non vested stock option awards was 1 3 million which we expect to recognize over a weighted average remaining vesting term of all unvested awards of 1 2 years During the year ended April 27 2024 stock options with respect to 0 3 million shares vested
Restricted 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 on the earlier of the date a director ceases to be a member of the board for any reason other than the termination of service for cause or the one year anniversary of the grant date During fiscal 2024 we granted less than 0 1 million restricted stock units to our non employee directors 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 The weighted average fair value of the restricted stock units that were granted during fiscal 2024 fiscal 2023 and fiscal 2022 was 30 80 26 49 and 35 34 respectively
Primarily includes 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
Includes 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 revenue includes sales to La Z Boy Furniture Galleries
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
Our Wholesale segment consists primarily of four operating segments La Z Boy our largest operating segment our England subsidiary our casegoods operating segment that sells furniture under three brands American Drew
and our international operating segment which 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 Wholesale segment manufactures and imports upholstered furniture such as recliners and motion furniture sofas loveseats chairs sectionals modulars ottomans and sleeper sofas and imports casegoods wood furniture such as bedroom sets dining room sets entertainment centers and occasional pieces The Wholesale segment sells directly to La Z Boy Furniture Galleries
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 and through small format stores in key urban markets None of the operating segments included in Corporate and Other meet the requirements of reportable segments
The accounting policies of the operating segments are the same as those described in Note 1 Accounting Policies We account for intersegment revenue transactions between our segments consistent with independent third party transactions that is at current market prices As a result the manufacturing profit related to sales to our Retail segment is included within the Wholesale segment Operating income realized on intersegment revenue transactions is therefore generally consistent with the operating income realized on our revenue from independent third party transactions Segment operating income is based on profit or loss from operations before interest expense interest income other income expense net and income taxes Identifiable assets are cash and equivalents notes and accounts receivable net inventories net property plant and equipment right of use lease assets goodwill and other intangible assets Our unallocated assets include deferred income taxes corporate assets including a portion of cash and equivalents and various other assets Sales are attributed to countries on the basis of the customer s location
For our Canada and Mexico foreign operating units we permanently reinvest the earnings and consequently do not record a deferred tax liability relative to the undistributed earnings We have reinvested approximately 63 0 million of the earnings After enactment of the Tax Cuts and Jobs Act in 2017 the potential deferred tax attributable to these earnings would be approximately 2 9 million primarily related to foreign withholding taxes and state income taxes The Company is not permanently reinvested on undistributed earnings for its Thailand and United Kingdom foreign operating units and has provided for deferred tax attributable to those earnings of approximately 1 4 million as of the end of fiscal 2024
We evaluate our deferred taxes to determine if a valuation allowance is required Accounting standards require that we assess whether a valuation allowance should be established based on the consideration of all available evidence using a more likely than not standard with significant weight being given to evidence that can be objectively verified
The evaluation of the amount of net deferred tax assets expected to be realized necessarily involves forecasting the amount of taxable income that will be generated in future years We have forecasted future results using estimates management believes to be reasonable We based these estimates on objective evidence such as expected trends resulting from certain leading economic indicators Based upon our net deferred tax asset position at April 27 2024 we estimate that approximately 26 6 million of future taxable income would need to be generated to fully recover our net deferred tax assets The realization of deferred income tax assets is dependent on future events and actual results may vary from management s forecasts due to economic volatility and uncertainty along with unpredictable complexities in the global supply chain Such variances could result in adjustments to the valuation allowance on deferred tax assets in future periods and such adjustments could be material to the financial statements
The remaining valuation allowance of 1 5 million is primarily related to certain U S state and foreign deferred tax assets The U S state deferred taxes are primarily related to state net operating losses and state tax credits The foreign deferred taxes are primarily related to capital losses
As of April 27 2024 we had a gross unrecognized tax benefit of 1 2 million related to uncertain tax positions in various jurisdictions A reconciliation of the beginning and ending balance of these unrecognized tax benefits is as follows
We recognize interest and penalties associated with uncertain tax positions in income tax expense We had approximately 0 5 million and 0 4 million accrued for interest and penalties as of April 27 2024 and April 29 2023 respectively
If recognized 1 0 million of the total 1 2 million of unrecognized tax benefits would decrease our effective tax rate We do not expect that the net liability for uncertain income tax positions will significantly change within the next 12 months The remaining balance will be settled or released as tax audits are effectively settled statutes of limitation expire or other new information becomes available
Our U S federal income tax returns for fiscal years 2021 and subsequent years are still subject to audit In addition we conduct business in various states The major states in which we conduct business are subject to audit for fiscal years 2020 and subsequent years Our foreign operations are subject to audit for fiscal years 2014 and subsequent years
Prior to fiscal 2019 we granted restricted stock awards that contained 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 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 exclude the effect of options from our diluted share calculation when the weighted average exercise price of the options is higher than the average market price since including the options effect would be anti dilutive We excluded options to purchase 0 5 million 1 4 million and 0 2 million shares from the diluted share calculation for the years ended April 27 2024 April 29 2023 and April 30 2022 respectively
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
The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at April 27 2024 and April 29 2023 There were no transfers into or out of Level 1 Level 2 or Level 3 for any of the periods presented
At April 27 2024 and April 29 2023 we held marketable securities intended to enhance returns on our cash and to fund future obligations of our non qualified defined benefit retirement plan our executive deferred compensation plan and our performance compensation retirement plan
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 April 27 2024 and April 29 2023 we held no Level 3 assets or liabilities with a carrying value During fiscal 2023 we recorded a 10 3 million impairment charge for one of our Level 3 investments to other income expense net in the consolidated statement of income reducing its carrying value to zero as it was determined the value of the investment was not recoverable The following is a reconciliation of our Level 3 assets and liabilities recorded at fair value using significant unobservable inputs for the fiscal year ended April 29 2023
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 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
There were no changes in our internal controls over financial reporting that occurred during the fourth quarter of fiscal 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting
On March 22 2024 Ms Janet Kerr a member of the Company s Board of Directors adopted a trading arrangement for the sale of securities of the Company s common stock a the Rule 10b5 1 Trading Plan that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5 1 c Ms Kerr s Rule 10b5 1 Trading Plan which has a term duration of six months provides for the sale of up to 3 890 shares of common stock pursuant to the terms of the plan
Other than as described above during the quarter ended April 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
The information required by this item appearing under the section captioned Information About Our Executive Officers in Part I of this Annual Report and the information that will be in our proxy statement for our 2024 Annual Meeting of Shareholders Proxy Statement under the caption Board and Corporate Governance Matters is incorporated herein by reference
We have adopted a Code of Business Conduct which applies to all of our officers directors and employees A current copy of the code is posted at our website www la z boy com We will disclose any amendments to or waivers from the code applicable to an executive officer or director at our website www la z boy com
We have also adopted an Insider Trading Policy that governs the purchase sale and or other dispositions of the Company s securities by directors officers and employees that we believe is reasonably designed to promote compliance with insider trading laws rules and regulations and listing standards applicable to the Company A copy of the Company s Insider Trading Policy is filed as Exhibit 19 to this Annual Report
The information required by this item which will be in our Proxy Statement under the captions Board and Corporate Governance Matters Director Compensation Compensation Matters Compensation Discussion and Analysis Compensation Matters Executive Compensation Tables Compensation Matters CEO Pay Ratio Compensation Matters Pay versus Performance and Compensation Matters Compensation and Talent Oversight Committee Report is incorporated herein by reference The information contained in Compensation Matters Compensation and Talent Oversight Committee Report shall not be deemed to be filed with the SEC or subject to the liabilities of the Exchange Act except to the extent that the Company specifically incorporates such information into a document filed under the Securities Act or the Exchange Act
The information required by this item which will be in our Proxy Statement under the captions Securities Ownership and Compensation Matters Proposal 4 Approve the La Z Boy Incorporated 2024 Omnibus Incentive Plan is incorporated herein by reference
The information required to be reported under this item which will be included in our Proxy Statement under the captions Board and Corporate Governance Matters Corporate Governance Director Independence and Board and Corporate Governance Matters Corporate Governance Related Person Transactions is incorporated herein by reference
The information required to be reported under this item which will be included in our Proxy Statement under the captions Audit Matters Audit and Other Fees and Audit Matters Pre Approval Policy and Procedures is incorporated herein by reference
Credit Agreement dated as of October 15 2021 among La Z Boy Incorporated the lenders party thereto and Wells Fargo Bank National Association as administrative agent Incorporated by reference to Exhibit 4 1 to Form 8 K filed October 15 2021
First Amendment to Credit Agreement dated as of December 20 2022 among La Z Boy Incorporated the lenders party thereto and Wells Fargo Bank National Association as administrative agent Incorporated by reference to Exhibit 4 1 to Form 10 Q for the quarter ended January 28 2023
La Z Boy Incorporated Restricted Stock Plan for Non Employee Directors amended and restated through August 12 2003 Incorporated by reference to Exhibit B to Definitive Proxy Statement filed July 8 2003
Form of Change in Control Agreement in effect for Melinda D Whittington Similar agreements are in effect for each of our other executive officers except the severance period in those agreements is 24 months rather than 36 months Incorporated by reference to Exhibit 10 3 for Form 10 K for the fiscal year ended April 29 2023
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below as of June 17 2024 by the following persons on behalf of the registrant and in the capacities indicated

Company Name	LA-Z-BOY INC Vist SEC web-site
Category	HOUSEHOLD FURNITURE
Trading Symbol	LZB