LA-Z-BOY INC
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(Mark One)
For the quarterly period ended
January 25, 2025
or
For the transition period from ______ to ______
COMMISSION FILE NUMBER
1-9656
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
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Registrant's telephone number, including area code (
734
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242-1444
None
(Former name, former address and former fiscal year, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
| Class | Outstanding at February 11, 2025 | |||||||
| Common Stock, $1.00 Par Value |
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LA-Z-BOY INCORPORATED
FORM 10-Q THIRD QUARTER OF FISCAL 2025
TABLE OF CONTENTS
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Page
Number |
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2
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands, except per share data) | 1/25/2025 | 1/27/2024 | 1/25/2025 | 1/27/2024 | ||||||||||||||||||||||
| Sales | $ |
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$ |
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$ |
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$ |
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| Cost of sales |
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| Gross profit |
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| Selling, general and administrative expense |
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| Operating income |
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| Interest expense |
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| Interest income |
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| Other income (expense), net |
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| Income before income taxes |
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| Income tax expense |
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| Net income |
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| Net (income) attributable to noncontrolling interests |
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| Net income attributable to La-Z-Boy Incorporated | $ |
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$ |
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$ |
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$ |
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| Basic weighted average common shares |
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| Basic net income attributable to La-Z-Boy Incorporated per share | $ |
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$ |
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$ |
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$ |
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| Diluted weighted average common shares |
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| Diluted net income attributable to La-Z-Boy Incorporated per share | $ |
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$ |
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$ |
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$ |
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The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | 1/25/2025 | 1/27/2024 | ||||||||||||||||||||||
| Net income | $ |
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$ |
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$ |
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$ |
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| Other comprehensive income (loss) | ||||||||||||||||||||||||||
| Currency translation adjustment |
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| Net unrealized gain (loss) on marketable securities, net of tax |
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| Net pension amortization, net of tax |
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| Total other comprehensive income (loss) |
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| Total comprehensive income before noncontrolling interests |
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| Comprehensive (income) attributable to noncontrolling interests |
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(
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(
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(
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| Comprehensive income attributable to La-Z-Boy Incorporated | $ |
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$ |
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$ |
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$ |
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The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
| (Unaudited, amounts in thousands, except par value) | 1/25/2025 | 4/27/2024 | ||||||||||||
| Current assets | ||||||||||||||
| Cash and equivalents | $ |
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$ |
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Receivables, net of allowance of $
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| Inventories, net |
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| Other current assets |
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| Total current assets |
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| Property, plant and equipment, net |
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| Goodwill |
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| Other intangible assets, net |
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| Deferred income taxes – long-term |
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| Right of use lease assets |
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| Other long-term assets, net |
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| Total assets | $ |
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$ |
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| Current liabilities | ||||||||||||||
| Accounts payable | $ |
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$ |
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| Lease liabilities, short-term |
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| Accrued expenses and other current liabilities |
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| Total current liabilities |
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| Lease liabilities, long-term |
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| Other long-term liabilities |
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| Shareholders' equity | ||||||||||||||
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Preferred shares –
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Common shares, $
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| Capital in excess of par value |
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| Retained earnings |
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| Accumulated other comprehensive loss |
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| Total La-Z-Boy Incorporated shareholders' equity |
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| Noncontrolling interests |
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| Total equity |
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| Total liabilities and equity | $ |
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$ |
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The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
| Nine Months Ended | ||||||||||||||
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | ||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net income | $ |
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$ |
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| Adjustments to reconcile net income to cash provided by operating activities | ||||||||||||||
| (Gain)/loss on disposal and impairment of assets |
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| Gain on sale of investments |
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| Provision for doubtful accounts |
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| Depreciation and amortization |
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| Amortization of right-of-use lease assets |
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| Lease impairment/(settlement) |
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| Equity-based compensation expense |
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| Change in deferred taxes |
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| Change in receivables |
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| Change in inventories |
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| Change in other assets |
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| Change in payables |
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| Change in lease liabilities |
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| Change in other liabilities |
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| Net cash provided by operating activities |
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| Cash flows from investing activities | ||||||||||||||
| Proceeds from disposals of assets |
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| Capital expenditures |
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| Purchases of investments |
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| Proceeds from sales of investments |
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| Acquisitions |
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| Net cash used for investing activities |
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| Cash flows from financing activities | ||||||||||||||
| Payments on finance lease liabilities |
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| Holdback payments for acquisitions |
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| Stock issued for stock and employee benefit plans, net of shares withheld for taxes |
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| Repurchases of common stock |
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| Dividends paid to shareholders |
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| Dividends paid to minority interest joint venture partners (1) |
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| Net cash used for financing activities |
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| Effect of exchange rate changes on cash and equivalents |
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| Change in cash, cash equivalents and restricted cash |
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| Cash, cash equivalents and restricted cash at beginning of period |
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| Cash, cash equivalents and restricted cash at end of period | $ |
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$ |
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| Supplemental disclosure of non-cash investing activities | ||||||||||||||
| Capital expenditures included in payables | $ |
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$ |
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(1)
Includes dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| (Unaudited, amounts in thousands, except per share data) |
Common
Shares |
Capital in Excess of
Par Value |
Retained
Earnings |
Accumulated Other
Comprehensive Income (Loss) |
Non-Controlling
Interests |
Total | ||||||||||||||||||||||||||||||||
| At April 27, 2024 | $ |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — |
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— |
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| Other comprehensive income | — | — | — |
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| Stock issued for stock and employee benefit plans, net of cancellations and withholding tax |
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(
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— | — |
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Repurchases of
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(
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(
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(
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— | — |
(
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| Stock option and restricted stock expense | — |
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— | — | — |
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Dividends declared and paid ($
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— | — |
(
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— | — |
(
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Dividends declared not paid ($
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— | — |
(
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— | — |
(
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| At July 27, 2024 | $ |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income (loss) | — | — |
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— |
(
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| Other comprehensive income | — | — | — |
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| Stock issued for stock and employee benefit plans, net of cancellations and withholding tax |
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(
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— | — |
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Repurchases of
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(
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(
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(
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— | — |
(
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| Stock option and restricted stock expense | — |
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— | — | — |
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Dividends declared and paid ($
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— | — |
(
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— |
(
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(
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Dividends declared not paid ($
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— | — |
(
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— | — |
(
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| At October 26, 2024 | $ |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — |
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— |
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| Other comprehensive income (loss) | — | — | — |
(
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(
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| Stock issued for stock and employee benefit plans, net of cancellations and withholding tax |
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(
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— | — |
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Repurchases of
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(
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(
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(
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— | — |
(
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| Stock option and restricted stock expense | — |
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Dividends declared and paid ($
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— | — |
(
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(
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Dividends declared not paid ($
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— | — |
(
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(
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| At January 25, 2025 | $ |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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(1)
Non-controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.
7
| (Unaudited, amounts in thousands, except per share data) |
Common
Shares |
Capital in Excess of
Par Value |
Retained
Earnings |
Accumulated Other
Comprehensive Income (Loss) |
Non-Controlling
Interests |
Total | ||||||||||||||||||||||||||||||||
| At April 29, 2023 | $ |
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$ |
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$ |
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$ |
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$ |
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$ |
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| Net income | — | — |
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— |
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| Other comprehensive income (loss) | — | — | — |
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(
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| Stock issued for stock and employee benefit plans, net of cancellations and withholding tax |
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(
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(
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— | — |
(
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Repurchases of
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(
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(
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(
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— | — |
(
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| Stock option and restricted stock expense | — |
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— | — | — |
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Dividends declared and paid ($
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— | — |
(
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— | — |
(
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Dividends declared not paid ($
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— | — |
(
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— | — |
(
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| At July 29, 2023 | $ |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — |
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— |
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| Other comprehensive income (loss) | — | — | — |
(
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(
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(
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| Stock issued for stock and employee benefit plans, net of cancellations and withholding tax |
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(
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— | — |
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Repurchases of
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(
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(
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(
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— | — |
(
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| Stock option and restricted stock expense | — |
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— | — | — |
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Dividends declared and paid ($
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— | — |
(
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— |
(
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(
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Dividends declared not paid ($
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— | — |
(
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— | — |
(
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| At October 28, 2023 | $ |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — |
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— |
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| Other comprehensive income | — | — | — |
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| Stock issued for stock and employee benefit plans, net of cancellations and withholding tax |
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(
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— | — |
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Repurchases of
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(
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(
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(
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— | — |
(
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| Stock option and restricted stock expense | — |
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— | — | — |
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Dividends declared and paid ($
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— | — |
(
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— | — |
(
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Dividends declared not paid ($
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— | — |
(
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— | — |
(
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| At January 27, 2024 | $ |
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$ |
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$ |
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$ |
(
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$ |
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$ |
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(1)
Non-controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
8
LA-Z-BOY INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1:
Basis of Presentation
The accompanying consolidated financial statements include the consolidated accounts of La-Z-Boy Incorporated and our majority-owned subsidiaries (collectively, the "Company"). We derived the April 27, 2024 balance sheet from our audited financial statements. We prepared the interim financial information in conformity with generally accepted accounting principles ("US GAAP"), which we applied on a basis consistent with those reflected in our fiscal 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), but the information does not include all of the disclosures required by US GAAP. In management’s opinion, the interim financial information includes all adjustments and accruals, consisting only of normal recurring adjustments (except as otherwise disclosed), that are necessary for a fair statement of results for the respective interim periods. The interim results reflected in the accompanying financial statements are not necessarily indicative of the results of operations that will occur for the full fiscal year ending April 26, 2025.
Accounting Pronouncements Adopted in Fiscal 2025
The following table summarizes Accounting Standards Updates ("ASUs"), which were adopted in fiscal 2025, but did not have a material impact on our accounting policies or our consolidated financial statements and related disclosures.
| ASU | Description | Adoption Date | ||||||||||||
| ASU 2023-07 | Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures | Fiscal 2025 | ||||||||||||
| ASU 2023-05 | Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement | Fiscal 2025 | ||||||||||||
| ASU 2023-02 | Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method | Fiscal 2025 | ||||||||||||
Accounting Pronouncements not yet Adopted
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.
| ASU | Description | Adoption Date | ||||||||||||
| ASU 2024-04 | Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments | Fiscal 2027 | ||||||||||||
| ASU 2024-03 | Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses | Fiscal 2028 | ||||||||||||
| ASU 2023-09 | Income Taxes (Topic 740): Improvements to Income Tax Disclosures | Fiscal 2026 | ||||||||||||
Note 2:
Acquisitions
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 2025 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 2025 and 2024 reflect a core component of our strategic priorities, which is to grow our company-owned retail business and leverage our integrated retail model (where we earn a combined profit on both the wholesale and retail sales) in suitable geographic markets, alongside the existing La-Z-Boy Furniture Galleries
®
network.
Prior to each Retail acquisition completed in fiscal 2025 and 2024, we licensed to the counterparty the exclusive right to own and operate the 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 required rights are indefinite-lived because our retailer agreements are perpetual agreements that have no specific expiration date and no renewal options. The effective settlement date of these arrangements resulted in no settlement gain or loss as the contractual terms were at
9
market. For federal income tax purposes, we amortize and deduct these indefinite-lived intangible assets and goodwill, if any, over
15
years.
Toledo
,
Ohio
Acquisition
On January 16, 2025, we completed our acquisition of the Toledo, Ohio business that operates
two
independently owned La-Z-Boy Furniture Galleries
®
stores for $
6.0
million, inclusive of and subject to further customary adjustments. The acquisition also included the purchase of the building and land for one of the stores. We paid total cash of $
5.6
million during the third quarter of fiscal 2025 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 $
1.7
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 stores and future benefits of these synergies.
Melbourne and Cocoa, Florida Acquisition
On September 10, 2024, we completed our acquisition of the Melbourne and Cocoa, Florida business that operates
two
independently owned La-Z-Boy Furniture Galleries
®
stores and
one
distribution center for $
11.4
million, inclusive of and subject to further customary adjustments. The acquisition also included the purchase of buildings and land for both stores and the distribution center. We paid total cash of $
11.3
million during the second and third quarters of fiscal 2025 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 $
0.9
million related to the reacquired rights described above. We also recognized $
1.7
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.
Davenport, Iowa Acquisition
On July 22, 2024, we completed our acquisition of the Davenport, Iowa business that operates
one
independently owned La-Z-Boy Furniture Galleries
®
store for $
7.4
million, inclusive of and subject to further customary adjustments. We paid total cash of $
6.9
million during the first and second quarters of fiscal 2025 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 $
1.7
million related to the reacquired rights described above. We also recognized $
5.1
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.
Prior Year Acquisitions
Illinois and Indiana Acquisition
On December 11, 2023, we completed our acquisition of the Illinois and Indiana businesses that operate
six
independently owned La-Z-Boy Furniture Galleries
®
stores and
one
distribution center for $
18.4
million, inclusive of 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 stores and future benefits of these synergies.
Lafayette, Louisiana Acquisition
On October 23, 2023, we completed our acquisition of the Lafayette, Louisiana business that operates
one
independently owned La-Z-Boy Furniture Galleries
®
store and
one
distribution center for $
2.8
million, inclusive of 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.
10
Colorado Springs, Colorado Acquisition
Note 3:
Cash and Restricted Cash
At January 27, 2024, 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 were 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.
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | ||||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
||||||||||
| Restricted cash |
|
|
||||||||||||
| Total cash, cash equivalents and restricted cash | $ |
|
$ |
|
||||||||||
Note 4:
Inventories
A summary of inventories is as follows:
| (Unaudited, amounts in thousands) | 1/25/2025 | 4/27/2024 | ||||||||||||
| Raw materials | $ |
|
$ |
|
||||||||||
| Work in process |
|
|
||||||||||||
| Finished goods |
|
|
||||||||||||
| FIFO inventories |
|
|
||||||||||||
| Excess of FIFO over LIFO |
(
|
(
|
||||||||||||
| Total inventories | $ |
|
$ |
|
||||||||||
Note 5:
Goodwill and Other Intangible Assets
We have goodwill on our consolidated balance sheet as follows:
| Reportable Segment/Unit | Reporting Unit | Related Acquisition | ||||||||||||
| Wholesale Segment | United Kingdom | Wholesale business in the United Kingdom and Ireland | ||||||||||||
| Wholesale Segment | United Kingdom | La-Z-Boy United Kingdom Manufacturing (Furnico) | ||||||||||||
| Retail Segment | Retail |
La-Z-Boy Furniture Galleries
®
stores
|
||||||||||||
| Corporate and Other | Joybird | Joybird | ||||||||||||
The following table summarizes changes in the carrying amount of our goodwill by reportable segment:
| (Unaudited, amounts in thousands) |
Wholesale
Segment |
Retail
Segment |
Corporate
and Other |
Total
Goodwill |
||||||||||||||||||||||
|
Balance at April 27, 2024
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Acquisitions |
|
|
|
|
||||||||||||||||||||||
| Translation adjustment |
(
|
(
|
|
(
|
||||||||||||||||||||||
|
Balance at January 25, 2025
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
11
We have intangible assets on our consolidated balance sheet as follows:
| Reportable Segment | Intangible Asset | Useful Life | ||||||||||||
| Wholesale Segment | Customer relationships from our acquisition of the wholesale business in the United Kingdom and Ireland |
Amortizable over
|
||||||||||||
| Wholesale Segment |
American Drew
®
trade name
|
Indefinite-lived | ||||||||||||
| Retail Segment |
Reacquired rights to own and operate La-Z-Boy Furniture Galleries
®
stores
|
Indefinite-lived | ||||||||||||
| Corporate and Other |
Joybird
®
trade name
|
Amortizable over
-year useful life
|
||||||||||||
The following summarizes changes in our intangible assets:
| (Unaudited, amounts in thousands) |
Indefinite-
Lived Trade Names |
Finite-Lived
Trade Name |
Indefinite-
Lived Reacquired Rights |
Other
Intangible Assets |
Total
Intangible Assets |
|||||||||||||||||||||||||||
| Balance at April 27, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Acquisitions |
|
|
|
|
|
|||||||||||||||||||||||||||
| Amortization |
|
(
|
|
(
|
(
|
|||||||||||||||||||||||||||
| Translation adjustment |
|
|
(
|
|
(
|
|||||||||||||||||||||||||||
| Balance at January 25, 2025 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
We test indefinite-lived intangibles and goodwill for impairment on an annual basis in the fourth quarter of each fiscal year, and more frequently if events or changes in circumstances indicate that an asset might be impaired. We test amortizable intangible assets for impairment if events or changes in circumstances indicate that the assets might be impaired.
Note 6:
Investments
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.
Our short-term investments are included in other current assets and our long-term investments are included in other long-term assets on our consolidated balance sheet.
The following summarizes our investments:
| (Unaudited, amounts in thousands) | 1/25/2025 | 4/27/2024 | ||||||||||||
| Short-term investments: | ||||||||||||||
| Marketable securities | $ |
|
$ |
|
||||||||||
| Held-to-maturity investments |
|
|
||||||||||||
| Total short-term investments |
|
|
||||||||||||
| Long-term investments: | ||||||||||||||
| Marketable securities |
|
|
||||||||||||
| Total investments | $ |
|
$ |
|
||||||||||
| Investments to enhance returns on cash | $ |
|
$ |
|
||||||||||
| Investments to fund compensation/retirement plans |
|
|
||||||||||||
| Total investments | $ |
|
$ |
|
||||||||||
12
The following is a summary of the unrealized gains, unrealized losses, and fair value by investment type:
| 1/25/2025 | 4/27/2024 | |||||||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands) |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair Value |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair Value | ||||||||||||||||||||||||||||||||
| Equity securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Fixed income |
|
(
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
| Other |
|
(
|
|
|
(
|
|
||||||||||||||||||||||||||||||||
| Total securities | $ |
|
$ |
(
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
The following table summarizes sales of marketable securities:
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | 1/25/2025 | 1/27/2024 | ||||||||||||||||||||||
| Proceeds from sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Gross realized gains |
|
|
|
|
||||||||||||||||||||||
| Gross realized losses |
|
|
(
|
(
|
||||||||||||||||||||||
As of January 25, 2025, we held $
6.3
million of fixed income marketable securities, classified as available-for-sale securities, all of which do not have a single contractual maturity date.
Note 7:
Product Warranties
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
to
three years
on fabric and leather, from
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.
A reconciliation of the changes in our product warranty liability is as follows:
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands) |
1/25/2025
|
1/27/2024 (1) |
1/25/2025 (2)
|
1/27/2024 (1) | ||||||||||||||||||||||
| Balance as of the beginning of the period | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Accruals during the period |
|
|
|
|
||||||||||||||||||||||
| Settlements during the period |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Balance as of the end of the period | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
(1)
Accruals and settlements for fiscal 2024 have been revised. The adjustments were offsetting and had no impact on the liability balance at the end of each reporting period in fiscal 2024 or the amount recognized in the consolidated statement of income for fiscal 2024.
(2)
$
21.8
million and $
22.4
million is recorded in accrued expenses and other current liabilities as of January 25, 2025, and April 27, 2024, respectively, while the remainder is included in other long-term liabilities.
We recorded accruals during the periods presented in the table above, primarily to reflect charges that relate to warranties issued during the respective periods.
13
Note 8:
Stock-Based Compensation
The table below summarizes the total stock-based compensation expense we recognized for all outstanding grants in our consolidated statement of income:
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | 1/25/2025 | 1/27/2024 | ||||||||||||||||||||||
| Equity-based awards expense | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
Liability-based awards expense
(1)
|
|
|
|
|
||||||||||||||||||||||
| Total stock-based compensation expense | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
Restricted Stock
. During the first nine months of fiscal 2025, we granted
245,813
shares of restricted stock units to employees and we also have restricted stock awards outstanding from previous grants. We issue restricted stock at no cost to the employees and 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, fiscal 2024 and fiscal 2025 grants. We accelerate the expense for restricted stock granted to retirement-eligible employees over the vesting period, with expense recognized from the grant date through their retirement eligibility date or over the
ten months
following the grant date, whichever period is longer. We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur. The weighted-average fair value of the restricted stock that was awarded in the first nine months of fiscal 2025 was $
38.17
per share, the market value of our common shares on the date of grant.
Restricted Stock Units Issued to Directors.
During the first nine months of fiscal 2025, we granted
32,378
restricted stock units to our non-employee directors. 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. 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 granted to our non-employee directors in the first nine months of fiscal 2025 was $
40.24
per share.
Performance Shares.
During the first quarter of fiscal 2025, we granted
163,888
performance-based shares, and we also have performance-based share awards outstanding from previous grants. Payouts 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
fiscal years.
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. The fair value of each share of the awards we granted in fiscal 2025 that vest based on attaining performance goals was $
35.59
, the market value of our common shares on the date we granted the awards less the dividends we expect to pay before the shares vest. For shares that vest based on market conditions, we use a Monte Carlo valuation model to estimate each share’s fair value as of the date of 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. For shares that vest based on market conditions, we expense compensation cost over the vesting period regardless of whether the market condition is ultimately satisfied. Based on the Monte Carlo model, the fair value as of the grant date of the fiscal 2025 grant of shares that vest based on market conditions was $
54.67
.
14
Stock Options.
We did not grant stock options to employees during the first nine months of fiscal 2025, 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
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.
Note 9:
Accumulated Other Comprehensive Income (Loss)
Activity in accumulated other comprehensive income (loss) for the quarters ended January 25, 2025, and January 27, 2024, is as follows:
| (Unaudited, amounts in thousands) | Translation adjustment | Unrealized gain (loss) on marketable securities | Net pension amortization and net actuarial loss | Accumulated other comprehensive income (loss) | ||||||||||||||||||||||
| Balance at October 26, 2024 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Changes before reclassifications |
(
|
(
|
|
(
|
||||||||||||||||||||||
| Amounts reclassified to net income |
|
(
|
|
|
||||||||||||||||||||||
| Tax effect |
|
|
(
|
|
||||||||||||||||||||||
| Other comprehensive income (loss) attributable to La-Z-Boy Incorporated |
(
|
(
|
|
(
|
||||||||||||||||||||||
| Balance at January 25, 2025 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Balance at October 28, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Changes before reclassifications |
|
|
|
|
||||||||||||||||||||||
| Amounts reclassified to net income |
|
|
|
|
||||||||||||||||||||||
| Tax effect |
|
(
|
(
|
(
|
||||||||||||||||||||||
| Other comprehensive income attributable to La-Z-Boy Incorporated |
|
|
|
|
||||||||||||||||||||||
| Balance at January 27, 2024 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
15
Activity in accumulated other comprehensive income (loss) for the nine months ended January 25, 2025, and January 27, 2024, is as follows:
| (Unaudited, amounts in thousands) | Translation adjustment | Unrealized gain (loss) on marketable securities | Net pension amortization and net actuarial loss | Accumulated other comprehensive income (loss) | ||||||||||||||||||||||
| Balance at April 27, 2024 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Changes before reclassifications |
|
|
|
|
||||||||||||||||||||||
| Amounts reclassified to net income |
|
(
|
|
|
||||||||||||||||||||||
| Tax effect |
|
(
|
(
|
(
|
||||||||||||||||||||||
| Other comprehensive income attributable to La-Z-Boy Incorporated |
|
|
|
|
||||||||||||||||||||||
| Balance at January 25, 2025 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Balance at April 29, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Changes before reclassifications |
|
|
|
|
||||||||||||||||||||||
| Amounts reclassified to net income |
|
|
|
|
||||||||||||||||||||||
| Tax effect |
|
(
|
(
|
(
|
||||||||||||||||||||||
| Other comprehensive income attributable to La-Z-Boy Incorporated |
|
|
|
|
||||||||||||||||||||||
| Balance at January 27, 2024 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
We reclassified both the unrealized gain (loss) on marketable securities and the net pension amortization from accumulated other comprehensive loss to net income through other income (expense), net.
The components of noncontrolling interest were as follows:
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | 1/25/2025 | 1/27/2024 | ||||||||||||||||||||||
| Balance as of the beginning of the period | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Net income |
|
|
|
|
||||||||||||||||||||||
| Other comprehensive income (loss) |
|
|
|
(
|
||||||||||||||||||||||
| Dividends distributed to joint venture minority partners |
|
|
(
|
(
|
||||||||||||||||||||||
| Balance as of the end of the period | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
Note 10:
Revenue Recognition
Our revenue is primarily derived from product sales. We report product sales net of discounts and recognize them when control (rights and obligations associated with the product) passes to the customer. For sales to furniture retailers or distributors, control typically transfers when we ship the product. In cases where we sell directly to the end consumer, control of the product is generally transferred upon delivery.
For shipping and handling activities, we have elected to apply the accounting policy election permitted in ASC 606-10-25-18B, which allows an entity to account for shipping and handling activities as fulfillment activities (rather than as a promised good or service) when the activities are performed even if those activities are performed after the control of the good has been transferred. We expense shipping and handling costs at the time we recognize revenue in accordance with this election.
For sales tax, we have elected to apply the accounting policy election permitted in ASC 606-10-32-2A, which allows an entity to exclude from the measurement of the transaction price all taxes imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales taxes). This allows us to present revenue net of these certain types of taxes.
We have elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to recognize the promised amount of consideration without adjusting for the effects of a significant financing component if the contract has a duration of one year or less. As our contracts typically are less than one year in length and do not have significant financing components, we have not adjusted consideration.
16
The following table presents our revenue disaggregated by product category and by segment or unit:
| Quarter Ended January 25, 2025 | Quarter Ended January 27, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | Wholesale | Retail |
Corporate
and Other |
Total | Wholesale | Retail |
Corporate
and Other |
Total | ||||||||||||||||||||||||||||||||||||||||||
| Upholstered Furniture | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
| Casegoods Furniture |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Delivery |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
|
Other
(1)
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
| Eliminations |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated Net Sales | $ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended January 25, 2025 | Nine Months Ended January 27, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | Wholesale | Retail |
Corporate
and Other |
Total | Wholesale | Retail |
Corporate
and Other |
Total | ||||||||||||||||||||||||||||||||||||||||||
| Upholstered Furniture | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
| Casegoods Furniture |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Delivery |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Other (1) |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
| Eliminations |
(
|
(
|
||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated Net Sales | $ |
|
$ |
|
||||||||||||||||||||||||||||||||||||||||||||||
(1)
Primarily includes revenue for advertising, royalties, parts, accessories, after-treatment products, surcharges, rebates and other sales incentives.
Upholstered Furniture
- Includes revenue for upholstered furniture, such as recliners, sofas, loveseats, chairs, sectionals, modulars, and ottomans. This revenue includes sales to La-Z-Boy Furniture Galleries
®
stores (including company-owned stores), operators of La-Z-Boy Comfort Studio
®
locations, England Custom Comfort Center locations, other major dealers, independent retailers, and the end consumer.
Casegoods Furniture
- Includes 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
®
stores (including company-owned stores), independent retailers, and the end consumer.
Contract Assets and Liabilities.
We receive customer deposits from end consumers before we recognize revenue and in some cases, we have the unconditional right to collect the remaining portion of the order price before we fulfill our performance obligation, resulting in a contract asset and a corresponding deferred revenue liability. In our consolidated balance sheet, customer deposits and deferred revenue (collectively, the "contract liabilities") are reported in accrued expenses and other current liabilities while contract assets are reported as other current assets.
The following table presents our contract assets and liabilities:
| (Unaudited, amounts in thousands) | 1/25/2025 | 4/27/2024 | ||||||||||||
| Contract assets | $ |
|
$ |
|
||||||||||
| Customer deposits | $ |
|
$ |
|
||||||||||
| Deferred revenue |
|
|
||||||||||||
|
Total contract liabilities
(1)
|
$ |
|
$ |
|
||||||||||
(1)
During the nine months ended January 25, 2025, we recognized revenue of $
116.5
million related to our contract liability balance at April 27, 2024.
17
Note 11:
Segment Information
Our reportable operating segments include the Wholesale segment and the Retail segment.
Wholesale Segment
. 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
®
, Hammary
®
, and Kincaid
®
), and our international operating segment, which includes our international La-Z-Boy 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
®
stores, operators of La-Z-Boy Comfort Studio
®
locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.
Retail Segment
. Our Retail segment consists of
one
operating segment comprised of our
197
company-owned La-Z-Boy Furniture Galleries
®
stores. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other home furnishings accessories, to end consumers through these stores.
Corporate and Other
. Corporate and Other includes the shared costs for corporate functions, including human resources, information technology, finance and accounting, 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.
18
The following table presents sales and operating income (loss) by segment:
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | 1/25/2025 | 1/27/2024 | ||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||
| Wholesale segment: | ||||||||||||||||||||||||||
| Sales to external customers | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Intersegment sales |
|
|
|
|
||||||||||||||||||||||
| Wholesale segment sales |
|
|
|
|
||||||||||||||||||||||
| Retail segment sales |
|
|
|
|
||||||||||||||||||||||
| Corporate and Other: | ||||||||||||||||||||||||||
| Sales to external customers |
|
|
|
|
||||||||||||||||||||||
| Intersegment sales |
|
|
|
|
||||||||||||||||||||||
| Corporate and Other sales |
|
|
|
|
||||||||||||||||||||||
| Eliminations |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Consolidated sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Operating Income (Loss) | ||||||||||||||||||||||||||
| Wholesale segment | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Retail segment |
|
|
|
|
||||||||||||||||||||||
| Corporate and Other |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Consolidated operating income |
|
|
|
|
||||||||||||||||||||||
| Interest expense |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
| Interest income |
|
|
|
|
||||||||||||||||||||||
| Other income (expense), net |
|
(
|
(
|
|
||||||||||||||||||||||
| Income before income taxes | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
Note 12:
Income Taxes
Our effective tax rate was
25.1
% and
25.6
% for the third quarter and nine months ended January 25, 2025, respectively, compared with
20.2
% and
24.5
% for the third quarter and nine months ended January 27, 2024, respectively. The increase in our effective tax rate in the third quarter ended January 25, 2025 compared with the same period a year ago was primarily the result of favorable return to provision adjustments impacting the prior year and absent these discrete items, the effective tax rate would have been
25.6
% for the third quarter ended January 27, 2024. Our effective tax rate varies from the
21
% federal statutory rate primarily due to state taxes.
19
Note 13:
Earnings per Share
The following is a reconciliation of the numerators and denominators we used in our computations of basic and diluted earnings per share:
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited, amounts in thousands, except per share data) | 1/25/2025 | 1/27/2024 | 1/25/2025 | 1/27/2024 | ||||||||||||||||||||||
| Numerator (basic and diluted): | ||||||||||||||||||||||||||
| Net income available to common Shareholders | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Basic weighted average common shares outstanding |
|
|
|
|
||||||||||||||||||||||
| Contingent common shares |
|
|
|
|
||||||||||||||||||||||
| Stock option dilution |
|
|
|
|
||||||||||||||||||||||
| Diluted weighted average common shares outstanding |
|
|
|
|
||||||||||||||||||||||
| Earnings per Share: | ||||||||||||||||||||||||||
| Basic | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
Diluted
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
(1)
Diluted earnings per share was computed using the treasury stock 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.
Note 14:
Fair Value Measurements
Accounting standards require that we put financial assets and liabilities into one of three categories based on the inputs we use to value them:
•
Level 1 — Financial assets and liabilities, the values of which are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.
•
Level 2 — Financial assets and liabilities, the values of which are based on quoted prices in markets that are not active or on model inputs that are observable for substantially the full term of the asset or liability.
•
Level 3 — Financial assets and liabilities, the values of which are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
Accounting standards require that in making fair value measurements, we use observable market data when available. When inputs used to measure fair value fall within different levels of the hierarchy, we categorize the fair value measurement as being in the lowest level that is significant to the measurement. We recognize transfers between levels of the fair value hierarchy at the end of the reporting period in which they occur.
In addition to assets and liabilities that we record at fair value on a recurring basis, we are required to record assets and liabilities at fair value on a non-recurring basis. We measure non-financial assets such as other intangible assets, goodwill, and other long-lived assets at fair value when there is an indicator of impairment, and we record them at fair value only when we recognize an impairment loss.
20
The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at January 25, 2025 and April 27, 2024. There were no transfers into or out of Level 1, Level 2, or Level 3 for any of the periods presented.
| At January 25, 2025 | ||||||||||||||||||||||||||||||||
| Fair Value Measurements | ||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | Level 1 | Level 2 | Level 3 | NAV(1) | Total | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Marketable securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Held-to-maturity investments |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| At April 27, 2024 | ||||||||||||||||||||||||||||||||
| Fair Value Measurements | ||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands) | Level 1 | Level 2 | Level 3 | NAV(1) | Total | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Marketable securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Held-to-maturity investments |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
At January 25, 2025 and April 27, 2024, we held marketable securities to fund future obligations of certain retirement plans. At April 27, 2024, we also held marketable securities intended to enhance returns on our cash.
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
We have prepared this Management’s Discussion and Analysis as an aid to understanding our financial results. It should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes to Consolidated Financial Statements. After a cautionary note regarding forward-looking statements, we begin with an introduction to our key businesses and then provide discussions of our results of operations, liquidity and capital resources, and critical accounting policies.
Cautionary Note Regarding Forward-Looking Statements
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," "non-recurring," "one-time," "outlook," "seeks," "short-term," "target," "unusual," or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," or "may." A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak to our views only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial performance.
Our actual future results and trends may differ materially from those we anticipate depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our Annual Report for the fiscal year ended April 27, 2024, under Item 1A, "Risk Factors" and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and in our other filings with the Securities and Exchange Commission ("SEC"). Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in our Annual Report for the fiscal year ended April 27, 2024 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.
Introduction
Our Business
We are the leading global producer of reclining chairs and one of the largest manufacturers/distributors of residential furniture in the United States
.
The La-Z-Boy Furniture Galleries
®
stores retail network is the third largest retailer of single-branded furniture in the United States
.
We manufacture, market, import, export, distribute and retail upholstery furniture products under the La-Z-Boy
®
, England, Kincaid
®
, and Joybird
®
tradenames. In addition, we import, distribute and retail accessories and casegoods (wood) furniture products
under the Kincaid
®
, American Drew
®
, Hammary
®
, and Joybird
®
tradenames.
As of January 25, 2025, our supply chain operations included the following:
•
Five major manufacturing locations and 15 distribution centers in the United States and three facilities in Mexico to support our speed-to-market and customization strategy
•
A logistics company that distributes a portion of our products in the United States
•
An upholstery manufacturing business in the United Kingdom and a wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland
•
A global trading company in Hong Kong that helps us manage our Asian supply chain by establishing and maintaining relationships with our Asian suppliers, as well as identifying efficiencies and savings opportunities
22
During the second quarter of fiscal 2024, we announced actions intended to drive efficiencies and optimize our manufacturing capacity in our global supply chain operations. As part of this initiative, we made the decision to shift upholstery production from our Ramos, Mexico operations to our other upholstery plants and relocate our cut and sew operations back to Ramos, Mexico, resulting in the permanent closure of our leased cut and sew facility in Parras, Mexico. As a result of these actions, charges were recorded within the Wholesale segment in the first nine months of fiscal 2024, totaling $4.0 million in cost of sales for severance-related expenses, and $3.0 million in SG&A expense for the accelerated depreciation of fixed assets.
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.
•
The centerpiece of our retail distribution strategy is our network of 362 La-Z-Boy Furniture Galleries
®
stores and 537 La-Z-Boy Comfort Studio
®
locations, each dedicated to marketing our La-Z-Boy branded products. We consider this dedicated space to be “proprietary.”
◦
La-Z-Boy Furniture Galleries
®
stores help consumers furnish their homes by combining the style, comfort, and quality of La-Z-Boy furniture with our available design services. We own 197 of the La-Z-Boy Furniture Galleries
®
stores, while the remainder are independently owned and operated.
◦
La-Z-Boy Comfort Studio
®
locations are defined spaces within larger independent retailers that are dedicated to displaying and selling La-Z-Boy branded products. All 537 La-Z-Boy Comfort Studio
®
locations are independently owned and operated.
◦
In total, we have approximately 7.7 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded products in the United States and Canada.
◦
We also have approximately 2.8 million square feet of floor space outside of the United States and Canada dedicated to selling La-Z-Boy branded products.
•
Our other brands, England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets, with over half of Hammary’s sales originating through the La-Z-Boy Furniture Galleries
®
store network.
◦
Kincaid and England have their own dedicated proprietary in-store programs with 654 outlets and approximately 1.9 million square feet of proprietary floor space.
•
In total, our proprietary floor space includes approximately 12.4 million square feet worldwide.
•
Joybird sells product primarily online and has 12 small-format stores in key urban markets.
Century Vision Strategy
Our goal is to deliver value to our shareholders over the long term by executing our Century Vision, our strategic plan for growth to our centennial year in 2027, in which we aim to grow sales and market share and strengthen our operating margins. The foundation of our strategic 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:
Expanding the La-Z-Boy brand reach
•
Leveraging our connection to comfort and reinvigorating our brand with a consumer focus and expanded omni-channel presence.
Our strategic initiatives to leverage and reinvigorate our iconic La-Z-Boy brand center on a renewed focus on leveraging the compelling La-Z-Boy comfort message, accelerating our omni-channel offering, and identifying additional consumer-base growth opportunities. We leverage our consumer insights to develop and deliver on-trend upholstered furniture, particularly in the motion and reclining categories. We launched our new brand campaign and marketing platform in fiscal 2024,
Long Live the Lazy
, 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
23
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.
•
Growing our La-Z-Boy Furniture Galleries
®
store network
. We expect our strategic initiatives in this area to generate growth in our Retail segment through an increased company-owned store count and in our Wholesale segment as our proprietary distribution network expands. We are 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 and opening new La-Z-Boy Furniture Galleries
®
stores where we see opportunity for growth, or where we believe we have opportunities for further market penetration.
•
Expanding the reach of our wholesale distribution channels.
Consumers experience the La-Z-Boy brand in many channels including the La-Z-Boy Furniture Galleries
®
store network and in the La-Z-Boy Comfort Studio
®
locations, our store-within-a-store format. While consumers increasingly interact with the brand digitally, our consumers demonstrate an affinity for visiting our stores to shop, allowing us to frequently deliver the flagship La-Z-Boy Furniture Galleries
®
store, or La-Z-Boy Comfort Studio
®
, 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.
Profitably growing the Joybird brand
•
Profitably growing the Joybird brand with a digital-first consumer experience.
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.
Enhancing our enterprise capabilities
•
Enhancing our enterprise capabilities to support the growth of our consumer brands and enable potential acquisitions for growth.
Key to successful growth is ensuring we have 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.
Reportable Segments
Our reportable operating segments include the Retail segment and the Wholesale segment.
•
Retail Segment
. Our Retail segment consists of one operating segment comprised of our 197 company-owned La-Z-Boy Furniture Galleries
®
stores. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other home furnishings accessories, to end consumers through these stores.
•
Wholesale Segment
. 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
®
, Hammary
®
, and Kincaid
®
), and our international operating segment, which includes our international La-Z-Boy 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
®
stores, operators of La-Z-Boy Comfort Studio
®
locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.
•
Corporate and Other
. Corporate and Other includes the shared costs for corporate functions, including human resources, information technology, finance and accounting, 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
24
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.
Results of Operations
Fiscal 2025 Third Quarter Compared with Fiscal 2024 Third Quarter
La-Z-Boy Incorporated
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands, except percentages) | 1/25/2025 | 1/27/2024 | % Change | 1/25/2025 | 1/27/2024 | % Change | ||||||||||||||||||||||||||||||||
| Sales | $ | 521,777 | $ | 500,406 | 4.3% | $ | 1,538,336 | $ | 1,493,492 | 3.0 | % | |||||||||||||||||||||||||||
| Operating income | 35,168 | 32,561 | 8.0% | 106,310 | 100,699 | 5.6 | % | |||||||||||||||||||||||||||||||
| Operating margin | 6.7% | 6.5% | 6.9% | 6.7% | ||||||||||||||||||||||||||||||||||
Sales
Consolidated sales increased $21.4 million, or 4%, and $44.8 million, or 3%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The increase during the third quarter of fiscal 2025 was primarily driven by delivered same-store sales growth in our Retail business, incremental sales resulting from our Retail acquisitions, and higher delivered volume in our Joybird business. The increase during the first nine months of fiscal 2025 was primarily driven by incremental sales resulting from our Retail acquisitions, higher delivered volume in our Joybird business, and higher delivered wholesale volume in our core North America La-Z-Boy branded upholstery business, including growth from our major wholesale dealers.
Operating Margin
Operating margin, which is calculated as operating income as a percentage of sales, increased 20 basis points in both the third quarter and first nine months of fiscal 2025, compared with the same periods a year ago.
•
Gross margin, which is calculated as gross profit as a percentage of sales, increased 170 basis points and 90 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.
◦
Changes in our consolidated mix led to a 110 basis point increase in gross margin in the third quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher gross margin than our Wholesale segment.
◦
Lower input costs, led by reduced commodity prices and improved sourcing, drove an increase in gross margin during the third quarter and first nine months of fiscal 2025, compared with the same periods a year ago.
◦
The third quarter and first nine months of fiscal 2024 experienced favorable duty expense causing a comparative decrease in gross margin in the third quarter and first nine months of fiscal 2025.
◦
Favorable fluctuations in the Mexican peso relative to the U.S. dollar drove lower production-related costs, resulting in increased gross margin during the third quarter of fiscal 2025 compared with the same period a year ago.
◦
During the first nine months of fiscal 2024 we recognized $4.0 million of severance-related charges as part of our global supply chain optimization initiative, resulting in a comparative gross margin increase in the first nine months of fiscal 2025.
•
SG&A expenses as a percentage of sales increased 150 basis points and 70 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.
25
◦
Changes in our consolidated mix led to a 110 basis point increase in SG&A expense as a percentage of sales in the third quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.
◦
SG&A expense as a percentage of sales increased in the third quarter and first nine months of fiscal 2025 compared with the same periods a year ago, due to fixed cost deleverage on lower sales in our international wholesale business due to a significant customer transition.
◦
SG&A expense as a percentage of sales in the first nine months of fiscal 2025 also increased due to higher selling expenses and fixed costs resulting from acquisitions of independently owned La-Z-Boy Furniture Galleries
®
and retail store expansion, both to support our long-term strategy of growing our Retail segment.
We discuss each segment’s results in the following section.
Retail Segment
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands, except percentages) | 1/25/2025 | 1/27/2024 | % Change | 1/25/2025 | 1/27/2024 | % Change | ||||||||||||||||||||||||||||||||
| Sales | $ | 227,667 | $ | 204,696 | 11.2% | $ | 651,601 | $ | 627,248 | 3.9 | % | |||||||||||||||||||||||||||
| Operating income | 24,457 | 22,313 | 9.6% | 73,003 | 79,512 | (8.2) | % | |||||||||||||||||||||||||||||||
| Operating margin | 10.7% | 10.9% | 11.2% | 12.7% | ||||||||||||||||||||||||||||||||||
Sales
The Retail segment’s sales increased $23.0 million, or 11%, and $24.4 million, or 4%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The increase during the third quarter was primarily due to higher delivered same-store sales along with $9.2 million of incremental sales resulting from our retail store acquisitions that occurred in fiscal 2024 and fiscal 2025. During the first nine months of fiscal 2025, our retail store acquisitions contributed $32.1 million of incremental sales but were partially offset by a decline in delivered same-store sales.
Written same-store sales increased 7% and 1% in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago, driven by strong store-level execution and improved traffic trends in the third quarter of fiscal 2025. Same-store sales include the sales of all currently active stores that have been open and company-owned for each comparable period.
Operating Margin
The Retail segment's operating margin decreased 20 basis points and 150 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.
•
Gross margin decreased 10 basis points and increased 10 basis points in the third quarter and first nine months of 2025, respectively, compared with the same periods a year ago, as a result of slight shifts in our product mix.
•
SG&A expenses as a percentage of sales increased 10 basis points and 160 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The increase in the first nine months of fiscal 2025 was primarily due to increased selling expenses and fixed costs resulting from our acquisitions of independently owned La-Z-Boy Furniture Galleries
®
and retail store expansion, both to support our long-term strategy of growing our Retail segment.
Wholesale Segment
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands, except percentages) | 1/25/2025 | 1/27/2024 | % Change | 1/25/2025 | 1/27/2024 | % Change | ||||||||||||||||||||||||||||||||
| Sales to external customers | $ | 255,028 | $ | 260,542 | $ | 770,031 | $ | 760,531 | ||||||||||||||||||||||||||||||
| Intersegment sales | 107,970 | 95,833 | 307,764 | 294,286 | ||||||||||||||||||||||||||||||||||
| Total Sales | 362,998 | 356,375 | 1.9% | 1,077,795 | 1,054,817 | 2.2 | % | |||||||||||||||||||||||||||||||
| Operating income | 23,565 | 22,711 | 3.8% | 72,093 | 67,664 | 6.5 | % | |||||||||||||||||||||||||||||||
| Operating margin | 6.5% | 6.4% | 6.7% | 6.4% | ||||||||||||||||||||||||||||||||||
26
Sales
The Wholesale segment’s sales increased $6.6 million, or 2%, and $23.0 million, or 2%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. Over the same periods, intercompany sales from our Wholesale segment to our Retail segment increased 13% and 5%, respectively. Sales in both the third quarter and first nine months of fiscal 2025 benefited from a favorable shift in product mix toward higher price products which was partially offset by the impact of a significant customer transition in our international wholesale business. Additionally, sales during the first nine months of fiscal 2025 were higher due to increased sales volume in our core North America La-Z-Boy branded upholstery business, including growth from our major wholesale dealers.
Operating Margin
The Wholesale segment's operating margin increased 10 basis points and 30 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago
•
Gross margin increased 130 basis points and 40 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.
◦
Lower input costs, led by reduced commodity prices and improved sourcing drove an 80 basis point and 70 basis point increase in gross margin during the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.
◦
The third quarter and first nine months of the prior year experienced favorable duty expense, causing a comparative 70 basis point and 30 basis point decrease in gross margin in the third quarter and first nine months of fiscal 2025, respectively.
◦
Favorable fluctuations in the Mexican peso relative to the U.S. dollar drove lower production-related costs, resulting in an 80 basis point increase in gross margin during the third quarter of fiscal 2025 compared with the same period a year ago.
◦
Gross margin in the third quarter of fiscal 2025 benefited 20 basis points from a favorable shift in channel mix toward sales to our La-Z-Boy Furniture Galleries
®
, which generally carry products with a higher gross margin than products sold to external customers. A shift in channel mix towards external customers was experienced during the first nine months of fiscal 2025, resulting in a 50 basis point decrease in gross margin.
◦
During the first nine months of fiscal 2024, we recognized $4.0 million in severance-related charges as part of our global supply chain optimization initiative, resulting in comparative gross margin increase of 10 basis points and 40 basis points in the third quarter and first nine months of fiscal 2025, respectively.
•
SG&A expense as a percentage of sales increased 120 basis points and 10 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.
◦
Marketing expense in the third quarter of fiscal 2025 increased relative to the prior year, resulting in a 50 basis point increase in SG&A expense as a percentage of sales. For the first nine months of fiscal 2025, marketing expense decreased relative to the prior year, as during fiscal 2024 we launched our
Long Live the Lazy
campaign, resulting in a 30 basis point comparative decrease in SG&A expense as a percentage of sales.
◦
SG&A expense as a percentage of sales increased 50 basis points and 30 basis points in the third quarter and first nine months of fiscal 2025, respectively, from fixed cost deleverage on lower sales in our international wholesale business due to a significant customer transition.
Corporate and Other
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| (Unaudited, amounts in thousands, except percentages) | 1/25/2025 | 1/27/2024 | % Change | 1/25/2025 | 1/27/2024 | % Change | ||||||||||||||||||||||||||||||||
| Sales | $ | 40,662 | $ | 38,132 | 6.6% | $ | 121,457 | $ | 114,425 | 6.1 | % | |||||||||||||||||||||||||||
| Intercompany eliminations | (109,550) | (98,797) | (10.9)% | (312,517) | (302,998) | (3.1) | % | |||||||||||||||||||||||||||||||
| Operating loss | (12,854) | (12,463) | (3.1)% | (38,786) | (46,477) | 16.5 | % | |||||||||||||||||||||||||||||||
Sales
Corporate and Other sales increased $2.5 million and $7.0 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The change in sales was primarily led by Joybird sales which
27
increased $3.0 million to $37.1 million and $8.4 million to $110.3 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago, as higher delivered volume and a favorable shift in product mix more than offset promotional activity. Written sales for Joybird increased 10% and 7% in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.
Intercompany eliminations increased in the third quarter and first nine months of fiscal 2025 compared with the same periods a year ago due to higher sales from our Wholesale segment to our Retail segment.
Operating Loss
Our Corporate and Other operating loss increased $0.4 million and decreased $7.7 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The third quarter of fiscal 2025 benefited from improved Joybird operating margin, resulting in breakeven profit, but was more than offset by lower intercompany operating profit from our global trading company in Hong Kong. In the first nine months of fiscal 2025, Joybird operating profit improvements along with favorable intercompany inventory profit elimination adjustments, relative to the same period a year ago, were partially offset by lower intercompany operating profit from our global trading company in Hong Kong.
Non-Operating Income (Expense)
Interest Income
Interest income was $0.7 million lower and $0.4 million higher in the third quarter and first nine months of 2025, respectively, compared with the same period a year ago, primarily driven by changes in interest rates which decreased throughout the first nine months of fiscal 2025.
Other Income, (Expense), Net
Other income (expense), net was $0.1 million of income and $2.4 million of expense in the third quarter and first nine months of fiscal 2025, respectively. The expense in the first nine months of fiscal 2025 was primarily due to exchange rate losses related to our operations in Mexico and Thailand.
Income Taxes
Our effective tax rate was 25.1% and 25.6% for the third quarter and first nine months of fiscal 2025, respectively, compared with 20.2% and 24.5% for the third quarter and first nine months of fiscal 2024. The increase in our effective tax rate in the third quarter of fiscal 2025 compared with the same period a year ago was primarily the result of favorable return to provision adjustments impacting the prior year and absent these discrete items, the effective tax rate would have been 25.6% for the third quarter of fiscal 2024. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.
Liquidity and Capital Resources
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 $314.6 million at January 25, 2025, compared with $341.1 million at April 27, 2024. In addition, we had investments to enhance our returns on cash of $2.6 million at January 25, 2025, compared with $6.8 million at April 27, 2024.
28
The following table illustrates the main components of our cash flows:
| Nine Months Ended | ||||||||||||||
| (Unaudited, amounts in thousands) | 1/25/2025 | 1/27/2024 | ||||||||||||
| Cash Flows Provided By (Used For) | ||||||||||||||
| Net cash provided by operating activities | $ | 125,269 | $ | 105,354 | ||||||||||
| Net cash used for investing activities | (71,190) | (54,029) | ||||||||||||
| Net cash used for financing activities | (81,208) | (64,476) | ||||||||||||
| Exchange rate changes | 620 | (348) | ||||||||||||
| Change in cash, cash equivalents and restricted cash | $ | (26,509) | $ | (13,499) | ||||||||||
Operating Activities
During the first nine months of fiscal 2025, net cash provided by operating activities was $125.3 million, an increase of $19.9 million compared with the same period a year ago. The year over year increase was primarily due to an increase in customer deposits and favorable net changes in working capital, including lower receivables and lower inventory, partially offset by reduced payables. Our cash provided by operating activities in fiscal 2025 was primarily attributable to net income, adjusted for non-cash items and favorable net changes in working capital, including higher payables and lower receivables, partially offset by an increase in inventory.
Investing Activities
During the first nine months of fiscal 2025, net cash used for investing activities was $71.2 million, an increase of $17.2 million compared with the same period a year ago, primarily due to an increase in capital expenditures. Cash used for investing activities in fiscal 2025 included the following:
•
Cash used for capital expenditures in the period was $51.5 million compared with $38.0 million during the first nine months of fiscal 2024, which was primarily related to La-Z-Boy Furniture Galleries
®
(new stores and remodels), manufacturing-related investments, and market showroom upgrades. We anticipate that spending on these items will continue in fiscal 2025 with full year fiscal 2025 capital expenditures expected to be in the range of $70 to $80 million. We have no material contractual commitments outstanding for future capital expenditures.
•
Cash used for acquisitions was $24.8 million, primarily related to the acquisition of the Davenport, Iowa, Melbourne and Cocoa, Florida, and Toledo, Ohio retail businesses.
•
Proceeds from the sale of investments, net of investment purchases, were $4.9 million.
Financing Activities
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 an increase, up to an additional amount of $100 million. The Credit Facility will mature on October 15, 2026 and provides us the ability to extend the maturity date for two additional one-year periods, subject to the satisfaction of customary conditions. As of January 25, 2025, we have no borrowings outstanding under the Credit Facility.
The Credit Facility contains certain restrictive loan covenants, including, among others, financial covenants requiring a maximum consolidated net lease adjusted leverage ratio and a minimum consolidated fixed charge coverage ratio, as well as customary covenants limiting our ability to incur indebtedness, grant liens, make acquisitions, merge or consolidate, and dispose of certain assets. As of January 25, 2025, we were in compliance with our financial covenants under the Credit Facility. We believe our cash and cash equivalents, short-term investments, and cash from operations, in addition to our available Credit Facility, will provide adequate liquidity for our business operations over the next 12 months.
During the first nine months of fiscal 2025, net cash used for financing activities was $81.2 million, an increase of $16.7 million compared with the same period a year ago, primarily due to higher share repurchases, partially offset by higher proceeds from exercised stock options. In addition, our cash used for financing activities in fiscal 2024 included holdback payments of $5.0 million for a prior period acquisition. Cash used for financing activities in fiscal 2025 included the following:
•
Our board of directors has authorized the repurchase of company stock and we spent $64.4 million in the first nine months of fiscal 2025 to repurchase 1.7 million shares. As of January 25, 2025, 4.0 million shares remained available
29
for repurchase pursuant to this 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.
•
Cash paid to our shareholders in quarterly dividends was $25.9 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.
•
Proceeds from exercised stock options, net of stock issued and taxes withheld as part of our employee benefit plans, were $10.9 million.
Exchange Rate Changes
Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $0.6 million for the nine months ended January 25, 2025. These changes impacted our cash balances held in Canada, Thailand, and the United Kingdom.
Other
During the third quarter of fiscal 2025, there were no material changes to the information about our contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024. 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.
Critical Accounting Policies
We disclosed our critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024. There were no material changes to our critical accounting policies or estimates during the nine months ended January 25, 2025.
Recent Accounting Pronouncements
See Note 1, Basis of Presentation, to the consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting standards and other new accounting standards.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the first nine months of fiscal 2025, there were no material changes from the information contained in Item 7A of our Annual Report on Form 10-K for the fiscal year ended April 27, 2024.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal controls over financial reporting that occurred during the third quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II — OTHER INFORMATION
ITEM 1A. RISK FACTORS
We disclosed our risk factors in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024. There have been no material changes to our risk factors during the first nine months of fiscal 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our board of directors has authorized the repurchase of Company stock. Repurchases under these programs will be made at management's discretion from time to time on the open market or in privately negotiated transactions and through Rule 10b5-1. We spent $11.2 million in the third quarter of fiscal 2025 to repurchase 0.3 million shares, pursuant to a Rule 10b5-1 plan and as discretionary purchases. As of January 25, 2025, 4.0 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 January 25, 2025 and includes shares purchased from employees to satisfy their withholding tax obligations upon vesting of restricted shares:
| (Unaudited, amounts in thousands, except per share data) |
Total number of
shares repurchased (1) |
Average price paid per share | Total number of shares repurchased as part of publicly announced plan (2) | Maximum number of shares that may yet be repurchased under the plan | ||||||||||||||||||||||
| Fiscal November (October 27 – November 30, 2024) | 271 | $ | 41.47 | 271 | 3,994 | |||||||||||||||||||||
| Fiscal December (December 1 – December 28, 2024) | — | $ | — | — | 3,994 | |||||||||||||||||||||
| Fiscal January (December 29 – January 25, 2025) | 2 | $ | 44.66 | — | 3,994 | |||||||||||||||||||||
|
Total (Fiscal Third Quarter of 2025)
|
273 | 271 | 3,994 | |||||||||||||||||||||||
(1) In addition to the 271,028 shares we repurchased during the quarter as part of our publicly announced, board-authorized plan described above, this column includes 1,625 shares we repurchased from employees to satisfy their withholding tax obligations upon vesting of restricted and performance based shares.
(2) On October 28, 1987, our board of directors announced the authorization of the plan to repurchase Company stock. The plan originally authorized 1.0 million shares, and since October 1987, 33.5 million shares have been added to the plan for repurchase. The authorization has no expiration date.
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Officers
During the quarter ended January 25, 2025, 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).
32
ITEM 6. EXHIBITS
|
Exhibit
Number |
Description | |||||||
| (3.1) | ||||||||
| (31.1) | ||||||||
| (31.2) | ||||||||
| (32) | ||||||||
| (101.INS) | Inline XBRL Instance Document | |||||||
| (101.SCH) | Inline XBRL Taxonomy Extension Schema Document | |||||||
| (101.CAL) | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| (101.LAB) | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| (101.PRE) | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| (101.DEF) | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| (104) |
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended January 25, 2025, formatted in Inline XBRL (included in Exhibit 101)
|
|||||||
33
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LA-Z-BOY INCORPORATED | ||||||||
| (Registrant) | ||||||||
| Date: February 18, 2025 | ||||||||
| BY: /s/ Jennifer L. McCurry | ||||||||
|
Jennifer L. McCurry
Vice President, Corporate Controller and Chief Accounting Officer |
||||||||
34
TABLE OF CONTENTS
Part I - Financial Information (unaudited)printItem 1. Financial StatementsprintNote 1: Basis Of PresentationprintNote 2: AcquisitionsprintNote 3: Cash and Restricted CashprintNote 4: InventoriesprintNote 5: Goodwill and Other Intangible AssetsprintNote 6: InvestmentsprintNote 7: Product WarrantiesprintNote 8: Stock-based CompensationprintNote 9: Accumulated Other Comprehensive Income (loss)printNote 10: Revenue RecognitionprintNote 11: Segment InformationprintNote 12: Income TaxesprintNote 13: Earnings Per ShareprintNote 14: Fair Value MeasurementsprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 2. Management S Discussion and Analysis Of Financial Condition and ResultsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 5. Other InformationprintItem 6. Exhibitsprint