What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-17 compared with 2020-08-18 · 131 added, 95 removed, 144 unchanged (61% of the section changed)

12 unchanged sentences

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 year ended April 25, 2020, under Item 1A, "Risk Factors" and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results.

Any or all of the forward-looking statements contained our Annual Report or any other public statement made by us, including by our management, may turn out to be incorrect.

Any or all of the forward-looking statements contained in our Annual Report or any other public statement made by us, including by our management, may turn out to be incorrect.

We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements.

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In addition, we import, distribute and retail accessories and casegoods (wood) furniture products under the Kincaid ® , American Drew ® , Hammary ® , and Joybird ® tradenames.

As of July 25, 2020 , we had five major manufacturing locations and six regional distribution centers in the United States and two facilities in Mexico to support our speed-to-market and customization strategy.

We closed our manufacturing facility located in Redlands, California as of the end of the second quarter of fiscal 2020.

On June 4, 2020, we announced the closure of our Newton, Mississippi upholstery manufacturing facility.

Production from both of these facilities has shifted to available capacity at the Company’s Dayton, Tennessee, Neosho, Missouri, and Siloam Springs, Arkansas plants.

As of October 24, 2020, we operated five major manufacturing locations and seven regional distribution centers in the United States and two facilities in Mexico to support our speed-to-market and customization strategy.

In the first quarter of fiscal 2021, we announced the closure of our Newton, Mississippi upholstery manufacturing facility.

In the first half of fiscal 2021, as consumers continued to allocate more discretionary spending to home furnishings, the demand for our products has outpaced our production capacity.

In response, our supply chain team continues to demonstrate agility and flexibility to identify ways to increase production capacity on both an opportunistic and permanent basis.

We have increased capacity by adding manufacturing cells at our Mexico Cut-and-Sew Center, adding weekend production shifts to our U.S.

plants, and temporarily re-activating a portion of our Newton, Mississippi upholstery manufacturing facility.

Further, we will open a leased upholstery assembly plant, in San Luis Rio Colorado, Mexico early in the third quarter of fiscal 2021.

We operate a wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland.

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The centerpiece of our retail distribution strategy is our network of 355 La-Z-Boy Furniture Galleries ® stores and 561 La-Z-Boy Comfort Studio ® locations, each dedicated to marketing our La-Z-Boy branded products.

We consider this dedicated space to be “proprietary.” We own 155 of the La-Z-Boy Furniture Galleries ® stores.

We consider this dedicated space to be “proprietary.” We own 159 of the La-Z-Boy Furniture Galleries ® stores, which include those stores acquired in connection with our acquisition of the Seattle, Washington business that operated six independently owned La-Z-Boy Furniture Galleries ® stores.

The remainder of the La-Z-Boy Furniture Galleries ® stores, as well as all 561 La-Z-Boy Comfort Studio ® locations, are independently owned and operated.

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To stimulate growth, our Live Life Comfortably ® marketing campaign features celebrity brand ambassador, Kristen Bell, and focuses on expanding our digital marketing and e-commerce capabilities to build traffic across our multiple digital and physical properties.

Millennial actress and social media influencer, Kristen, injects youthful style and sensibility into our marketing campaign which enhances the appeal of our brand with a younger customer base.

Further, we are driving change throughout our digital platforms to improve the user experience, with a specific focus on the ease by which customers browse through our broad product assortment, customize products to their liking, find stores to make a purchase, or purchase at www.la-z-boy.com.

As a millennial actress and social media influencer, Kristen injects youthful style and sensibility into our marketing campaign which enhances the appeal of our brand with a younger customer base.

Further, we are driving change throughout our digital platforms to improve the user experience, with a specific focus on the ease by which customers

browse through our broad product assortment, customize products to their liking, find stores to make a purchase, or purchase at www.la-z-boy.com.

• Our innovative products, including stain-resistant iClean™ and eco-friendly Conserve ™ fabrics and our power products, some of which include a wireless hand held remote, dual mechanisms and articulating headrests .

Our innovation, duo ® , is a revolutionary product line that features the look of stationary furniture with the power to recline at the push of a button.

We are committed to innovation throughout our business, and to support these efforts we opened our new state-of-the-art Innovation Center in January 2019 at our Dayton, Tennessee campus.

We are committed to innovation throughout our business, and to support these efforts we opened our new state-of-the-art Innovation Center in fiscal 2019 at our Dayton, Tennessee campus.

• Our multi-faceted online strategy to participate in and leverage the growth of online furniture sales .

On July 30, 2018, we purchased Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture, which positions us for growth in the ever-changing online selling environment and allows us to better reach millennial and Gen X consumers and leverage our supply chain assets.

During fiscal 2019, we purchased Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture, which positions us for growth in the ever-changing online selling environment and allows us to better reach millennial and Gen X consumers and leverage our supply chain assets.

In addition, we continue to increase online sales of La-Z-Boy furniture through la-z-boy.com and other digital players, such as Wayfair.

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Impact of COVID-19

In the fourth quarter of fiscal 2020, in response to the COVID-19 pandemic, we took actions to conserve cash in the near term, including the furlough of approximately 70% of our workforce while our manufacturing and retail operations were temporarily closed, temporary 50% salary reductions for our executive team and 25% salary reductions for the rest of our salaried workforce, along with the temporary suspension of our 401(k) match and our share repurchase program.

Effective as of June 4, 2020, in the first quarter of fiscal 2021, we announced our business realignment plan, which included the reduction of our global workforce by about 10% across our manufacturing, retail and corporate locations, including the closure of our Newton, Mississippi upholstery manufacturing facility.

As of the end of the first quarter of fiscal 2021, our manufacturing facilities and stores had all re-opened and the majority of our furloughed employees had returned to work.

The temporary salary reductions ended and full base salaries were reinstated as of June 1, 2020, for all employees other than the named executive officers of the Company.

The Newton, Mississippi upholstery manufacturing facility has permanently closed and production has been shifted to available capacity at our Dayton, Tennessee, Neosho, Missouri, and Siloam Springs,

Arkansas plants.

Effective as of August 1, 2020, in the second quarter of fiscal 2021 and subsequent to this financial report, the temporary 50% salary reductions for the named executive officers ended and full base salaries were reinstated, as was the Company's 401(k) match and cash compensation for the board of directors.

In response to the COVID-19 pandemic, we took the following actions over the past nine months to conserve cash in the near term and ensure the well-being of our employees and their families, our customers and the communities in which we operate.

Fourth quarter of fiscal 2020

• In accordance with government regulations, temporarily closed all manufacturing and retail operations

• Furloughed approximately 70% of our workforce

• Implemented a temporary 50% salary reduction for our executive team and 25% salary reduction for the rest of our salaried workforce along with the temporary suspension of our 401(k) match

• Temporarily eliminated our June quarterly dividend and suspended our share repurchase program

First quarter of fiscal 2021

• Announced our business realignment plan which included the reduction of our global workforce by about 10% across our manufacturing, retail, and corporate locations, including the closure of our Newton, Mississippi upholstery manufacturing facility.

• Re-opened all of our other manufacturing facilities, retail stores, and corporate headquarters along with the implementation of best-practice health and safety protocols

• The majority of our furloughed employees returned to work, temporary salary reductions ended and full base salaries were reinstated for all employees other than the named executive officers

Second quarter of fiscal 2021

• Temporary salary reduction for the named executive officers ended and full base salaries reinstated

• Reinstated 401(k) match for employees and cash compensation for the board of directors

• The board of directors elected to reinstate a regular quarterly dividend to shareholders of $0.07 per share, 50% of the dividend amount paid quarterly prior to the Company's suspension of dividends.

This dividend was paid on September 15, 2020, to shareholders of record as of September 3, 2020.

Third quarter of fiscal 2021

• On November 17, 2020, the board of directors declared a quarterly dividend to shareholders of $0.14 per share.

This returns the quarterly dividend to the full amount paid quarterly prior to the company's suspension of dividends.

The dividend will be paid on December 15, 2020, to shareholders of record as of December 2, 2020.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES Act”) was signed into law.

The CARES Act, among other things, includes provisions providing for refundable payroll tax credits, deferment of employer social security

payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act, among other things, includes provisions providing for refundable payroll tax credits, deferment of employer social security payments, lengthening net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The Company continues to examine the impact that the CARES Act may have on its results of operations, financial condition and/or financial statement disclosures.

We continue to actively manage the impact of the COVID-19 crisis and we are unable to predict the impact COVID-19 will have on our financial operations in the near and long term.

The timing of any future actions in response to COVID-19 is largely dependent on the mitigation of the spread of the virus, status of government orders, directives and guidelines, recovery of the business environment, economic conditions, and consumer demand for our products.

Additionally, as we have re-opened stores and re-started manufacturing facilities, we continue to follow enhanced health and safety protocols across all locations to ensure our employees and our customers are well-protected

We continue to actively manage the impact of the COVID-19 crisis and there is uncertainty regarding the impact COVID-19 will have on our financial operations in the near and long term.We also continue to actively manage our global supply chain and manufacturing operations, which may be adversely impacted with respect to availability and pricing based on uncontrollable factors.

The need for, or timing of, any future actions in response to COVID-19 is largely dependent on the mitigation of the spread of the virus, status of government orders, directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, and consumer demand for our products.

Results of Operations

Fiscal 2021 First Quarter Compared with Fiscal 2020 First Quarter

Fiscal 2021 Second Quarter Compared with Fiscal 2020 Second Quarter

La-Z-Boy Incorporated

Quarter Ended

Quarter Ended Six Months Ended

(Unaudited, amounts in thousands, except percentages) 10/24/20 10/26/19 %

Change 10/24/20 10/26/19 %

Sales $ 459,120 $ 447,212 2.7 % $ 744,578 $ 860,845 (13.5) %

Operating income 47,939 29,601 62.0 % 52,264 53,023 (1.4) %

Operating margin 10.4 % 6.6 % 7.0 % 6.2 %

Consolidated sales decreased $128.2 million in the first quarter of fiscal 2021 , compared with the same period a year ago.

The sales decrease was primarily due to the impact of COVID-19 which caused temporary store closures in the latter part of the fourth quarter of fiscal 2020 and a phased reopening in the first two months of fiscal 2021, temporary closures of our manufacturing facilities, and a negative impact on our ability to deliver product to customers.

This period of closure, given our production cycle from written order to delivery, has resulted in lower reported sales in the first quarter of fiscal 2021.

As our retail and manufacturing locations have reopened, we have experienced a strong pace of written order trends and our manufacturing production is continuing to ramp up production to meet the demand.

Consolidated sales increased $11.9 million in the second quarter of fiscal 2021, but decreased $116.3 million in the first six months of fiscal 2021, compared with the same periods a year ago.

Since retail and manufacturing locations have reopened after the COVID-19 related temporary closures, we have continued to experience a strong pace of written order trends through the first half of fiscal 2021 and our manufacturing production is continuing to ramp up capacity to meet record order demand.

Sales increased in the second quarter of fiscal 2021, compared with the same period last year, primarily due to strong delivered sales from Joybird and our Retail segment.

The sales decrease in the first six months of 2021, compared with the same period last year, was primarily due to the impact of COVID-19, which caused temporary store closures in the latter part of the fourth quarter of fiscal 2020 and a phased reopening in the first two months of fiscal 2021, temporary closures of our manufacturing facilities, and a negative impact on our ability to deliver product to customers.

Operating Margin

Operating margin, which is calculated as operating income as a percentage of sales, decreased 420 basis points in the first quarter compared with the same period a year ago.

Gross margin, which is calculated as gross profit as a percentage of sales, increased 20 basis points in the first quarter of fiscal 2021 , compared with the same period a year ago primarily due to targeted cost reduction actions relative to lower sales volume and gross margin improvements in our Joybird business.

Selling, general and administrative ("SG&A") expenses as a percentage of sales increased 440 basis points in the first quarter of fiscal 2021 , compared with the same period a year ago primarily due to lower sales volume relative to fixed costs as well as an increase in expenses resulting from our business realignment plan, which included a reduction in workforce and the shut down of our Newton manufacturing location.

These increases in SG&A expenses as a percentage of sales were partially offset by cost reductions in response to the lower sales volume driven by the COVID-19 closures.

Operating margin, which is calculated as operating income as a percentage of sales, increased 380 basis points and 80 basis points in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 290 basis points and 190 basis points in the second quarter and the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated sales mix increased gross margin by 120 basis points and 40 basis points in the second quarter and the first six months of fiscal 2021, respectively, compared with the same periods last fiscal year.

This benefit was driven by the growth of Joybird and our Retail segment, which have higher gross margins than our Wholesale segment.

◦ The second quarter and first six months of last fiscal year included supply chain initiative costs, primarily associated with the closure of our Redlands manufacturing facility, which were higher when compared with the expenses resulting from our business alignment actions in the second quarter and first six months of 2021.

The absence of higher business initiative costs in fiscal 2021 resulted in a comparative 50 basis point and 40 basis point increase in gross margin in the second quarter and first six months of this year, respectively.

◦ Additionally, Joybird experienced significant improvements in gross margin in the second quarter and the first six months of fiscal 2021, primarily resulting from supply chain synergies and improved manufacturing plant performance.

• Selling, general and administrative ("SG&A") expenses as a percentage of sales decreased 100 basis points and increased 100 basis points in the second quarter and the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

◦ In the second quarter of fiscal 2021, the improvement in SG&A expense as a percentage of sales when compared with the same quarter last year was primarily due to continued disciplined expense management, lower spending on advertising given the strong order demand and lower administrative expenses due to COVID-19 travel restrictions, along with a decrease in salary and wages driven by our business realignment plan and reduction in workforce in the first quarter of fiscal 2021, partially offset by an increase in selling expenses.

◦ In the first six months of fiscal 2021, the increase in SG&A expense as a percentage of sales compared with the same period last year was primarily due to lower sales volume relative to fixed costs and an increase in expenses resulting from our business realignment plan, partially offset by cost reductions in response to the lower sales volume driven by the COVID-19 closures.

◦ Changes in our consolidated sales mix increased SG&A expense as a percentage of sales by 100 basis points and 40 basis points in the second quarter and in the first six months of fiscal 2021, respectively.

◦ Additionally, a $2.5 million pre-tax charge resulting from the recognition of the increase in the fair value of the Joybird contingent consideration liability increased SG&A as a percent of sales 50 basis points and 30 basis points in the second quarter and in the first six months of fiscal 2021, respectively.

We discuss each segment’s results in the following section.

Wholesale Segment

Quarter Ended

Quarter Ended Six Months Ended

(Unaudited, amounts in thousands, except percentages) 10/24/20 10/26/19 %

Change 10/24/20 10/26/19 %

Sales $ 343,016 $ 350,245 (2.1) % $ 566,589 $ 670,796 (15.5) %

Operating income 41,683 34,285 21.6 % 59,623 63,149 (5.6) %

Operating margin 12.2 % 9.8 % 10.5 % 9.4 %

The Wholesale segment’s sales decreased $97.0 million in the first quarter of fiscal 2021 , compared with the same period a year ago.

In the first quarter of fiscal 2021 , lower unit volume decreased sales 28.4% due to the impact of COVID-19, which caused temporary store closures in the latter part of the fourth quarter of fiscal 2020 and a phased reopening into the first two months of fiscal 2021 and closures of our manufacturing facilities.

This period of closure, given our production cycle from written order to delivery, has resulted in lower reported sales in the first quarter of fiscal 2021.

As our wholesale operations have reopened in the first quarter, we have experienced a strong pace of written order trends and our manufacturing facilities are continuing to ramp up production to meet the demand.

For the first quarter of fiscal 2021 , we also experienced an unfavorable change in our product mix resulting from planned sales promotions.

The Wholesale segment’s sales decreased $7.2 million and $104.2 million in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

Sales decreased 2.1% in the second quarter of fiscal 2021, compared with the same period a year ago.

While we continue to increase manufacturing production capacity to meet demand, a temporary supply shortage of polyurethane foam led to lower unit volume.

In the first six months of fiscal 2021, compared with the same period a year ago, lower unit volume decreased sales 14.4% due to the impact of COVID-19, which caused temporary store and manufacturing facility closures in the latter part of the fourth quarter of fiscal 2020 and a phased reopening in the first two months of the first quarter of fiscal 2021.

Operating Margin

Operating margin decreased 100 basis points in the first quarter of fiscal 2021 , compared with the same period a year ago.

Gross margin decreased 90 basis points in the first quarter of fiscal 2021 , compared with the same period a year ago.

The decrease in sales volume resulted in a 130 basis point decrease in gross margin, due to lower absorption of overhead costs, partially offset by manufacturing cost reduction actions.

The change in product mix resulted in a 100 basis point decrease in gross margin.

Higher selling prices, net of discounts, resulted in a 70 basis point increase in gross margin.

Lower raw material commodity prices provided a 50 basis point benefit to the segment’s gross margin.

Costs associated with our business realignment plan in the first quarter of fiscal 2021, which primarily included severance related expenses associated with the closure of our Newton manufacturing location, were largely offset by similar costs from our supply chain initiative in the first quarter of fiscal 2020 resulting from the closure of our Redlands manufacturing facility.

SG&A expense as a percentage of sales was essentially flat, increasing 10 basis points in the first quarter of fiscal 2021 , compared with the same period a year ago.

The increase in SG&A expenses resulting from the business realignment actions in the first quarter of fiscal 2021, which included the reduction in workforce and the shut down of our Newton manufacturing location, were largely offset by expense reductions in response to lower sales volume.

Operating margin increased 240 basis points and 110 basis points in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

● Gross margin increased 100 basis points and 30 basis points in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

◦ The second quarter and first six months of last fiscal year included supply chain initiative costs primarily associated with the closure of our Redlands, California manufacturing facility, which were higher when compared with the expenses resulting from our business alignment actions in the second quarter and first six months of 2021.

The absence of higher business initiative costs in fiscal 2021 resulted in a comparative 70 basis point and 50 basis point increase in the segment's gross margin in the second quarter and in the first six months of this year, respectively.

◦ Additionally, in the second quarter and the first six months of fiscal 2021, gross margin benefited from improvement in supply chain costs due to efficiencies gained from operating fewer manufacturing facilities, but those costs were mostly offset by costs associated with increasing production capacity in the current year.

● SG&A expense as a percentage of sales decreased 140 basis points and 80 basis points in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

The decrease in SG&A expense as a percentage of sales, in both periods, was primarily due to continued disciplined expense management and lower spending on advertising given the strong order demand and lower administrative expenses due to COVID-19 travel restrictions, along with a decrease in salary and wages driven by our business realignment plan and reduction in workforce in the first quarter of fiscal 2021.

Retail Segment

Quarter Ended

Quarter Ended Six Months Ended

(Unaudited, amounts in thousands, except percentages) 10/24/20 10/26/19 %

Change 10/24/20 10/26/19 %

Sales $ 162,275 $ 148,404 9.3 % $ 253,412 $ 291,400 (13.0) %

Operating income 15,093 8,412 79.4 % 8,466 16,889 (49.9) %

Operating margin 9.3 % 5.7 % 3.3 % 5.8 %

The Retail segment’s sales decreased $51.9 million in the first quarter of fiscal 2021 , compared with the same period a year ago.

The decrease in sales in the first quarter of fiscal 2021 compared with the same period a year ago was primarily due to a 36.7% , or $51.7 million , decrease in delivered same-store sales driven by a phased reopening of our retail locations throughout the first half of the first quarter of fiscal 2021 due to COVID-19.

With all of our retail locations now open, we are seeing positive sales trends with written same store sales up 11.1% in the first quarter of fiscal 2021 compared with the same quarter last year, due to increased demand for products in the home category and strong execution at the store level.

The Retail segment’s sales increased $13.9 million and decreased $38.0 million in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

The increase in sales in the second quarter of fiscal 2021 was primarily due to a 6.3% increase in same-store delivered sales, or $9.1 million, as well as an additional $3.5 million of delivered sales from our newly acquired Seattle-based stores.

The decrease in sales in the first six months of fiscal 2021 was primarily due to a 14.8%, or $42.1 million, decrease in delivered same-store sales driven by a phased reopening of our retail locations throughout the first two months of the first quarter of fiscal 2021 due to COVID-19.

Since all of our retail stores have re-opened, we have continued to experience strong sales trends with written same store sales up 36.3% in the second quarter of fiscal 2021 compared with the same quarter last year, driven by increased demand for products in the home furnishings category and strong execution at the store level.

Same-store delivered sales include the sales of all currently active stores which have been open for each comparable period.

Operating Margin

Operating margin decreased 1320 basis points in the first quarter of fiscal 2021 , compared with the same period a year ago.

Gross margin was relatively flat in the first quarter, compared with the same period a year ago.

SG&A expense as a percentage of sales increased 1310 basis points in the first quarter of fiscal 2021 , compared with the same periods a year ago, primarily due to lower delivered sales relative to fixed costs (primarily occupancy and selling expenses).

Operating margin increased 360 basis points in the second quarter, but decreased 250 basis points in the first six months of fiscal 2021, respectively, compared with the same period a year ago.

● Gross margin increased 30 basis points in both the second quarter and in the first six months of fiscal 2021 compared with the same periods a year ago.

● SG&A expense as a percentage of sales decreased 330 basis points in the second quarter, but increased 280 basis points in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

The improvement in SG&A as a percentage of sales in the second quarter of fiscal 2021 compared with the same quarter last year was primarily attributable to higher delivered sales relative to fixed costs coupled with lower spending on advertising given the strong order demand and lower administrative expenses due to COVID-19 travel restrictions.

Conversely, the increase in SG&A as a percentage of sales in the first six months of fiscal 2021 compared with the same period last year was primarily due to lower delivered sales relative to fixed costs.

Corporate and Other

Quarter Ended

Quarter Ended Six Months Ended

(Unaudited, amounts in thousands, except percentages) 10/24/20 10/26/19 %

Change 10/24/20 10/26/19 %

Sales $ 33,717 $ 24,311 38.7 % $ 50,458 $ 44,863 12.5 %

Intercompany eliminations (79,888) (75,748) (5.5) % (125,881) (146,214) 13.9 %

Operating loss (8,837) (13,096) 32.5 % (15,825) (27,015) 41.4 %

Sales decreased $3.8 million in the first quarter of fiscal 2021 compared with the same period a year ago, primarily due to a $3.7 million decrease in Joybird sales to $13.4 million for the quarter.

Joybird sales were down 21.7% in the first quarter of fiscal 2021 due to the impact of COVID-19 which resulted in the temporary closure of our manufacturing facilities in the latter part of the fourth quarter of fiscal 2020 and into the first quarter of fiscal 2021.

We are seeing positive sales trends, with written sales up 38.2% in the first quarter of 2021 compared with the same quarter last year, due to increased demand for products in the home category and increased online traffic, especially earlier in the quarter when many brick-and-mortar retail stores were closed due to COVID-19.

Intercompany eliminations decreased in the first quarter of fiscal 2021 compared with the same period a year ago due to lower sales from our Wholesale segment to our Retail segment, resulting from decreased sales in the Retail segment due to COVID-19 related closures.

Sales increased $9.4 million and $5.6 million in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

The increase in sales in the second quarter of fiscal 2021, compared with the same period last year, was primarily due to an $8.7 million, or 41.9%, increase in Joybird sales to $29.4 million primarily driven by strong written order trends through the first half of this fiscal year as we continue to experience increased demand for products in the home furnishings category and increased online traffic.

In the first six months of fiscal 2021, compared with the same period last year, Joybird sales increased $5.0 million to $42.9 million despite lower delivered sales in the first quarter of fiscal 2021 due to the impact of COVID-19 which resulted in the temporary closure of our manufacturing facilities in the latter part of the fourth quarter of fiscal 2020 and into the first quarter of fiscal 2021.

Written sales for Joybird were up 25% and 31% in the second quarter and in the first six months of fiscal 2021, respectively, compared with the same periods a year ago.

Intercompany eliminations increased in the second quarter of fiscal 2021 compared with the same period a year ago due to higher sales from our Wholesale segment to our Retail segment due to higher sales volume.

Intercompany eliminations decreased in the first six months of fiscal 2021, resulting from decreased sales in the Retail segment in the first quarter due to COVID-19 related closures.

Operating Loss

Our Corporate and Other operating loss decreased $6.9 million in the first quarter of fiscal 2021 , compared with the same period a year ago.

Despite lower Joybird sales in the first quarter of fiscal 2021 compared with the same period last year, operating losses improved as the Company is continuing to align costs with sales volume and make improvements across the business model with the objective to balance investments in growth with bottom-line performance.

Further, as a result of our COVID-19 action plan, corporate spending was down in the first quarter fiscal 2021 when compared with the same period last year.

Our Corporate and Other operating loss decreased $4.3 million and $11.2 million in the second quarter and first six months of fiscal 2021, respectively, compared with the same periods a year ago.

The operating loss in the second quarter and in the first six months of fiscal 2021 includes a $2.5 million pre-tax charge resulting from the recognition of the increase in the fair value of the Joybird contingent consideration liability, as we expect consideration will be owed under the terms of the earnout agreement in connection with the acquisition of Joybird based on our most recent financial projections.

The decrease in operating losses in the second quarter and in the first six months of fiscal 2021, compared to the same periods last year, was largely driven by improvements in the Joybird business.

Joybird delivered a profitable second quarter in fiscal 2021 and despite lower Joybird sales in the first quarter of fiscal 2021, compared with the same period last year, Joybird delivered profits in the first six months of this year driven by significant improvements to gross margin and lower SG&A expenses.

The work to integrate Joybird and leverage synergies has begun to come to fruition and as we build on the trajectory of the business, we will continue to balance investments in top-line growth with bottom-line performance.

Non-Operating Income (Expense)

Other Income (Expense), Net

Other income (expense), net was $1.5 million of income in the first quarter of fiscal 2021 compared with $0.8 million of expense in the first quarter of fiscal 2020 .

The income in the first quarter of fiscal year 2021 was primarily due to unrealized gains on investments and gains on company owned life insurance.

The expense in fiscal 2020 was primarily due to foreign exchange losses, partially offset by unrealized gains on investments.

Our effective tax rate was 19.8% for the first quarter of fiscal 2021 , compared with 22.0% in the first quarter of fiscal 2020 .

Absent discrete adjustments, primarily related to tax deductions from stock-based compensation, our effective tax rate in the first quarter of fiscal 2021 would have been 26.1% .

Other income (expense), net was de minimis in the second quarter of fiscal 2021 compared with $1.4 million of income in the second quarter of fiscal 2020.

The income in fiscal 2020 was primarily due to the return of $1.9 million in pre-tax cash from the settlement of our defined-benefit pension plan in our La-Z-Boy operating unit, which occurred during the fourth quarter of fiscal 2019.

Other income (expense), net was $1.5 million of income in the first six months of fiscal 2021 compared with $0.6 million of income in the first six months of fiscal 2020.

The income in the first six months of fiscal year 2021 was primarily due to unrealized gains on investments.

The income in the first six months of fiscal 2020 was primarily due to the return of pension funds noted above, partially offset by exchange rate losses.

Our effective tax rate was 26.0% and 25.3% for the second quarter and in the first six months of fiscal 2021, respectively, compared with 26.6% and 24.6% in the second quarter and in the first six months of fiscal 2020.

Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.

2 unchanged sentences

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.

We had cash, cash equivalents and restricted cash of $336.7 million at July 25, 2020 , compared with $263.5 million at April 25, 2020 .

In addition, we had investments to enhance our returns on cash of $16.5 million at July 25, 2020 , compared with $28.6 million at April 25, 2020 .

We had cash, cash equivalents and restricted cash of $353.4 million at October 24, 2020, compared with $263.5 million at April 25, 2020.

In addition, we had investments to enhance our returns on cash of $27.2 million at October 24, 2020, compared with $28.6 million at April 25, 2020.

We maintain a revolving credit facility secured primarily by our accounts receivable, inventory, cash deposit and securities accounts.

4 unchanged sentences

liquidity, we proactively borrowed $75.0 million from our revolving credit facility in the fourth quarter of 2020.

Subsequently, in the first quarter of fiscal 2021, following consideration of business performance, liquidity and trends during the first quarter of fiscal year 2021, $25.0 million was repaid which reduced the outstanding borrowing on our revolving credit facility to $50.0 million as of July 25, 2020 .

At July 25, 2020 , we were not subject to the fixed-charge coverage ratio requirement and had excess availability of $28.3 million of the $150.0 million credit commitment.

Excess availability was lower than the total remaining credit commitment primarily due to a decrease in eligible assets as of July 25, 2020 , resulting primarily from lower eligible accounts receivable due to a decrease in delivered sales in the quarter as a result of the impact of COVID-19, as well as higher reserves required due to the increase in customer deposits during the quarter.

Capital expenditures for the first quarter of fiscal 2021 were $9.8 million compared with $12.3 million during the first quarter of fiscal 2020 .

Capital expenditures in the first quarter of fiscal 2021 included spending on manufacturing machinery and equipment, upgrades to our upholstered furniture manufacturing plant in Dayton, Tennessee, and improvements to select retail stores.

Subsequently, considering business performance, liquidity and trends during the first six months of fiscal 2021, $25.0 million was repaid in the first quarter of fiscal 2021 and $50.0 million was repaid in the second quarter of fiscal 2021, bringing the outstanding balance on our revolving credit facility to zero as of October 24, 2020.

At October 24, 2020, we were not subject to the fixed-charge coverage ratio requirement and had excess availability of $62.8 million of the $150.0 million credit commitment.

Excess availability was lower than the total remaining credit commitment primarily due to higher reserves required due to the increase in customer deposits during the first six months of fiscal 2021.

Capital expenditures for the first six months of fiscal 2021 were $15.4 million compared with $22.9 million during the first six months of fiscal 2020.

Capital expenditures in the first six months of fiscal 2021 included spending on manufacturing machinery and equipment, upgrades to our upholstered furniture manufacturing plant in Dayton, Tennessee, and improvements to select retail stores.

We have no material contractual commitments outstanding for future capital expenditures.

We expect capital expenditures to be in the range of $40 to $45 million for fiscal 2021, largely dependent on liquidity and scaled in response to the recovery of the business environment, economic conditions, and consumer demand for our products.

Our fiscal 2021 capital spending will reflect essential maintenance spending, other projects as business conditions permit, and projects that have already begun, which will include plant upgrades to our upholstery manufacturing and distribution facilities in Dayton, Tennessee and Neosho, Missouri, technology upgrades and improvements to several of our retail stores.

Our fiscal 2021 capital spending will include plant upgrades to our upholstery manufacturing and distribution facilities in Dayton, Tennessee and Neosho, Missouri, costs for new production capacity in Mexico, technology upgrades and improvements to several of our retail stores.

In response to the COVID-19 pandemic, in the fourth quarter of fiscal 2020, we took action to conserve cash in the near term.

Actions taken at that time included the furlough of approximately 70% of our workforce while our manufacturing and retail operations were temporarily closed, temporary 50% salary reductions for our executive team and 25% salary reductions for the rest of our salaried workforce, along with the temporary suspension of our 401(k) match and our share repurchase program.

Further, effective as of June 4, 2020, the Company reduced its global workforce by about 10% across its manufacturing, retail and corporate locations, including the permanent closure of its Newton, Mississippi upholstery manufacturing facility.

Further, effective as of June 4, 2020, the Company reduced its global workforce by about 10% across its manufacturing, retail and corporate locations, including the closure of its Newton, Mississippi upholstery manufacturing facility.

As of the end of the first quarter of fiscal 2021, our manufacturing facilities and stores had all re-opened and the majority of our furloughed employees had returned to work.

Full base salaries were reinstated as of June 1, 2020, for all employees other than

the named executive officers of the Company.

Full base salaries were reinstated as of June 1, 2020, for all employees other than the named executive officers of the Company.

As of August 1, 2020, full base salaries were reinstated for our named executive officers, as were the Company's 401(k) match and cash compensation for the board of directors.

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As announced on March 29, 2020, the June 2020 dividend was eliminated to preserve near-term financial flexibility in response to the impact of COVID-19.

In accordance with our long-term capital allocation strategy, we will seek to return value to our shareholders through dividends and share repurchases when appropriate to do so.

On August 18, 2020, the board of directors elected to reinstate a regular quarterly dividend to shareholders of $0.07 per share, 50% of the dividend amount paid quarterly prior to the Company's suspension of dividends.

The dividend will be paid on September 15, 2020, to shareholders of record as of September 3, 2020.

This dividend was paid on September 15, 2020, to shareholders of record as of September 3, 2020.

On November 17, 2020, the board of directors declared a quarterly dividend to shareholders of $0.14 per share.

This returns the quarterly dividend to the full amount paid quarterly prior to the company's suspension of dividends.

The dividend will be paid on December 15, 2020, to shareholders of record as of December 2, 2020.

Our board of directors has authorized the repurchase of company stock.

As of July 25, 2020 , 4.5 million shares remained available for purchase pursuant to this authorization.

As of October 24, 2020, 4.5 million shares remained available for purchase pursuant to this authorization.

The authorization has no expiration date.

As announced on March 29, 2020, share repurchases under the board of directors’ prior authorization were temporarily halted to prioritize near-term financial flexibility in response to the impact of COVID-19, as such, there were no share repurchases in the first quarter of fiscal 2021.

Reinstatement of a share repurchase program under the board’s prior authorization is at the discretion of management and will depend on our earnings, capital requirements, financial condition and other factors that we consider to be relevant, such as the timing and extent of the economic recovery and the consumer demand for our products.

Resumption of a share repurchase program under the board’s prior authorization is at the discretion of management and will depend on our earnings, capital requirements, financial condition and other factors that we consider to be relevant, such as the timing and extent of the economic recovery and the consumer demand for our products.

The following table illustrates the main components of our cash flows:

Quarter Ended

Six Months Ended

(Unaudited, amounts in thousands) 10/24/20 10/26/19

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Net cash provided by operating activities $ 195,710 $ 53,702

Net cash provided by (used for) investing activities

Net cash used for investing activities (21,383) (32,345)

Net cash used for financing activities (86,372) (34,842)

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Operating Activities

During the first quarter of fiscal 2021 , net cash provided by operating activities was $106.3 million .

Our cash provided by operating activities was primarily attributable to a $61.1 million increase in customer deposits driven by the increase in written Retail and Joybird sales in the period.

Additionally, changes to working capital resulted in an increase in cash provided by operating activities, as receivables and inventory both decreased and payables increased $8.9 million in the quarter.

During the first six months of fiscal 2021, net cash provided by operating activities was $195.7 million.

Our cash provided by operating activities was primarily attributable to a $100.0 million increase in customer deposits driven by the increase in written Retail and Joybird sales in the period and net income generated during the period.

Investing Activities

During the first quarter of fiscal 2021 , net cash provided by investing activities was $0.8 million , primarily due to $14.7 million in proceeds from the sale of investments, as we shifted a portion of our investments to cash, partially offset by $3.6 million used for the purchase of investments.

Cash used for capital expenditures in the period was $9.8 million , which primarily related to spending on manufacturing machinery and equipment, upgrades to our Dayton, Tennessee upholstered furniture manufacturing facility and improvements to select retail stores.

During the first six months of fiscal 2021, net cash used for investing activities was $21.4 million, primarily due to c ash used for capital expenditures in the period of $15.4 million, which primarily related to spending on manufacturing machinery and equipment, upgrades to our Dayton, Tennessee upholstered furniture manufacturing facility and improvements to select retail stores.

Additionally, cash used for acquisitions was $7.8 million, which primarily included guaranteed payments related to the acquisition of Joybird, and the acquisition of the assets of the Seattle, Washington business that operated six independently owned La-Z-Boy Furniture Galleries ® stores and one warehouse.

Financing Activities

During the first quarter of fiscal 2021 , net cash used for financing activities was $35.3 million , primarily due to $25.0 million in payments on our revolving credit facility and $8.5 million in dividends paid to our joint venture minority partners, resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.

During the first six months of fiscal 2021, net cash used for financing activities was $86.4 million, primarily due to $75.0 million in payments on our revolving credit facility, $8.5 million in dividends paid to our joint venture minority partners, resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested, and $3.2 million paid to our shareholders in quarterly dividends.

Exchange Rate Changes

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $1.3 million from the end of fiscal year 2020 to the end of the first quarter of fiscal 2021 .

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $1.9 million from the end of fiscal year 2020 to the end of the second quarter of fiscal 2021.

These changes impacted our cash balances held in Canada, Thailand, and the United Kingdom.

During the first quarter of fiscal 2021 , there were no material changes to the information about our contractual obligations and commitments shown in the table contained in our Annual Report on Form 10-K for the fiscal year ended April 25, 2020 .

During the second quarter of fiscal 2021, there were no material changes to the information about our contractual obligations

and commitments shown in the table contained in our Annual Report on Form 10-K for the fiscal year ended April 25, 2020.

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.

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We disclosed our critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended April 25, 2020.

There were no material changes to our critical accounting policies during the quarter ended July 25, 2020 .

There were no material changes to our critical accounting policies during the six months ended October 24, 2020.

Recent Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the first quarter of fiscal 2021 , 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 25, 2020 .

During the first six months of fiscal 2021, 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 25, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis