What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-02-16 compared with 2020-11-17 · 110 added, 92 removed, 183 unchanged (52% of the section changed)

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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 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.

As of January 23, 2021, we operated five major manufacturing locations and seven regional distribution centers in the United States and three 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.

Subsequent to the announced closure of our Newton facility, consumers have continued to allocate more discretionary spending to home furnishings and as a result, 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.

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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.

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

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 351 La-Z-Boy Furniture Galleries ® stores and 563 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 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.

We consider this dedicated space to be “proprietary.” We own 158 of the La-Z-Boy Furniture Galleries ® stores.

The remainder of the La-Z-Boy Furniture Galleries ® stores, as well as all 563 La-Z-Boy Comfort Studio ® locations, are independently owned and operated.

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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.

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 .

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Second quarter of fiscal 2021

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

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

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

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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 dividend was paid on December 15, 2020, to shareholders of record as of December 2, 2020.

• Resumed share repurchases under our previous share repurchase authorization.

Fourth quarter of fiscal 2021

• On February 16, 2021, the board of directors declared a quarterly dividend to shareholders of $0.15 per share, an increase of $0.01 per share, or 7%.

The dividend is payable on March 15, 2021, to shareholders of record as of March 4, 2021.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“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, 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 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.

In the third quarter of fiscal 2021, the Company determined amounts that it is eligible to claim for employee retention payroll tax credits and recognized $5.2 million in non-operating income for wages and healthcare costs paid to employees during suspension of operations due to government orders which qualify under the provisions of the CARES Act.

The Company continues to evaluate 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 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 have been adversely impacted with respect to availability and pricing based on uncontrollable factors as well as COVID-19 related constraints on our manufacturing capacity as we continue to prioritize the health and safety of our employees.

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 Second Quarter Compared with Fiscal 2020 Second Quarter

Fiscal 2021 Third Quarter Compared with Fiscal 2020 Third Quarter

La-Z-Boy Incorporated

Quarter Ended Six Months Ended

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Operating margin 7.3 % 11.0 % 7.1 % 7.9 %

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.

Consolidated sales decreased $5.7 million and $121.9 million in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

Compared with the third quarter of fiscal 2020, which had the strongest sales in our recent history, sales in the third quarter of fiscal 2021 were 1.2% lower primarily due to the impact of COVID-19-related production and delivery challenges combined with delays in overseas shipments in the supply chain that have impacted the speed at which we have been able to scale our manufacturing production capacity to meet record demand.

The sales decrease in the first nine 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, 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.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 370 basis points and 80 basis points in the third quarter and in the first nine 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 80 basis points and 160 basis points in the third quarter and the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

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

This benefit was primarily driven by the growth of Joybird, which has a higher gross margin than our Wholesale segment.

◦ The third quarter and the first nine 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 fiscal 2021.

The absence of higher business initiative costs in fiscal 2021 resulted in a comparative 20 basis point and 30 basis point increase in gross margin in the third quarter and the first nine months of this year, respectively.

◦ Additionally, Joybird experienced significant improvements in gross margin in the third quarter and the first nine months of fiscal 2021, primarily resulting from product pricing actions taken, increase in average ticket and favorable product mix.

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.

◦ Partially offsetting these increases, higher costs related to expanding our manufacturing capacity in the third quarter and the first nine months of fiscal 2021 negatively impacted gross margin when compared with the same periods last fiscal year.

• Selling, general and administrative ("SG&A") expenses as a percentage of sales increased 450 basis points and increased 240 basis points in the third quarter and the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

◦ The pre-tax charge resulting from the increase in the fair value of the Joybird contingent consideration liability increased SG&A $10.0 million, or 210 basis points as a percentage of sales, and $12.5 million, or 100 basis points as a percent of sales, in the third quarter and the first nine months of fiscal 2021, respectively.

◦ The third quarter and the first nine months of last fiscal year included the sale of our Redlands facility, which resulted in a $9.7 million pre-tax gain, the absence of which in fiscal 2021 drove a comparative 210 basis point and 80 basis point increase in SG&A expense as a percentage of sale in the third quarter and in the first nine months of this fiscal year, respectively.

◦ Changes in our consolidated sales mix increased SG&A expense as a percentage of sales by 30 basis points and 40 basis points in the third quarter and in the first nine months of fiscal 2021, respectively.

This increase was primarily driven by the growth of Joybird, which has a higher SG&A rate than our Wholesale segment.

◦ Additionally, in the first nine months of fiscal 2021, SG&A expense as a percentage of sales increased compared with the same period last year primarily due to lower delivered sales relative to fixed costs coupled with higher selling expenses driven by the increase in written sales.

The increase was partially offset by cost reductions in response to the lower sales volume driven by the COVID-19 closures, including a decrease in marketing and travel expenses.

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

Wholesale Segment

Quarter Ended Six Months Ended

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Operating margin 10.2 % 13.4 % 10.4 % 10.8 %

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.

The Wholesale segment’s sales decreased $14.1 million and $118.3 million in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

Sales were lower in the third quarter and in the first nine months of fiscal 2021 compared with the same periods last year, due to a decrease in volume and unfavorable product mix as COVID-19-related production and delivery challenges, and delays in overseas shipments in the supply chain, have impacted the speed at which we have been able to scale our manufacturing production capacity to meet record demand.

Further, sales in the first nine months of fiscal 2021 were lower than the same period last year 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 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.

Operating margin decreased 320 basis points and 40 basis points in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

● Gross margin decreased 70 basis points and 10 basis points in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

◦ In the third quarter and the first nine months of fiscal 2021, gross margin decreased 160 basis points and 110 basis points, respectively, compared with the same periods last fiscal year, due to higher costs related to expanding our manufacturing capacity as well as COVID-19 related issues which impacted our production and delivery volume and product mix.

◦ Further, in the third quarter of fiscal 2021, rising raw material costs negatively impacted gross margin by 40 basis points compared with the same period last year.

◦ Partially offsetting these items was a decrease in promotional activity in response to strong product demand, which improved gross margin 100 basis points and 90 basis points in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods last year.

◦ Additionally, the third quarter and the first nine 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 realignment actions in the first nine months of 2021.

The absence of higher business initiative costs in fiscal 2021 resulted in a comparative 30 basis point and 40 basis point increase in the segment's gross margin in the third quarter and in the first nine months, respectively.

● SG&A expense as a percentage of sales increased 250 basis points and 30 basis points in the third quarter and in the

first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

◦ The third quarter and the first nine months of last fiscal year included the sale of our Redlands facility, which resulted in a $9.7 million pre-tax gain, the absence of which in fiscal 2021 drove a comparative 280 basis point and 110 basis point increase in SG&A expense as a percentage of sales in the third quarter and in the first nine months of this year, respectively.

◦ Partially offsetting the above item was a 20 basis point and 30 basis point reduction in SG&A as a percentage of sales in the third quarter and in the first nine months of the fiscal 2021, respectively, due to favorable adjustments to our bad debt reserves resulting from improved business conditions.

◦ Additionally, SG&A as a percentage of sales decreased in the third quarter and in the first nine months of fiscal 2021 due to disciplined expense management related to our spending on advertising given the strong order demand and lower administrative expenses due to COVID-19 travel restrictions, and was further

reduced due to lower salaries and wages driven by our business realignment plan and reduction in workforce in the first quarter of fiscal 2021.

Retail Segment

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

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Operating margin 8.9 % 9.8 % 5.5 % 7.3 %

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.

The Retail segment’s sales decreased $1.5 million and $39.5 million in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

The decrease in sales in the third quarter of fiscal 2021 was primarily due to a 6.3% decrease in same-store delivered sales, or $10.3 million, due to COVID-19-related production challenges in our wholesale segment.

Partially offsetting this decline was the benefit of $8.0 million of delivered sales from our recently acquired Seattle-based stores.

The decrease in sales in the first nine months of fiscal 2021 was primarily due to a 11.7%, or $52.1 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 and subsequent COVID-19-related production challenges in our wholesale segment.

Partially offsetting this decline was the benefit of $11.4 million of delivered sales from our recently acquired Seattle-based stores.

In fiscal 2021, since all of our retail stores have re-opened, we have continued to experience strong sales trends.

Written same store sales were up 9.1% and 18.2% in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods 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 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.

Operating margin decreased 90 basis points and 180 basis points in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

● Gross margin increased 10 basis points and 20 basis points in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

● SG&A expense as a percentage of sales increased 100 basis points and 200 basis points in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago, primarily due to lower delivered sales relative to fixed costs coupled with higher selling expenses driven by the increase in written sales.

This was partially offset by lower advertising given the strong demand and lower administrative expenses due to COVID-19 travel restrictions.

Corporate and Other

Quarter Ended Six Months Ended

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Operating loss (15,979) (13,116) (21.8) % (31,804) (40,131) 20.7 %

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.

Sales increased $8.0 million and $13.6 million in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

The increase in sales in the third quarter of fiscal 2021, compared with the same period last year, was primarily due to a $6.6 million, or 30.3%, increase in Joybird sales to $28.6 million, primarily driven by strong written order trends through the first nine months 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 nine months of fiscal 2021, compared with the same period last year, Joybird sales increased $11.6 million to $71.5 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 79% and 47% in the third quarter and in the first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

Intercompany eliminations decreased in both the third quarter and in the first nine months of fiscal 2021 compared with the same periods a year ago due to lower sales from our Wholesale segment to our Retail segment due to lower sales volume resulting from COVID-19-related production and delivery challenges and delays in overseas shipments in the supply chain.

Operating Loss

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.

Our Corporate and Other operating loss increased $2.9 million and $8.3 million in the third quarter and first nine months of fiscal 2021, respectively, compared with the same periods a year ago.

The operating loss in the third quarter and in the first nine months of fiscal 2021 includes a $10.0 million and a $12.5 million pre-tax charge, respectively, 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 significant improvements to our most recent financial projections.

These pre-tax charges were partially offset by Joybird's positive operating profits in the third quarter and first nine months of fiscal 2021, which have improved when compared with the same periods last year primarily due to significant increases in gross margin due to product pricing actions taken, an increase in average ticket and favorable product mix.

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Other Income (Expense), Net

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.

Other income (expense), net was $6.5 million of income in the third quarter of fiscal 2021 compared with $6.0 million of expense in the third quarter of fiscal 2020.

The income in fiscal 2021 was primarily due to $5.2 million of payroll tax credits resulting from the CARES Act along with unrealized gains on investments.

The expense in fiscal 2020 was primarily due to a $6.0 million impairment of our investment in a privately held start-up company.

Other income (expense), net was $8.0 million of income in the first nine months of fiscal 2021 compared with $5.4 million of expense in the first nine months of fiscal 2020.

The income in the first nine months of fiscal year 2021 was primarily due to the payroll tax credits noted above along with unrealized gains on investments.

The expense in the first nine months of fiscal 2020 was primarily due to the investment impairment charge noted above combined with exchange rate losses, partially offset by 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.

Our effective tax rate was 27.7% and 26.4% for the third quarter and the first nine months of fiscal 2021, respectively, compared with 26.0% and 25.3% for the third quarter and the first nine months of fiscal 2020, respectively.

The increase in our effective tax rate in fiscal 2021 compared with fiscal 2020 is primarily due to the tax effect of the non-deductible increase in the Joybird contingent consideration liability.

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

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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 $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 had cash, cash equivalents and restricted cash of $393.0 million at January 23, 2021, compared with $263.5 million at April 25, 2020.

In addition, we had investments to enhance our returns on cash of $30.6 million at January 23, 2021, 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.

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

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.

As of January 23, 2021, borrowings outstanding under the revolving credit facility remain at zero and we were not subject to the fixed-charge coverage ratio requirement and had excess availability of $56.7 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 nine months of fiscal 2021.

Capital expenditures for the first nine months of fiscal 2021 were $26.7 million compared with $35.5 million during the first nine months of fiscal 2020.

Capital expenditures in the first nine months of fiscal 2021 included spending on manufacturing machinery and equipment, upgrades to our upholstered furniture manufacturing plant in Dayton, Tennessee, improvements to select retail stores, and costs for new production capacity in Mexico.

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 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.

We expect capital expenditures to be in the range of $35 to $40 million for fiscal 2021, which will include plant upgrades to our upholstery manufacturing and distribution facilities in Dayton, Tennessee and Neosho, Missouri, new upholstery manufacturing capacity in Mexico, technology upgrades and improvements to a number 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.

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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.

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

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

Further, on February 16, 2021, the board of directors declared a quarterly dividend to shareholders of $0.15 per share, an increase of $0.01 per share or 7%.

The dividend is payable on March 15, 2021, to shareholders of record as of March 4, 2021.

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

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 and second quarters of fiscal 2021.

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.

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 and second quarters of fiscal 2021.

On December 14, 2020, we resumed share repurchases under the previous share repurchase authorization, pursuant to which 4.5 million shares currently remain available for purchase.

We spent $0.9 million in the third quarter of fiscal 2021 to purchase less than 0.1 million shares.

With the cash flows we anticipate generating in fiscal 2021, we expect to continue to be opportunistic in purchasing company stock.

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

Six Months Ended

Nine Months Ended

(Unaudited, amounts in thousands) 1/23/21 1/25/20

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Operating Activities

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.

During the first nine months of fiscal 2021, net cash provided by operating activities was $249.8 million.

Our cash provided by operating activities was primarily attributable to a $121.9 million increase in customer deposits driven by the increase in written Retail and Joybird sales in the period and net income, including non-cash adjustments, generated during the period.

Investing Activities

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.

During the first nine months of fiscal 2021, net cash used for investing activities was $35.7 million, primarily due to c ash used for capital expenditures in the period of $26.7 million, which primarily related to spending on manufacturing machinery and equipment, upgrades to our Dayton, Tennessee upholstered furniture manufacturing facility, improvements to select retail stores, and costs for new production capacity in Mexico.

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 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.

During the first nine months of fiscal 2021, net cash used for financing activities was $87.8 million, primarily due to $75.0 million in payments on our revolving credit facility, $9.7 million paid to our shareholders in quarterly dividends, 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.

Exchange Rate Changes

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.

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $3.2 million from the end of fiscal year 2020 to the end of the third quarter of fiscal 2021.

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

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

During the third 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.

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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 six months ended October 24, 2020.

There were no material changes to our critical accounting policies during the nine months ended January 23, 2021.

Recent Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

During the first nine 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