What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-06-15 compared with 2020-06-23 · 140 added, 101 removed, 134 unchanged (64% 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 April 25, 2020 , we had six 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 our Newton upholstery facility will be shifted to available capacity at the company’s Dayton, Tennessee, Neosho, Missouri, and Siloam Springs, Arkansas plants.

Refer to Note 21, Subsequent Events, for further information.

As of April 24, 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.

We also operate a logistics company that distributes a portion of our products in the United States.

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

We operate a global trading company in Hong Kong which helps us manage our Asian supply chain by establishing and maintaining relationships with our Asian suppliers, as well as identifying efficiencies and savings opportunities.

We also participate in two joint ventures in Thailand that support our international businesses:

We participate in two consolidated joint ventures in Thailand that support our international businesses:

one that operates a manufacturing facility and another that operates a wholesale sales office.

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Principal Products and Industry Segments

Our reportable operating segments are the Upholstery segment, the Casegoods segment and the Retail segment.

Upholstery Segment .

Our Upholstery segment is our largest business segment and consists primarily of two operating segments:

La-Z-Boy, our largest operating segment, and the operating segment for our England subsidiary.

The Upholstery segment also includes our international wholesale businesses.

We aggregate these operating segments into one reportable segment because they are economically similar and because they meet the other aggregation criteria for determining reportable segments.

Our Upholstery segment manufactures and imports upholstered furniture such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas.

Upholstery segment sells directly to La-Z-Boy Furniture Galleries ® stores, operators of La-Z-Boy Comfort Studio ® locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.

Casegoods Segment.

Our Casegoods segment consists of one operating segment that sells furniture under three brands:

Our reportable operating segments include the Wholesale segment and the Retail segment.

Effective in the first quarter of fiscal 2021, in order to better align with the manner in which we view and manage the business, coupled with economic and customer channel similarities, we revised our reportable operating segments by aggregating the former Upholstery segment with the former Casegoods segment to form the newly combined Wholesale segment.

The change in our reportable operating segments reflects how the Company evaluates financial information used to make operating decisions.

There were no changes to our Retail operating segment or Corporate & Other as part of this revision.

• Wholesale Segment .

Our Wholesale segment consists primarily of three operating segments:

La-Z-Boy, our largest operating segment, our England subsidiary, and our casegoods operating segment that sells furniture under three brands:

American Drew ® , Hammary ® , and Kincaid ® .

The Casegoods segment is an importer, marketer, and distributor of casegoods (wood) furniture such as bedroom sets, dining room sets, entertainment centers and occasional pieces, and also manufactures some custom upholstered furniture.

The Casegoods segment sells directly to major dealers, as well as La-Z-Boy Furniture Galleries ® stores, and a wide cross-section of other independent retailers.

The Wholesale segment also includes our international wholesale businesses.

We aggregate these operating segments into one reportable segment because they are economically similar

and meet the other aggregation criteria for determining reportable segments.

Our Wholesale segment manufactures and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas and imports casegoods (wood) furniture, such as occasional pieces, bedroom sets, dining room sets and entertainment centers.

The Wholesale segment sells directly to La-Z-Boy Furniture Galleries ® stores, operators of La-Z-Boy Comfort Studio ® locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.

• Retail Segment.

Our Retail segment consists of one operating segment comprising our 159 company-owned La-Z-Boy Furniture Galleries ® stores.

The Retail segment primarily sells upholstered furniture, in addition to some casegoods and other accessories, to end consumers through these stores.

The Retail segment primarily sells upholstered furniture, in addition to some casegoods and other accessories, to the end consumer through these stores.

• Corporate & Other.

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We have provided additional detailed information regarding our segments and their products in Note 17, Segment Information, to our consolidated financial statements and our "Management's Discussion and Analysis" section, both of which are included in this report.

Recent Developments

COVID-19 Impact

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 to be a global pandemic.

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Such measures included temporary quarantines, shelter-in-place orders and directives, restrictions on travel, and forced closures of non-essential businesses, which included many sectors within retail commerce.

On March 29, 2020, we announced our action plan in response to the COVID-19 crisis including, among other things, the temporary closure of our U.S.

manufacturing facilities, company-owned La-Z-Boy Furniture Galleries ® stores, and regional distribution centers, the furlough of approximately 70% of our global workforce, temporary salary reductions of 50% for senior management and 25% for salaried employees, and temporary suspension of cash compensation for our board of directors.

On April 9, 2020, we provided an update to our COVID-19 action plan which emphasized our continued focus on the health, safety and well-being of our employees and their families, our customers, and the communities in which we operate.

Our update involved the continued evaluation of plans and timing as it related to re-opening our company owned La-Z-Boy Furniture Galleries ® stores and to re-starting production at our U.S.- and Mexico-based manufacturing facilities, which are subject to applicable federal, state and local requirements and guidelines.

In addition, we announced that we would continue to operate our regional distribution centers, adhering to safety guidelines, to deliver in-process orders.

On April 22, 2020, we provided a further update on our COVID-19 action plan which included, among other things, the resumption of operations at partial production capacity at several U.S.- based plants on April 27, 2020.

In addition, we announced that we would open several retail locations across the U.S.

on a reduced schedule with the expectation to open additional stores in the coming weeks, in accordance with federal, state and local guidelines.

In addition to the operational actions outlined above, we have implemented a number of measures to maintain liquidity during the COVID-19 crisis, including, among other things, managing workforce costs, deferring rent payments on active leases and delaying planned capital expenditures deemed non-essential.

Further, during the fourth quarter of 2020 we proactively drew $75.0 million under our revolving credit facility and announced the elimination of the June quarterly dividend and temporarily halted our share repurchase program to prioritize near-term financial flexibility.

The temporary salary reductions instituted on March 29, 2020, 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 50% salary reductions for the named executive officers remain in effect as of the date of this filing.

On June 4, 2020, we announced the reduction of our global workforce by about 10%, or approximately 850 employees, across manufacturing, retail and corporate locations, including the closure of our Newton, Mississippi, upholstery manufacturing facility.

Production from that facility will be shifted to available capacity at our Dayton, Tennessee, Neosho, Missouri, and Siloam Springs, Arkansas plants.

The Newton-based integrated internal supply functions will remain in operation.

Approximately 170 individuals work across these areas and will remain with the company.

Refer to Note 21, Subsequent Events, for further information.

We continue to manage the impact of the COVID-19 crisis on a daily basis and as of the date of this filing, we are unable to predict when and how quickly we will be able to resume full retail and manufacturing operations and the impact this 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.

We expect a phased return to operations over a period of time.

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

In response to the COVID-19 pandemic, we implemented, and continue to monitor, various safety measures to ensure the well-being of our employees and their families, customers and the communities in which we operate.

Beginning at the end of fiscal 2020, we also took the following actions to conserve cash in the near term:

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 and cash compensation for the board of directors

• 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 were 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 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.

• 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 was paid on March 15, 2021, to shareholders of record as of March 4, 2021.

• Under our reinstated share repurchase authorization, during the fourth quarter of fiscal 2021 we repurchased 1.1 million shares for a total of $43.3 million

Additionally, 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.

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 and other COVID-19-related legislation 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 uncertainty remains 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 and any new variants along with the adoption and effectiveness of vaccines, status of government orders, directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, and consumer demand for our products, all of which are highly uncertain.

Raw Materials and Parts

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We purchase the remainder in covers that have already been cut and sewn to our specifications by third-party offshore suppliers.

We buy cut-and-sewn leather and fabric products from five primary suppliers.

Of the products that we import, two suppliers that operate in China and one in Vietnam manufacture approximately 95% of the leather cut-and-sewn sets, and three suppliers that also operate in China manufacture approximately 90% of the fabric products.

One of the five primary suppliers manufactures both leather cut-and-sewn sets and fabric products.

We buy cut-and-sewn leather and fabric products from six primary suppliers.

Of the products that we import, three suppliers that operate in China and one in Vietnam manufacture over 95% of the leather cut-and-sewn sets, and three suppliers that also operate in China manufacture approximately 90% of the fabric products.

One of the six primary suppliers manufactures both leather cut-and-sewn sets and fabric products.

We use these suppliers primarily for their product design capabilities, to leverage our buying power, and to control quality and product flow, in addition to their ability to handle the volume of product we require to operate our business.

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We manage our Asian supply chain through our global trading company in Hong Kong, which works to identify efficiencies and savings opportunities, while verifying La-Z-Boy quality standards are being adhered to and managing the relationships with our Asian suppliers.

During fiscal 2020 , the prices of materials we use in our upholstery manufacturing process decreased.

As we begin fiscal 2021 , we expect the impact of the COVID-19 pandemic will result in raw material prices that are flat or slightly down in the short term, then gradually increase as North American manufacturing returns to more normal levels.

Geo-political pressures associated with COVID-19 will continue to introduce uncertainty into many markets, including with respect to freight and tariffs.

To the extent that we experience incremental costs in these areas, we may increase our selling prices or assess material surcharges to offset the impact while they are in effect.

During fiscal 2021, the prices of materials we use in our upholstery manufacturing process increased driven by supply chain challenges due to COVID-19, higher demand for raw materials in manufacturing sectors and the home furnishings industry due to an economic sector rotation, and inflationary cost pressure.

In addition, COVID-19 and weather-related disruptions led to temporary shortages of polyurethane foam in the second and third quarters of fiscal 2021.

As we begin fiscal 2022, we expect raw material prices to remain at historically high levels in many categories due to price inflation in our core materials and global supply chain complexities.

COVID-19 related issues will continue to introduce uncertainty into many markets, especially with respect to freight, tariffs and labor availability.

To the extent that we experience incremental costs in any of these areas, we may increase our selling prices or assess material surcharges to offset the impact.

However, increases in selling prices, or surcharges, may not fully mitigate the impact of raw material cost increases which would adversely impact operating profits.

Further, given our current backlog, we would anticipate delays in the realization of pricing actions due to the timing difference between written orders and the recognition of revenue upon delivery.

Finished Goods Imports

We import all of the casegoods (wood) furniture that we sell.

In fiscal 2020 , we purchased approximately 58% of this imported product from three suppliers.

Imported finished goods represented 7% of our consolidated sales in both fiscal 2021 and 2020.

We import all of the casegoods (wood) furniture that we sell primarily to remain competitive for these products.

In fiscal 2021, we purchased 64% of this imported product from three suppliers based in Asia.

We use these suppliers primarily to leverage our buying power, to control quality and product flow, and because their capabilities align with our product design needs.

In addition, these suppliers have the ability to handle the volume of product we require.

If any of these suppliers experience financial or other difficulties, or are negatively affected by the COVID-19 pandemic, we could experience disruptions in our product flow until we obtain alternate suppliers, which could be lengthy due to the longer lead time required for sourced wood furniture from Asian manufacturers.

We use an all-import model for our casegoods furniture primarily to remain competitive for these products.

The prices we paid for these imported products, including associated transportation costs, increased in fiscal 2020 compared with fiscal 2019 , partially due to an increase in tariffs on certain product imported from China.

During fiscal 2020, to reduce the impact of higher

tariffs, we shifted a large portion of product sourcing from China to Vietnam.

As a result, we now import approximately 10% of our casegoods product from China and 87% from Vietnam compared to 25% and 72% from China and Vietnam in fiscal 2019, respectively.

In fiscal 2021 , we expect freight costs to decrease and overall product costs to be flat when compared with 2020.

Looking across our business, imported finished goods represented 7% and 8% of our consolidated sales in fiscal 2020 and fiscal 2019 , respectively.

If any of these suppliers experience financial or other difficulties, including sustained negative effects of the COVID-19 pandemic or supply chain challenges, we could experience disruptions in our product flow until we obtain alternate suppliers, which could be lengthy due to the longer lead time required for sourced wood furniture from Asian manufacturers.

The prices we paid for these imported products, including associated transportation costs, increased in fiscal 2021 compared with fiscal 2020, primarily due to constrained supply resulting from increased demand across the industry due to an economic sector rotation to home furnishings.

Additionally, shipping container availability was constrained throughout fiscal 2021, resulting from an imbalance in container supply driven by COVID-19 disruptions and increased demand.

As we expect continued higher demand for home furnishings and shipping capacity, in fiscal 2022, we anticipate overall product costs and freight costs associated with our finished goods imports to increase.

Seasonal Business

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For our retail and e-commerce businesses, which includes our company-owned retail stores and Joybird, the third quarter is typically the seasonally highest-volume sales quarter.

During fiscal 2020 , however, we experienced our largest sales volume during the third quarter in both our wholesale and retail businesses followed by a significant slowdown in sales in the middle of the fourth quarter due to the impact of COVID-19.

During the fourth quarter of fiscal 2020, the entire U.S.

retail industry was adversely impacted by retail store and manufacturing closures, supply chain disruption and economic uncertainty due to the COVID-19 pandemic.

This impact is not reflective of any seasonal trends in the furniture industry and is not an indicator that seasonal trends are changing for our wholesale or retail businesses.

We schedule production to maintain consistent manufacturing activity throughout the year whenever possible.

In a typical year, we schedule production to maintain consistent manufacturing activity throughout the year whenever possible.

During the summer months, the furniture industry typically experiences weaker demand, and as such we typically shut down our domestic plants for one week each fiscal year to perform routine maintenance on our equipment.

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Also driven by the seasonal slowdown in the summer, our retail business typically experiences its lowest sales in the first quarter.

During fiscal 2021, however, our sales volume and production schedule did not follow typical trends due to the impact of COVID-19.

Beginning in the fourth quarter of fiscal 2020, COVID-19 drove retail store and manufacturing closures, supply chain disruption and economic uncertainty leading to a significant decline in sales which continued in the first quarter of fiscal 2021.

After our retail locations and manufacturing facilities reopened by the end of the first quarter of fiscal 2021, we have continued to see an increase in demand, partly driven by an economic sector rotation in which discretionary spend shifted to consumers' homes.

In response, we took several actions to increase our production capacity throughout the year.

As a result, during fiscal 2021, we experienced our largest sales volume during the fourth quarter in both our wholesale and retail businesses.

Additionally, in fiscal 2022 we do not anticipate typical seasonal trends due to our record backlog as of the end of fiscal 2021.

This impact is not reflective of any long term seasonal trends in the furniture industry and is not an indicator that seasonal trends are changing for our wholesale or retail businesses.

Economic Cycle and Purchasing Cycle

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In addition, consumer confidence, employment rates, international trade policies, and other factors could affect demand.

We are unable to predict how or to what extent the COVID-19 pandemic may impact the economic and purchasing cycle for our products in the short and long term.

During fiscal 2021, the furniture industry was significantly impacted by COVID-19.

Starting in the second quarter of fiscal 2021, we experienced heightened demand, as more discretionary spend was allocated to the home furnishings industry.

However, we are unable to predict how long this demand will last or to what extent the COVID-19 pandemic may impact the economic and purchasing cycle for our products in the short and long term.

Upholstered furniture has a shorter life cycle than casegoods furniture because upholstered furniture is typically more fashion and design-oriented and is often purchased one or two pieces at a time.

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The following describes our significant practices regarding working capital items.

For our Upholstery segment, we maintain raw materials and work-in-process inventory at our manufacturing locations.

Finished goods inventory is maintained at our six regional distribution centers as well as our manufacturing locations.

For our upholstery business within our Wholesale segment, we maintain raw materials and work-in-process inventory at our manufacturing locations.

Finished goods inventory is maintained at our seven regional distribution centers as well as our manufacturing locations.

Our regional distribution centers allow us to streamline the warehousing and distribution processes for our La-Z-Boy Furniture Galleries ® store network, including both company-owned stores and independently-owned stores.

Our regional distribution centers also allow us to reduce the number of individual warehouses needed to supply our retail outlets and help us reduce inventory levels at our manufacturing and retail locations.

For our Casegoods segment, we import wood furniture from Asian vendors, resulting in long lead times on these products.

For our casegoods business within our Wholesale segment, we import wood furniture from Asian vendors, resulting in long lead times on these products.

To address these long lead times and meet our customers' delivery requirements, we maintain higher levels of finished goods inventory in our domestic warehouses, as a percentage of sales, of our casegoods products than our upholstery products.

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Joybird finished goods inventory is maintained at our regional distribution centers, at its manufacturing location or in-transit to the end consumer.

Our inventory decreased $15.3 million as of year end fiscal 2020 compared with year end fiscal 2019 primarily as a result of a slowdown in our supply chain related to decreased sales volume and the closure of our manufacturing facilities for a four-week period at the end of the fourth quarter, all due to the impact of COVID-19.

Our inventory increased $44.5 million as of year end fiscal 2021 compared with year end fiscal 2020 primarily to support increased sales demand coupled with declines at the end of fiscal 2020 due to a slowdown in our supply chain related to decreased sales volume and the temporary closure of our manufacturing facilities, all due to the impact of COVID-19.

We actively manage our inventory levels on an ongoing basis to ensure they are appropriate relative to our sales volume, while maintaining our focus on service to our customers.

Accounts Receivable:

Our accounts receivable decreased $43.9 million as of year end fiscal 2020 compared with year end fiscal 2019 .

The decrease in accounts receivable was primarily due to fourth quarter sales in fiscal 2020 being lower compared with the same period a year ago due to the impact of COVID-19 as well as an increase in our allowance for receivable credit losses and the write-off of $7.9 million of accounts receivable, primarily due to the bankruptcy of our largest customer, Art Van Furniture Group.

Our accounts receivable increased $40.0 million as of year end fiscal 2021 compared with year end fiscal 2020.

The increase in accounts receivable was primarily due to fourth quarter sales in fiscal 2021 being higher compared with the same period a year ago driven by increased demand throughout the year, combined with the adverse impact that COVID-19 had in the prior year.

Additionally, our allowance for receivable credit losses was lower at the end of fiscal 2021 compared with the end of fiscal 2020 reflecting normalized collection trends in the second half of the year, positive retailer economics, and strong consumer demand.

We monitor our customers' accounts and limit our credit exposure to certain independent dealers and strive to decrease our days' sales outstanding where possible.

Our days' sales outstanding is a measure of the time needed to collect outstanding accounts receivable once we have completed a sale.

Our days' sales outstanding was relatively flat in fiscal 2020 compared with fiscal 2019.

Our days' sales outstanding is a measure of the time needed to collect outstanding accounts receivable once we have completed a sale and was approximately 30 days or less in both fiscal 2021 and fiscal 2020.

Accounts Payable:

Our accounts payable decreased $9.9 million as of year end fiscal 2020 compared with year end fiscal 2019 , primarily due to a slowdown in the purchase of inventory and a decrease in nonessential purchases in response to lower sales volume, which was partly offset by an increase in days payables outstanding, due to an initiative to extend payment terms with suppliers by an average of 15 days in order to enhance liquidity in response to COVID-19.

Our accounts payable increased $38.6 million as of year end fiscal 2021 compared with year end fiscal 2020, primarily due to higher inventory purchases as we continue to scale production to meet increased demand.

Additionally, accounts payable was lower at the end of the prior year as we decreased nonessential purchases in response to lower sales volume due to COVID-19.

Customer Deposits:

We collect a deposit from our customers at the time a customer order is placed in one of our company-owned retail stores or through our websites, www.la-z-boy.com and www.joybird.com.

Customer deposits decreased $2.1 million as of fiscal year end 2020 compared with year end fiscal 2019 , primarily due to lower written sales volume resulting from COVID-19 related retail store closures.

Customer deposits increased $140.0 million as of fiscal year end 2021 compared with year end fiscal 2020, primarily due to higher written Retail and Joybird sales volume throughout the year.

Our wholesale customers are furniture retailers.

While primarily located throughout the United States and Canada, we also have customers located in various other countries, including the United Kingdom, China, Australia, South Korea and New Zealand.

Sales in our Upholstery and Casegoods segments are primarily to third-party furniture retailers, but we also sell directly to end consumers through our company-owned La-Z-Boy Furniture Galleries ® stores that make up our Retail segment and through our websites, www.la-z-boy.com and www.joybird.com.

Sales in our Wholesale segment are primarily to third-party furniture retailers, but we also sell directly to end consumers through our company-owned La-Z-Boy Furniture Galleries ® stores that make up our Retail segment and through our websites, www.la-z-boy.com and www.joybird.com.

We have formal agreements with many furniture retailers for them to display and merchandise products from one or more of our operating units and sell them to consumers in dedicated retail space, either in stand-alone stores or dedicated proprietary galleries or studios within their stores.

We consider this dedicated space to be "proprietary." For our Upholstery and Casegoods segments, our fiscal 2020 customer mix based on sales was approximately 60% proprietary, 15% major dealers such as Slumberland Furniture, Art Van Furniture Group, and Mathis Bros., and 25% other independent retailers.

Art Van Furniture Group filed for bankruptcy and has begun Chapter 7 liquidation during the fourth quarter of fiscal 2020.

We consider this dedicated space to be "proprietary." For our Wholesale segment, our fiscal 2021 customer mix based on sales was approximately 60% proprietary, 12% major dealers, such as Slumberland Furniture, Nebraska Furniture Mart, and Homemakers Furniture, and 28% other independent retailers.

The success of our product distribution model relies heavily on having retail floor space that is dedicated to displaying and marketing our products.

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We continue to maintain and update our current stores to improve the quality of the network.

Subject to the recovery of the business environment in fiscal 2021, the La-Z-Boy Furniture Galleries ® store network plans to open, relocate or remodel 20 to 25 stores during fiscal 2021 , all of which will feature our latest store designs.

The La-Z-Boy Furniture Galleries ® store network plans to open, relocate or remodel 25 to 30 stores during fiscal 2022, all of which will feature our latest store designs.

We select independent dealers for our proprietary La-Z-Boy Furniture Galleries ® store network based on factors such as their management and financial qualifications and the potential for distribution in specific geographical areas.

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We import casegoods product primarily to fill our internal orders, rather than customer or consumer orders, resulting in higher finished goods inventory on hand as a percentage of sales.

Because the size of our backlog at a given time may not be indicative of our future sales, we do not rely entirely on backlogs to predict future sales.

Our Upholstery segment backlogs as of April 25, 2020 , and April 27, 2019 , were approximately $72.6 million and $66.9 million, respectively.

Higher backlogs as of the end of fiscal 2020 were driven by strong written orders in the second and third quarter which outpaced invoiced orders due to our four-week manufacturing shut down and a slowdown in our ability to deliver to certain areas due to COVID-19.

Additionally, due to COVID-19, the annual April Furniture Market, which is typically a critical source of order generation was canceled.

Our Casegoods segment backlogs were $5.4 million and $7.4 million, as of April 25, 2020 , and April 27, 2019 , respectively, primarily attributable to the negative impact of COVID-19.

Our Corporate and Other segment backlog as of April 25, 2020 , and April 27, 2019 , was $4.9 million and $3.7 million, respectively, which relates to the Joybird business.

Joybird continued to receive orders due to its online business model which built a backlog while its manufacturing facilities were closed due to COVID-19 at the end of fiscal year 2020.

We define backlog as any written order that has not yet been delivered, whether to an independent furniture retailer, an independently-owned La-Z-Boy Furniture Galleries ® store or the end consumer, excluding stock replenishment orders not associated with a specific end consumer.

Historically, the size of our backlog at a given time varies and may not be indicative of our future sales, and therefore, we do not rely entirely on backlogs to predict future sales.

During fiscal 2021, we have experienced unprecedented demand driving an increase in written orders which has outpaced our production capacity.

Further, the pace at which we were able to increase our production capacity was hampered during fiscal year 2021, due to COVID-19-related production challenges, including mandated manufacturing shutdowns, plant absenteeism, material shortages, and shipping delays.

As a result, our wholesale backlog was at a record level as of April 24, 2021 at $616.7 million, compared with $37.6 million as of April 25, 2020.

Competitive Conditions

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We compete in the mid to upper-mid price point, and a shift in consumer taste and trends to lower-priced products could negatively affect our competitive position.

In the Upholstery segment, our largest competitors are Ashley, Bassett, Best Chair, Flexsteel, Klaussner, Kuka, Man Wah, and Southern Motion.

In the Casegoods segment, our main competitors are Bassett, Bernhardt, Hooker Furniture, and Lacquer Craft.

The Casegoods segment faces additional market pressures from foreign manufacturers entering the United States market and increased direct purchases from foreign suppliers by large United States retailers.

In the Wholesale segment, our largest competitors are Ashley, Bassett, Bernhardt, Best Chair, Flexsteel, Hooker Furniture, Klaussner, Kuka, Lacquer Craft, Man Wah, and Southern Motion.

Our wholesale business also faces additional market pressures from foreign manufacturers entering the United States market and increased direct purchases from foreign suppliers by large United States retailers.

The La-Z-Boy Furniture Galleries ® stores operate in the retail furniture industry in the United States and Canada, and different stores have different competitors based on their geographic locations.

Competitors include:

Arhaus, Ashley, Bassett Furniture Direct, Bob's Discount Furniture, Crate and Barrel, Ethan Allen, Restoration Hardware, Havertys, Williams-Sonoma, several

other regional competitors (for example Raymour & Flanigan Furniture, Mathis Brothers, and Slumberland Furniture), and family-owned independent furniture stores.

In our Corporate & Other segment, our Joybird business sells almost exclusively online and competes primarily with Amazon, Article, CB2, Love Sac, Maiden Home, Wayfair and West Elm.

Arhaus, Ashley, Bassett Furniture Direct, Bob's Discount Furniture, Crate and Barrel, Ethan Allen, Restoration Hardware, Havertys, Williams-Sonoma, as well as several other regional competitors (for example Raymour & Flanigan Furniture, Mathis Brothers, and Slumberland Furniture), and family-owned independent furniture stores.

Our Joybird business sells almost exclusively online and competes primarily with Amazon, Article, CB2, Love Sac, Maiden Home, Wayfair and West Elm.

In addition to the larger competitors listed above, a substantial number of small and medium-sized companies operate within our business segments, all of which are highly competitive.

Trademarks, Licenses and Patents

We own the La-Z-Boy trademark, which is essential to the Upholstery and Retail segments of our business, and the Joybird trademark, which is essential to our e-commerce business.

We also own a number of other trademarks that we utilize in marketing our products.

We own the La-Z-Boy trademark, which is essential to the Wholesale and Retail segments of our business.

We also own the Joybird trademark, which, along with the La-Z-Boy trademark, is essential to our e-commerce business.

Additionally, we own a number of other trademarks that we utilize in marketing our products.

We consider our La-Z-Boy trademark to be among our most valuable assets and we have registered that trademark and others in the United States and various other countries where our products are sold.

These trademarks have a perpetual life, subject to renewal.

We license the use of the La-Z-Boy trademark to our major international partners and dealers outside of North America.

We license the use of the La-Z-Boy trademark to certain international partners and dealers outside of North America.

We also license the use of the La-Z-Boy trademark on contract office furniture, outdoor furniture, and non-furniture products, as these arrangements enhance our brand awareness, broaden the perceptions of La-Z-Boy, and create visibility of the La-Z-Boy brand in channels outside of the residential furniture industry.

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Based on a review of all currently known facts and our experience with previous environmental matters, we currently do not believe it is probable that we will have any additional loss for environmental matters that would be material to our consolidated financial statements.

We employed a little over 9,500 full-time equivalent employees as of April 25, 2020 , compared with approximately 9,700 employees at the end of fiscal 2019 .

We employed approximately 7,300 employees in our Upholstery segment, 200 in our Casegoods segment, 1,500 in our Retail segment, 300 in our Joybird business, and the remaining employees are corporate personnel.

Human Capital

We employed approximately 11,500 full-time equivalent employees as of April 24, 2021, compared with approximately 9,500 employees at the end of fiscal 2020.

The increase in headcount can be attributed to the increase in production and capacity at our U.S.

and Mexico manufacturing facilities to meet demand, partially offset by actions taken to reduce our workforce in early fiscal 2021 in response to COVID-19.

As of April 24, 2021, we employed approximately 9,400 employees in our Wholesale segment, 1,500 in our Retail segment, 400 in our Joybird business, with the remaining employees being corporate personnel.

We employ the majority of our employees on a full-time basis.

As part of our COVID-19 action plan, on March 29, 2020, we announced temporary furloughs for approximately 70% of our global workforce.

On June 4, 2020, we announced a global workforce reduction of about 10%, or approximately 850 employees, across our manufacturing, retail and corporate locations, including the closure of our Newton, Mississippi upholstery manufacturing facility.

The Company’s Newton upholstery plant employs about 300 people, of which, approximately 170 individuals will remain with the company.

Refer to Note 21, Subsequent Events, for further information.

The majority of furloughed employees are expected to return to work by July 1, 2020, with timing largely dependent upon stay-at-home guidelines, economic conditions and customer demand, and our focus on the health, safety and well-being of our employees.

Culture and Values

At La-Z-Boy, we strive to enrich people's lives by transforming houses into homes.

We do this by building our iconic brand and continually innovating within the furniture industry.

We believe that our people drive us forward because their commitment to our core values - Act with Integrity, Think Customer, Be Committed, Stay Connected, Drive Change - enables us to Build Something Amazing.

Diversity, Inclusion and Belonging

We believe in creating and fostering a workplace in which all our employees feel valued, included and empowered to do their best work and contribute their ideas and perspectives.

Our Company is committed to recruiting and retaining diverse talent so that our workforce better reflects the communities in which we operate our business globally.

We recognize that our employees’ unique backgrounds, experiences, and perspectives enable us to create and deliver the best-quality product, provide outstanding service to meet the needs of our diverse customer base, and transform houses into homes.

Our diversity, inclusion and belonging initiatives include:

• Integrating diversity, inclusion and belonging into our overall corporate strategy and developing impactful practices and initiatives to advance our Company’s diversity, inclusion and belonging journey;

• Establishing a Diversity, Inclusion and Belonging Council to provide enterprise-wide leadership focused on supporting all our employees, developing training and learning opportunities for our employees on diversity, unconscious bias and other topics, and creating sustainable plans to increase diversity in talent acquisition;

• Expanding our support of employee resource groups, which provide learning and mentorship experiences for our diverse employees, supporting our objective of creating diversity awareness across our organization, and helping our employees use their collective voices to positively impact our Company and the communities in which we operate our business and live;

• As an extension of our corporate values and leadership attributes, developing a set of commitments to diversity, inclusion and belonging that we refer to as LZB4ALL;

• Demonstrating our Company’s commitment at the highest levels of leadership, including having our President and Chief Executive Officer sign the CEO Action for Diversity & Inclusion™ pledge to advance diversity and inclusion in the workplace.

Safety and Health

La-Z-Boy is committed to protecting the health and safety of our employees as an integral part of our business.

Our most recent employee engagement survey indicated that our employees believe our commitment to safety is a clear strength and a hallmark of our culture.

Additionally, over the past four years we have been recognized by the National Safety Council (NSC) with multiple awards for performance and leadership in safety, including being a three-time recipient of the Corporate Safety Culture Award and winning the Green Cross for Safety Excellence Award.

Our strong safety culture allowed us to quickly develop and implement best practice health and safety protocols in response to the COVID-19 pandemic including, social distancing, health surveillance, increased ventilation and air filtration, and robust contact tracing to limit the virus’s impact to our employees.

We have partnered with local health departments to conduct drive-up COVID-19 testing, distribution of sanitation equipment and La-Z-Boy-manufactured face coverings, and have held several vaccination clinics at our major manufacturing locations and our world headquarters.

Additionally we have implemented a $100 vaccine support payment for our U.S.based employees who complete the vaccine series.

The support payment is being provided to help employees remove barriers that come with the vaccine process, such as missing work, arranging for childcare, or incurring transportation costs, among other things.

Community Giving

Throughout our 94-year history, giving back to our communities has been woven through La-Z-Boy’s culture following the example set by our founders.

When it comes to giving, our vision is to improve the lives of others by developing exceptional programs based on partnerships where employees feel a sense of connection and pride in their communities and our mission is to enhance the quality of life in the communities in which we live and serve through leadership, financial contributions and volunteer efforts.

Our philanthropic initiatives include the La-Z-Boy Foundation, local community involvement, disaster relief and our signature charity, Ronald McDonald House Charities.

La-Z-Boy is honored to be the official furniture provider for Ronald McDonald House Charities.

Our employees further exemplify the spirit of giving through leadership and volunteer efforts in their own communities, and for numerous non-profit organizations, which include the United Way, Relay for Life, Habitat for Humanity and others.

In the early stages of the COVID-19 pandemic that were marked by a shortage in personal protective equipment, we made and donated hundreds of thousands of masks and tens of thousands of medical gowns to healthcare workers in the communities in which we operate, and offered masks to our suppliers for their workforces.

The Company also donated recliners to local hospitals for healthcare workers and the La-Z-Boy Foundation donated funds to local Monroe, Michigan-based groups and nonprofit organizations in our plant communities to help those in need during the crisis.

In addition, we donated $1 million of furniture to frontline healthcare workers through our #OneMillionThanks campaign.

Internet Availability

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Item 1. Business