What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-06-15 compared with 2020-06-23 · 388 added, 410 removed, 885 unchanged (47% of the section changed)

12 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) of the Exchange Act.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based upon the framework in "Internal Control—Integrated Framework" set forth by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based upon the framework in "Internal Control—Integrated Framework (2013)" set forth by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of April 24, 2021.

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of La-Z-Boy Incorporated and its subsidiaries (the “Company”) as of April 25, 2020 and April 27, 2019, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended April 25, 2020, including the related notes and the financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheet of La-Z-Boy Incorporated and its subsidiaries (the “Company”) as of April 24, 2021 and April 25, 2020, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended April 24, 2021, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of April 24, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 24, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in fiscal 2020 and revenue from contracts with customers in fiscal 2019.

Change in Accounting Principle

As discussed in Note 6 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in fiscal 2020.

Basis for Opinions

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment - Joybird Reporting Unit

As described in Notes 1 and 7 to the consolidated financial statements, the Company’s consolidated goodwill balance was $161.0 million as of April 25, 2020, and the goodwill associated with the Corporate and Other reporting segment was $55.4 million, which is inclusive of the Joybird reporting unit.

The Company tests goodwill for impairment on an annual basis in the fourth quarter of its fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may be impaired.

In connection with its annual assessment, management recorded a non-cash pretax impairment charge of $26.9 million to reduce the carrying value of the Joybird goodwill to its fair value.

Management applies the income approach using discounted future cash flows to estimate the fair value of the Joybird reporting unit.

Estimating future cash flows requires management to make significant assumptions and to apply judgment to project future revenues based on estimated short and long-term growth rates and estimates of future operating margins.

Significant judgment is also involved in selecting the appropriate discount rate to be applied to the projected future cash flows.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Joybird reporting unit is a critical audit matter are there was significant judgment by management when developing the fair value of the reporting unit.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate management’s significant assumptions, including short and long-term revenue growth rates, future operating margins, and the discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included testing the effectiveness of controls relating to management’s annual goodwill impairment assessment, including controls over the valuation of the Company’s reporting units.

These procedures also included, among others, testing management’s process for developing the fair value estimate of the Joybird reporting unit;

evaluating the appropriateness of the discounted cash flow model;

testing the completeness, accuracy, and relevance of the underlying data used in the model;

and evaluating the significant assumptions used by management, including the short and long-term revenue growth rates, future operating margins, and the discount rate.

Evaluating management’s assumptions related to short and long-term revenue growth rates and future operating margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and certain significant assumptions, including the discount rate.

Accrued Product Warranties for the Wholesale Segment

As described in Note 12 to the consolidated financial statements, as of April 24, 2021, the Company had accrued product warranties of $23.6 million, of which the Wholesale segment comprises a significant portion.

Management accrues an estimated liability for product warranties when revenue is recognized on the sale of warrantied products.

Management estimates future warranty claims on product sales based on historical claims experience and periodically adjusts the provision to reflect changes in actual experience.

The liability estimate incorporates repair costs, including materials, labor and overhead amounts necessary to perform repairs, and any costs associated with delivering the repaired product to customers.

The principal considerations for our determination that performing procedures relating to the accrued product warranties for the Wholesale segment is a critical audit matter are (i) the significant judgment by management when developing the accrual and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures relating to the estimation methodology and the applicability of historical cost of materials and labor used in the methodology.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the accrued product warranties for the Wholesale segment.

These procedures also included, among others, evaluating the appropriateness of the estimation methodology applied in the accrual, evaluating the applicability of the historical cost of materials and labor used in the methodology, and testing the historical cost of materials and labor.

/s/ PricewaterhouseCoopers LLP

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Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands, except per share data) 4/24/2021 4/25/2020 4/27/2019

Sales $ 1,734,244 $ 1,703,982 $ 1,745,401

Cost of sales 993,984 982,537 1,042,831

Gross profit 740,260 721,445 702,570

Selling, general and administrative expense 603,524 575,821 572,896

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Pension termination refund (charge) — 1,900 ( 32,671 )

Other expense, net

Other income (expense), net 9,466 ( 6,983 ) ( 2,237 )

Income before income taxes 145,913 115,173 95,327

Income tax expense 38,384 36,189 25,186

Net income 107,529 78,984 70,141

Net income attributable to noncontrolling interests ( 1,068 ) ( 1,515 ) ( 1,567 )

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Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

Net income $ 107,529 $ 78,984 $ 70,141

Other comprehensive income (loss)

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Pension termination, net of tax — — 23,807

Net pension amortization and actuarial gain, net of tax

Total other comprehensive income

Net pension amortization and actuarial gain (loss), net of tax 578 ( 1,197 ) 1,705

Total other comprehensive income (loss) 5,965 ( 3,209 ) 23,240

Total comprehensive income before noncontrolling interests 113,494 75,775 93,381

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Receivables, net of allowance of $ 4,011 at 4/24/2021 and $ 7,541 at 4/25/2020

139,341 99,351

Inventories, net 226,137 181,643

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Property, plant and equipment, net 219,194 214,767

Goodwill 175,814 161,017

Other intangible assets, net 30,431 28,653

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Other long-term assets, net 79,008 64,640

Total assets $ 1,786,322 $ 1,434,889

Current liabilities

Short-term borrowings $ — $ 75,000

Current portion of long-term debt

Accounts payable 94,152 55,511

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Total current liabilities 611,670 350,169

Long-term debt

Lease liability, long-term 295,023 270,162

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45,361 outstanding at 4/24/2021 and 45,857 outstanding at 4/25/2020

45,361 45,857

Capital in excess of par value 330,648 318,215

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Noncontrolling interests 8,648 15,553

Total equity 782,146 716,306

Total liabilities and equity $ 1,786,322 $ 1,434,889

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Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

Cash flows from operating activities

Net income $ 107,529 $ 78,984 $ 70,141

Adjustments to reconcile net income to cash provided by operating activities

Gain on disposal of assets ( 37 ) ( 10,068 ) ( 325 )

Gain on conversion of investment

Gain on sale of investments ( 954 ) ( 693 ) ( 656 )

Change in deferred taxes

Provision for doubtful accounts ( 3,169 ) 13,383 502

1 unchanged sentence

Equity-based compensation expense 12,671 8,371 10,981

Change in right-of use lease asset

Goodwill impairment — 26,862 —

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Pension plan contributions — — ( 7,000 )

Change in deferred taxes 8,790 719 ( 1,668 )

Change in receivables ( 38,288 ) 29,686 7,195

Change in inventories ( 40,727 ) 14,900 3,135

Change in right-of use lease asset 65,571 67,673 —

Change in other assets 2,926 7,039 ( 7,737 )

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Proceeds from sales of investments 36,071 37,244 20,944

Acquisitions, net of cash acquired

Acquisitions ( 2,000 ) — ( 75,630 )

Net cash used for investing activities ( 40,703 ) ( 33,915 ) ( 121,692 )

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Payments on debt and finance lease liabilities ( 75,050 ) ( 161 ) ( 223 )

Payments for debt issuance costs

Holdback payments for acquisition purchases ( 5,783 ) ( 6,850 ) ( 875 )

Stock issued for stock and employee benefit plans, net of shares withheld for taxes 9,030 3,029 13,901

Purchases of common stock ( 44,202 ) ( 43,369 ) ( 22,957 )

Dividends paid

Net cash provided by (used for) financing activities

Dividends paid to shareholders ( 16,542 ) ( 25,091 ) ( 23,508 )

Dividends paid to minority interest joint venture partners (1) ( 8,507 ) — —

Net cash (used for) provided by financing activities ( 141,054 ) 2,558 ( 33,662 )

Effect of exchange rate changes on cash and equivalents 3,015 ( 1,144 ) ( 475 )

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Capital expenditures included in accounts payable $ 4,638 $ 3,528 $ 3,250

(1) Includes dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts in thousands, except per share amounts)

Capital in Excess of

Accumulated Other

(Amounts in thousands, except per share amounts) Common

Shares Capital in Excess of

Par Value Retained

Earnings Accumulated Other

Comprehensive Income

Non-Controlling

(Loss) Non-Controlling

Interests Total

At April 28, 2018 $ 46,788 $ 298,948 $ 291,644 $ ( 25,199 ) $ 13,035 $ 625,216

Net income — — 68,574 — 1,567 70,141

Other comprehensive income — — — 23,374 ( 134 ) 23,240

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Purchases of 752 shares of common stock

( 752 ) ( 11,961 ) ( 10,244 ) — — ( 22,957 )

Stock option and restricted stock expense — 10,981 — — — 10,981

Cumulative effect adjustment for investments, net of tax — — 1,637 ( 1,637 ) — —

Dividends declared and paid ($ 0.50 /share)

— — ( 23,508 ) — — ( 23,508 )

Dividends declared not paid ($ 0.50 /share)

— — ( 38 ) — — ( 38 )

At April 27, 2019 $ 46,955 $ 313,168 $ 325,847 $ ( 3,462 ) $ 14,468 $ 696,976

Net income — — 77,469 — 1,515 78,984

Other comprehensive income (loss) — — — ( 2,943 ) ( 266 ) ( 3,209 )

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Purchases of 1,409 shares of common stock

( 1,409 ) ( 8,097 ) ( 33,863 ) — — ( 43,369 )

Stock option and restricted stock expense — 8,371 — — — 8,371

Cumulative effect adjustment for investments, net of tax

Cumulative effect adjustment for leases, net of tax (1) — — 574 — — 574

Reclassification of certain income tax effects (2) — — 547 ( 547 ) — —

Dividends declared and paid ($ 0.54 /share)

— — ( 25,091 ) — — ( 25,091 )

Dividends declared not paid ($ 0.54 /share)

— — ( 115 ) — — ( 115 )

Change in noncontrolling interests — 320 — — ( 164 ) 156

At April 25, 2020 $ 45,857 $ 318,215 $ 343,633 $ ( 6,952 ) $ 15,553 $ 716,306

Net income — — 106,461 — 1,068 107,529

Other comprehensive income — — — 5,431 534 5,965

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Purchases of 1,079 shares of common stock

( 1,079 ) ( 10,426 ) ( 32,697 ) — — ( 44,202 )

Stock option and restricted stock expense — 12,671 — — — 12,671

Cumulative effect adjustment for leases, net of tax (1)

Reclassification of certain income tax effects (2)

Dividends declared and paid ($ 0.36 /share) (3)

— — ( 16,542 ) — ( 8,507 ) ( 25,049 )

Dividends declared not paid ($ 0.36 /share)

Change in noncontrolling interests

— — ( 104 ) — — ( 104 )

At April 24, 2021 $ 45,361 $ 330,648 $ 399,010 $ ( 1,521 ) $ 8,648 $ 782,146

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(2) Income tax effects of the Tax Cuts and Jobs Act are reclassified from Accumulated Other Comprehensive Income ("AOCI") to retained earnings due to the adoption of ASU 2018-02 , Income Statement-Reporting Comprehensive Income (Topic 220).

(3) Non-controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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All intercompany transactions have been eliminated, including any related profit on intercompany sales.

At April 25, 2020 , we owned preferred shares of two privately-held companies, and a warrant to purchase common shares of one of the companies, both of which are variable interest entities.

At April 24, 2021, we owned preferred shares and warrants to purchase common shares of two privately-held companies, both of which are variable interest entities.

We have not consolidated their results in our financial statements because we do not have the power to direct those activities that most significantly impact their economic performance and, therefore, are not the primary beneficiary.

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Inventories are stated at the lower of cost or market.

Cost is determined using the last-in, first-out ("LIFO") basis for approximately 62 % of our inventories at both April 25, 2020 , and April 27, 2019 .

Cost is determined using the last-in, first-out ("LIFO") basis for approximately 61 % and 62 % of our inventories at April 24, 2021, and April 25, 2020, respectively.

Cost is determined for all other inventories on a first-in, first-out ("FIFO") basis.

The LIFO method of accounting is used for our La-Z-Boy U.S.

wholesale business inventory and the imported finished goods inventory owned by our Casegoods segment, while the FIFO method is used for the remainder of our inventory.

The majority of our La-Z-Boy Wholesale segment inventory uses the LIFO method of accounting, while the FIFO method is used primarily in our Retail segment and Joybird business.

Property, Plant and Equipment

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Any resulting gains or losses are recorded as a component of selling, general and administrative (SG&A) expenses.

We review the carrying value of our long-lived assets for impairment if events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Our assessment of recoverability is based on our best estimates using either quoted

market prices or an analysis of the undiscounted projected future cash flows by asset groups in order to determine if there is any indicator of impairment requiring us to further assess the fair value of our long-lived assets.

Our asset groups consist of our operating segments in our Upholstery reportable segment, our Casegoods segment, each of our retail stores, our Joybird operating segment, and other corporate assets.

We review the carrying value of our long-lived assets, which includes our right-of-use lease assets, for impairment if events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Our assessment of recoverability is based on our best estimates using either quoted market prices or an analysis of the undiscounted projected future cash flows by asset

groups in order to determine if there is any indicator of impairment requiring us to further assess the fair value of our long-lived assets.

Our asset groups consist of our operating segments in our Wholesale reportable segment, each of our retail stores, our Joybird operating segment, and other corporate assets, which are evaluated at the consolidated level.

Indefinite-Lived Intangible Assets and Goodwill

We test indefinite-lived intangibles and goodwill for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value might be impaired.

Indefinite-lived intangible assets include our American Drew trade name and the reacquired right to own and operate La-Z-Boy Furniture Galleries ® stores we have acquired.

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A Retailer Agreement remains in effect as long as the independent retailer is not in default under the terms of the agreement.

We establish the fair value of our indefinite-lived trade names and reacquired rights based upon the relief from royalty method.

Our goodwill relates to the acquisition of La-Z-Boy Furniture Galleries ® stores, the acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland, and the acquisition of Joybird ® , an e-commerce retailer and manufacturer of upholstered furniture.

The reporting unit for goodwill arising from retail store acquisitions is our Retail operating segment.

We have four geographic regions which are considered components of our Retail operating segment.

These four geographic regions are aggregated into one reporting unit for goodwill because they are economically similar, they operate in a consistent manner across the regions, and each store supports and benefits from common research and development projects.

We have three geographic regions which are considered components of our Retail operating segment.

These three geographic regions are aggregated into one reporting unit for goodwill because they are economically similar, they operate in a consistent manner across the regions, and each store supports and benefits from common research and development projects.

Additionally, the goodwill is recoverable from each of the geographic regions working in concert because we can change the composition of the regions to strategically rebalance management and distribution capacity as needed.

The reporting unit for goodwill arising from the acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland and the acquisition of Joybird is each respective operating segment.

The estimated fair value of the reporting units is determined based upon the income approach using discounted future cash flows.

We have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of our intangible assets or reporting units are greater than their carrying value.

If the qualitative assessment leads to a determination that the intangible asset/reporting unit’s fair value may be less than its carrying value, or if we elect to bypass the qualitative assessment altogether, we are required to perform a quantitative impairment test by calculating the fair value of the intangible asset/reporting unit and comparing the fair value with its associated carrying value.

We establish the fair value of our indefinite-lived trade names and reacquired rights based upon the relief from royalty method.

The estimated fair value of our reporting units is determined based upon the income approach using discounted future cash flows.

In situations where the fair value is less than the carrying value, an impairment charge would be recorded for the shortfall.

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We have amortizable intangible assets related to the acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland, which primarily include acquired customer relationships.

These intangible assets are amortized on a straight-line basis over their useful lives, which do not exceed 15 years .

We also have an amortizable intangible asset for the Joybird ® trade name, which is amortized on a straight-line basis over its useful life of eight years .

These intangible assets are amortized on a straight-line basis over their estimated useful lives, which do not exceed 15 years.

We also have an amortizable intangible asset for the Joybird ® trade name, which is amortized on a straight-line basis over its estimated useful life of eight years .

All intangible amortization expense is recorded as a component of SG&A expense.

We established the fair value of these amortizable intangible assets based on the multi-period excess earnings method, a variant of the income approach, and also using the relief from royalty method.

We established the fair value of these amortizable intangible assets based on the multi-period excess earnings method, a variant of the income approach, and the relief from royalty method, as applicable.

Available-for-sale debt securities are recorded at fair value with the net unrealized gains and losses (that are deemed to be temporary) reported as a component of other comprehensive income/(loss).

Equity securities are recorded at fair value with unrealized gains and losses recorded in other expense, net.

We also hold non-marketable preferred shares of two privately held-start up companies.

Equity securities are recorded at fair value with unrealized gains and losses recorded in other income (expense), net.

We also hold non-marketable preferred shares and warrants to purchase common shares of two privately-held start-up companies.

The fair value of these equity investments is not readily determinable and therefore, we estimate the fair value as costs minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for identical or similar investments with the same issuer.

Realized gains and losses for all investments, charges for other-than-temporary impairments of debt securities, and charges for impairment on our equity investments without readily determinable values are included in determining net income, with related purchase costs based on the first-in, first-out method.

We evaluate our available-for-sale debt investments for possible other-than-temporary impairments by reviewing factors such as the extent to which, and length of time, an investment's fair value has been below our cost basis, the issuer's financial condition, and our ability and intent to hold the investment for sufficient time for its market value to recover.

We evaluate our available-for-sale debt investments for possible other-than-temporary impairments by reviewing factors such as the extent to which an investment's fair value is below our cost basis, the issuer's

financial condition, and our ability and intent to hold the investment for sufficient time for its market value to recover.

For impairments that are other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the investment's cost and its fair value at the balance sheet date of the reporting period for which the assessment is made.

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These assets are classified as other long-term assets on our consolidated balance sheet and are used to fund our executive deferred compensation plan and performance compensation retirement plan.

The change in cash surrender or contract value is recorded as income or expense, in other expense, net, during each period.

The change in cash surrender or contract value is recorded as income or expense, in other income (expense), net, during each period.

Customer Deposits

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At the time we recognize revenue, we make provisions for estimated refunds, product returns, and warranties, as well as other incentives that we may offer to customers.

When estimating our incentives, we utilize either the expected value method or the most likely amount to determine the amount of variable consideration.

When estimating our incentives, we utilize either the expected value method or the

most likely amount to determine the amount of variable consideration.

We use either method depending on which method will provide the best estimate of the variable consideration, and we only include variable consideration when it is probable that there will not be a significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is subsequently resolved.

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Our sales incentives, including cash discounts and rebates, are recorded as a reduction to revenues.

Service allowances are for a distinct good or service received from our customer and are recorded as a

component of SG&A expense in our consolidated statement of income, and are not recorded as a reduction of revenue and are not considered variable consideration.

Service allowances are for a distinct good or service received from our customer and are recorded as a component of SG&A expense in our consolidated statement of income, and are not recorded as a reduction of revenue and are not considered variable consideration.

We use substantial judgment based on the type of variable consideration or service allowance, historical experience and expected sales volume when estimating these provisions.

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Additionally, we review orders from dealers that are significantly past due, and we ship product only when our ability to collect payment from our customer for the new order is probable.

Our allowances for credit losses reflect our best estimate of probable losses inherent in the trade accounts receivable balance.

We determine the allowance based on known troubled accounts, historic experience, and other currently available evidence.

Our allowances for credit losses reflect our best estimate of losses inherent in the trade accounts receivable balance.

We determine the allowance based on known troubled accounts, weighing probabilities of future conditions and expected outcomes, and other currently available evidence.

Cost of Sales

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Other general and administrative expenses included in SG&A are composed primarily of compensation and benefit costs for administrative employees and other administrative costs.

Other Expense, Net

Other expense, net is made up primarily of foreign currency exchange net gain/(loss), gain/(loss) on the sale of investments, unrealized gain/(loss) on equity securities, and all components of pension costs other than service costs and the refund/(charge) associated with the termination of our defined benefit pension plan for eligible factory hourly employees in our La-Z-Boy operating unit in fiscal 2019.

Other Income (Expense), Net

Other income (expense), net is made up primarily of foreign currency exchange net gain/(loss), gain/(loss) on the sale of investments, unrealized gain/(loss) on equity securities, and all components of pension costs other than service costs and the refund/(charge) related to the termination of our defined benefit pension plan for eligible factory hourly employees in our La-Z-Boy operating unit in fiscal 2019.

Other income (expense), net also includes the benefit of $ 5.2 million of payroll tax credits resulting from the CARES Act recognized during the third quarter of fiscal 2021 and a $ 6.0 million impairment of our investment in a privately-held start-up company recognized in fiscal 2020.

Research and Development Costs

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a likelihood of more than 50%), based on, among other things, forecasts of taxable earnings in the related tax jurisdiction.

We consider historical and projected future operating results, the eligible carry-forward period, tax law changes, tax planning opportunities, and other relevant considerations when making judgments about realizing the value of our deferred tax assets.

We consider historical and projected future results of operations, the eligible carry-forward period, tax law changes, tax planning opportunities, and other relevant considerations when making judgments about realizing the value of our deferred tax assets.

We recognize in our consolidated financial statements the benefit of a position taken or expected to be taken in a tax return when it is more likely than not that the position would be sustained upon examination by tax authorities.

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Foreign Currency Translation

The functional currency of our wholesale Canadian and Mexico subsidiaries is the U.S.

Transaction gains and losses associated with translating our wholesale Canadian and Mexico subsidiaries' assets and liabilities, which are non-U.S.

Dollar denominated, are recorded in other expense, net in our consolidated statement of income.

The functional currency of each of our other foreign subsidiaries is its respective local currency.

Assets and liabilities of those subsidiaries whose functional currency is their local currency are translated at the year-end exchange rates, and revenues and expenses are translated at average exchange rates for the period, with the corresponding translation effect included as a component of other comprehensive income.

Foreign currency transaction gains and losses associated with translating assets and liabilities denominated in a currency that is different than a subsidiaries' functional currency, are recorded in cost of sales and other income (expense), net in our consolidated statement of income.

Assets and liabilities of foreign subsidiaries whose functional currency is their local currency are translated at the year-end exchange rates, and revenues and expenses are translated at average exchange rates for the period, with the corresponding translation effect included as a component of other comprehensive income.

Accounting for Stock-Based Compensation

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Accounting pronouncement adopted in fiscal 2021

The accounting standards update ("ASU") described in the paragraph below had a significant impact on our accounting policies and our consolidated financial statements and related disclosures.

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842), requiring lessees to record substantially all operating leases on their balance sheet.

Under this standard, the lessee is required to record an asset for the right to use the underlying asset for the lease term and a corresponding liability for the contractual lease payments.

We adopted this standard in the first quarter of fiscal 2020 using a modified retrospective approach.

See Note 6, Leases, for further information.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

We adopted the new standard in the first quarter of fiscal 2019 with modified retrospective application.

The following table summarizes additional ASUs which were adopted in fiscal 2020, but did not have a material impact on our accounting policies or our consolidated financial statements and related disclosures.

Plan Accounting:

Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965):

Employee Benefit Plan Master Trust Reporting

Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities

Income Statement – Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

Compensation – Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting

Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements

Derivatives and Hedging (Topic 815):

Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

Accounting pronouncements not yet adopted

The following table summarizes additional accounting pronouncements which we have not yet adopted, but we believe will not have a material impact on our accounting policies or our consolidated financial statements and related disclosures.

Adoption Date

Financial Instruments – Credit losses (Topic 326):

The following table summarizes Accounting Standards Updates ("ASUs") which were adopted in fiscal 2021, but did not have a

material impact on our accounting policies or our consolidated financial statements and related disclosures.

ASU Description

ASU 2016-13 Financial Instruments – Credit losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

Compensation – Retirement benefits – Defined Benefit Plans – General (Subtopic 715-20):

Changes to the Disclosure Requirements for Defined Benefit Plans

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321, Topic 325, and Topic 815

Reference Rate Reform (Topic 848):

ASU 2020-04 Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

We did not complete any acquisitions during the fiscal year ended April 25, 2020 .

Acquisitions completed in fiscal year 2019 are described below.

Accounting pronouncements not yet adopted

ASU Description Adoption Date

ASU 2018-14 Compensation – Retirement benefits – Defined Benefit Plans – General (Subtopic 715-20):

Changes to the Disclosure Requirements for Defined Benefit Plans Fiscal 2022

ASU 2019-12 Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes Fiscal 2022

ASU 2020-01 Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 Fiscal 2022

On September 14, 2020, we completed our asset acquisition of the Seattle, Washington business that operated six independently owned La-Z-Boy Furniture Galleries ® stores and one warehouse for $ 13.5 million, subject to customary adjustments.

In the second quarter of fiscal 2021, a $ 2.0 million cash payment was made for the purchase with future guaranteed payments of $ 9.4 million to be paid over 36 months or fewer, with timing of payments dependent upon the achievement of sales thresholds defined in the purchase agreement.

This acquisition is a core part of our strategy to grow our company-owned retail business and leverage our integrated retail model where we earn a combined profit on both the wholesale and retail sales.

Prior to this acquisition, we licensed to the counterparty the exclusive right to own and operate La-Z-Boy Furniture Galleries ® stores (and to use the associated trademarks and trade name) in the Seattle, Washington market, and we reacquired these rights when we consummated the transaction.

The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual agreements that have no specific expiration date and no renewal options.

The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market.

We recorded an indefinite-lived intangible asset of $ 2.2 million related to these reacquired rights.

We also recognized $ 12.9 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired stores and future benefits of these synergies.

For federal income tax purposes, we will amortize and appropriately deduct all of the indefinite-lived intangible assets and goodwill assets over 15 years.

The acquisition of the Seattle, Washington business was not significant to our consolidated financial statements, and, therefore, pro-forma financial information is not presented.

All of our provisional purchase accounting estimates for this acquisition are based on the information and data available to us as of the time of the issuance of these financial statements, and in accordance with Accounting Standard Codification Topic 805-10-25-15, are subject to change within the first 12 months of acquisition as we have access to additional data.

Prior Year Acquisitions

We did not complete any acquisitions during fiscal 2020.

Acquisitions completed in fiscal 2019 are described below.

Retail acquisitions

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These acquisitions are an integral part of our ongoing strategy to grow our company-owned retail business and leverage our integrated retail model where we earn a combined profit on both the wholesale and retail sides of the business.

Prior to our retail acquisitions, we licensed the exclusive right to own and operate La-Z-Boy Furniture Galleries® stores (and to use the associated trademarks and trade name) in those markets to the dealers whose assets we acquired, and we reacquired these rights when we purchased the dealers' other assets.

The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual agreements that have no specific expiration date and no renewal options.

A Retailer Agreement remains in effect as long as the independent retailer is not in default under the terms of the agreement.

The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market.

We recorded an indefinite-lived intangible asset of $ 6.6 million related to these reacquired rights.

We also recognized $ 32.0 million of goodwill in fiscal 2019 related primarily to synergies we expect from the integration of the acquired stores and future benefits of these synergies.

For federal income tax purposes, we will amortize and appropriately deduct all of the indefinite-lived intangible assets and goodwill assets over 15 years .

We based the purchase price allocations on fair values at the dates of acquisition, and summarize them in the following table:

(Amounts in thousands)

Retail Segment Acquisitions

Fair value of consideration:

Forgiveness of accounts receivable

Guaranteed future payments

Total fair value of consideration

Amounts recognized for assets acquired and liabilities assumed:

Other current assets

Property, plant and equipment

Indefinite-lived reacquired rights

Other long-term assets

Customer deposits

Other current liabilities

Total identifiable net assets acquired

All acquired stores were included in our Retail segment results upon acquisition.

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("Joybird"), an e-commerce retailer and manufacturer of upholstered furniture, for guaranteed cash payments of $ 75 million, which was subject to a working capital adjustment of $ 2.5 million.

We received the working capital adjustment during the third quarter of fiscal 2019 from amounts placed in escrow

at the time of the closing of the transaction.

We received the working capital adjustment during the third quarter of fiscal 2019 from amounts placed in escrow at the time of the closing of the transaction.

We acquired Joybird to better position ourselves for growth in the online selling environment and increase our visibility with millennial and Gen X consumers, while simultaneously leveraging our supply chain assets.

The guaranteed payments include a closing date cash payment of $ 37.5 million in purchase price consideration (net of the working capital adjustment), $ 7.5 million in prepaid compensation, and the assumption of $ 5.0 million of liabilities that will be paid within two years following the acquisition.

The remaining $ 25 million will be paid in five annual installments of $ 5 million on the anniversary date of the acquisition, the first of which was paid in the first quarter of fiscal 2020.

The merger agreement also includes two future earn-out opportunities based on Joybird’s financial performance in fiscal 2021 and fiscal 2023.

The remaining $ 25 million will be paid in five annual installments of $ 5 million on the anniversary date of the acquisition.

The $ 7.5 million of prepaid compensation relates to the retention of the four Joybird founders, who became our employees, each of whom agreed to forfeit proportional amounts if one or more of them resigns in the two years following the acquisition.

We are amortizing the $ 7.5 million to SG&A expense over the two-year retention period on a straight-line basis.

We amortized the $ 7.5 million to SG&A expense over the two-year retention period on a straight-line basis.

As we neared the end of the period for which four founders of Joybird were required to remain with the organization, we separated two of the founders during the fourth quarter of fiscal 2020.

We waived our right to recover any compensation from these two founders, as we believe their work and two years of service commitment were substantially fulfilled, and accordingly we accelerated the amortization of the proportional amount of their respective retention agreement.

In addition to the guaranteed cash payments of $ 75 million , we recorded a contingent consideration liability on the date of acquisition of $ 7.5 million , which reflects the fair value of the earn-out opportunities as of the date of acquisition.

In addition to the guaranteed cash payments of $ 75 million, we recorded a contingent consideration liability on the date of acquisition of $ 7.5 million, which reflected the fair value of the earn-out opportunities as of the date of acquisition.

We also recorded a finite-lived intangible asset of $ 6.4 million reflecting the fair value of the acquired Joybird ® trade name, which we are amortizing to SG&A expense on a straight-line basis over its useful life of eight years .

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Subsequent adjustments to the fair value of the contingent consideration will impact SG&A expense in our consolidated statement of income.

Goodwill of $ 82.3 million , related to the Joybird acquisition, is primarily related to synergies we expect from the integration of the acquisition and the anticipated future benefits of these synergies.

The finite-lived intangible asset and goodwill asset for Joybird are not deductible for federal income tax purposes.

We included the Joybird operating segment in our other business activities which we report within our Corporate and Other reportable segment.

Refer to Note 7, Goodwill and Other Intangible Assets, and Note 20, Fair Value Measurements, for further information regarding the fair value of the contingent consideration, goodwill and intangible assets related to Joybird.

The following table summarizes the purchase price allocation for Joybird at the date of acquisition:

(Amounts in thousands)

Joybird Acquisition

Fair value of consideration:

Cash (paid at closing)

Guaranteed payment

Acquisition earn-out

Assumption of liability

Working capital adjustment

Total fair value of consideration

Amounts recognized for assets acquired and liabilities assumed:

Other current assets

Property, plant and equipment

Finite-lived tradename

Other long-term assets

Accounts payable

Customer deposits

Other current liabilities

Other long-term liabilities

Total identifiable net liabilities acquired

Comparability

During fiscal 2021, we determined that holdback payments for acquisition purchases of $ 6.9 million and $ 0.9 million included in net cash used by investing activities should have been included in net cash used by financing activities for the fiscal years ended April 25, 2020 and April 27, 2019, respectively.

Although the amounts impacting payments for acquisitions were not material to the fiscal 2020 or 2019 consolidated financial statements, the classification of these amounts has been corrected by revising the consolidated statements of cash flows for the fiscal years ended April 25, 2020 and April 27, 2019.

Restricted Cash

We have restricted cash on deposit with a bank as collateral for certain letters of credit.

All our letters of credit have maturity dates within the next 12 months, but we expect to renew some of these letters of credit when they mature.

All of our letters of credit have maturity dates within the next 12 months, and we expect to renew some of these letters of credit when they mature.

(Amounts in thousands) 4/24/2021 4/25/2020

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Property, Plant and Equipment

(Amounts in thousands)

Estimated Useful Lives

Buildings and building fixtures

Machinery and equipment

Information systems and software

Furniture and fixtures

Land improvements

Transportation equipment

Construction in progress

(Amounts in thousands) Estimated Useful Lives 4/24/2021 4/25/2020

Buildings and building fixtures 3 - 40 years

$ 234,375 $ 233,063

Machinery and equipment 3 - 15 years

167,577 155,776

Information systems and software 3 - 7 years

93,174 90,705

Furniture and fixtures 3 - 15 years

23,441 23,890

Land improvements 3 - 30 years

23,855 17,427

Transportation equipment 3 - 10 years

15,372 15,092

Land N/A 12,405 14,236

Construction in progress N/A 24,848 28,234

595,047 578,423

Accumulated depreciation ( 375,853 ) ( 363,656 )

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Depreciation expense for the fiscal years ended April 24, 2021, April 25, 2020, and April 27, 2019, was $ 31.7 million, $ 30.0 million, and $ 27.5 million, respectively.

During the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and all related amendments.

The guidance requires lessees to recognize substantially all leases on their balance sheet as a right-of-use ("ROU") asset and a lease liability.

The adoption of ASU 2016-02 resulted in an increase in total long-term assets and total liabilities of $ 314.2 million at the beginning of fiscal 2020.

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02, Leases (Topic 842), requiring lessees to record substantially all operating leases on their balance sheet.

Under this standard, the lessee is required to record an asset for the right to use the underlying asset for the lease term and a corresponding liability for the contractual lease payments.

We adopted this standard in the first quarter of fiscal 2020 using a modified retrospective approach.

The Company leases real estate for retail stores, distribution centers, warehouses, plants, showrooms and office space.

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Most of our leases do not have an interest rate implicit in the lease.

As a result, for purposes of measuring our ROU asset and lease liability, we determine our incremental borrowing rate by applying a spread above the U.S.

As a result, for purposes of measuring our right of use ("ROU") asset and lease liability, we determine our incremental borrowing rate by applying a spread above the U.S.

Treasury borrowing rates.

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Due to the variable nature of these costs, they are not included in the measurement of the ROU asset and lease liability.

The Company has elected to apply the practical expedients permitted under transition guidance to forgo the restatement of comparative periods and to not reassess leases entered into prior to adoption.

In addition, we have elected the practical expedient to not separate lease and non-lease components when determining the ROU asset and lease liability.

We have also made an accounting policy election to not recognize an ROU asset and lease liability on the balance sheet for those leases with an initial term of one year or less and instead, such liabilities will be expensed on a straight-line basis over the lease term.

COVID-19 Impact

In response to the COVID-19 global pandemic, beginning in April of fiscal 2020, we have secured rent relief from several of our lessors, most often in the form of the deferral of rent payments for one or more months.

Under these agreements, certain rent payments will be deferred without penalty and will be paid back over varying periods.

In response to the COVID-19 global pandemic, beginning in April of fiscal 2020, we secured rent relief from several of our lessors, most often in the form of the deferral of rent payments for one or more months.

Under these agreements, certain rent payments were deferred without penalty and are to be paid back over varying periods.

In accordance with FASB Staff Q&A - Topic 842 and Topic 840:

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we have elected to account for lease deferrals resulting directly from COVID-19 as if the enforceable rights and obligations for the deferrals existed in the respective contracts at lease inception and as such we will not account for the deferrals as lease modifications.

Guidance from the FASB Staff Q&A provided methods to account for such rent deferrals which include the option to treat the lease as if no changes to the lease contract were made or to treat the deferred

payments as variable lease payments.

The FASB Staff Q&A allows entities to select the most practical approach and does not require the same approach be applied consistently to all leases.

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we elected to account for lease deferrals resulting directly from COVID-19 as if the enforceable rights and obligations for the deferrals existed in the respective contracts at lease inception and as such we did not account for the deferrals as lease modifications.

Guidance from the FASB Staff Q&A provided methods to account for such rent deferrals which included the option to treat the lease as if no changes to the lease contract were made or to treat the deferred payments as variable lease payments.

The FASB Staff Q&A allowed entities to select the most practical approach and did not require the same approach be applied consistently to all leases.

For the majority of our leases, we elected to account for the deferrals as if no changes to the lease contract were made and continued to recognize lease expense, on a straight-line basis, during the deferral period.

During April of fiscal 2020, payment deferrals and concessions totaled $ 4.4 million , the majority of which was recorded in other current liabilities on the consolidated balance sheet.

As of April 24, 2021, we have paid back the majority of our deferred rent.

Supplemental balance sheet information pertaining to our leases is as follows:

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Operating leases

ROU assets $ 343,207 $ 318,634

Lease liabilities, short-term 67,493 64,363

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Financing leases

ROU assets $ 593 $ 13

Lease liabilities, short-term 121 13

Lease liabilities, long-term 473 —

The ROU assets by segment are as follows:

(Amounts in thousands) 4/24/2021 4/25/2020

Wholesale $ 76,899 $ 69,665

Retail 253,910 236,719

Corporate & Other 12,991 12,263

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The components of lease cost are as follows:

Fiscal Year Ended (1)

(52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020

Year Ended April 25, 2020

Operating lease cost $ 79,072 $ 76,223

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Variable lease cost (2)

( 245 ) ( 40 )

Sublease income ( 1,546 ) ( 2,504 )

Total lease cost $ 77,879 $ 74,093

(1) Rental expense for fiscal year ended 4/27/2019 was $ 77.2 million.

(2) Includes deferred payments on select leases in accordance with the FASB Staff Q&A.

The following tables present supplemental lease disclosures:

Year Ended April 25, 2020

(Amounts in thousands)

Operating Leases

Financing Leases

Fiscal Year Ended

(52 weeks) (52 weeks)

4/24/2021 4/25/2020

(Amounts in thousands) Operating Leases Financing Leases Operating Leases Financing Leases

Cash paid for amounts included in the measurement of lease liabilities $ 79,707 $ 53 $ 77,176 $ 165

Lease liabilities arising from new ROU assets 93,399 631 72,061 —

(Amounts in thousands)

Operating Leases

Financing Leases

4/24/2021 4/25/2020

(Amounts in thousands) Operating Leases Financing Leases Operating Leases Financing Leases

Weighted-average remaining lease term (years) 6.8 4.8 7.0 0.3

Weighted-average discount rate 3.3 % 1.7 % 3.9 % 3.9 %

The following table presents our undiscounted cash flows as of April 25, 2020 , and our minimum contractual obligations on our leases as of April 27, 2019 :

(Amounts in thousands)

Operating Leases

Financing Leases

Operating Leases

Financing Leases

The following table presents our maturity of lease liabilities:

(Amounts in thousands) Operating Leases (1) Financing Leases

Within one year $ 78,079 $ 130

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Total lease payments 403,394 618

Interest 41,351 24

Total lease obligations $ 362,043 $ 594

(1) Excludes approximately $ 29.7 million in future lease payments for various operating leases commencing in a future period

Goodwill and Other Intangible Assets

We have goodwill on our consolidated balance sheet as follows:

Reportable Segment

Reporting Unit

Related Acquisition

Upholstery Segment

La-Z-Boy United Kingdom

Wholesale business in the United Kingdom and Ireland

Retail Segment

La-Z-Boy Furniture Galleries ® stores

Corporate & Other Segment

Reportable Segment/Unit Reporting Unit Related Acquisition

Wholesale Segment La-Z-Boy United Kingdom Wholesale business in the United Kingdom and Ireland

Retail Segment Retail La-Z-Boy Furniture Galleries ® stores

Corporate & Other Segment Joybird Joybird

We test goodwill for impairment on an annual basis in the fourth quarter of each fiscal year, and more frequently if events or changes in circumstances indicate that it might be impaired.

Due to the economic conditions during the fourth quarter of fiscal 2020 as a result of the COVID-19 pandemic, we determined that we could not assess goodwill recoverability qualitatively using the Step 0 approach and deemed it necessary to perform the quantitative Step 1 goodwill impairment test for each applicable reporting unit.

In accordance with ASU 2017-04, Intangibles-Goodwill and Other, which we adopted during fiscal 2019, our quantitative goodwill impairment tests were performed by comparing the fair value of the reporting unit with its carrying value, recognizing an impairment charge, if necessary, for the amount by which the carrying value exceeds the fair value.

The quantitative Step 1 goodwill impairment test requires us to estimate the fair value of each applicable reporting unit.

Estimating the fair value of each reporting unit requires management to make significant assumptions and to apply judgment to project future sales based on estimated short and long-term growth rates along with future operating margins.

Significant judgment is also involved in selecting the appropriate discount rate to be applied to the projected future cash flows.

Changes in these assumptions may affect our fair value estimates and the result of impairment tests in future periods.

Specific assumptions used and the results of our annual goodwill impairment tests as of April 25, 2020 were as follows:

Upholstery Segment

The goodwill associated with our La-Z-Boy United Kingdom reporting unit resides in our Upholstery reportable segment.

To estimate the fair value of this reporting unit, we applied the income approach using discounted future cash flows.

Sales and operating income projections were based on assumptions driven by the current economic conditions.

Other key assumptions used in the quantitative assessment of the reporting units' goodwill were a discount rate of 9.5 % , reflecting a market participant weighted average cost of capital, and a tax rate of 18.0 % , which was specific to the La-Z-Boy United Kingdom reporting unit.

Based on our testing, the relative fair value of our La-Z-Boy United Kingdom reporting unit exceeded its carrying value as of April 25, 2020 and no impairment was recorded.

Retail Segment

The goodwill associated with ou r acquisitions of La-Z-Boy Furniture Galleries ® stores resides in our Retail reportable segment.

To estimate the fair value of this reporting unit, we applied the income approach using discounted future cash flows.

Sales and operating income projections were based on assumptions driven by the current economic conditions.

Due to uncertainty around the future impact of COVID-19, our projections considered various scenarios and we probability-weighted the likelihood of each scenario in determining the reporting unit's fair value.

Other key assumptions used in the quantitative assessment of the reporting unit's goodwill were a discount rate of 9.5 % , reflecting a market participant weighted average cost of capital, and a

tax rate of 23.5 % , which is specific to the jurisdictions in which our acquired stores operate in.

Based on our testing, the relative fair value of our Retail reporting unit exceeded its carrying value as of April 25, 2020 and no impairment was recorded.

Corporate & Other Segment

The goodwill associated with our Joybird reporting unit resides in our Corporate and Other reportable segment.

To estimate the fair value of this reporting unit, we applied the income approach using discounted future cash flows.

Sales and operating income projections were based on assumptions driven by the current economic conditions.

Additionally, we assumed a 2.0 % terminal growth rate for the reporting unit.

Financial projections used in the fiscal 2020 impairment test were based on various scenarios and were significantly lower than those used in the fiscal 2019 impairment test due to the impact of the COVID-19 pandemic, integration activities taking longer than anticipated and a slower than anticipated growth rate due to a shifting focus on profitability.

Other key assumptions used in the quantitative assessment of the reporting unit's goodwill were a discount rate of 17.5 % , reflecting a market participant weighed average cost of capital assuming Joybird would be sold as a stand-alone business, and a tax rate of 24.3 % , which was specific to the Joybird reporting unit.

Based on our testing, the carrying value of the Joybird reporting unit exceeded its relative fair value as of April 25, 2020 , and we recorded a non-cash pre-tax impairment charge of $ 26.9 million during the fourth quarter of fiscal 2020 to reduce the carrying value of the goodwill to its fair value.

Under US GAAP, we have the option to first assess qualitative factors in order to determine if it is more likely than not that the fair value of one of our reporting units is greater than its carrying value ("Step 0").

If the qualitative assessment leads to a determination that the reporting unit’s fair value is less than its carrying value, or if we elect to bypass the qualitative assessment altogether, we are required to perform a quantitative impairment test ("Step 1") by calculating the fair value of the reporting unit and comparing the fair value with its associated carrying value.

During our fiscal 2021 annual impairment test, we first assessed goodwill recoverability qualitatively using the Step 0 approach for each of our reporting units.

For our qualitative assessment, we considered the most recent quantitative analysis, which was performed during the fourth quarter of fiscal 2020, including assumptions used, such as discount rates and tax rates, indicated fair values, and the amounts in which those fair values exceeded their carrying amounts.

Further, we compared actual performance in fiscal 2021, along with future financial projections to the internal financial projections used in the prior quantitative analysis.

Additionally, we considered various other factors including macroeconomic conditions, relevant industry and market trends, and factors specific to the Company that could indicate a potential change in the fair value of our reporting units.

Lastly, we evaluated whether any events have occurred or any circumstances have changed since the fourth quarter of fiscal 2020 that would indicate that our goodwill may have become impaired since our last quantitative test.

Based on these qualitative assessments, we determined that it is more likely than not that the fair value of each of our reporting units exceeded their respective carrying value and as such, our goodwill was not considered impaired as of April 24, 2021, and the Step 1 quantitative goodwill impairment analysis was not necessary.

Fiscal 2020 Goodwill Impairment Charge

As a result of our fiscal 2020 annual impairment test, we recorded a non-cash pre-tax impairment charge of $ 26.9 million to reduce the carrying value of the goodwill for our Joybird reporting unit to its indicated fair value.

Factors contributing to the impairment charge included financial projections at that time, largely impacted by uncertainties around COVID-19, integration activities taking longer than anticipated, and a slower than anticipated growth rate due to a shifting focus on profitability.

The following table summarizes changes in the carrying amount of our goodwill by reportable segment:

(Amounts in thousands)

Balance at April 28, 2018

Translation adjustment

(Amounts in thousands) Wholesale

Segment Retail

Segment Corporate

and Other Total

Balance at April 27, 2019 $ 12,148 $ 94,103 $ 79,616 $ 185,867

Prior period adjustment (1)

— — 2,692 2,692

Impairment charge — — ( 26,862 ) ( 26,862 )

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Balance at April 25, 2020 11,630 93,941 55,446 161,017

Acquisitions — 12,936 — 12,936

Translation adjustment 1,422 439 — 1,861

Balance at April 24, 2021 $ 13,052 $ 107,316 $ 55,446 $ 175,814

(1) Includes $ 3.5 million adjustment made during the fourth quarter of fiscal 2020, as we determined that both goodwill and the customer deposit liability were understated, partially offset by a $ 0.8 million working capital adjustment made in the first quarter of fiscal 2020.

The carrying amount of our goodwill could be at risk for future impairment.

There continues to be uncertainty surrounding the macroeconomic factors impacting our business, most notably, the impact of the COVID-19 pandemic, and a sustained economic downturn, significantly extended recovery, change in the assumed long-term revenue growth or profitability for our respective reporting units, especially Joybird, or change in market participant assumptions such as an increased discount rate, could increase the likelihood of future goodwill impairment charges.

We have intangible assets on our consolidated balance sheet as follows:

Reportable Segment

Intangible Asset

Upholstery segment

Primarily acquired customer relationships from our acquisition of the wholesale business in the United Kingdom and Ireland

Amortizable over useful lives that do not exceed 15 years

Casegoods segment

American Drew ® trade name

Reportable Segment Intangible Asset Useful Life

Wholesale Segment Primarily acquired customer relationships from our acquisition of the wholesale business in the United Kingdom and Ireland Amortizable over useful lives that do not exceed 15 years

Wholesale Segment American Drew ® trade name

Indefinite-lived

Retail segment

Reacquired rights to own and operate La-Z-Boy Furniture Galleries ® stores

Retail segment Reacquired rights to own and operate La-Z-Boy Furniture Galleries ® stores

Indefinite-lived

Corporate & Other

Joybird ® trade name

Corporate & Other Joybird ® trade name

Amortizable over eight -year useful life

We test amortizable intangible assets and indefinite-lived intangibles for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value might be impaired.

Due to the economic conditions during the fourth quarter of fiscal 2020 as a result of the COVID-19 pandemic, we tested all intangible assets for impairment based on the multi-period excess earnings method, a variant of the income approach, and also using the relief from royalty method.

Sales projections were based on assumptions driven by the current economic conditions.

Our testing in the fourth quarter of fiscal 2020 did not indicate impairment of our intangible assets.

Similar to our goodwill testing, we used the qualitative Step 0 approach to assess if it was more likely than not that the fair values of our intangible assets were greater than their carrying values.

Based on the same qualitative factors outlined above, we determined that it is more likely than not that the fair value of each of our intangible assets exceeded their respective carrying value and as such, our intangible assets were not considered impaired as of April 24, 2021, and the Step 1 quantitative impairment analysis was not necessary.

The following summarizes changes in our intangible assets:

(Amounts in thousands)

Indefinite-Lived Trade Names

Finite-Lived Trade Name

Indefinite-Lived Reacquired Rights

Other Intangible Assets

Total Intangible Assets

(Amounts in thousands) Indefinite-Lived Trade Names Finite-Lived Trade Name Indefinite-Lived Reacquired Rights Other Intangible Assets Total Intangible Assets

Balance at April 27, 2019 $ 1,155 $ 5,801 $ 20,117 $ 2,834 $ 29,907

Amortization — ( 798 ) — ( 220 ) ( 1,018 )

Translation adjustment — — ( 121 ) ( 115 ) ( 236 )

Balance at April 25, 2020 $ 1,155 $ 5,003 $ 19,996 $ 2,499 $ 28,653

Acquisitions — — 2,182 — 2,182

Amortization — ( 798 ) — ( 228 ) ( 1,026 )

Translation adjustment — — 329 293 622

Balance at April 24, 2021 $ 1,155 $ 4,205 $ 22,507 $ 2,564 $ 30,431

There continues to be uncertainty surrounding the macroeconomic factors impacting our business, most notably, the impact of the COVID-19 pandemic, and a sustained economic downturn, significantly extended recovery, or change in the assumed long-term revenue growth rates could increase the likelihood of future intangible asset impairment charges.

For our intangible assets recorded as of April 24, 2021, we estimate annual amortization expense to be $ 1.0 million for each of the five succeeding fiscal years.

We have current and long-term investments intended to enhance returns on our cash as well as to fund future obligations of our non-qualified defined benefit retirement plan, our executive deferred compensation plan, and our performance compensation retirement plan.

We also hold other investments consisting of cost-basis preferred shares of two privately-held start-up companies (refer to Note 20, Fair Value Measurement).

Our short-term investments are included in other current assets and our long-term investments are included in other long-term assets on our consolidated balance sheet.

We also hold other investments consisting of cost-basis preferred shares of two privately held start-up companies.

In the third quarter of fiscal 2020, we recognized an impairment of $ 6.0 million , which represents the full cost-basis value of the investment in one of these privately held start-up companies.

The impairment loss is recognized in other expense, net on the consolidated statement of income.

Refer to Note 20, Fair Value Measurements for further information.

The following summarizes our investments:

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The following is a summary of the unrealized gains, unrealized losses, and fair value by investment type:

(Amounts in thousands)

4/24/2021 4/25/2020

(Amounts in thousands) Gross

Losses Fair Value Gross

Losses Fair Value

Equity securities $ 2,798 $ ( 5 ) $ 14,954 $ 1,011 $ ( 6,390 ) $ 12,692

Fixed income 136 ( 29 ) 35,631 268 ( 56 ) 30,213

Other 559 — 4,819 372 — 5,117

Total securities $ 3,493 $ ( 34 ) $ 55,404 $ 1,651 $ ( 6,446 ) $ 48,022

The following table summarizes sales of marketable securities:

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

7 unchanged sentences

Within six to ten years 1,268

Thereafter 1,804

Total $ 35,631

Accrued Expenses and Other Current Liabilities

6 unchanged sentences

Accrued expenses and other current liabilities $ 449,904 $ 155,282

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

Availability under the agreement fluctuates according to a borrowing base calculated on eligible accounts receivable and inventory.

The increase in customer deposits and deferred revenue was primarily driven by higher Retail segment and Joybird written sales in fiscal 2021.

Higher written sales also led to an increase in contract assets, which are included in other current assets on the consolidated balance sheet, consistent with the increase in deferred revenue.

Refer to Note 16, Revenue Recognition, for additional details regarding our contract assets and contract liabilities.

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

Availability under the agreement fluctuates according to a borrowing base calculated on eligible accounts receivable and inventory, net of customer deposits.

We amended this agreement on December 19, 2017, extending its maturity date to December 19, 2022.

The credit agreement includes affirmative and negative covenants that apply under certain circumstances, including a fixed-charge coverage ratio requirement that applies when excess availability under the line is less than certain thresholds.

At April 25, 2020 , we had $ 75.0 million in borrowings outstanding under the agreement, which was proactively borrowed to manage liquidity in response to economic conditions resulting from COVID-19 in the fourth quarter of 2020.

At April 24, 2021, we were not subject to the fixed-charge coverage ratio requirement, as we had no borrowings outstanding under the agreement, and had excess availability of $ 61.7 million of the $ 150.0 million credit

Excess availability was lower than the total remaining credit commitment, primarily due to higher reserves required due to the $ 140.0 million increase in customer deposits during the year.

At April 25, 2020, we had $ 75.0 million in borrowings outstanding under the agreement, which was proactively borrowed to manage liquidity in response to economic conditions resulting from COVID-19 in the fourth quarter of 2020 and was repaid during the first half of fiscal 2021.

At April 25, 2020, we were not subject to the fixed-charge coverage ratio requirement and had excess availability of $ 43.2 million of the $ 150.0 million credit commitment.

Excess availability was lower than the total remaining credit commitment primarily due to lower eligible assets as of April 25, 2020 , primarily resulting from lower eligible accounts receivable due to lower sales in the quarter as a result of COVID-19.

At April 27, 2019, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the agreement, and had excess availability of $ 148.1 million of the $ 150.0 million credit commitment.

Cash paid for interest during fiscal years 2021, 2020, and 2019 was $ 0.8 million, $ 0.6 million, and $ 1.0 million, respectively.

Employee Benefits

Employee Retirement and Welfare Plans

The table below summarizes the total costs associated with our employee retirement and welfare plans.

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

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On January 1, 2019, we increased our matching contributions for eligible employees which resulted in an additional expense of $ 1.7 million in fiscal 2019.

As a result of the increased matching contributions, supplemental contributions awarded to eligible employees based on achievement of operating performance targets during fiscal 2019 and 2018 were discontinued.

Additionally, on March 29, 2020, we announced a temporary freeze on 401(k) matching contributions as part of our COVID-19 action plan.

During the second quarter of fiscal 2021 we reinstated 401(k) match for employees.

Performance Compensation Retirement Plan.

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Executive Deferred Compensation Plan.

We maintain an executive deferred compensation plan for eligible highly compensated employees.

An element of this plan allows contributions for eligible highly compensated employees.

We maintain an executive deferred compensation plan for eligible highly compensated employees, an element of which may include Company contributions.

Further information related to the plan is as follows:

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Cash surrender value on life insurance contracts included in other long-term assets (1)

41,133 34,562

Mutual funds held by plan included in other current assets (2)

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We hold available-for-sale marketable securities to fund future obligations of this plan in a Rabbi trust (refer to Note 8, Investments, and Note 20, Fair Value Measurements, for additional information on these investments).

We are not required to fund the non-qualified defined benefit retirement plan in fiscal 2021 ;

not required to fund the non-qualified defined benefit retirement plan in fiscal 2022;

however, we have the discretion to make contributions to the Rabbi trust.

4 unchanged sentences

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

1 unchanged sentence

Benefit payments (1)

1,091 1,091 1,091

(1) Benefit payments are scheduled to be between $ 1.0 million and $ 1.1 million annually for the next 10 years.

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Both the initial charge and the refund were recorded as pension termination refund (charge) in our consolidated statement of income.

There were no net periodic pension costs associated with the terminated pension plan in the fiscal year ended April 25, 2020 .

For the fiscal years ended April 27, 2019 and April 28, 2018 , net periodic pension costs were as follows:

There were no net periodic pension costs associated with the terminated pension plan in the fiscal years ended April 24, 2021, or April 25, 2020.

For the fiscal year ended April 27, 2019, net periodic pension costs were as follows:

Fiscal Year Ended

(Amounts in thousands) 4/27/2019

Service cost $ 851

Interest cost 4,464

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Net periodic pension cost $ 35,998

The components of net periodic pension cost other than the service cost were included in other expense, net in our consolidated statement of income.

The components of net periodic pension cost, other than the service cost, were included in other income (expense), net in our consolidated statement of income.

Service cost was recorded in cost of sales in our consolidated statement of income.

Employee Vacation Policy Changes

We enacted changes to our employee vacation policies that became effective on January 1, 2019.

Our new vacation policies enhanced the amount of vacation time earned by our employees.

Additionally, under these vacation policies, our salaried and office hourly employees now accrue vacation in the current calendar year for use in the current calendar year, and any vacation time earned but not used will be forfeited at the end of each calendar year.

These changes reduced our salaried and office hourly employee vacation liability and resulted in a one-time non-cash gain of $ 5.1 million in our consolidated statement of income during fiscal 2019 .

Of the total $ 5.1 million gain recorded, $ 1.3 million was recorded in cost of sales with the remainder recorded in SG&A expense.

Our factory hourly employee vacation policies were only changed to enhance the amount of vacation time earned by our employees, with no change to accrual methodologies, and resulted in $ 1.1 million incremental expense in fiscal 2019 , recorded in cost of sales.

Product Warranties

We accrue an estimated liability for product warranties when we recognize revenue on the sale of warrantied products.

We estimate future warranty claims on new sales based on our historical claims experience and any additional anticipated future costs on previously sold products.

We estimate future warranty claims on product sales based on our historical claims experience and periodically adjust the provision to reflect changes in actual experience.

We incorporate repair costs into our liability estimates, including materials, labor and overhead amounts necessary to perform repairs, and any costs associated with delivering repaired product to our customers.

Over 90 % of our warranty liability relates to our Upholstery reportable segment as we generally warrant our products against defects for one year on fabric and leather, from one to ten years on cushions and padding, and provide a limited lifetime warranty on certain mechanisms and frames.

Our Upholstery segment warranties cover labor costs relating to our parts for one year.

Over 90 % of our warranty liability relates to our Wholesale reportable segment as we generally warrant our products against defects for one year on fabric and leather, from one to ten years on cushions and padding, and provide a limited lifetime warranty on certain mechanisms and frames.

Our Wholesale segment warranties cover labor costs relating to our parts for one year.

We provide a limited lifetime warranty against defects on a majority of the Joybird products, which are a part of our Corporate and Other results.

For all our manufacturer warranties, the warranty period begins when the consumer receives our

For all our manufacturer warranties, the warranty period begins when the consumer receives our product.

We use considerable judgment in making our estimates, and we record differences between our actual and estimated costs when the differences are known.

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Balance as of the beginning of the year $ 23,255 $ 22,736

Acquisitions (1)

Accruals during the year 21,956 22,563

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Balance as of the end of the year (1)

Acquired warranty liabilities from fiscal 2019 acquisition of Joybird.

Refer to Note 2, Acquisitions, for further information on the acquisition.

$ 23,636 $ 23,255

(1) $ 14.4 million and $ 14.3 million recorded in accrued expenses and other current liabilities as of April 24, 2021, and April 25, 2020, respectively, while the remainder is included in other long-term liabilities.

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Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

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Restricted stock awards 3,367 2,913 2,548

Restricted stock units

Performance based units

Restricted stock units issued to Directors 840 900 704

Performance-based shares 5,505 2,558 4,222

Total equity-based awards expense 12,671 8,371 10,981

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Total stock-based compensation expense (1)

$ 14,549 $ 7,389 $ 11,320

(1) Stock-based compensation expense is recorded in SG&A expense in the consolidated statement of income.

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We accelerate the expense for options granted to retirement eligible employees over the vesting period, with expense recognized from the grant date through their retirement eligibility date or over the ten months following the grant date, whichever period is longer.

We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur.

Granted options outstanding under the former long-term equity award plan remain in effect and have a term of 10 years.

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(In Thousands)

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term

Weighted Average Exercise Price Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

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Outstanding at April 25, 2020 1,438 $ 28.76 7.2 $ 103

Granted 316 27.54 N/A N/A

Canceled ( 7 ) 31.34 N/A N/A

Exercised ( 405 ) 26.79 N/A 5,102

Outstanding at April 24, 2021 1,342 29.05 7.2 19,008

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Treasury issues with a term equal to the expected life assumed at the date of the grant.

We estimate forfeiture rates based on our employees' forfeiture history and believe they will approximate future results.

The fair value of stock options granted during fiscal 2021, fiscal 2020, and fiscal 2019 were calculated using the following assumptions:

Fiscal 2020 grant

Fiscal 2019 grant

Fiscal 2018 grant

Fiscal 2021 grant Fiscal 2020 grant Fiscal 2019 grant

Risk-free interest rate 0.34 % 2.19 % 2.82 %

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Stock Appreciation Rights ("SARs").

We have not granted any SARs to employees since fiscal 2014, but we have SARs outstanding from the fiscal 2013 and fiscal 2014 grants.

We have not granted any SARs to employees since fiscal 2014, but we have SARs outstanding from the fiscal 2014 award.

All outstanding SARs are fully vested and have a term of ten years .

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We have no remaining unrecognized compensation cost at April 24, 2021, relating to SARs awards as they are all fully vested, but we will continue to remeasure these awards to reflect the fair value at the end of each reporting period until all awards are exercised or forfeited.

As of April 25, 2020 , we had 7,149 and 13,869 SARs outstanding for the fiscal 2013 and fiscal 2014 awards, respectively.

These awards have exceeded their expected life and are remeasured to fair value based on their intrinsic value, which is the market value of our common stock on the last day of the reporting period less the exercise price, until the earlier of the exercise date or the contractual term date.

At April 25, 2020 , the intrinsic value per share of the fiscal 2013 and 2014 awards were $ 9.10 and $ 2.01 , respectively.

As of April 24, 2021, we had 6,010 SARs outstanding for the fiscal 2014 award.

the exercise date or the contractual term date.

At April 24, 2021, the intrinsic value per share of the fiscal 2014 award was $ 24.16 .

Restricted Stock .

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The weighted average fair value of the restricted stock that was awarded in fiscal 2021 was $ 29.35 per share, the market value of our common shares on the date of grant.

We estimate forfeiture rates based on our employees' forfeiture history and believe they will approximate future results.

We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur.

We recognize compensation expense for restricted stock over the vesting period equal to the fair value on the date our compensation committee approved the awards.

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Non-vested shares at April 25, 2020 293 $ 30.34

Granted 138 29.35

Vested ( 102 ) 29.66

Canceled ( 9 ) 30.20

Non-vested shares at April 24, 2021 320 30.14

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In the event of an employee's termination during the vesting period, the potential right to earn shares under this program is generally forfeited.

Payout of these grants depends on our financial performance ( 80 % ) and a market-based condition based on the total return our shareholders receive on their investment in our stock relative to returns earned through investments in other public companies ( 20 % ).

Payout of the fiscal 2021 grant depends on our financial performance ( 50 %) and a market-based condition based on the total return our shareholders receive on their investment in our stock relative to returns earned through investments in other public companies ( 50 %).

The performance award opportunity ranges from 50 % of the employee's target award if minimum performance requirements are met to a maximum of 200 % of the target award based on the attainment of certain financial and shareholder-return goals over a specific performance period, which is generally three fiscal years.

Grants of performance-based shares during fiscal 2019 and fiscal 2020 were weighted ( 80 %) on financial performance and ( 20 %) on market-based conditions consistent with those in the fiscal 2021 grant

The number of awards that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring employees to remain employed with the Company through the end of the three-year performance periods.

3 unchanged sentences

Outstanding shares at April 25, 2020 534 $ 29.21

Granted 337 30.75

Vested ( 98 ) 25.93

Unearned or canceled ( 104 ) 30.30

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We account for performance-based shares as equity-based awards because when they vest, they will be settled in common shares.

We estimate forfeiture rates based on our employees' forfeiture history and believe they will approximate future results.

We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur.

For shares that vest based on our results relative to the performance goals, we expense as compensation cost the fair value of the shares as of the day we granted the awards recognized over the performance period, taking into account the probability that we will satisfy the performance goals.

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The Monte Carlo valuation model uses multiple simulations to evaluate our probability of achieving various stock price levels to determine our expected performance ranking relative to our peer group.

Similar to the way in which we expense the awards of stock options, we expense compensation cost, net of estimated forfeitures, over the vesting period regardless of whether the market condition is ultimately satisfied.

Similar to the way in which we expense the awards of stock options, we expense compensation cost over the vesting period regardless of whether the market condition is ultimately satisfied.

Based on the Monte Carlo model, the fair value as of the grant date of the fiscal 2021, fiscal 2020, and fiscal 2019 grants of shares that vest based on market conditions was $ 38.14 , $ 38.75 , and $ 46.39 , respectively.

2 unchanged sentences

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

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Activity in accumulated other comprehensive loss was as follows:

(Amounts in thousands)

Translation adjustment

Change in fair value of cash flow hedge

Unrealized gain (loss) on marketable securities

Net pension amortization and net actuarial loss

Accumulated other comprehensive loss

(Amounts in thousands) Translation adjustment Change in fair value of cash flow hedge Unrealized gain (loss) on marketable securities Net pension amortization and net actuarial loss Accumulated other comprehensive loss

Balance at April 28, 2018 $ 2,388 $ 154 $ 1,376 $ ( 29,117 ) $ ( 25,199 )

Changes before reclassifications ( 2,338 ) ( 369 ) 330 ( 479 ) ( 2,856 )

Cumulative effect adjustment for investments (1) — — ( 1,637 ) ( 1,637 )

Amounts reclassified to net income (3) — 280 25 26,553 26,858

Tax effect — 22 ( 88 ) ( 562 ) ( 628 )

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated ( 2,338 ) ( 67 ) ( 1,370 ) 25,512 21,737

1 unchanged sentence

Changes before reclassifications ( 1,941 ) — 387 ( 1,809 ) ( 3,363 )

Cumulative effect adjustment for investments (1)

Reclassification of certain income tax effects (2) — ( 97 ) 258 ( 708 ) ( 547 )

Amounts reclassified to net income — 14 ( 141 ) 218 91

Tax effect — ( 4 ) ( 61 ) 394 329

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated ( 1,941 ) ( 87 ) 443 ( 1,905 ) ( 3,490 )

1 unchanged sentence

Changes before reclassifications 4,932 — ( 96 ) 428 5,264

Reclassification of certain income tax effects (3)

Amounts reclassified to net income — — ( 9 ) 347 338

Tax effect — — 26 ( 197 ) ( 171 )

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated 4,932 — ( 79 ) 578 5,431

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We reclassified the net $ 1.6 million of cumulative effect adjustment from accumulated other comprehensive loss to retained earnings as a result of adopting ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10).

(2) Income tax effects of the Tax Cuts and Jobs Act are reclassified from AOCI to retained earnings due to adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220).

(3) Includes a net $ 23.8 million charge related to the pension termination that occurred in the fourth quarter of fiscal 2019.

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For further information, refer to Note 11, Employee Benefits.

Income tax effects of the Tax Cuts and Jobs Act are reclassified from AOCI to retained earnings due to adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220).

We reclassified the unrealized gain/(loss) on marketable securities from accumulated other comprehensive loss to net income through other expense, net, reclassified the change in fair value of cash flow hedges to net income through cost of sales, and reclassified the net pension amortization to net income through other expense, net.

We reclassified the unrealized gain/(loss) on marketable securities from accumulated other comprehensive loss to net income through other income (expense), net, reclassified the change in fair value of cash flow hedges to net income through cost of sales, and reclassified the net pension amortization to net income through other income (expense), net.

The components of noncontrolling interest were as follows:

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

Balance as of the beginning of the year $ 15,553 $ 14,468 $ 13,035

Net income 1,068 1,515 1,567

Other comprehensive income (loss) 534 ( 266 ) ( 134 )

Change in noncontrolling interests

Dividends distributed to joint venture minority partners ( 8,507 ) — —

Other changes in noncontrolling interests — ( 164 ) —

Balance as of the end of the year $ 8,648 $ 15,553 $ 14,468

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Year Ended April 24, 2021

(Amounts in thousands)

(Amounts in thousands) Wholesale Retail Corporate

and Other Total

Motion Upholstery Furniture $ 759,451 $ 371,587 $ 523 $ 1,131,561

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Occasional Furniture 44,897 20,682 3,171 68,750

102,159 85,008 ( 23,345 ) 163,822

Total $ 1,301,298 $ 612,906 $ 127,370 $ 2,041,574

Eliminations ( 307,330 )

Consolidated Net Sales $ 1,734,244

Year Ended April 25, 2020

(Amounts in thousands)

(Amounts in thousands) Wholesale Retail Corporate

and Other Total

Motion Upholstery Furniture $ 751,697 $ 355,427 $ 364 $ 1,107,488

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Occasional Furniture 43,933 20,069 1,931 65,933

97,498 79,984 ( 23,998 ) 153,484

Total $ 1,310,294 $ 598,554 $ 89,092 $ 1,997,940

Eliminations ( 293,958 )

Consolidated Net Sales $ 1,703,982

Primarily includes revenue for delivery, advertising, royalties, parts, accessories, after-treatment products, tariff surcharges, discounts & allowances, rebates and other sales incentives.

(1) Primarily includes revenue for delivery, advertising, royalties, parts, accessories, after-treatment products, surcharges, discounts & allowances, rebates and other sales incentives.

Motion Upholstery Furniture - Includes gross revenue for upholstered furniture, such as recliners, sofas, loveseats, chairs, sectionals and modulars that have a mechanism that allows the back of the product to recline or the product's footrest to extend.

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This gross revenue includes sales to La-Z-Boy Furniture Galleries ® stores (including company-owned stores), independent retailers, and the end consumer.

At April 25, 2020 , our consolidated balance sheet includes current assets of $ 17.1 million that we reported as other receivables.

These other receivables represent the remaining consideration to which we are entitled prior to fulfilling our performance obligation.

At the beginning of fiscal 2020 , we had $ 17.0 million of other receivables.

At April 24, 2021, our consolidated balance sheet includes contract assets of $ 108.5 million, reported as other current assets, that represent the remaining consideration to which we are entitled prior to fulfilling our performance obligation.

At the beginning of fiscal 2021, we had $ 17.1 million of contract assets.

The increase from the beginning of fiscal year 2021 compared with April 24, 2021, was driven by the unprecedented demand for our products during fiscal 2021 which resulted in an increase in written orders and a higher product backlog.

We receive customer deposits from end consumers before we recognize revenue and in some cases we have the unconditional right to collect the remaining portion of the order price before we fulfill our performance obligation, resulting in deferred revenue (collectively, the "contract liabilities").

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At the beginning of fiscal 2020, we had $ 40.7 million of customer deposits and $ 17.1 million of deferred revenues.

These increases from prior year to current year are primarily related to the increased demand and written orders for our products during fiscal 2021.

During the fiscal year ended April 24, 2021, we recognized $ 55.1 million of revenue related to our contract liability balance at April 25, 2020.

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Segment Information

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.

The Upholstery segment sells directly to La-Z-Boy Furniture Galleries ® stores, operators of La-Z-Boy Comfort Studio ® locations and 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.

Prior period results disclosed in the tables below have been revised to reflect these changes.

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 coordinated 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 .

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Corporate & Other includes the shared costs for corporate functions, including human resources, information technology, finance and legal, in addition to revenue generated through royalty agreements with companies licensed to use the La-Z-Boy ® brand name on various products.

We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segments including our global trading company in

Hong Kong and Joybird, an e-commerce retailer that manufactures upholstered furniture such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports casegoods (wood) furniture such as occasional tables and other accessories.

Joybird sells to end consumers primarily online through its website, www.joybird.com.

We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segments, including our global trading company in Hong Kong and Joybird, an e-commerce retailer that manufactures upholstered furniture such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports casegoods (wood) furniture such as occasional tables and other accessories.

Joybird sells to the end consumer primarily online through its website, www.joybird.com.

None of the operating segments included in Corporate & Other meet the requirements of reportable segments.

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We account for intersegment revenue transactions between our segments consistent with independent third-party transactions, that is, at current market prices.

As a result, the manufacturing profit related to sales to our Retail segment is included within the appropriate Upholstery or Casegoods segment.

As a result, the manufacturing profit related to sales to our Retail segment is included within the Wholesale segment.

Operating income realized on intersegment revenue transactions is therefore generally consistent with the operating income realized on our revenue from independent third-party transactions.

Segment operating income is based on profit or loss from operations before interest expense, interest income, other expense, net and income taxes.

Segment operating income is based on profit or loss from operations before interest expense, interest income, pension termination refunds (charges), other income (expense), net and income taxes.

Identifiable assets are cash and equivalents, notes and accounts receivable, net inventories, net property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets.

3 unchanged sentences

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

Upholstery segment:

Sales to external customers

Intersegment sales

Upholstery segment sales

Casegoods segment:

Wholesale segment:

Sales to external customers $ 1,006,377 $ 1,026,630 $ 1,112,634

Intersegment sales 294,921 283,664 270,081

Casegoods segment sales

Wholesale segment sales 1,301,298 1,310,294 1,382,715

Retail segment sales 612,906 598,554 570,201

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Corporate and Other sales 127,370 89,092 74,012

Eliminations ( 307,330 ) ( 293,958 ) ( 281,527 )

Consolidated sales $ 1,734,244 $ 1,703,982 $ 1,745,401

Operating Income (Loss)

Upholstery segment

Casegoods segment

Wholesale segment $ 134,312 $ 142,440 $ 140,495

Retail segment 46,724 48,256 37,922

4 unchanged sentences

Pension termination refund (charge) — 1,900 ( 32,671 )

Other expense, net

Other income (expense), net 9,466 ( 6,983 ) ( 2,237 )

Income before income taxes $ 145,913 $ 115,173 $ 95,327

1 unchanged sentence

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

Depreciation and Amortization

Upholstery segment

Casegoods segment

Wholesale segment $ 19,029 $ 17,612 $ 17,265

Retail segment 4,894 4,271 4,007

2 unchanged sentences

Capital Expenditures

Upholstery segment

Casegoods segment

Wholesale segment $ 27,303 $ 36,602 $ 39,063

Retail segment 8,958 7,597 4,604

3 unchanged sentences

United States 91 % 89 % 89 %

Canada 5 % 6 % 6 %

Other 4 % 5 % 5 %

Total 100 % 100 % 100 %

(Amounts in thousands) 4/24/2021 4/25/2020

Upholstery segment

Casegoods segment

Wholesale segment $ 720,721 $ 531,295

Retail segment 546,299 495,970

2 unchanged sentences

Long-Lived Assets by Geographic Location

Domestic $ 713,525 $ 662,623

International 55,714 48,852

2 unchanged sentences

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

United States $ 124,547 $ 102,125 $ 73,058

Foreign 21,366 13,048 22,269

Total $ 145,913 $ 115,173 $ 95,327

Income tax expense (benefit) consists of the following components:

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

Current $ 18,327 $ 25,026 $ 17,629

Deferred 6,771 1,440 ( 2,649 )

Current 6,475 7,901 6,199

Deferred 2,339 ( 1,409 ) ( 933 )

Current 4,451 3,025 4,919

Deferred 21 206 21

Total income tax expense $ 38,384 $ 36,189 $ 25,186

2 unchanged sentences

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(% of income before income taxes) 4/24/2021 4/25/2020 4/27/2019

1 unchanged sentence

Increase (reduction) in income taxes resulting from:

Remeasurement of deferred taxes for changes in statutory U.S.

State income taxes, net of federal benefit 4.3 % 4.2 % 4.1 %

Tax effect of defined benefit pension plan termination — % — % 2.7 %

manufacturing benefit

Gains and losses on corporate owned life insurance ( 1.2 ) % 0.5 % ( 0.2 ) %

Change in valuation allowance 0.7 % 0.7 % 0.6 %

1 unchanged sentence

Non-deductible asset impairment — % 4.9 % — %

Fair value adjustment of contingent liability

Fair value adjustment of contingent consideration liability 2.0 % ( 1.4 ) % — %

Tax on undistributed foreign earnings — % 1.1 % — %

7 unchanged sentences

(Amounts in thousands) 4/24/2021 4/25/2020

Leases $ 88,536 $ 81,537

Deferred and other compensation 21,361 20,821

State income tax—net operating losses, credits and other 6,222 5,536

Warranty 5,709 5,797

Inventory 530 —

Workers' compensation 2,559 2,567

Bad debt 1,326 2,061

Employee benefits 1,904 3,441

Federal net operating losses, credits 1,286 1,663

Other — 2,354

Valuation allowance ( 3,495 ) ( 2,137 )

2 unchanged sentences

Property, plant and equipment ( 17,837 ) ( 14,893 )

Inventory — ( 827 )

Goodwill and other intangibles ( 10,084 ) ( 8,286 )

Tax on undistributed foreign earnings ( 752 ) ( 1,316 )

Other ( 910 ) —

Net deferred tax assets $ 11,915 $ 20,839

The deferred tax assets associated with loss carry forwards and the related expiration dates are as follows:

(Amounts in thousands)

Federal net operating losses

Fiscal 2034 - 2038

state net operating losses (excluding federal tax effect)

Fiscal 2020 - 2038

Foreign capital losses

(Amounts in thousands) Amount Expiration

Federal net operating losses $ 1,286 Fiscal 2038 - 2039

state net operating losses (excluding federal tax effect) 2,698 Fiscal 2022 - 2037

Foreign capital losses 17 Indefinite

We evaluate our deferred taxes to determine if a valuation allowance is required.

3 unchanged sentences

We based these estimates on objective evidence such as expected trends resulting from certain leading economic indicators.

Based upon our net deferred tax asset position at April 25, 2020 , we estimate that about $ 65.5 million of future taxable income would need to be generated to fully recover our net deferred tax assets.

Based upon our net deferred tax asset position at April 24, 2021, we estimate that approximately $ 31.6 million of future taxable income would need to be generated to fully recover our net deferred tax assets.

The realization of deferred income tax assets is dependent on future events.

1 unchanged sentence

Such variances could result in adjustments to the valuation allowance on deferred tax assets in future periods, and such adjustments could be material to the financial statements.

During fiscal 2020 , we recorded a $ 0.2 million decrease in our valuation allowance for deferred tax assets that are now considered more likely than not to be realized.

This determination was primarily due to state net operating losses and the limitations on the realization of deferred tax assets related to executive compensation.

During fiscal 2021, we recorded a $ 1.4 million increase in our valuation allowance for deferred tax assets that are not considered more likely than not to be realized.

This determination was primarily due to state tax credits and the limitations on the realization of deferred tax assets related to executive compensation.

A summary of the valuation allowance by jurisdiction is as follows:

(Amounts in thousands)

(Amounts in thousands) 4/24/2021 4/25/2020 Change

Federal $ 1,391 $ 1,172 $ 219

State 2,087 948 1,139

Foreign 17 17 —

Total $ 3,495 $ 2,137 $ 1,358

The remaining valuation allowance of $ 3.5 million primarily related to certain U.S.

5 unchanged sentences

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

7 unchanged sentences

We recognize interest and penalties associated with uncertain tax positions in income tax expense.

We had approximately $ 0.3 million accrued for interest and penalties as of both April 25, 2020 , and April 27, 2019 .

We had approximately $ 0.4 million and $ 0.3 million accrued for interest and penalties as of April 24, 2021, and April 25, 2020, respectively.

If recognized, $ 0.9 million of the total $ 1.1 million of unrecognized tax benefits would decrease our effective tax rate.

2 unchanged sentences

federal income tax returns for fiscal years 2018 and subsequent are still subject to audit.

The audit of our U.S.

federal income tax return for fiscal year 2016 was closed in fiscal 2020 with no material adjustments.

In addition, we conduct business in various states.

9 unchanged sentences

Fiscal Year Ended

(52 weeks) (52 weeks) (52 weeks)

(Amounts in thousands) 4/24/2021 4/25/2020 4/27/2019

8 unchanged sentences

Earnings per Share:

Basic $ 2.31 $ 1.67 $ 1.46

Diluted $ 2.30 $ 1.66 $ 1.44

The values for contingent common shares set forth above reflect the dilutive effect of common shares that we would have issued to employees under the terms of performance-based share awards if the relevant performance period for the award had been the reporting period.

We had outstanding options to purchase 0.3 million shares for the year ended April 25, 2020 , with a weighted average exercise price of $ 33.15 .

We excluded the effect of these options from our diluted share calculation since the weighted average exercise price of the options was higher than the average market price, and including the options' effect would have been anti-dilutive.

Similarly, we excluded options to purchase 0.4 million shares from the diluted share calculation for the year ended April 27, 2019 .

We did not exclude any outstanding options from the diluted share calculation for the fiscal year ended April 24, 2021.

We exclude the effect of options from our diluted share calculation when the weighted average exercise price of the options are higher than the average market price, since including the options' effect would be anti-dilutive.

We excluded options to purchase 0.3 million and 0.4 million shares from the diluted share calculation for the years ended April 25, 2020 and April 27, 2019, respectively.

Fair Value Measurements

8 unchanged sentences

We measure non-financial assets such as other intangible assets, goodwill, and other long-lived assets at fair value when there is an indicator of impairment, and we record them at fair value only when we recognize an impairment loss.

The following table presents the fair value hierarchy for those assets we measured at fair value on a recurring basis at April 25, 2020 , and April 27, 2019 .

The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at April 24, 2021 and April 25, 2020.

There were no transfers into or out of Level 1, Level 2, or Level 3 for any of the periods presented.

1 unchanged sentence

Fair Value Measurements

(Amounts in thousands)

(Amounts in thousands) Level 1 Level 2 Level 3 NAV(1) Total

Marketable securities $ 119 $ 37,572 $ — $ 7,602 $ 45,293

1 unchanged sentence

Cost basis investments — — 7,579 — 7,579

Total assets $ 2,651 $ 37,572 $ 7,579 $ 7,602 $ 55,404

Contingent consideration liability $ — $ — $ 14,100 $ — $ 14,100

At April 25, 2020

Fair Value Measurements

(Amounts in thousands)

(Amounts in thousands) Level 1 Level 2 Level 3 NAV(1) Total

Marketable securities $ — $ 31,691 $ — $ 6,515 $ 38,206

1 unchanged sentence

Cost basis investment — — 6,479 — 6,479

Total assets $ 3,337 $ 31,691 $ 6,479 $ 6,515 $ 48,022

Contingent consideration liability $ — $ — $ — $ — $ —

3 unchanged sentences

The fair value measurements for our Level 1 and Level 2 securities are based on quoted prices in active markets, as well as through broker quotes and independent valuation providers, multiplied by the number of shares owned exclusive of any transaction costs.

Our Level 3 assets included non-marketable preferred shares of two privately held start-up companies, and a warrant to purchase common shares of one of these privately held start-up companies.

At April 24, 2021, our Level 3 assets included non-marketable preferred shares and warrants to purchase common shares of two privately-held start-up companies.

The fair value for our Level 3 investments is not readily determinable so we estimate the fair value as costs minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for identical or similar investments with the same issuer.

During the second quarter of fiscal 2020, we invested an additional $ 0.5 million in one of these privately held start-up companies.

Subsequently and during the third quarter of fiscal 2020, with respect to the same investee, we recorded an impairment charge of $ 6.0 million to other expense, net in the consolidated statement of income for the full carrying value as it was determined the value of the investment was not recoverable.

For non-marketable equity investments, the measurement of fair value requires significant judgment and includes quantitative and qualitative analysis of identified events or circumstances that impact the fair value of the investment.

Among other factors, we assessed the investee’s ability to meet business milestones, its financial condition and near-term prospects (including the rate at which the investee was using its cash), the investee’s need for possible additional funding at a lower valuation, and the competitive environment in which the investee operates its business.

Our Level 3 liabilities included our contingent consideration liability from the Joybird acquisition.

We estimated the fair value of the Joybird contingent consideration liability based on future revenues and earnings in fiscal 2021 and fiscal 2023.

The fair value was determined using a variation of the income approach, known as the real options method, whereby revenue and earnings were simulated over the earn-out periods in a risk-neutral framework using Geometric Brownian Motion.

For each simulation path, the potential earn-out payments were calculated based on management’s probability estimates for achievement

of the revenue and earnings milestones and then were discounted to the valuation date using a discount rate of 4.2 % for the fiscal 2021 milestone and 4.7 % for the fiscal 2023 milestone.

During the fourth quarter of fiscal 2020, in connection with our annual impairment testing, we reduced the fair value of the contingent consideration liability by its full carrying value of $ 7.9 million , as we no longer expect any additional consideration amounts will be owed related to the acquisition of Joybird based on our most recent financial projections and the terms of the earnout agreement.

Consistent with our goodwill impairment testing, the estimated revenues and earnings projections for Joybird used in our fair value assessment at the end of fiscal 2020 were lower than those used in prior periods due to integration activities taking longer than anticipated, a slower than anticipated growth rate due to a shifting focus on profitability, and most notably, the impact of the COVID-19 pandemic.

The reduction in fair value was recorded to SG&A in the consolidated statement of income.

During fiscal 2021, we invested an additional $ 1.1 million in one of these privately-held start-up companies.

There were no other changes to the fair value of our Level 3 assets during fiscal 2021.

Our Level 3 liability includes our contingent consideration liability resulting from the Joybird acquisition.

During fiscal 2021, we recognized an increase in the fair value of our liability of $ 14.1 million, as we expect consideration will be owed under the terms of the earnout agreement based on significant improvements to our most recent financial projections.

The fair value of contingent consideration is based on revenues and earnings of the Joybird business in fiscal 2021, and future revenues and earnings of the Joybird business in fiscal 2023.

The fair value is determined using a variation of the income approach, known as the real options method, whereby revenue and earnings are simulated over the earnout periods in a risk-neutral framework using Geometric Brownian Motion.

For each simulation path, the potential earn-out payments are calculated based on management’s probability estimates for achievement of the revenue and earnings milestones and then were discounted to the valuation date using a discount rate of 1.0 % for the fiscal 2021 milestone and 1.7 % for the fiscal 2023 milestone.

There were no other changes to the fair value of our Level 3 liabilities during fiscal 2021.

The following table is a reconciliation of our Level 3 assets and liabilities recorded at fair value using significant unobservable inputs:

(Amounts in thousands)

(Amounts in thousands) Assets Liabilities

Balance at April 27, 2019 $ 11,979 $ 7,900

Write-up, net

Translation adjustment

Purchases 500 —

Write-off ( 6,000 ) ( 7,900 )

Balance at April 25, 2020 6,479 —

Purchases 1,100 —

Fair value adjustment — 14,100

Balance at April 24, 2021 $ 7,579 $ 14,100

Subsequent Events

On June 4, 2020, we announced a continuation of the Company's COVID-19 action plan.

Effective as of June 4, 2020, the Company reduce its global workforce by about 10 % , or approximately 850 employees, across its manufacturing, retail and corporate locations, including the closure of its Newton, Mississippi upholstery manufacturing facility.

Production from the Newton facility will be shifted to available capacity at the company’s Dayton, Tennessee, Neosho, Missouri, and Siloam Springs, Arkansas plants.

The Newton facility employs about 300 people, accounts for approximately 10 % of the La-Z-Boy branded business total upholstery production, and manufactures La-Z-Boy recliners, motion sofas and classics (high-leg recliners).

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

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

We expect to incur approximately $ 5 million to $ 7 million in fiscal 2021 of one-time pre-tax charges related to these initiatives, the majority of which will be realized in the first quarter.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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-K

Item 8. Financial Statements and Supplementary Data