What changed in this filing

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Item 1. Financial Statements

2021-08-17 compared with 2021-02-16 · 89 added, 190 removed, 441 unchanged (39% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENT OF INCOME

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands, except per share data) 7/24/2021 7/25/2020

10 unchanged sentences

Net income 25,266 4,679

Net income attributable to noncontrolling interests ( 357 ) ( 204 ) ( 607 ) ( 434 )

Net (income) loss attributable to noncontrolling interests ( 700 ) 119

Net income attributable to La-Z-Boy Incorporated $ 24,566 $ 4,798

6 unchanged sentences

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/24/2021 7/25/2020

2 unchanged sentences

Currency translation adjustment ( 1,242 ) 2,111

Change in fair value of cash flow hedges, net of tax — — — 10

Net unrealized gain (loss) on marketable securities, net of tax ( 14 ) 16 ( 37 ) 170

Net unrealized gain on marketable securities, net of tax 448 42

Net pension amortization, net of tax 62 65

24 unchanged sentences

Accounts payable $ 118,120 $ 94,152

Short-term borrowings — 75,000

Lease liabilities, current 67,408 67,614

18 unchanged sentences

CONSOLIDATED STATEMENT OF CASH FLOWS

Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/24/2021 7/25/2020

1 unchanged sentence

Net income $ 25,266 $ 4,679

Adjustments to reconcile net income to cash provided by (used for) operating activities

(Gain)/loss on disposal of assets 133 ( 10,051 )

Adjustments to reconcile net income to cash provided by operating activities

Loss on disposal of assets 44 14

Gain on sale of investments ( 256 ) ( 108 )

Change in deferred taxes 5,189 1,238

Provision for doubtful accounts ( 611 ) ( 1,575 )

Depreciation and amortization 8,553 8,119

Amortization of right-of-use lease assets 17,245 16,469

Equity-based compensation expense 2,460 2,047

Change in deferred taxes 370 785

Change in receivables ( 1,783 ) 3,745

Change in inventories ( 38,921 ) 1,686

Change in right-of-use lease assets 48,864 48,972

Change in other assets ( 10,380 ) 4,031

5 unchanged sentences

Proceeds from disposals of assets 8 10

Proceeds from insurance — 1,080

Capital expenditures ( 19,343 ) ( 9,810 )

1 unchanged sentence

Proceeds from sales of investments 9,716 14,671

Acquisitions ( 7,783 ) ( 6,412 )

Net cash used for investing activities ( 35,680 ) ( 31,114 )

Net cash provided by (used for) investing activities ( 19,519 ) 1,248

Cash flows from financing activities

Payments on debt and finance lease liabilities ( 30 ) ( 25,013 )

Holdback payments for acquisition purchases — ( 437 )

Stock issued for stock and employee benefit plans, net of shares withheld for taxes ( 2,228 ) ( 1,749 )

Purchases of common stock ( 875 ) ( 35,346 )

Repurchases of common stock ( 35,640 ) —

Dividends paid to shareholders ( 6,777 ) —

15 unchanged sentences

Earnings Accumulated Other

Comprehensive Income

Comprehensive

Loss Non-Controlling

1 unchanged sentence

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

Net income (loss) — — 4,798 — ( 119 ) 4,679

Other comprehensive income — — — 1,720 498 2,218

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 132 ( 195 ) ( 1,686 ) — — ( 1,749 )

Stock option and restricted stock expense — 2,047 — — — 2,047

Dividends declared and paid (1) — — 5 — ( 8,507 ) ( 8,502 )

At July 25, 2020 $ 45,989 $ 320,067 $ 346,750 $ ( 5,232 ) $ 7,425 $ 714,999

Net income — — 24,566 — 700 25,266

Other comprehensive income — — — 1,275 79 1,354

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 124 1,995 ( 6 ) — — 2,113

Stock option and restricted stock expense — 4,120 — — — 4,120

Dividends declared and paid ($ 0.07 /share)

— — ( 3,221 ) — — ( 3,221 )

Dividends declared not paid ($ 0.07 /share)

— — ( 20 ) — — ( 20 )

At October 24, 2020 $ 46,113 $ 326,182 $ 378,438 $ ( 3,957 ) $ 7,873 $ 754,649

Net income — — 29,232 — 357 29,589

Other comprehensive income — — — 1,975 362 2,337

Other comprehensive loss — — — ( 302 ) ( 430 ) ( 732 )

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 181 291 ( 2,700 ) — — ( 2,228 )

Purchases of 22 shares of common stock

Repurchases of 919 shares of common stock

( 919 ) ( 530 ) ( 34,191 ) — — ( 35,640 )

4 unchanged sentences

— — ( 46 ) — — ( 46 )

At January 23, 2021 $ 46,316 $ 333,975 $ 401,117 $ ( 1,982 ) $ 8,592 $ 788,018

(1) No dividends to shareholders were declared or paid during the first quarter of fiscal 2021;

amount includes dividends forfeited from restricted stock awards previously granted.

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.

At July 24, 2021 $ 44,623 $ 332,869 $ 379,862 $ ( 1,823 ) $ 8,918 $ 764,449

(Unaudited, amounts in thousands) Common

2 unchanged sentences

Earnings Accumulated Other

Comprehensive Income

(Loss) Non-Controlling

Comprehensive

Income (Loss) Non-Controlling

Interests Total

3 unchanged sentences

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 132 ( 195 ) ( 1,686 ) — — ( 1,749 )

Repurchases of 391 shares of common stock

( 391 ) ( 3,762 ) ( 8,160 ) — — ( 12,313 )

Stock option and restricted stock expense — 2,047 — — — 2,047

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

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

Dividends declared and paid ($ 0.13 /share)

— — ( 6,112 ) — — ( 6,112 )

Dividends declared and paid (1) — — 5 — ( 8,507 ) ( 8,502 )

At July 25, 2020 $ 45,989 $ 320,067 $ 346,750 $ ( 5,232 ) $ 7,425 $ 714,999

Net income — — 22,593 — 311 22,904

Other comprehensive income — — — 1,260 359 1,619

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 84 1,908 ( 4 ) — — 1,988

Purchases of 335 shares of common stock

( 335 ) ( 1,908 ) ( 8,611 ) — — ( 10,854 )

Stock option and restricted stock expense — 3,032 — — — 3,032

Dividends declared and paid ($ 0.13 /share)

— — ( 6,039 ) — — ( 6,039 )

Dividends declared not paid ($ 0.13 /share)

— — ( 46 ) — — ( 46 )

At October 26, 2019 $ 46,439 $ 314,239 $ 336,989 $ ( 2,468 ) $ 15,543 $ 710,742

Net income — — 34,512 — 204 34,716

Other comprehensive income (loss) — — — 107 ( 162 ) ( 55 )

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 14 281 ( 37 ) — — 258

Purchases of 378 shares of common stock

( 378 ) ( 284 ) ( 11,520 ) — — ( 12,182 )

Stock option and restricted stock expense — 2,528 — — — 2,528

Cumulative effect adjustment for investments, net of tax — — — — — —

Dividends declared and paid ($ 0.14 /share)

— — ( 6,490 ) — — ( 6,490 )

Dividends declared not paid ($ 0.14 /share)

— — ( 35 ) — — ( 35 )

At January 25, 2020 $ 46,075 $ 316,764 $ 353,419 $ ( 2,361 ) $ 15,585 $ 729,482

(1) Cumulative effect adjustment of deferred gains on prior sale/leaseback transactions as a result of adopting ASU 2016-02 .

(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.

(1) No dividends to shareholders were declared or paid during the first quarter of fiscal 2021;

amount includes dividends forfeited from restricted stock awards previously granted.

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

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The interim results reflected in the accompanying financial statements are not necessarily indicative of the results of operations that will occur for the full fiscal year ending April 30, 2022.

At January 23, 2021, we owned preferred shares and warrants to purchase common shares of two privately held companies, both of which are variable interest entities.

At July 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.

As part of our continued response to the impact of COVID-19, on June 4, 2020, we announced our business realignment plan, which included the reduction of the Company's global workforce by approximately 10 % across our manufacturing, retail and corporate locations, including the closure of our Newton, Mississippi upholstery manufacturing facility.

In the first nine months of fiscal 2021, we incurred expenses of $ 3.9 million associated with our business realignment plan, primarily due to severance costs and an impairment of the carrying value of the Newton manufacturing facility.

Subsequent to the announcement of our business realignment plan in the first quarter of fiscal 2021, consumers have continued to allocate more discretionary spending to home furnishings and as a result, the demand for our products has outpaced our production capacity.

In response, we have added manufacturing cells at our Mexico Cut-and-Sew Center, added weekend production shifts to our U.S plants, temporarily re-activated a portion of our Newton, Mississippi upholstery manufacturing facility, and have opened a leased upholstery plant, in San Luis Rio Colorado, Mexico.

During the fourth quarter of fiscal 2020, in response to economic conditions resulting from COVID-19, to strengthen our financial position and maintain liquidity, we proactively borrowed $ 75.0 million from our revolving credit facility.

Given the positive trends in cash flows during the first six months of fiscal 2021, we repaid all of the $ 75.0 million borrowed under our line of credit in the first and second quarters of fiscal 2021.

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

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

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

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

We continue to actively manage the impact of the COVID-19 crisis and there is uncertainty regarding the impact COVID-19 will have on our financial operations in the near and long term.

Accounting pronouncements adopted in fiscal 2022

1 unchanged sentence

ASU Description

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

Measurement of Credit Losses on Financial Instruments

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Accounting pronouncements not yet adopted

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

ASU Description Adoption Date

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

Changes to the Disclosure Requirements for Defined Benefit Plans Fiscal 2022

Changes to the Disclosure Requirements for Defined Benefit Plans

ASU 2019-12 Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes Fiscal 2022

Simplifying the Accounting for Income Taxes

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 less, 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.

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

Cash and Restricted Cash

19 unchanged sentences

Corporate & Other Joybird Joybird

The following is a roll-forward of goodwill for the nine months ended January 23, 2021:

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

(Unaudited, amounts in thousands) Wholesale

3 unchanged sentences

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

Acquisitions — 12,936 — 12,936

Translation adjustment ( 116 ) ( 27 ) — ( 143 )

Balance at January 23, 2021 $ 12,875 $ 107,239 $ 55,446 $ 175,560

Balance at July 24, 2021 $ 12,936 $ 107,289 $ 55,446 $ 175,671

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

7 unchanged sentences

Amortizable over eight -year useful life

The following is a roll-forward of our other intangible assets for the nine months ended January 23, 2021:

The following summarizes changes in our intangible assets:

(Unaudited, amounts in thousands) Indefinite-

2 unchanged sentences

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

Acquisitions — — 2,182 — 2,182

Amortization — ( 200 ) — ( 61 ) ( 261 )

Translation adjustment — — ( 20 ) ( 21 ) ( 41 )

Balance at January 23, 2021 $ 1,155 $ 4,404 $ 22,449 $ 2,589 $ 30,597

Balance at July 24, 2021 $ 1,155 $ 4,005 $ 22,487 $ 2,482 $ 30,129

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

1 unchanged sentence

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.

We also hold other investments consisting of cost-basis preferred shares of two privately-held start-up companies (refer to Note 14, Fair Value Measurements).

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.

24 unchanged sentences

The following table summarizes sales of marketable securities:

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/24/2021 7/25/2020

17 unchanged sentences

Accrued expenses and other current liabilities $ 466,809 $ 449,904

The increase in customer deposits and deferred revenue was primarily driven by higher Retail segment and Joybird written sales in the first nine months of 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 11, Revenue Recognition, for additional details regarding our contract assets and contract liabilities.

Product Warranties

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

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

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

Over 90 % of our warranty liability relates to our Wholesale 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.

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 Joybird products, which are a part of our Corporate and Other results.

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

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

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

A reconciliation of the changes in our product warranty liability is as follows:

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/24/2021 (1)

3 unchanged sentences

Balance as of the end of the period $ 24,433 $ 23,123

$ 22,995 $ 23,345 $ 22,995 $ 23,345

(1) $ 14.3 million recorded in accrued expenses and other current liabilities at both January 23, 2021 and April 25, 2020, while the remainder is in included in other long-term liabilities.

(1) $ 14.8 million and $ 14.4 million is recorded in accrued expenses and other current liabilities as of July 24, 2021 and April 24, 2021, respectively, while the remainder is included in other long-term liabilities.

We recorded accruals during the periods presented in the table above, primarily to reflect charges that relate to warranties issued during the respective periods.

1 unchanged sentence

The table below summarizes the total stock-based compensation expense we recognized for all outstanding grants in our consolidated statement of income:

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/24/2021 7/25/2020

2 unchanged sentences

Total stock-based compensation expense $ 1,776 $ 2,631

(1) Liability-based awards are comprised primarily of deferred stock units granted to non-employee directors.

Compensation expense for these awards is based on the market price of our common stock on the grant date and is remeasured each reporting period based on the market value of our common shares on the last day of the reported period.

Stock Options.

2 unchanged sentences

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

The vesting period for our stock options ranges from one to four years, with accelerated vesting upon retirement.

The vesting period for our stock options ranges from

one to four years , with accelerated vesting upon retirement.

The vesting date for retirement-eligible employees is the later of the date they meet the criteria for retirement or the end of the fiscal year in which the grant was made.

11 unchanged sentences

Restricted Stock .

We granted 121,385 shares of restricted stock to employees during the first nine months of fiscal 2021.

We also have shares of restricted stock outstanding from previous grants.

We granted 112,713 shares of restricted stock to employees during the first quarter of fiscal 2022.

We issue restricted stock at no cost to the employees, and the shares are held in an escrow account until the vesting period ends.

If a recipient’s employment ends during the escrow period (other than as a result of death or disability), the shares are returned at no cost to the Company.

If a recipient's employment ends during the escrow period (other than through death or disability), the shares are returned at no cost to the Company.

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

The weighted-average fair value of the restricted stock awarded in the first nine months of fiscal 2021 was $ 27.63 per share, the market value of our common shares on the date of grant.

The weighted-average fair value of the restricted stock that was awarded in the first quarter of fiscal 2022 was $ 38.52 per share, the market value of our common shares on the date of grant.

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 grant date of the award.

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.

Restricted stock awards vest at 25 % per year, beginning one year from the grant date over a term of four years .

Restricted Stock Units.

During the second quarter of fiscal 2021, we granted 26,192 restricted stock units to our non-employee directors.

These restricted stock units vest when the director leaves the board.

We account for these restricted stock units as equity-based awards because when they vest, they will be settled in shares of our common stock.

We measure and recognize compensation expense for these awards based on the market price of our common shares on the date of the grant, which was $ 32.08 .

Performance Shares.

3 unchanged sentences

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

Grants of performance-based shares during fiscal 2021 were weighted the same as those granted during fiscal 2022 while grants of performance-based shares during fiscal 2020 were weighted ( 80 %) on financial performance and ( 20 %) on market-based conditions.

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

7 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The activity in accumulated other comprehensive income (loss) for the quarters ended January 23, 2021, and January 25, 2020, is as follows:

(Unaudited, 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 income (loss)

Balance at October 24, 2020 $ 997 $ — $ 426 $ ( 5,380 ) $ ( 3,957 )

Changes before reclassifications 1,924 — ( 27 ) — 1,897

Amounts reclassified to net income — — 9 86 95

Tax effect — — 4 ( 21 ) ( 17 )

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated 1,924 — ( 14 ) 65 1,975

Balance at January 23, 2021 $ 2,921 $ — $ 412 $ ( 5,315 ) $ ( 1,982 )

Balance at October 26, 2019 $ 1,345 $ — $ 418 $ ( 4,231 ) $ ( 2,468 )

Changes before reclassifications 50 — 41 — 91

Amounts reclassified to net income — — ( 20 ) 55 35

Tax effect — — ( 5 ) ( 14 ) ( 19 )

Other comprehensive income attributable to La-Z-Boy Incorporated 50 — 16 41 107

Balance at January 25, 2020 $ 1,395 $ — $ 434 $ ( 4,190 ) $ ( 2,361 )

The activity in accumulated other comprehensive income (loss) for the nine months ended January 23, 2021, and January 25, 2020, is as follows:

The activity in accumulated other comprehensive income (loss) for the quarters ended July 24, 2021, and July 25, 2020, is as follows:

(Unaudited, amounts in thousands) Translation adjustment Unrealized gain (loss) on marketable securities Net pension amortization and net actuarial loss Accumulated other comprehensive income (loss)

Balance at April 24, 2021 $ 3,041 $ 370 $ ( 4,932 ) $ ( 1,521 )

3 unchanged sentences

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated ( 812 ) 448 62 ( 302 )

Balance at January 23, 2021 $ 2,921 $ — $ 412 $ ( 5,315 ) $ ( 1,982 )

Balance at July 24, 2021 $ 2,229 $ 818 $ ( 4,870 ) $ ( 1,823 )

Balance at April 25, 2020 $ ( 1,891 ) $ 449 $ ( 5,510 ) $ ( 6,952 )

Changes before reclassifications 1,613 77 — 1,690

Reclassification of certain income tax effects (1) — ( 97 ) 258 ( 708 ) ( 547 )

Amounts reclassified to net income — ( 22 ) 87 65

Tax effect — ( 13 ) ( 22 ) ( 35 )

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated 1,345 ( 87 ) 428 ( 585 ) 1,101

Balance at January 25, 2020 $ 1,395 $ — $ 434 $ ( 4,190 ) $ ( 2,361 )

(1) Income tax effects of the Tax Cuts and Jobs Act are reclassified from AOCI to retained earnings due to adoption of ASU 2018-02.

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.

Other comprehensive income attributable to La-Z-Boy Incorporated 1,613 42 65 1,720

Balance at July 25, 2020 $ ( 278 ) $ 491 $ ( 5,445 ) $ ( 5,232 )

We reclassified the unrealized gain (loss) on marketable securities from accumulated other comprehensive loss to net income through other income (expense), net, and reclassified the net pension amortization to net income through other income (expense), net.

The components of non-controlling interest were as follows:

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/24/2021 7/25/2020

Balance as of the beginning of the period $ 8,648 $ 15,553

Net income 357 204 607 434

Net income (loss) 700 ( 119 )

Other comprehensive income (loss) ( 430 ) 498

13 unchanged sentences

The following table presents our revenue disaggregated by product category and by segment or unit:

Quarter Ended January 23, 2021 Quarter Ended January 25, 2020

Quarter Ended July 24, 2021

(Unaudited, amounts in thousands) Wholesale Retail Corporate

and Other Total Wholesale Retail Corporate

and Other Total

8 unchanged sentences

Consolidated Net Sales $ 524,783

Nine Months Ended January 23, 2021 Nine Months Ended January 25, 2020

Quarter Ended July 25, 2020

(Unaudited, amounts in thousands) Wholesale Retail Corporate

and Other Total Wholesale Retail Corporate

and Other Total

8 unchanged sentences

Consolidated Net Sales $ 285,458

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

(1) Primarily includes revenue for delivery, advertising, royalties, parts, accessories, after-treatment products, surcharges, discounts and 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.

8 unchanged sentences

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

At January 23, 2021 and at April 25, 2020, our consolidated balance sheet included $ 93.9 million and $ 17.1 million, respectively, of contract assets that represent the remaining consideration to which we are entitled prior to fulfilling our performance obligation.

These assets are reported as other current assets in our consolidated balance sheet.

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”).

At January 23, 2021, we included $ 162.6 million of customer deposits and $ 93.9 million of deferred revenues in accrued expenses and other current liabilities on our consolidated balance sheet.

At the beginning of fiscal 2021, we had $ 40.7 million of customer deposits and $ 17.1 million of deferred revenues.

During the quarter and nine months ended January 23, 2021, we recognized revenue of $ 3.4 million and $ 54.9 million, respectively, related to our contract liability balance at April 25, 2020.

The increase in our contract assets and contract liabilities at January 23, 2021 was primarily the result of increased written sales during the first nine months of fiscal 2021 compared with those in the fourth quarter of fiscal 2020.

We receive customer deposits from end consumers before we recognize revenue and in some cases we have the unconditional right to collect the remaining portion of the order price before we fulfill our performance obligation, resulting in a contract asset and a corresponding deferred revenue liability.

In our consolidated balance sheet, customer deposits and deferred revenue (collectively, the "contract liabilities") are reported in accrued expenses and other current liabilities while contract assets are reported as other current assets.

The following presents our contract assets and liabilities:

(Unaudited, amounts in thousands) 7/24/2021 4/24/2021

Contract assets $ 129,723 $ 108,460

Customer deposits $ 183,434 $ 180,766

Deferred revenue 129,723 108,460

Total contract liabilities (1)

$ 313,157 $ 289,226

(1) During the quarter ended July 24, 2021, we recognized revenue of $ 165.5 million, related to our contract liability balance at April 24, 2021.

Segment Information

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 .

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The Wholesale 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.

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

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

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The following table presents sales and operating income (loss) by segment:

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/24/2021 7/25/2020

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Income before income taxes $ 34,084 $ 5,834

Our effective tax rate was 27.7 % and 26.4 % for the third quarter and nine months ended January 23, 2021, respectively, compared with 26.0 % and 25.3 % for the third quarter and nine months ended January 25, 2020, respectively.

Our effective tax rate was 25.9 % for the quarter ended July 24, 2021, compared with 19.8 % for the quarter ended July 25, 2020.

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

The increase in our effective tax rate in fiscal 2022 compared with fiscal 2021 is primarily due to additional tax benefits from stock compensation in fiscal 2021.

Absent discrete adjustments, our effective tax rate would have been 25.3 % and 26.1 % in the first quarter of fiscal 2022 and the first quarter of fiscal 2021, respectively.

Earnings per Share

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Prior to fiscal 2019, we granted restricted stock awards that contained non-forfeitable rights to dividends on unvested shares, and we are required to include these participating securities in calculating our basic earnings per common share, using the two-class method.

Beginning in fiscal 2019 and going forward, the restricted stock awards we granted do not have non-forfeitable rights to dividends and therefore are not considered participating securities.

The dividends on these restricted stock awards are, and will continue to be, held in escrow until the stock awards vest at which time we will pay any accumulated dividends.

The following is a reconciliation of the numerators and denominators we used in our computations of basic and diluted earnings per share:

Quarter Ended Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands, except per share data) 7/24/2021 7/25/2020

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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 nine months ended January 23, 2021, 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 0.3 million shares from the diluted share calculation for the nine months ended January 25, 2020.

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

For the quarter ended July 24, 2021, all outstanding options were included in the diluted share calculation.

For the quarter ended July 25, 2020, we excluded options to purchase 1.5 million shares from the diluted share calculation.

Fair Value Measurements

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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 January 23, 2021 and April 25, 2020.

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

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

At January 23, 2021

At July 24, 2021

Fair Value Measurements

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(1) Certain marketable securities investments are measured at fair value using net asset value per share under the practical expedient methodology.

At January 23, 2021 and April 25, 2020, we held marketable securities intended to enhance returns on our cash and to fund future obligations of our non-qualified defined benefit retirement plan, as well as marketable securities to fund future obligations of our executive deferred compensation plan and our performance compensation retirement plan.

At July 24, 2021 and April 24, 2021, we held marketable securities intended to enhance returns on our cash and to fund future obligations of our non-qualified defined benefit retirement plan, as well as marketable securities to fund future obligations of our executive deferred compensation plan and our performance compensation retirement plan.

We also held other fixed income and cost basis investments.

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.

At January 23, 2021, our Level 3 assets included non-marketable preferred shares and warrants to purchase common shares of two privately held start-up companies.

At July 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 nine months ended January 23, 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 the nine months ended January 23, 2021.

There were no changes to the fair value of our Level 3 assets during the quarter ended July 24, 2021.

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

During the nine months ended January 23, 2021 we recognized an increase in the fair value of our liability of $ 12.5 million, with a $ 10.0 million increase during the third quarter and a $ 2.5 million increase during the second quarter, 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 future revenues and earnings of the Joybird business in fiscal 2021 and fiscal 2023 and is determined using a variation of the income approach, known as the real options method, whereby revenue and earnings were simulated over the earnout periods in a risk-neutral framework using Geometric Brownian Motion.

The contingent consideration fair value is based on revenue and earnings of the Joybird business in fiscal 2021, and future revenue 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 were simulated over the earnout periods in a risk-neutral framework using Geometric Brownian Motion.

For each simulation path, the potential earnout 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 1.0 % for the fiscal 2021 milestone and 1.6 % for the fiscal 2023 milestone.

There were no other changes to the fair value of our Level 3 liabilities during the nine months ended January 23, 2021.

There were no changes to the fair value of our Level 3 liabilities during the quarter ended July 24, 2021.

Based on the achievement of fiscal 2021 performance metrics, we expect to pay $ 10.0 million of the contingent consideration during the second quarter of fiscal 2022.

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

What changed 10-Q

Item 1. Financial Statements