LA-Z-BOY INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We have prepared this Management’s Discussion and Analysis as an aid to understanding our financial results. It should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes to Consolidated Financial Statements. After a cautionary note regarding forward-looking statements, we begin with an introduction to our key businesses and then provide discussions of our results of operations, liquidity and capital resources, and critical accounting policies. Cautionary Note Regarding Forward-Looking Statements La-Z-Boy Incorporated and its subsidiaries (individually and collectively, "we," "our," "us," "La-Z-Boy" or the "Company") make "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, business and industry and the effect of the novel coronavirus ("COVID-19") pandemic on our business operations and financial results. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may include words such as "anticipates," "believes," "continues," "estimates," "expects," "feels," "forecasts," "hopes," "intends," "plans," "projects," "likely," "seeks," "short-term," "non-recurring," "one-time," "outlook," "target," "unusual," or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," or "may." A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak to our views only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control, such as the continuing and developing impact of, and uncertainty caused by, the COVID-19 pandemic. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial performance. Our actual future results and trends may differ materially from those we anticipate depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our Annual Report for the year ended April 24, 2021, under Item 1A, "Risk Factors" and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in our Annual Report or any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason. Introduction Our Business We are the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the United States . The La-Z-Boy Furniture Galleries ® stores retail network is the third largest retailer of single-branded furniture in the United States . We manufacture, market, import, export, distribute and retail upholstery furniture products under the La-Z-Boy ® , England, Kincaid ® , and Joybird ® tradenames. In addition, we import, distribute and retail accessories and casegoods (wood) furniture products under the Kincaid ® , American Drew ® , Hammary ® , and Joybird ® tradenames. As of July 24, 2021, our supply chain operations included the following: • Five major manufacturing locations and seven regional distribution centers in the United States and four facilities in Mexico to support our speed-to-market and customization strategy • A logistics company that distributes a portion of our products in the United States • A wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland • A global trading company in Hong Kong which helps us manage our Asian supply chain by establishing and maintaining relationships with our Asian suppliers, as well as identifying efficiencies and savings opportunities 19 Table of Contents We also participate in two consolidated joint ventures in Thailand that support our international businesses: one that operates a manufacturing facility and another that operates a wholesale sales office. Additionally, we also have contracts with several suppliers in Asia to produce products that support our pure import model for casegoods. We sell our products through multiple channels: to furniture retailers or distributors in the United States, Canada, and approximately 65 other countries, including the United Kingdom, China, Australia, South Korea and New Zealand, directly to consumers through retail stores that we own and operate, and through our websites, www.la-z-boy.com and www.joybird.com. • The centerpiece of our retail distribution strategy is our network of 352 La-Z-Boy Furniture Galleries ® stores and 560 La-Z-Boy Comfort Studio ® locations, each dedicated to marketing our La-Z-Boy branded products. We consider this dedicated space to be “proprietary.” ◦ La-Z-Boy Furniture Galleries ® stores help consumers furnish their homes by combining the style, comfort, and quality of La-Z-Boy furniture with our available design services. We own 157 of the La-Z-Boy Furniture Galleries ® stores, while the remainder are independently owned and operated. ◦ La-Z-Boy Comfort Studio ® locations are defined spaces within larger independent retailers that are dedicated to displaying and selling La-Z-Boy branded products. All 560 La-Z-Boy Comfort Studio ® locations are independently owned and operated. ◦ In total, we have approximately 7.8 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded products in North America. ◦ We also have approximately 3.0 million square feet of floor space outside of the United States and Canada dedicated to selling La-Z-Boy branded products. • Our other brands, England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets, with slightly over half of Hammary’s sales originating through the La-Z-Boy Furniture Galleries ® store network. ◦ Kincaid and England have their own dedicated proprietary in-store programs with 633 outlets and approximately 2.0 million square feet of proprietary floor space. ◦ In total, our proprietary floor space includes approximately 12.8 million square feet worldwide. • Joybird sells product primarily online and has a limited amount of proprietary retail showroom floor space it uses to develop its brand. Our goal is to deliver value to our shareholders over the long term through executing our strategic initiatives. The foundation of our strategic initiatives is driving profitable sales growth in all areas of our business. We plan to drive growth in the following ways: • Our branded distribution channels, which include the La-Z-Boy Furniture Galleries ® store network and the La-Z-Boy Comfort Studio ® locations, our store-within-a-store format . We expect this initiative to generate growth in our Retail segment through an increased company-owned store count and in our Wholesale segment as our proprietary distribution network expands. We are not only focused on growing the number of locations, but also on upgrading existing store locations to our new concept designs. • Our company-owned retail business. We are growing this business by increasing same-store sales through improved execution at the store level and by acquiring existing La-Z-Boy Furniture Galleries ® stores and opening new La-Z-Boy Furniture Galleries ® stores, primarily in markets that can be serviced through our regional distribution centers, where we see opportunity for growth, or where we believe we have opportunities for further market penetration. • Our unique multi-channel distribution network . In addition to our branded distribution channels, nearly 2,000 other dealers sell La-Z-Boy products, providing us the benefit of multi-channel distribution. These outlets include some of the best-known names in the industry, including Slumberland, Nebraska Furniture Mart, Mathis Brothers and Raymour & Flanagan. Our other brands in the Wholesale segment, England, American Drew, Hammary, and Kincaid, enjoy distribution through many of the same outlets. We believe there is significant growth potential for our brands through these retail channels. • Our on-trend products including stationary upholstered furniture featured in our Live Life Comfortably ® marketing campaign . While we are known for our iconic recliners, they account for less than half of our sales in dollars, and we 20 Table of Contents believe we have the potential to expand sales of our other products. To stimulate growth, our Live Life Comfortably ® marketing campaign features celebrity brand ambassador Kristen Bell and focuses on expanding our digital marketing and e-commerce capabilities to build traffic across our multiple digital and physical properties. As a millennial actress and social media influencer, Kristen injects youthful style and sensibility into our marketing campaign, which enhances the appeal of our brand with a younger customer base. Further, we are driving change throughout our digital platforms to improve the user experience, with a specific focus on the ease with which customers browse through our broad product assortment, customize products to their liking, find stores to make a purchase, or purchase at www.la-z-boy.com. • Our innovative products, including stain-resistant iClean™ and eco-friendly Conserve™ fabrics and our power products, some of which include a wireless hand-held remote, dual mechanisms and articulating headrests . Our innovation, duo ® , is a revolutionary product line that features the look of stationary furniture with the power to recline at the push of a button. We are committed to innovation throughout our business, and to support these efforts we opened our new state-of-the-art Innovation Center in fiscal 2019 at our Dayton, Tennessee campus. • Our multi-faceted online strategy to participate in and leverage the growth of online furniture sales . During fiscal 2019, we purchased Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture, which positions us for growth in the ever-changing online selling environment and allows us to better reach millennial and Gen X consumers and leverage our supply chain assets. In addition, we continue to increase online sales of La-Z-Boy furniture through la-z-boy.com and other digital players. Our reportable operating segments include the Wholesale segment and the Retail segment. • 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 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 bedroom sets, dining room sets, entertainment centers and occasional pieces. The Wholesale segment sells directly to La-Z-Boy Furniture Galleries ® stores, operators of La-Z-Boy Comfort Studio ® locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers. • Retail Segment . Our Retail segment consists of one operating segment comprised of our 157 company-owned La-Z-Boy Furniture Galleries ® stores. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other accessories, to end consumers through these stores. • Corporate & Other. 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 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. Impact of COVID-19 We have been and continue to be impacted by the COVID-19 pandemic. Specifically, beginning in the fourth quarter of fiscal 2020, the temporary closure of our manufacturing facilities, state and local restrictions limiting our ability to deliver product to consumers, and the temporary closure of our company-owned stores consistent with most retailers across North America negatively impacted our financial results. In response to the financial impacts of the pandemic, beginning at the end of fiscal 2020, we took several actions to conserve cash in the near term and during the first quarter of fiscal 2021, we announced our business realignment plan, which included the reduction of our global workforce by about 10% across our manufacturing, retail, and corporate locations, including the closure of our Newton, Mississippi upholstery manufacturing facility. 21 Table of Contents By the end of the first quarter of fiscal 2021, all retail and manufacturing locations had reopened, and since that time, we have experienced a strong pace of written order trends as consumers continue to allocate more discretionary spending to home furnishings. In response to demand for our products outpacing our production capacity and with backlog still at a record level, our supply chain team continues to demonstrate agility and flexibility to identify ways to increase production capacity. We have increased capacity by adding manufacturing cells at our Mexico Cut-and-Sew Center, adding second shifts and weekend production shifts to our U.S. plants, and temporarily reactivating a portion of our Newton, Mississippi upholstery manufacturing facility. In addition, we opened a leased upholstery assembly plant in San Luis Rio Colorado, Mexico and a leased sewing facility in Parras, Mexico during the third quarter of fiscal 2021 and the first quarter of fiscal 2022, respectively. Further, during the first quarter of fiscal 2022, we signed a lease to open additional manufacturing capacity in Torreon, Mexico. We continue to actively manage the impact of the COVID-19 crisis as we face continued uncertainty regarding the impact COVID-19 will have on our financial operations in the near and long term. We also continue to actively manage our global supply chain and manufacturing operations, which have been adversely impacted with respect to availability and pricing of raw materials and freight based on uncontrollable factors as well as COVID-19 related constraints on our manufacturing capacity as we continue to prioritize the health and safety of our employees. The need for, or timing of, any future actions in response to COVID-19 is largely dependent on the mitigation of the spread of the virus along with the adoption and effectiveness of vaccines, status of government orders, directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, and consumer demand for our products, all of which are highly uncertain. Results of Operations Fiscal 2022 First Quarter Compared with Fiscal 2021 First Quarter La-Z-Boy Incorporated Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/24/2021 7/25/2020 % Change Sales $ 524,783 $ 285,458 83.8% Operating income 34,371 4,325 694.7% Operating margin 6.5% 1.5% Sales Consolidated sales increased 83.8%, or $239.3 million in the first quarter of fiscal 2022, compared with the same period a year ago. The sales increase was primarily due to the prior year impact of COVID-19 which caused temporary store closures in the latter part of the fourth quarter of fiscal 2020 and a phased reopening in the first two months of fiscal 2021, temporary closures of our manufacturing facilities, and a negative impact on our ability to deliver product to customers. Since retail and manufacturing locations reopened by the end of the first quarter of fiscal 2021, we have experienced a strong pace of written order trends, and in response we have continued to scale and increase our manufacturing capacity to meet demand. The sustained increase in demand for our products, our strong execution at the store level, and the continued expansion of our manufacturing capacity contributed to record sales in the first quarter of fiscal 2022. Operating Margin Operating margin, which is calculated as operating income as a percentage of sales, increased 500 basis points in the first quarter of fiscal 2021, compared with the same period a year ago. • Gross margin, which is calculated as gross profit as a percentage of sales, decreased 230 basis points in the first quarter of fiscal 2022, compared with the same period a year ago. ◦ Availability challenges in the global supply chain caused by COVID-19, as well as an increase in demand, drove higher raw material and freight costs resulting in a 580 basis point decline in gross margin. ◦ The expansion of our manufacturing capacity in response to the increase in written order demand led to higher production costs and labor challenges resulting in a 300 basis point decline in gross margin. ◦ Changes in our consolidated mix improved gross margin by 220 basis points, driven by growth of our Retail segment and Joybird, which have higher gross margins than our Wholesale segment. 22 Table of Contents ◦ Partially offsetting the declines above, the remaining benefit was primarily due to an improved gross margin at Joybird, the result of higher sales volume, product pricing actions taken, an increase in average ticket, favorable product mix, and synergies due to its integration into our broader supply chain operations. • Selling, general and administrative ("SG&A") expenses as a percentage of sales decreased 730 basis points in the first quarter of fiscal 2022, compared with the same period a year ago, primarily due to higher sales volume relative to fixed costs, mainly in the Retail segment. Additionally, the first quarter of fiscal 2021 included expenses resulting from our business realignment plan noted above, the absence of which led to a 90 basis point improvement in the first quarter of fiscal 2022. We discuss each segment’s results in the following section. Wholesale Segment Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/24/2021 7/25/2020 % Change Sales $ 393,499 $ 223,573 76.0% Operating income 18,331 17,940 2.2% Operating margin 4.7% 8.0% Sales The Wholesale segment’s sales increased $169.9 million in the first quarter of fiscal 2022, compared with the same period a year ago, led primarily by an increase in delivered unit volume. At the beginning of fiscal 2021, sales were adversely affected due to the impact of COVID-19, which caused temporary store and manufacturing closures in the latter part of the fourth quarter of fiscal 2020 and a phased reopening in the first two months of fiscal 2021. Since reopening by the end of the first quarter of fiscal 2021, we have continued to expand and scale our manufacturing capabilities in response to significant increases in order demand. In addition to higher volume, sales in the first quarter of fiscal 2022 benefited from favorable pricing actions taken in response to rising manufacturing costs. Operating Margin Operating margin decreased 330 basis points in the first quarter of fiscal 2022, compared with the same period a year ago. • Gross margin decreased 530 basis points in the first quarter of fiscal 2022, compared with the same period a year ago. ◦ Rising raw material and freight costs due to higher demand and global supply chain challenges resulted in a 650 basis point decrease in gross margin. ◦ Continued manufacturing capacity expansion, in response to significant increases in written order demand, drove an increase in production costs and labor challenges resulting in a 350 basis point decrease in gross margin. ◦ Partially offsetting these decreases, gross margin benefited from higher delivered sales volume and pricing actions taken in response to rising manufacturing costs. • SG&A expense as a percentage of sales decreased 200 basis points in the first quarter of fiscal 2022, compared with the same period a year ago, primarily due to higher sales volume relative to fixed costs combined with higher SG&A expenses in the first quarter of fiscal 2021 resulting from our business realignment actions noted above. Retail Segment Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/24/2021 7/25/2020 % Change Sales $ 181,847 $ 91,137 99.5% Operating income 20,438 (6,627) N/M Operating margin 11.2% (7.3)% N/M - Not meaningful 23 Table of Contents Sales The Retail segment’s sales increased $90.7 million in the first quarter of fiscal 2022, compared with the same period a year ago, led by a 92.2% increase in delivered same-store sales. The first quarter of fiscal 2021 was negatively impacted by COVID-19 related closures which began in the fourth quarter of fiscal 2020 followed by a phased reopening of our retail locations through the first two months of fiscal 2021. Since the reopening of all our retail stores, we have continued to experience strong sales trends. In the first quarter of fiscal 2022, written same-store sales increased 21.9% compared with the same period last year, driven by sustained higher demand for products in the home furnishings category and strong execution at the store level. Same-store delivered sales include the sales of all currently active stores which have been open for each comparable period. Operating Margin Operating margin increased 1,850 basis points in the first quarter of fiscal 2022, compared with the same period a year ago. • Gross margin increased 70 basis points in the first quarter of fiscal 2022, compared with the same period a year ago, primarily due to product mix and the impact COVID-19 had in the prior year. • SG&A expense as a percentage of sales decreased 1,780 basis points in the first quarter of fiscal 2022, compared with the same period a year ago, primarily due to higher delivered sales relative to fixed costs, mainly occupancy and selling expenses. Corporate and Other Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/24/2021 7/25/2020 % Change Sales $ 43,634 $ 16,741 160.6% Intercompany eliminations (94,197) (45,993) (104.8)% Operating loss (4,398) (6,988) 37.1% Sales Sales increased $26.9 million in the first quarter of fiscal 2022, compared with the same period a year ago, led by Joybird sales which increased $25.2 million to $38.7 million. The increase was primarily due to increased demand for products in the home furnishings category, investments in marketing and website improvements which increased online conversion, and added retail store locations. Further, sales in the first quarter of fiscal 2021 were negatively impacted by COVID-19, although to a lesser extent than our other retail businesses as Joybird primarily operates in the online, direct-to-consumer marketplace. Despite this, written sales for Joybird were still 30.5% higher in the first quarter of fiscal 2022, compared with the same period a year ago. Intercompany eliminations increased in the first quarter of fiscal 2022 compared with the same period a year ago due to higher sales from our Wholesale segment to our Retail segment, driven by higher sales in the Retail segment compared with the depressed sales in the prior year due to closures related to COVID-19. Operating Loss Our Corporate and Other operating loss decreased $2.6 million in the first quarter of fiscal 2022, compared with the same period a year ago. The decrease was primarily due to Joybird's positive operating profits partially offset by higher investments in our information technology infrastructure. Joybird's positive operating profits, compared with a loss in the first quarter of fiscal 2021, are primarily due to higher sales volume, increases in gross margin due to product pricing actions taken, an increase in average ticket and favorable product mix. Joybird has achieved sustained structural profitability and we will continue to invest in marketing to expand awareness and customer acquisition to drive growth. Non-Operating Income (Expense) Other Income (Expense), Net Other income (expense), net was $0.1 million of expense in the first quarter of fiscal 2022 compared with $1.5 million of income in the first quarter of fiscal 2021. The income in fiscal 2021 was primarily due to unrealized gains on investments and gains on company-owned life insurance. 24 Table of Contents Income Taxes 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. Liquidity and Capital Resources Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash from operations, and amounts available under our credit facility. We believe these sources remain adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, and fulfill other cash requirements for day-to-day operations and capital expenditures. We had cash, cash equivalents and restricted cash of $336.2 million at July 24, 2021, compared with $394.7 million at April 24, 2021. In addition, we had investments to enhance our returns on cash of $32.5 million at both July 24, 2021 and April 24, 2021. We maintain a revolving credit facility secured primarily by our accounts receivable, inventory, cash deposit and securities accounts. Availability under the credit 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 to extend 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 credit line is less than certain thresholds. At July 24, 2021, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the agreement, and had excess availability of $60.7 million of the $150.0 million credit commitment. Excess availability was lower than the total remaining credit commitment primarily due to higher reserves required due to our high balance of customer deposits. Capital expenditures for the first quarter of fiscal 2022 were $19.3 million compared with $9.8 million during the first quarter of fiscal 2021. Capital expenditures in the first quarter of fiscal 2022 included improvements to our retail stores, plant upgrades to our upholstery manufacturing and distribution facilities, new upholstery manufacturing capacity in Mexico, and technology upgrades. We have no material contractual commitments outstanding for future capital expenditures. We expect capital expenditures to be in the range of $65 to $75 million for fiscal 2022, which will include improvements to a number of our retail stores, plant upgrades to our upholstery manufacturing and distribution facilities in Neosho, Missouri, new upholstery manufacturing capacity in Mexico, and technology upgrades. Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. We expect the board to continue declaring regular quarterly cash dividends for the foreseeable future, but it may discontinue doing so at any time. Our board of directors has authorized the repurchase of company stock. As of July 24, 2021, 2.5 million shares remained available for repurchase pursuant to this authorization. We spent $35.6 million in the first quarter of fiscal 2022 to repurchase 0.9 million shares. On August 17, 2021, the board of directors approved a 6.5 million increase in its share repurchase authorization, which when combined with the 2.5 million shares remaining at the end of the first quarter of fiscal 2022, represents approximately 20% of shares outstanding. The following table illustrates the main components of our cash flows: Quarter Ended (Unaudited, amounts in thousands) 7/24/2021 7/25/2020 Cash Flows Provided By (Used For) Net cash provided by operating activities $ 6,163 $ 106,300 Net cash provided by (used for) investing activities (19,519) 1,248 Net cash used for financing activities (44,675) (35,706) Exchange rate changes (446) 1,310 Change in cash, cash equivalents and restricted cash $ (58,477) $ 73,152 25 Table of Contents Operating Activities During the first quarter of fiscal 2022, net cash provided by operating activities was $6.2 million. Our cash provided by operating activities was primarily attributable to net income generated during the period partially offset by an increase in working capital. The increase in working capital was led by higher inventory to ensure input material availability to support increased sales demand and manufacturing capacity. Investing Activities During the first quarter of fiscal 2022, net cash used for investing activities was $19.5 million, primarily due to c ash used for capital expenditures in the period of $19.3 million, which primarily related to spending on retail store improvements, plant upgrades to our upholstery manufacturing and distribution facilities, new upholstery manufacturing capacity in Mexico, and technology upgrades. Financing Activities During the first quarter of fiscal 2022, net cash used for financing activities was $44.7 million, primarily due to $35.6 million used to repurchase our common stock pursuant to our share repurchase authorization and $6.8 million paid to our shareholders in quarterly dividends. Exchange Rate Changes Due to changes in exchange rates, our cash, cash equivalents, and restricted cash decreased by $0.4 million from the end of fiscal year 2021 to the end of the first quarter of fiscal 2022. These changes impacted our cash balances held in Canada, Thailand, and the United Kingdom. Other During the first quarter of fiscal 2022, there were no material changes to the information about our contractual obligations and commitments shown in the table contained in our Annual Report on Form 10-K for the fiscal year ended April 24, 2021. We do not expect our continuing compliance with existing federal, state and local statutes dealing with protection of the environment to have a material effect on our capital expenditures, earnings, competitive position or liquidity. Critical Accounting Policies We disclosed our critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended April 24, 2021. There were no material changes to our critical accounting policies during the quarter ended July 24, 2021. Recent Accounting Pronouncements See Note 1, Basis of Presentation, to the consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting standards and other new accounting standards. 26 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the first quarter of fiscal 2022, there were no material changes from the information contained in Item 7A of our Annual Report on Form 10-K for the fiscal year ended April 24, 2021.