What changed in this filing

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Item 1. Business

2022-06-21 compared with 2021-06-15 · 114 added, 140 removed, 134 unchanged (65% of the section changed)

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In addition, we import, distribute and retail accessories and casegoods (wood) furniture products under the Kincaid ® , American Drew ® , Hammary ® , and Joybird ® tradenames.

As of April 24, 2021, we operated five major manufacturing locations and seven regional distribution centers in the United States and three facilities in Mexico to support our speed-to-market and customization strategy.

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

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

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

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

As of April 30, 2022, our supply chain operations included the following:

• Five major manufacturing locations and nine regional distribution centers in the United States and five 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

• An upholstery manufacturing business in the United Kingdom

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

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

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

We also have contracts with several suppliers in Asia to produce products that support our pure import model for casegoods.

Additionally, we 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:

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• The centerpiece of our retail distribution strategy is our network of 348 La-Z-Boy Furniture Galleries ® stores and 531 La-Z-Boy Comfort Studio ® locations, each dedicated to marketing our La-Z-Boy branded products.

We consider this dedicated space to be "proprietary." We own 159 of the La-Z-Boy Furniture Galleries ® stores.

The remainder of the La-Z-Boy Furniture Galleries ® stores, as well as all 561 La-Z-Boy Comfort Studio ® locations, are independently owned and operated.

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 161 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 531 La-Z-Boy Comfort Studio ® locations are independently owned and operated.

◦ In total, we have approximately 7.6 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded products in North America.

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◦ In total, our proprietary floor space includes approximately 12.5 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.

• Joybird sells product primarily online and has a limited amount of proprietary retail showroom floor space including small format stores in key urban markets.

Our goal is to deliver value to our shareholders over the long term through executing our strategic initiatives.

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

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

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

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

• Wholesale Segment .

Our Wholesale segment consists primarily of three operating segments:

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

American Drew ® , Hammary ® , and Kincaid ® .

The Wholesale segment also includes our international wholesale businesses.

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

and meet the other aggregation criteria for determining reportable segments.

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

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

• Retail Segment.

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

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

Joybird manufactures and sells upholstered furniture such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports and sells casegoods (wood) furniture, such as occasional tables and other accessories.

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

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

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

Our Wholesale segment manufactures and imports upholstered and casegoods (wood) furniture and 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.

Our Retail segment primarily sells upholstered furniture, in addition to some casegoods and other accessories, to end consumers through our company-owned La-Z-Boy Furniture Galleries ® stores.

We have provided additional detailed information regarding our segments and their products in Note 17, Segment Information,

to our consolidated financial statements and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section, both of which are included in this report.

COVID-19 Impact

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

This declaration, along with the continued spread of the disease, prompted federal, state, and local governments throughout the world, including the United States, to implement swift measures in an effort to combat the spread of the virus through social distancing.

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

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

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

Fourth quarter of fiscal 2020

• In accordance with government regulations, temporarily closed all manufacturing and retail operations

• Furloughed approximately 70% of our workforce

• Implemented a temporary 50% salary reduction for our executive team and 25% salary reduction for the rest of our salaried workforce along with the temporary suspension of our 401(k) match and cash compensation for the board of directors

• Temporarily eliminated our June quarterly dividend and suspended our share repurchase program

First quarter of fiscal 2021

• Announced our business realignment plan which included the reduction of our global workforce by about 10% across our manufacturing, retail, and corporate locations, including the closure of our Newton, Mississippi upholstery manufacturing facility

• Re-opened all of our other manufacturing facilities, retail stores, and corporate headquarters along with the implementation of best-practice health and safety protocols

• The majority of our furloughed employees returned to work, temporary salary reductions ended and full base salaries were reinstated for all employees other than the named executive officers

Second quarter of fiscal 2021

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

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

• The board of directors elected to reinstate a regular quarterly dividend to shareholders of $0.07 per share, 50% of the dividend amount paid quarterly prior to the Company's suspension of dividends.

This dividend was paid on September 15, 2020, to shareholders of record as of September 3, 2020.

Third quarter of fiscal 2021

• On November 17, 2020, the board of directors declared a quarterly dividend to shareholders of $0.14 per share.

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

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

• Resumed share repurchases under our previous share repurchase authorization

Fourth quarter of fiscal 2021

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

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

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

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

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

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

The Company continues to evaluate the impact that the CARES Act and other COVID-19-related legislation may have on its results of operations, financial condition and/or financial statement disclosures.

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

We also continue to actively manage our global supply chain and manufacturing operations, which have been adversely impacted with respect to availability and pricing based on uncontrollable factors as well as COVID-19-related constraints on our manufacturing capacity as we continue to prioritize the health and safety of our employees.

The need for, or timing of, any future actions in response to COVID-19 is largely dependent on the mitigation of the spread of the virus and any new variants along with the adoption and effectiveness of vaccines, status of government orders, directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, and consumer demand for our products, all of which are highly uncertain.

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 and company-owned stores due to state and local restrictions 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, and included the closure of our Newton, Mississippi upholstery manufacturing facility.

By the end of the first quarter of fiscal 2021, all retail and manufacturing locations had reopened, and since that time, we have experienced strong written orders 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 high level, our supply chain team continues to demonstrate agility and flexibility to identify ways to scale production capacity.

We have increased capacity by adding manufacturing cells at our Mexico Cut-and-Sew Center, strategically adding second shifts and weekend production shifts to our U.S.

plants when prudent, 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 Torreón, Mexico which began operations at the end of the third quarter of fiscal 2022.

Additionally, in the third quarter of fiscal 2021 we recognized employee retention credits of $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 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

No additional credits were taken during fiscal 2022.

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 continued effectiveness of vaccines, status of government orders, directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, and consumer demand for our products, all of which are highly uncertain.

Raw Materials and Parts

The principal raw materials and parts used for manufacturing are purchased cover (primarily fabrics and leather), polyester batting and polyurethane foam for cushioning and padding, lumber and plywood for frames, steel for motion mechanisms, electrical components for power units and various other metal components for fabrication of product.

We purchase about 40% of our polyurethane foam from one supplier, which has several facilities across the United States that deliver to our plants.

The principal raw materials and parts used for manufacturing that are purchased are cover (primarily fabrics and leather), polyester batting and polyurethane foam for cushioning and padding, lumber and plywood for frames, steel for motion mechanisms, electrical components for power units and various other metal components for fabrication of product.

We purchase most of our polyurethane foam from three suppliers, which have several facilities across the United States or Mexico that deliver to our plants.

We purchase cover from a variety of sources, but we rely on a limited number of major suppliers.

We purchase approximately two-thirds of our cover in a raw state (fabric rolls or leather hides) and cut and sew it into cover in our cut and sew facility in Mexico.

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

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

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

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

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

If any of these suppliers experience financial or other difficulties, we could experience temporary disruptions in our manufacturing process until we obtain alternate suppliers.

We purchase more than half of our cover in a raw state (fabric rolls or leather hides) from suppliers in China, then cut and sew it

into cover in our cut and sew facilities in Mexico.

We purchase the remainder of our cut and sewn leather and fabric kits from five main suppliers primarily from China as well as Vietnam and Haiti.

We use these suppliers primarily for their product design capabilities and to balance our mix of in-sourced and out-sourced production.

If any of these suppliers experience financial or other difficulties, we could experience temporary disruptions in our manufacturing process until we find alternative sources of supply.

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

During fiscal 2022, the prices of materials we use in our upholstery manufacturing process increased, driven by supply chain challenges due to COVID-19, higher demand for raw materials in manufacturing sectors and the home furnishings industry due to an economic sector rotation, and inflationary cost pressure.

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

As we begin fiscal 2023, we expect raw material prices to remain at historically high levels in many categories due to price inflation in our core materials and global supply chain complexities.

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

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

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

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

Finished Goods Imports

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

Imported finished goods represented 6% and 7% of our consolidated sales in fiscal 2022 and 2021, respectively.

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

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

In fiscal 2022, we purchased 63% of this imported product from four suppliers based in Asia.

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

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

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

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

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

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

The prices we paid for these imported products, including associated transportation costs, increased in fiscal 2022 compared with fiscal 2021, primarily due to constrained supply resulting from a combination of COVID-19 lockdowns, primarily in Vietnam, and increased demand across the industry.

Additionally, shipping container availability was constrained throughout fiscal 2022, resulting from an imbalance in container supply driven by COVID-19 disruptions and elevated demand.

Based on continued inflationary pressures and heightened demand for shipping capacity, in fiscal 2023 we anticipate overall product and freight costs associated with our finished goods imports to increase.

Seasonal Business

We believe that the demand for furniture generally reflects sensitivity to overall economic conditions, including consumer confidence, housing market conditions and unemployment rates.

For our wholesale businesses, the fourth quarter is historically the seasonally highest-volume sales quarter.

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

For our wholesale businesses, the fourth quarter has historically had the highest volume of delivered sales relative to other quarters.

For our retail and e-commerce businesses, which includes our company-owned retail stores and Joybird, the third quarter typically has the highest volume of delivered sales relative to other quarters.

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

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

Accordingly, for our wholesale business, the first quarter is usually the Company's weakest in terms of sales and earnings.

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

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

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

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

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

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

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

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

Accordingly, for our wholesale business, the first quarter is usually the Company's weakest quarter in terms of sales and earnings.

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

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

Since our retail locations and manufacturing facilities reopened by the end of the first quarter of fiscal 2021, we have experienced heightened demand and in response, we took several actions to increase our production capacity throughout the last two fiscal years.

As a result of these actions, coupled with the additional week in the fourth quarter of fiscal 2022, our wholesale and retail businesses both experienced their largest sales volume in the fourth quarter of fiscal 2022.

Further, due to our record backlog as of the end of fiscal 2022, we also do not anticipate typical seasonal trends until the second half of fiscal 2023.

We do not expect that this impact is reflective of any long term seasonal trends in the furniture industry or is an indicator that seasonal trends are permanently changing for our wholesale or retail businesses.

Economic Cycle and Purchasing Cycle

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

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

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

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

As a result of COVID-19, beginning in the second quarter of fiscal 2021, we experienced heightened demand, as more discretionary spending was allocated to the home furnishings industry which carried forward through much of fiscal 2022.

However, as various COVID-related restrictions were lifted near the end of fiscal 2022, and given the current geopolitical climate and rising inflation, we are unable to predict how long this demand will last or to what extent these factors may impact the economic and purchasing cycle for our products in the short and long term.

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

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

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

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

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

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

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

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

Our company-owned La-Z-Boy Furniture Galleries ® stores have finished goods inventory at the stores for display purposes.

Our Joybird business maintains raw materials and work-in-process inventory at its manufacturing location.

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

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

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

Our inventory increased $77.1 million as of year end fiscal 2022 compared with year end fiscal 2021 primarily to support increased sales demand and manufacturing capacity and to reduce the impact associated with volatility in raw material availability, as well as due to the higher cost of materials and other input costs.

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

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Our accounts receivable increased $44.4 million as of year end fiscal 2022 compared with year end fiscal 2021.

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

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

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

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

The increase in accounts receivable was primarily due to higher fourth quarter sales in fiscal 2022 compared with the same period a year ago driven by pricing and surcharge actions taken in response to rising manufacturing costs and higher overall volume.

Additionally, our allowance for receivable credit losses was lower at the end of fiscal 2022 compared with the end of fiscal 2021 reflecting strong collection trends.

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

Accounts Payable:

Our accounts payable increased $9.9 million as of year end fiscal 2022 compared with year end fiscal 2021, primarily due to higher inventory purchases as we continue to scale production to meet increased demand.

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

Customer Deposits:

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

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

Customer deposits increased $2.5 million as of fiscal year end 2022 compared with fiscal year end 2021, primarily due to higher written Retail and Joybird sales volume throughout the year.

Our wholesale customers are furniture retailers.

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

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

We consider this dedicated space to be "proprietary." For our Wholesale segment, our fiscal 2022 customer mix based on sales was approximately 56% proprietary, 11% major dealers, such as Berkshire Hathaway, Sofa Carpet Specialist (SCS), Slumberland Furniture and Mathis Brothers, and 33% other independent retailers.

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

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In addition, we sell product through proprietary space within other retail furniture stores, primarily La-Z-Boy Comfort Studio ® locations, England Custom Comfort Center locations, Kincaid Shoppes, and other international locations.

Additionally, our Joybird business, which sells product primarily online to end consumers through its website, www.joybird.com, also has a limited amount of proprietary retail floor space that it uses as a showroom to develop its brand.

Additionally, our Joybird business, which sells product primarily online to end consumers through its website, www.joybird.com, also has a limited amount of proprietary retail showroom floor space in small format stores in key urban markets.

Maintaining, updating, and, when appropriate, expanding our proprietary distribution network is a key part of our overall sales and marketing strategy.

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Orders and Backlog

We typically build upholstery units based on specific dealer orders, either for dealer stock or to fill consumers' custom orders.

We typically build upholstery units based on specific orders, either for dealer stock or to fill consumers' custom orders.

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

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

We define backlog as any written order that has not yet been delivered, whether to an independent furniture retailer, an independently-owned La-Z-Boy Furniture Galleries ® store, or the end consumer through our company-owned La-Z-Boy Furniture Galleries ® stores.

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

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

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

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

Our wholesale backlog was $697.2 million as of April 30, 2022, compared with $616.7 million as of April 24, 2021.

The increase in our backlog was primarily due to pricing actions taken to mitigate the impact of rising raw material and freight costs, along with a shift in product mix, as higher production capacity kept pace with written order demand during fiscal 2022.

Competitive Conditions

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Although digital retailers operate with lower overhead costs than a brick-and-mortar retailer, customer acquisition costs and advertising spend is typically much higher.

Companies such as Costco, Home Depot, IKEA, Sam's Club, Target, Wal-Mart, and others, also offer products that compete with some of our product lines.

Department stores and big box retailers with an online presence also offer products that compete with some of our product lines.

The home furnishings industry competes primarily on the basis of product styling and quality, customer service (product availability and delivery), price, and location.

We compete primarily by emphasizing our brand and the value, comfort, quality, and styling of our products.

We compete primarily by emphasizing our brand and the comfort, quality, styling and value of our products.

In addition, we remain committed to innovation while striving to provide outstanding customer service, exceptional dealer support, and efficient on-time delivery.

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

Competitors include:

Some competitors include:

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

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Compliance with Environmental Regulations

Our manufacturing operations involve the use and disposal of certain substances regulated under environmental protection laws and, from time to time, we may be involved in a small number of remediation actions and site investigations concerning these substances.

Our manufacturing operations involve the use and disposal of certain substances regulated under environmental protection laws and regulations and, from time to time, we may be involved in a small number of remediation actions and site investigations concerning these substances.

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

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We employed approximately 12,800 full-time equivalent employees as of April 30, 2022, compared with approximately 11,500 employees at the end of fiscal 2021.

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

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

The increase in headcount was primarily due to an increase in production and capacity at our Mexico manufacturing facilities to meet demand, along with our acquisition of the U.K.

manufacturing business in the third quarter of fiscal 2022.

As of April 30, 2022, we employed approximately 10,500 employees in our Wholesale segment, 1,500 in our Retail segment, 500 in our Joybird business, with the remaining employees being corporate personnel.

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

Culture and Values

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

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

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

Purpose and Values

At La-Z-Boy, we believe in the transformational power of comfort.

We provide an excellent consumer experience, create high quality products and empower people to transform rooms, homes and communities with comfort.

Our teams are committed to our core values of Courage, Curiosity and Compassion.

We are not afraid to try new things, we are relentless in our mission to understand our business and consumers, and we honor our almost 100-year legacy that was built on family.

Sustainability

As we build the La-Z-Boy of tomorrow, our goal is to make the world a better place through the transformational power of comfort.

Aligned with our core values, we embrace curiosity for sustainable design, operate with compassion for a sustainable planet, and empower courage for a sustainable culture.

Sustainable Design .

We embrace curiosity and our inquisitiveness helps us identify innovative opportunities for our products that uphold our commitment to quality, rely on sustainable materials and drive best practices in our supplier partnerships.

Sustainable Planet .

We strive to operate La-Z-Boy with compassion for the environment.

We are committed to responsible stewardship and integrate environmentally sound and sustainable practices into our daily decisions.

We work to reduce emissions, increase recycling efforts, and conserve water in all areas of our business.

Sustainable Culture .

At La-Z-Boy, we support our employees so they can make courageous choices and help our business thrive.

Our people practices are linked to our sustainability initiatives.

The sustainable culture we’re building empowers employees to do what is right in the workplace and in our communities.

From supporting our employees’ careers and providing a safe and ethical work environment to giving back to the communities where we live and work, people are always at the heart of our brand.

Diversity, Inclusion and Belonging

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

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

We recognize that our employees’ unique backgrounds, experiences and perspectives enable us to create the optimal work environment and deliver on our mission.

Aligning with our purpose and values, we intend to continue to be curious, courageous and compassionate in our efforts to foster an environment that attracts the best talent, values diversity of life experiences and perspectives and encourages innovation to accelerate the transformational power of comfort.

Our diversity, inclusion and belonging initiatives include:

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

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

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

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

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

• Expanding our support of employee resource groups, which include groups focused on Multicultural, Pride and Working Parents.

Our ERG’s provide learning and mentorship experiences for our diverse employees, supporting our objective of creating diversity awareness across our organization, and helping our employees use their collective voices to positively impact our Company and the communities in which we operate our business and live;

• Revisiting, assessing and implementing changes to our processes, in an effort to continue mitigating unconscious bias and enhancing our inclusion recruiting strategy;

• Enhancing and expanding our supplier inclusion network;

• Expanding inclusive leaders training throughout the organization;

• Creating space for individuals to share their perspective, values and voice to our global population through employee written articles, our internal podcast, and multiple video series on our internal communications platform and;

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

Safety and Health

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

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

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

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

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

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

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

We prioritize the health and safety of our employees, partners and the people in communities where we operate.

As the largest industrial manufacturer in many regions where we do business, we recognize our potential impact on surrounding communities.

We actively partner with local agencies in these communities to build proactive emergency and contingency plans for any major incidents that may occur at our facilities and any natural disasters that may impact the region.

We work to forge relationships with agencies, such as the Occupational Safety and Health Administration (OSHA), to understand how we can best adhere to health and safety practices.

During the COVID-19 pandemic, we worked with county health departments to approve our return-to-office and employee safety protocols before bringing employees back to our manufacturing plants.

Additionally, the National Safety Council (NSC) has recognized La-Z-Boy with hundreds of awards for safety performance and leadership throughout the Company’s history.

This includes our recognition as a five-time recipient of the Corporate Safety Culture Award and the Green Cross for Safety Excellence award, which recognizes only one corporation each year for outstanding achievements in safety.

Community Giving

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

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

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

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

Throughout the COVID-19 pandemic, we have been committed to helping those in communities where we operate, including manufacturing masks and medical gowns during the early stages of the pandemic.

During fiscal 2022, we hosted multiple on-site clinics at several of our North American locations to keep our communities safe and these programs were critical in providing vaccine access.

For instance, our clinic in Mexico provided vaccine access to more than 12,000 community members outside of our workforce and this earned us recognition from Canacintra, an organization in Mexico representing the industrial sector and its employees.

Internet Availability

Our Forms 10-K, 10-Q, 8-K, proxy statements on Schedule 14A, and amendments to those reports are available free of charge through links on our internet website, www.la-z-boy.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

Copies of any materials we file or furnish to the SEC can also be obtained free of charge through the SEC's website at www.sec.gov.

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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 1. Business