What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-06-21 compared with 2021-06-15 · 218 added, 245 removed, 1028 unchanged (31% of the section changed)

18 unchanged sentences

Opinions on the Financial Statements and Internal Control over Financial Reporting

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

We have audited the accompanying consolidated balance sheet of La-Z-Boy Incorporated and its subsidiaries (the “Company”) as of April 30, 2022 and April 24, 2021, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended April 30, 2022, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended April 30, 2022 appearing under Item 16 (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Interest income 1,338 1,101 2,785

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

Other income (expense), net ( 1,708 ) 9,466 ( 5,083 )

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Net unrealized gains (losses) on marketable securities, net of tax ( 668 ) ( 79 ) 185

Pension termination, net of tax — — 23,807

Net pension amortization and actuarial gain (loss), net of tax 1,394 578 ( 1,197 )

19 unchanged sentences

Deferred income taxes – long-term 10,632 11,915

Right of use lease asset 343,800 318,647

Right of use lease assets 405,755 343,800

Other long-term assets, net 82,207 79,008

1 unchanged sentence

Current liabilities

Short-term borrowings $ — $ 75,000

Accounts payable 104,025 94,152

Lease liability, short-term 67,614 64,376

Lease liabilities, short-term 75,271 67,614

Accrued expenses and other current liabilities 496,393 449,904

Total current liabilities 675,689 611,670

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

Lease liabilities, long-term 354,843 295,023

Other long-term liabilities 81,935 97,483

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Adjustments to reconcile net income to cash provided by operating activities

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

(Gain)/loss on disposal of assets ( 13,657 ) ( 37 ) ( 10,068 )

Gain on sale of investments ( 478 ) ( 954 ) ( 693 )

1 unchanged sentence

Depreciation and amortization 39,771 33,021 31,192

Amortization of right-of-use lease assets 72,942 65,571 67,673

Equity-based compensation expense 11,858 12,671 8,371

Goodwill impairment — — 26,862

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

Pension plan contributions — — ( 7,000 )

Pension termination refund — — ( 1,900 )

Change in deferred taxes 1,022 8,790 719

1 unchanged sentence

Change in inventories ( 72,022 ) ( 40,727 ) 14,900

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

Change in other assets ( 16,232 ) 2,926 7,039

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Stock issued for stock and employee benefit plans, net of shares withheld for taxes ( 1,818 ) 9,030 3,029

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

Repurchases of common stock ( 90,645 ) ( 44,202 ) ( 43,369 )

Dividends paid to shareholders ( 27,717 ) ( 16,542 ) ( 25,091 )

Dividends paid to minority interest joint venture partners (1)

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

( 1,260 ) ( 8,507 ) —

Net cash used for financing activities ( 144,561 ) ( 141,054 ) 2,558

Effect of exchange rate changes on cash and equivalents ( 1,919 ) 3,015 ( 1,144 )

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Net income — — 77,469 — 1,515 78,984

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

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

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 311 4,453 ( 1,735 ) — — 3,029

2 unchanged sentences

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

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

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

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

Dividends declared and paid ($ 0.54 /share)

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— — ( 115 ) — — ( 115 )

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

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

5 unchanged sentences

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

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

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

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

2 unchanged sentences

— — ( 104 ) — — ( 104 )

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

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

Net income — — 150,017 — 2,311 152,328

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

Other comprehensive income (loss) — — — ( 4,276 ) ( 802 ) ( 5,078 )

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 208 834 ( 2,860 ) — — ( 1,818 )

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The following is a summary of significant accounting policies followed in the preparation of La-Z-Boy Incorporated and its subsidiaries' (individually and collectively, "we," "our," "us," "La-Z-Boy" or the "Company") consolidated financial statements.

Our 2021, 2020 and 2019 fiscal years included 52 weeks.

Our fiscal year ends on the last Saturday of April.

Our 2022 fiscal year included 53 weeks, whereas our 2021 and 2020 fiscal years included 52 weeks.

The additional week in fiscal 2022 was included in the fourth quarter.

Principles of Consolidation

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

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

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

At April 30, 2022, we owned investments in two privately-held companies consisting of non-marketable preferred shares, warrants to purchase common shares, and convertible notes.

Each of these companies is a variable interest entity and 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.

Use of Estimates

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Internal costs relate primarily to employee activities for coding and testing the software under development.

Computer software costs are depreciated over three to seven years .

Computer software costs are depreciated over three to five years .

All maintenance and repair costs are expensed when incurred.

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

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

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

Our assessment of recoverability is based

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

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

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

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

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

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

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

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

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

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

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

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

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

When we perform the quantitative test for indefinite-lived intangible assets, we establish the fair value of our indefinite-lived trade names and reacquired rights based upon the relief from royalty method.

When we perform the quantitative test for goodwill, we establish the fair value for the reporting unit based on the income approach in which we utilize a discounted cash flow model.

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

Amortizable Intangible Assets

We test amortizable intangible assets for impairment if events or changes in circumstances indicate that the assets might be impaired.

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

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

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

We test amortizable intangible assets for impairment if events or changes in circumstances indicate that the assets might be impaired.

If we determine an assessment for impairment is necessary, we establish the fair value of these amortizable intangible assets based on the multi-period excess earnings method, a variant of the income approach, and the relief from royalty method, as applicable.

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

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

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

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

We also hold investments in two privately-held companies consisting of non-marketable preferred shares, warrants to purchase common shares, and convertible notes.

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

The convertible notes are recorded at fair value with the net unrealized

gains and losses (that are deemed to be temporary) reported as a component of other comprehensive income, consistent with our other available-for-sale debt securities.

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

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

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

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

The fair value of the investment then becomes the new amortized cost basis of the investment and it is not adjusted for subsequent recoveries in fair value.

There were no impairments recorded in the fiscal years ended April 30, 2022, or April 24, 2021, and there was an impairment charge for one of the investments of $ 6.0 million in fiscal 2020 that was recorded as a component of other income (expense), net.

Life Insurance

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The balance of the order is paid in full prior to delivery of the product.

Once the order is taken through our company-owned retail stores or www.la-z-boy.com we recognize a contract asset and a corresponding deferred revenue liability for the difference between the total order and the deposit collected.

Once the order is taken through our company-owned retail stores or www.la-z-boy.com we recognize a contract asset and a corresponding deferred revenue liability for the difference

between the total order and the deposit collected.

The contract asset is included in other current assets on our consolidated balance sheet and the deferred revenue is included in accrued expenses and other current liabilities on our consolidated balance sheet.

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

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

most likely amount to determine the amount of variable consideration.

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

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

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

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

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

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

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Other Income (Expense), Net

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

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

Other income (expense), net is made up primarily of foreign currency exchange net gain/(loss), gain/(loss) on the sale of investments, and unrealized gain/(loss) on equity securities.

Other income (expense), net for fiscal 2021 also includes the benefit of $ 5.2 million of payroll tax credits resulting from the CARES Act and other income (expense), net for fiscal 2020

includes a $ 1.9 million refund related to the fiscal 2019 termination of our defined benefit pension plan for eligible hourly employees in our La-Z-Boy operating unit.

Research and Development Costs

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The liability for these awards is remeasured and adjusted to its fair value at the end of each reporting period until paid.

We record compensation cost for stock-based awards that vest based on performance conditions ratably over the vesting periods when the vesting of such awards become probable.

We record compensation cost for stock-

based awards that vest based on performance conditions ratably over the vesting periods when the vesting of such awards become probable.

Commitments and Contingencies

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

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.

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

ASU 2021-10 Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance

Accounting pronouncements not yet adopted

ASU Description Adoption Date

ASU 2021-08 Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities From Contracts With Customers Fiscal 2024

Each of the acquisitions completed in fiscal 2022 noted below were not significant to our consolidated financial statements, and, therefore, pro-forma financial information is not presented.

All of our provisional purchase accounting estimates for these acquisitions 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 following the acquisition as we gain additional data.

Alabama and Chattanooga, Tennessee acquisition

On December 6, 2021, we completed our acquisition of the Alabama and Chattanooga, Tennessee businesses that operate four independently owned La-Z-Boy Furniture Galleries ® stores in Alabama and one in Chattanooga, Tennessee, for $ 8.3 million, subject to customary purchase price adjustments.

In the third quarter of fiscal 2022, we paid $ 8.0 million of cash for the purchase of the Alabama and Chattanooga, Tennessee stores and assets.

This acquisition reflects a core component of our strategic priorities, which is 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) in suitable geographic markets, alongside the existing La-Z-Boy Furniture Galleries ® network.

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 Alabama and Chattanooga, Tennessee markets, 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 $ 4.1 million related to these reacquired rights.

We also recognized $ 7.4 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.

Furnico (La-Z-Boy United Kingdom Manufacturing) acquisition

On October 25, 2021, we completed the acquisition of Furnico Furniture Ltd ("Furnico"), an upholstery manufacturing business in the U.K for approximately $ 13.3 million, subject to customary purchase price adjustments and in the third and fourth quarters of fiscal 2022, we paid total cash of $ 13.9 million for the purchase of the Furnico business.

Furnico produces La-Z-Boy branded product for the La-Z-Boy U.K.

business and also operates a wholesale business, selling white label products to key U.K.

With this acquisition, we expect to realize production synergies, cost savings through materials procurement, and increases in production capacity to support growth in the La-Z-Boy U.K business.

We recognized $ 9.2 million of goodwill in our Wholesale segment related primarily to synergies we expect from the integration of the acquired business and future benefits of these synergies.

The goodwill asset for Furnico is not deductible for federal income tax purposes.

Long Island, New York acquisition

On August 16, 2021, we completed our acquisition of the Long Island, New York business that operates three independently owned La-Z-Boy Furniture Galleries ® stores for $ 4.5 million, subject to customary adjustments.

In the second quarter of fiscal 2022, we paid $ 4.4 million of cash for the purchase of the Long Island, New York stores and assets.

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 Long Island, New York 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 $ 0.8 million related to these reacquired rights.

We also recognized $ 4.4 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.

Prior Year Acquisitions

We completed the following acquisition in fiscal 2021.

We did not complete any acquisitions during fiscal 2020.

Seattle, Washington acquisition

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

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

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

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

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

Prior Year Acquisitions

We did not complete any acquisitions during fiscal 2020.

Acquisitions completed in fiscal 2019 are described below.

Retail acquisitions

On August 15, 2018, and September 30, 2018, respectively, we acquired the assets of two independent operators of La-Z-Boy Furniture Galleries ® stores:

one that operated nine stores and two warehouses in Arizona and one that operated one store in Massachusetts, for an aggregate $ 42.8 million, including $ 38.9 million of cash, $ 2.6 million of forgiveness of accounts receivable, and $ 1.3 million of guaranteed future payments.

We will pay the guaranteed future payments as they are due, with the last payment being completed in the second quarter of fiscal 2022.

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

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

Joybird acquisition

On July 30, 2018, we completed our acquisition of Stitch Industries, Inc.

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

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

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

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

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

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

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

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

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

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

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

The undiscounted range of the contingent consideration is zero to $ 65 million and is based on sales and profitability of Joybird in fiscal 2021 and fiscal 2023.

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

Comparability

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

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

Restricted Cash

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Total inventories (1)

$ 303,191 $ 226,137

(1) Increased balance due to rising costs and higher volume to support increased sales demand and manufacturing capacity.

Property, Plant and Equipment

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184,223 167,577

Information systems and software 3 - 7 years

Information systems, hardware and software 3 - 15 years

102,861 93,174

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

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

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

We also have equipment leases for tractors/trailers, IT and office equipment, and vehicles.

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

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

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

Treasury borrowing rates.

In the case an interest rate is implicit in a lease we will use that rate as the discount rate for that lease.

If an interest rate is implicit in a lease we will use that rate as the discount rate for that lease.

Some of our leases contain variable rent payments based on a Consumer Price Index or percentage of sales.

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

COVID-19 Impact

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

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

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

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

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

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

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

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

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

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

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Operating leases

ROU assets $ 343,207 $ 318,634

ROU lease assets $ 405,287 $ 343,207

Lease liabilities, short-term 75,148 67,493

Lease liabilities, long-term 354,493 294,550

Financing leases

ROU assets $ 593 $ 13

Finance leases

ROU lease assets $ 468 $ 593

Lease liabilities, short-term 123 121

Lease liabilities, long-term 350 473

The ROU assets by segment are as follows:

The ROU lease assets by segment are as follows:

(Amounts in thousands) 4/30/2022 4/24/2021

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Corporate & Other 18,106 12,991

Total ROU assets $ 343,800 $ 318,647

Total ROU lease assets $ 405,755 $ 343,800

The components of lease cost are as follows:

Fiscal Year Ended

(52 weeks) (52 weeks)

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

(Amounts in thousands) 4/30/2022 4/24/2021 4/25/2020

Operating lease cost $ 83,520 $ 79,072 $ 76,223

Financing lease cost 53 166

Finance lease cost 130 53 166

Short-term lease cost 2,097 545 248

Variable lease cost 159 ( 245 ) ( 40 )

( 245 ) ( 40 )

Sublease income ( 550 ) ( 1,546 ) ( 2,504 )

Total lease cost $ 85,356 $ 77,879 $ 74,093

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

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

The following tables present supplemental lease disclosures:

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4/30/2022 4/24/2021

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

(Amounts in thousands) Operating Leases Finance Leases Operating Leases Finance Leases

Cash paid for amounts included in the measurement of lease liabilities $ 84,492 $ 130 $ 79,707 $ 53

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

Lease liabilities arising from new ROU lease assets 140,376 — 93,399 631

4/30/2022 4/24/2021

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

(Amounts in thousands) Operating Leases Finance Leases Operating Leases Finance Leases

Weighted-average remaining lease term (years) 7.2 3.8 6.8 4.8

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The following table presents our maturity of lease liabilities:

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

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

Within one year $ 86,634 $ 130

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

Wholesale Segment La-Z-Boy United Kingdom Manufacturing La-Z-Boy United Kingdom Manufacturing (Furnico)

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

Corporate & Other Segment Joybird Joybird

Corporate & Other Joybird Joybird

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

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

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

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

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Balance at April 25, 2020 (1)

Prior period adjustment (1)

$ 11,630 $ 93,941 $ 55,446 $ 161,017

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

Acquisitions — 12,936 — 12,936

Translation adjustment 1,422 439 — 1,861

Balance at April 24, 2021 (1)

13,052 107,316 55,446 175,814

Acquisitions 9,207 11,748 — 20,955

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Balance at April 30, 2022 (1)

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

$ 20,207 $ 118,951 $ 55,446 $ 194,604

(1) Includes $ 26.9 million of accumulated impairment losses in Corporate and Other.

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

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Amortizable over eight -year useful life

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

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

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

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

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

Based on the same qualitative factors outlined above, we determined that it is more likely than not that the fair value of each of our indefinite-lived intangible assets exceeded their respective carrying value and as such, our indefinite-lived intangible assets were not considered impaired as of April 30, 2022, and the Step 1 quantitative impairment analysis was not necessary.

The following summarizes changes in our intangible assets:

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

Acquisitions — — 2,182 — 2,182

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

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Balance at April 30, 2022 $ 1,155 $ 3,392 $ 27,319 $ 2,105 $ 33,971

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

For our intangible assets recorded as of April 30, 2022, we estimate annual amortization expense to be $ 1.0 million for each of the four succeeding fiscal years and $ 0.4 million in the fifth succeeding fiscal year.

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

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

We also hold investments of two privately-held companies consisting of non-marketable preferred shares, warrants to purchase common shares, and convertible notes (refer to Note 20, Fair Value Measurement).

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

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Accrued expenses and other current liabilities $ 496,393 $ 449,904

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

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

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

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

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

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

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

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

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

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

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

On October 15, 2021, we entered into a new five-year $ 200.0 million unsecured revolving credit facility (the “Credit Facility”).

Borrowings under the Credit Facility may be used by the Company for general corporate purposes.

We may increase the size of the facility, either in the form of additional revolving commitments or new term loans, subject to the discretion of each lender to participate in such increase, up to an additional amount of $ 100.0 million.

The Credit Facility will mature on October 15, 2026 and provides us the ability to extend the maturity date for two additional one-year periods, subject to the satisfaction of customary conditions.

As of April 30, 2022, we have no borrowings outstanding under the Credit Facility.

The Credit Facility contains certain restrictive loan covenants, including, among others, financial covenants requiring a maximum consolidated net lease adjusted leverage ratio and a minimum consolidated fixed charge coverage ratio, as well as customary covenants limiting our ability to incur indebtedness, grant liens, make acquisitions, merge or consolidate, and dispose of certain assets.

As of April 30, 2022, we were in compliance with our financial covenants under the Credit Facility.

The Credit Facility replaced our previous $ 150.0 million revolving credit facility, which had been secured primarily by all of our accounts receivable, inventory, cash deposits, and securities accounts.

The previous revolving credit facility was terminated on October 15, 2021, and is no longer in effect.

Cash paid for interest during fiscal years 2022, 2021, and 2020 was $ 0.5 million, $ 0.8 million and $ 0.6 million, respectively.

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401(k) Retirement Plan (1)

$ 11,763 $ 7,313 $ 9,380

Performance Compensation Retirement Plan 1,654 3,810 1,115

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Non-Qualified Defined Benefit Retirement Plan (2)

Net Periodic Pension Cost (2)

(1) Increase in fiscal 2022 compared with fiscal 2021 is primarily due to the temporary freeze on matching contributions started during the fourth quarter of fiscal 2020 as part of our COVID-19 action plan.

Matching contributions were reinstated during the second quarter of fiscal 2021.

(2) Primarily related to interest cost.

(2) Refer below for breakdown of net periodic pension cost.

401(k) Retirement Plan .

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For most operating units, we make matching contributions based on specific formulas.

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

As a result of the increased matching contributions, supplemental contributions awarded to eligible employees based on achievement of operating performance targets during fiscal 2019 were discontinued starting fiscal 2020.

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

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

Performance Compensation Retirement Plan.

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42,699 41,133

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

(1) Life insurance contracts are related to the Executive Deferred Compensation Plan and the PCRP.

(2) Mutual funds are considered trading securities.

Non-Qualified Defined Benefit Retirement Plan.

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

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

We are not required to fund the non-qualified defined benefit retirement plan in fiscal 2023;

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

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(Amounts in thousands) 4/30/2022 4/24/2021

Plan obligation included in long-term liabilities $ 15,783 $ 16,846

Short-term plan obligation included in other current liabilities $ 1,059 $ 1,066

Long-term plan obligation included in other long-term liabilities 12,461 14,717

Discount rate used to determine obligation 4.3 % 3.0 %

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

Defined Benefit Pension Plan.

During the fourth quarter of fiscal 2019, we terminated our defined benefit pension plan for eligible factory hourly employees in our La-Z-Boy operating unit.

In connection with the plan termination, we settled all future obligations under the plan through a combination of lump-sum payments to eligible participants who elected to receive them, and the transfer of any remaining benefit obligations under the plan to a highly rated insurance company.

As a result of these actions, we recognized a non-cash pre-tax pension termination charge of $ 32.7 million during the fourth quarter of fiscal 2019.

During the second quarter of fiscal 2020, we received a pre-tax refund of $ 1.9 million from the insurance company, representing an overpayment of the expected benefit obligations that were settled during the fourth quarter of fiscal 2019.

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

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

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

Fiscal Year Ended

(Amounts in thousands) 4/27/2019

Service cost $ 851

Interest cost 4,464

Expected return on plan assets ( 4,544 )

Net amortization 2,556

Pension termination charge 32,671

Net periodic pension cost $ 35,998

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

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

Product Warranties

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Balance as of the beginning of the year $ 23,636 $ 23,255

Acquisitions 548 —

Accruals during the year 30,146 21,956

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$ 27,036 $ 23,636

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

(1) $ 16.4 million and $ 14.4 million is recorded in accrued expenses and other current liabilities as of April 30, 2022, 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.

Contingencies and Commitments

Commitments and Contingencies

We have been named as a defendant in various lawsuits arising in the ordinary course of business and as a potentially responsible party at certain environmental clean-up sites, the effect of which are not considered significant.

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Under this plan, as amended, the aggregate number of common shares that may be issued through awards of any form is 5.9 million shares.

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

The table below summarizes the total stock-based compensation expense we recognized for all outstanding grants.

Stock-based compensation expense is recorded in SG&A in the consolidated statement of income:

Fiscal Year Ended

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Stock appreciation rights ( 102 ) 375 ( 240 )

Restricted stock units 43 20 22

Performance-based units 23 6 7

Deferred stock units 1,437 ( 768 ) 212

Deferred stock units issued to Directors ( 1,058 ) 1,437 ( 768 )

Total liability-based awards expense (2)

Total stock-based compensation expense (1)

( 1,131 ) 1,878 ( 982 )

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

Total stock-based compensation expense $ 10,727 $ 14,549 $ 7,389

(1) Includes restricted stock units and performance-based units.

(2) 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.

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We granted 252,996 stock options to employees during the first quarter of fiscal 2022, and we also have stock options outstanding from previous grants.

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

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.

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

We received $ 10.8 million, $ 4.8 million, and $ 16.2 million in cash during fiscal 2021, 2020, and 2019, respectively, for exercises of stock options.

We estimate the fair value of the employee stock options at the date of grant using the Black-Scholes option-pricing model, which requires management to make certain assumptions.

The fair value of stock options granted during fiscal years 2022, 2021, and 2020 were calculated using the following assumptions:

Risk-free interest rate 0.82 % 0.34 % 2.19 % U.S.

Treasury issues with term equal to expected life at grant date

Dividend rate 1.58 % — % 1.72 % Estimated future dividend rate and common share price at grant date

Expected life 5.0 years 5.0 years 5.0 years Contractual term of stock option and expected employee exercise trends

Stock price volatility 42.16 % 41.79 % 34.27 % Historical volatility of our common shares

Fair value per option $ 12.29 $ 10.06 $ 7.94

Plan activity for stock options under the above plans was as follows:

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During the year ended April 30, 2022, stock options with respect to 0.4 million shares vested.

We estimate the fair value of the employee stock options at the date of grant using the Black-Scholes option-pricing model, which requires management to make certain assumptions.

We estimate expected volatility based on the historical volatility of our common shares.

We base the average expected life on the contractual term of the stock option and expected employee exercise trends.

We base the risk-free rate on U.S.

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

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

Fiscal 2021 grant Fiscal 2020 grant Fiscal 2019 grant

Risk-free interest rate 0.34 % 2.19 % 2.82 %

Dividend rate — % 1.72 % 1.45 %

Expected life in years 5.0 5.0 5.0

Stock price volatility 41.79 % 34.27 % 33.07 %

Fair value per share $ 10.06 $ 7.94 $ 9.65

Stock Appreciation Rights ("SARs").

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

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

SARs will be paid in cash upon exercise and, accordingly, we account for SARs as liability-based awards that we remeasure to fair value at the end of each reporting period.

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

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

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

the exercise date or the contractual term date.

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

We received $ 1.1 million, $ 10.8 million, and $ 4.8 million in cash during fiscal 2022, 2021, and 2020, respectively, for exercises of stock options.

Restricted Stock .

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Unrecognized compensation cost related to non-vested restricted shares was $ 6.8 million and is expected to be recognized over a weighted-average remaining contractual term of all unvested awards of 1.7 years.

Restricted Stock Units.

Restricted Stock Units Issued to Directors.

Restricted stock units granted to our non-employee directors are offered at no cost to the directors and vest when a director leaves the board.

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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 grant, which was $ 32.08 , $ 31.77 , and $ 33.15 for the awards granted in fiscal 2021, fiscal 2020, and fiscal 2019, respectively.

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

The weighted-average fair value of the restricted stock units that were granted during fiscal 2022, fiscal 2021, and fiscal 2020 was $ 35.34 , $ 32.08 , and $ 31.77 , respectively.

Performance Awards.

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

During the first quarter of fiscal 2022, we granted 125,021 performance-based shares.

We also have performance-based share awards outstanding from previous grants.

Payout of the fiscal 2022 grant depends on our financial performance ( 50 %) and a market-based condition based on the total return our shareholders receive on their investment in our stock relative to returns earned through investments in other public companies ( 50 %).

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

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

The 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 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.

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

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

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

probability that we will satisfy the performance goals.

The fair value of each share of the awards we granted in fiscal 2022, fiscal 2021, and fiscal 2020 that vest based on attaining performance goals was $ 36.13 , $ 30.75 , and $ 28.68 , respectively, the market value of our common shares on the date we granted the awards less the dividends we expect to pay before the shares vest.

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Total expense $ 4,971 $ 5,505 $ 2,558

Deferred Stock Units.

Stock Appreciation Rights ("SARs").

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

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

SARs will be paid in cash upon exercise and, accordingly, we account for SARs as liability-based awards that we remeasure to fair value at the end of each reporting period.

We have no remaining unrecognized compensation cost at April 30, 2022, relating to SARs awards as they are all fully vested, but we will continue to remeasure these awards to reflect the fair value at the end of each reporting period until all awards are exercised or forfeited.

As of April 30, 2022, we had 6,010 SARs outstanding for the fiscal 2014 award.

At April 30, 2022, the intrinsic value per share of the fiscal 2014 award was $ 7.22 .

Deferred Stock Units Issued to Directors.

We have not granted any deferred stock units to non-employee directors since fiscal 2010, but we have units outstanding from the fiscal 2009 and fiscal 2010 awards.

We account for awards under our deferred stock unit plan for non-employee directors as liability-based awards because upon exercise these awards will be paid in cash.

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

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

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

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

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

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

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

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Balance at April 30, 2022 $ ( 1,961 ) $ — $ ( 298 ) $ ( 3,538 ) $ ( 5,797 )

(1) The cumulative effect adjustment for investments is composed of $ 2.1 million of unrealized gains on equity investments offset by $ 0.5 million of tax expense.

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

(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, Income Statement-Reporting Comprehensive Income (Topic 220).

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

Of this amount, $ 28.2 million of expense was recorded as pension termination charge and $ 4.4 million of income was recorded in income tax expense in our consolidated statement of income.

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

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.

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

The components of noncontrolling interest were as follows:

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Occasional Furniture 45,150 26,940 4,303 76,393

Delivery 190,110 26,915 7,999 225,024

90,025 80,117 ( 56,566 ) 113,576

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

Delivery 117,415 22,216 5,230 144,861

( 15,256 ) 62,792 ( 28,575 ) 18,961

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Consolidated Net Sales $ 1,734,244

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

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

The increase year-over-year is primarily due to an increase in surcharges in response to higher material and input costs.

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

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

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

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

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

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

At April 24, 2021, we included $ 180.8 million of customer deposits and $ 108.5 million of deferred revenues in accrued expenses and other current liabilities on our consolidated balance sheet.

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

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

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

We have elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to recognize the promised amount of consideration without adjusting for the effects of a significant financing component if the contract has a duration of one year or less.

As our contracts typically are less than one year in length and do not have significant financing components, we have not adjusted consideration.

Contract Assets and Liabilities .

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 table presents our contract assets and

(Unaudited, amounts in thousands) 4/30/2022 4/24/2021

Contract assets $ 139,006 $ 108,460

Customer deposits $ 183,233 $ 180,766

Deferred revenue 139,006 108,460

Total contract liabilities (1)

$ 322,239 $ 289,226

(1) During the year ended April 30, 2022, we recognized revenue of $ 271.9 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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American Drew ® , Hammary ® and Kincaid ® .

The Wholesale segment also includes our international wholesale businesses.

The Wholesale segment also includes our international wholesale and manufacturing 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.

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.

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

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

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

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

23 unchanged sentences

Interest income 1,338 1,101 2,785

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

Other income (expense), net ( 1,708 ) 9,466 ( 5,083 )

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State income taxes, net of federal benefit 3.9 % 4.3 % 4.2 %

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

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

Losses/(gains) on corporate owned life insurance — % ( 1.2 ) % 0.5 %

Change in valuation allowance 0.1 % 0.7 % 0.7 %

8 unchanged sentences

After enactment of the Tax Cuts and Jobs Act in 2017, the potential deferred tax attributable to these earnings would be approximately $ 2.5 million, primarily related to foreign withholding taxes and state income taxes.

The Company changed its permanent reinvestment position on undistributed earnings for its Thailand foreign operating units and provided for deferred tax attributable to those earnings of approximately $ 1.3 million in fiscal 2020.

The Company is not permanently reinvested on undistributed earnings for its Thailand foreign operating units and has provided for deferred tax attributable to those earnings of approximately $ 1.1 million in fiscal 2022.

The primary components of our deferred tax assets and (liabilities) were as follows:

9 unchanged sentences

Federal net operating losses, credits 908 1,286

Other — 2,354

Valuation allowance ( 3,517 ) ( 3,495 )

2 unchanged sentences

Property, plant and equipment ( 20,412 ) ( 17,837 )

Inventory — ( 827 )

Goodwill and other intangibles ( 11,914 ) ( 10,084 )

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Foreign capital losses 147 Indefinite

Foreign net operating losses 92 Indefinite

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

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Based upon our net deferred tax asset position at April 30, 2022, we estimate that approximately $ 30.5 million of future taxable income would need to be generated to fully recover our net deferred tax assets.

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

Actual results inevitably will vary from management's forecasts which may be impacted by the COVID-19 pandemic, possibly resulting in a sustained economic downturn, or significantly extended economic recovery.

The realization of deferred income tax assets is dependent on future events and actual results may vary from management's forecasts due to economic volatility and uncertainty along with unpredictable complexities in the global supply chain.

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

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

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

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

4 unchanged sentences

Total $ 3,517 $ 3,495 $ 22

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

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

federal, state and foreign deferred tax assets.

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

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

We had approximately $ 0.4 million accrued for interest and penalties as of April 30, 2022 and April 24, 2021.

If recognized, $ 0.9 million of the total $ 1.0 million of unrecognized tax benefits would decrease our effective tax rate.

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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.

The restricted stock awards we granted in fiscal 2021, 2020 and 2019 do not have non-forfeitable rights to dividends and therefore are not considered participating securities.

The dividends on the restricted stock awards granted in fiscal 2021, 2020 and 2019 are, and will continue to be, held in escrow until the stock awards vest at which time we will pay any accumulated dividends.

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:

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

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

We excluded options to purchase 0.2 million and 0.3 million shares from the diluted share calculation for the years ended April 30, 2022 and April 25, 2020, respectively.

We did no t exclude any outstanding options from the diluted share calculation for the fiscal year ended April 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 April 24, 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 April 30, 2022 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, 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 April 24, 2021, our Level 3 assets included non-marketable preferred shares and warrants to purchase common shares of two privately-held start-up companies.

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

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

At April 30, 2022, our Level 3 assets included investments in two privately-held companies consisting of non-marketable preferred shares, warrants to purchase common shares, and convertible notes The fair value for our Level 3 equity 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 fiscal 2022, we invested $ 2.5 million in a convertible note from one of these privately-held start-up companies.

The convertible note is considered a fixed income marketable security, classified as available-for-sale.

There were no other changes to the fair value of our Level 3 assets during fiscal 2022.

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

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

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

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

The fair value of our contingent consideration liability as of April 30, 2022, reflects our expectation that consideration will be owed under the terms of the earn out agreement based on fiscal 2023 projections of Joybird revenue and earnings.

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

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

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

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 4.5 %.

During fiscal 2022, we recognized a decrease in the fair value of our contingent consideration liability of $ 3.3 million

based on an updated valuation reflecting our most recent financial projections.

There were no other changes to the fair value of our Level 3 liabilities during the year ended April 30, 2022.

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

2 unchanged sentences

Purchases 1,100 —

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

Fair value adjustment — 14,100

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

Purchases 2,500 —

Settlements — ( 10,000 )

Fair value adjustment — ( 3,300 )

2 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data