What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-23 compared with 2022-02-15 · 70 added, 112 removed, 129 unchanged (59% 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 January 22, 2022, our supply chain operations included the following:

As of July 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

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

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

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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• Growing our company-owned retail business.

We are focused on growing this business by increasing same-store sales through improved execution at the store level and by acquiring existing La-Z-Boy Furniture Galleries ® stores and opening new La-Z-Boy Furniture Galleries ® stores, primarily in markets that can be serviced through our regional distribution centers, where we see opportunity for growth, or where we believe we have opportunities for further market penetration.

We are focused on growing this business by increasing same-store sales through improved execution at the store level and by opportunistically acquiring existing La-Z-Boy Furniture Galleries ® stores and opening new La-Z-Boy Furniture Galleries ® stores, primarily in markets that can be serviced through our regional distribution centers, where we see opportunity for growth, or where we believe we have opportunities for further market penetration.

• Accelerating the growth of the Joybird brand.

During fiscal 2019, we purchased Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture with a direct-to-consumer model.

We believe that Joybird is a brand with significant potential and our strategic initiatives in this area focus on fueling profitable growth through an increase in digital marketing spend to drive awareness and customer acquisition, ongoing investments in technology, an expansion of product assortment, and additional small format stores in our key urban markets to enhance our consumers' omni-channel experience.

We believe that Joybird is a brand with significant potential and our strategic initiatives in this area focus on fueling profitable growth through an increase in digital marketing spend to drive awareness and customer acquisition, ongoing investments in technology, an expansion of product assortment, and providing additional small-format stores in key urban markets to enhance our consumers' omni-channel experience.

• Enhancing our enterprise capabilities to support the growth of our consumer brands and enable potential acquisitions for growth.

In addition to our branded distribution channels, nearly 2,000 other dealers sell La-Z-Boy products, providing us the benefit of multi-channel distribution.

In addition to our branded distribution channels, approximately 2,200 other dealers sell La-Z-Boy products, providing us the benefit of multi-channel distribution.

These outlets include some of the best-known names in the industry, including Slumberland, Nebraska Furniture Mart, Mathis Brothers and Raymour & Flanagan.

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

Impact of COVID-19

We have been and continue to be impacted by the COVID-19 pandemic.

Specifically, beginning in the fourth quarter of fiscal 2020, the temporary closure of our manufacturing facilities, state and local restrictions limiting our ability to deliver product to consumers, and the temporary closure of our company-owned stores consistent with most retailers across North America negatively impacted our financial results.

In response to the financial impacts of the pandemic, beginning at the end of fiscal 2020, we took several actions to conserve cash in the near term and during the first quarter of fiscal 2021, we announced our business realignment plan, which included the reduction of our global workforce by about 10% across our manufacturing, retail, and corporate locations, 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 a strong pace of written order trends as consumers continue to allocate more discretionary spending to home furnishings.

In response to demand for our products outpacing our production capacity and with backlog still at a high level, our supply chain team continues to demonstrate agility and flexibility to identify ways to increase production capacity.

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

plants, and temporarily reactivating a portion of our Newton, Mississippi upholstery manufacturing facility.

In addition, we opened a leased upholstery assembly plant in San Luis Rio Colorado, Mexico and a leased sewing facility in Parras, Mexico during the third quarter of fiscal 2021 and the first quarter of fiscal 2022, respectively.

Further, during the first quarter of fiscal 2022, we signed a lease to open additional manufacturing capacity in Torreon, Mexico which began operations at the end of the third quarter of 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.

Results of Operations

Fiscal 2022 Third Quarter Compared with Fiscal 2021 Third Quarter

Fiscal 2023 First Quarter Compared with Fiscal 2022 First Quarter

La-Z-Boy Incorporated

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/22/2022 1/23/2021 % Change 1/22/2022 1/23/2021 % Change

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/30/2022 7/24/2021 % Change

Sales $ 604,091 $ 524,783 15.1%

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Operating margin 8.7% 6.5%

Consolidated sales increased $101.4 million, or 21.6%, and $457.5 million, or 37.7%, in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

Since retail and manufacturing locations reopened after the COVID-related shutdowns at the beginning of fiscal 2021, we have experienced a strong pace of written order trends while facing challenges in the global supply chain.

In response to heightened demand, we have expanded our manufacturing capacity, increased our strategic raw material reserves, and taken pricing and surcharge actions to counteract rising materials and freight costs.

Despite continued supply chain headwinds, the ongoing impact of these strategic actions and sustained demand led to significant sales growth in the third quarter and first nine months of fiscal 2022 compared with the same periods a year ago.

Consolidated sales increased $79.3 million, or 15.1%, in the first quarter of fiscal 2023 compared with the same period a year ago.

After retail and manufacturing locations reopened after COVID-related shutdowns at the beginning of fiscal 2021, we experienced a strong pace of written order trends while facing challenges in the global supply chain.

In response to heightened demand, we expanded our manufacturing capacity, increased our strategic raw material reserves, and took pricing and surcharge actions to counteract rising materials and freight costs.

The impact of these strategic actions over the last two years and our ability to work through our significant backlog led to a strong sales increase in the first quarter of fiscal 2023 compared with the same period a year ago.

Operating Margin

Operating margin, which is calculated as operating income as a percentage of sales, decreased 40 basis points in the third quarter of fiscal 2022, but increased 60 basis points in the first nine months of fiscal 2022, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, decreased 440 basis points and 410 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

◦ Continued increases in demand, as well as availability challenges in the global supply chain caused by COVID-19, including factory shutdowns in Vietnam, led to higher raw material and freight costs.

In response, we took pricing and surcharge actions which mostly offset rising costs in the third quarter and to a lesser extent, the first nine months of fiscal 2022, as they were increasingly realized in the second and third quarters of fiscal 2022.

◦ The expansion of our manufacturing capacity, in response to increased demand and sustained backlog, has led to higher production costs.

Further, continued labor challenges and the unavailability of component parts has resulted in temporary plant inefficiencies.

◦ Changes in our consolidated mix improved gross margin by 30 basis points and 50 basis points in the third quarter and first nine months of fiscal 2022, respectively.

The benefit was led by growth in our Retail segment and Joybird, both of which have higher gross margins relative to our Wholesale segment.

• Selling, general and administrative ("SG&A") expenses as a percentage of sales decreased 400 basis points and 470 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

◦ The third quarter and first nine months of fiscal 2021 included a $10.0 million and a $12.5 million pre-tax charge, respectively, resulting from the increase in the fair value of the Joybird contingent consideration liability, the absence of which in fiscal 2022 drove a comparative 210 basis point and 110 basis point decline in SG&A as a percentage of sales in the third quarter and first nine months of fiscal 2022, respectively.

◦ The first nine months of fiscal 2022 included a gain resulting from the sale of our Newton, Mississippi manufacturing facility while the first nine months of fiscal 2021 included expenses resulting from our business realignment plan.

These actions resulted in a comparative 40 basis point decrease in SG&A as a percentage of sales in the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

◦ The remaining decrease in both the third quarter and first nine months of fiscal 2022 was due to higher sales volume relative to fixed costs.

Operating margin, which is calculated as operating income as a percentage of sales, increased 220 basis points in the first quarter of fiscal 2023 compared with the same period a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 150 basis points in the first quarter of fiscal 2023, compared with the same period a year ago.

◦ Changes in our consolidated mix improved gross margin by 160 basis points, driven by growth of our Retail segment, which has a higher gross margin than our Wholesale segment.

◦ Gross margin was adversely impacted by higher raw material and freight costs caused by global supply chain and availability challenges, along with higher plant production costs resulting from the expansion of our manufacturing capacity and a challenging labor environment.

◦ Partially offsetting the item above, gross margin benefited from increased pricing and surcharges

• Selling, general and administrative ("SG&A") expenses as a percentage of sales decreased 70 basis points in the first quarter of fiscal 2023 compared with the same period a year ago, as higher delivered sales volume relative to fixed costs more than offset increased investments in marketing to drive written sales.

We discuss each segment’s results in the following section.

Wholesale Segment

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/22/2022 1/23/2021 % Change 1/22/2022 1/23/2021 % Change

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/30/2022 7/24/2021 % Change

Sales $ 441,818 $ 393,499 12.3%

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Operating margin 5.9% 4.7%

The Wholesale segment’s sales increased $72.6 million, or 20.7%, and $338.6 million, or 36.9%, in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

More than half of the sales increase in the third quarter was driven by pricing and surcharge actions taken in response to rising manufacturing costs, with the remaining increase primarily attributable to higher volume.

Partially offsetting these increases, sales in our casegoods business were adversely impacted in the third quarter of fiscal 2022 by product unavailability due to temporary COVID-related shutdowns in Vietnam.

The sales increase in the first nine months was primarily a result of higher volume and to a lesser extent pricing and surcharge actions, as they were increasingly realized in the second and third quarters of fiscal 2022.

Higher sales volume in both the third quarter and first nine months of fiscal 2022 was driven by increased demand following the reopening of our stores after the COVID-related shutdowns at the beginning of fiscal 2021 and, since that time, we have continued to expand and scale our manufacturing capabilities to meet demand and work through our record backlog.

The Wholesale segment’s sales increased $48.3 million, or 12% in the first quarter of fiscal 2023 compared with the same period a year ago.

The increase in sales was primarily driven by the realization of pricing and surcharge actions taken in response to rising manufacturing costs combined with favorable channel and product mix.

This was partially offset by a decline in delivered volume primarily the result of external dealers delaying receipt of finished goods due to warehouse constraints.

Operating Margin

Operating margin decreased 370 basis points and 330 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

• Gross margin decreased 480 basis points and 500 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

◦ Higher demand and global supply chain challenges led to rising raw material and freight costs, higher tariff costs resulting from sourcing changes, and decreased availability of casegoods products due to temporary factory shutdowns in Vietnam.

These challenges resulted in an 850 basis point and 770 basis point decrease in gross margin in the third quarter and first nine months of fiscal 2022, respectively, of which 110 basis points and 40 basis points were driven by our casegoods business which was adversely impacted by the Vietnam shutdowns.

◦ In response to the higher raw material and freight costs, we took pricing and surcharge actions to mitigate their impact, resulting in a 680 basis point and 540 basis point benefit to gross margin in the third quarter and first nine months of fiscal 2022, respectively.

◦ Continued manufacturing capacity expansion, in response to significant increases in written order demand, along with temporary component part unavailability, and sustained labor challenges drove an increase in production costs resulting in a 260 basis point and 300 basis point decrease in gross margin in the third quarter and first nine months of fiscal 2022, respectively.

• SG&A expense as a percentage of sales decreased 110 basis points and 170 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

◦ The decrease in SG&A as a percentage of sales in both periods was primarily due to higher sales volume relative to both fixed costs and marketing spend.

◦ Additionally, the first nine months of fiscal 2022 included a gain resulting from the sale of our Newton, Mississippi manufacturing facility while the first nine months of fiscal 2021 included expenses resulting from our business realignment plan.

These actions resulted in a comparative 50 basis point decrease in the segment's SG&A as a percentage of sales in the first nine months of fiscal 2022.

The Wholesale segment's operating margin increased 120 basis points in the first quarter of fiscal 2023 compared with the same period a year ago.

• Gross margin increased 120 basis points in the first quarter of fiscal 2023 compared with the same period a year ago.

◦ Gross margin increased 610 basis points from pricing and surcharge actions taken in response to rising raw materials and freight costs resulting from global supply challenges, the impact of which caused a 340 basis point decrease in gross margin.

◦ Favorable channel and product mix resulted in an 80 basis point improvement to gross margin

◦ Higher production costs related to manufacturing capacity expansion and sustained competition in the labor market drove a 180 basis point decrease in gross margin.

◦ The first quarter of fiscal 2023 included expenses related to our plans to finalize the closure of our Newton, Mississippi manufacturing facility which had been temporarily reactivated during the second quarter of fiscal 2021 in response to stronger-than-expected demand at that time.

This action resulted in a 20 basis point decrease in gross margin in the first quarter of fiscal 2023.

• SG&A expense as a percentage of sales was flat in the first quarter of fiscal 2023 compared with the same period a year ago as increased marketing spend was offset by fixed cost leverage from higher delivered sales.

Retail Segment

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/22/2022 1/23/2021 % Change 1/22/2022 1/23/2021 % Change

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/30/2022 7/24/2021 % Change

Sales $ 236,021 $ 181,847 29.8%

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Operating margin 16.2% 11.2%

The Retail segment’s sales increased $31.1 million, or 18.7%, and $151.9 million, or 36.2%, in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago, led by a 16.4% and 32.9% increase in delivered same-store sales, respectively.

Since the reopening of our retail stores in the beginning of fiscal 2021, we continue to see sustained higher demand for products in the home furnishings category and are continuing to experience strong sales trends as written same-store sales increased 2.7% over first nine months of fiscal 2022, compared with the same period a year ago.

While written same-store sales decreased 1.0% in the third quarter of fiscal 2022, compared with the same period a year ago, compared to the pre-pandemic third quarter of fiscal 2020, written same-store sales have increased at a compound annual growth rate of 3.6%.

The Retail segment’s sales increased $54.2 million, or 30%, in the first quarter of fiscal 2023 compared with the same period a year ago, led by a 25% increase in delivered same-store sales.

Additionally, the Retail segment benefited from a $12.2 million increase in sales related to our retail store acquisitions that occurred in fiscal 2022 and fiscal 2023.

Written same-store sales decreased 15% in the first quarter of fiscal 2023 compared with the same period a year ago, primarily the result of a return to expected industry-wide seasonal trends and softening demand driven by economic uncertainty and consumer sentiment.

Same-store delivered sales include the sales of all currently active stores which have been open and company-owned for each comparable period.

Operating Margin

Operating margin increased 330 basis points and 650 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

• Gross margin decreased 120 basis points and 80 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago, primarily due to the timing difference between higher product costs resulting from the pricing and surcharge actions taken by our manufacturing business and pricing actions taken by the Retail business which are realized upon delivery.

• SG&A expense as a percentage of sales decreased 450 basis points and 730 basis points in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago, primarily due to higher delivered sales relative to marketing spend and fixed costs, mainly occupancy and selling expenses.

The Retail segment's operating margin increased 500 basis points in the first quarter of fiscal 2023 compared with the same period a year ago.

• Gross margin decreased 80 basis points in the first quarter of fiscal 2023 compared with the same period a year ago primarily due to the timing difference between higher product costs resulting from the pricing and surcharge actions taken by our manufacturing business and pricing actions taken by the Retail business which are realized upon delivery.

• SG&A expense as a percentage of sales decreased 580 basis points in the first quarter of fiscal 2023 compared with the same period a year ago, primarily due to higher delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses.

Corporate and Other

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/22/2022 1/23/2021 % Change 1/22/2022 1/23/2021 % Change

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/30/2022 7/24/2021 % Change

Sales $ 48,730 $ 43,634 11.7%

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Operating loss (11,651) (4,398) (164.9)%

Sales increased $16.3 million and $54.5 million in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago, primarily led by Joybird sales which increased 55.8% to $44.5 million and 72.7% to $123.4 million, respectively.

The growth in Joybird sales was driven by increased demand for products in the home furnishings category, investments in marketing and website enhancements resulting in higher online conversion, increased pricing and favorable product mix, and the addition of retail store locations.

Further, sales in the first nine months of fiscal 2021 were negatively impacted by COVID-19, although to a lesser extent than our other retail businesses as Joybird primarily operates in the online, direct-to-consumer marketplace.

Written sales for Joybird were up 27.4% and 36.8% in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago, driven by significant investments in marketing.

Intercompany eliminations increased in the third quarter and first nine months of fiscal 2022 compared with the same periods a year ago due to higher sales from our Wholesale segment to our Retail segment, driven by higher sales in the Retail segment.

Corporate and Other sales increased $5.1 million in the first quarter of fiscal 2023, compared with the same period a year ago, primarily led by Joybird sales which increased 10% to $42.7 million.

The growth in Joybird sales was driven by the realization of pricing actions, higher volume resulting from investments in marketing and website enhancements leading to higher online conversion, and the addition of retail store locations.

Written sales for Joybird were up 12% in the first quarter of fiscal 2023 compared with the same period a year ago, driven by continued investments in marketing.

Intercompany eliminations increased in the first quarter 2023 compared with the same period a year ago due to higher sales from our Wholesale segment to our Retail segment.

Operating Loss

Our Corporate and Other operating loss decreased $3.7 million and $2.2 million in the third quarter and first nine months of fiscal 2022, respectively, compared with the same periods a year ago.

• There was a comparative benefit in the third quarter and first nine months of fiscal 2022, which was absent a $10.0 million and a $12.5 million pre-tax charge recognized in the same periods last year, respectively, resulting from the increase in the fair value of the Joybird contingent consideration liability based on financial projections at that time.

• Partially offsetting the item noted above, operating loss increased in the third quarter and first nine months of fiscal 2022 primarily due to decreased operating profits at Joybird resulting from significant investments in marketing to drive customer acquisition and awareness combined with rising raw material and freight costs due to higher demand and global supply chain challenges.

• Increased investments in our technology infrastructure also contributed to the increased operating loss in the third quarter and first nine months of fiscal 2022.

Non-Operating Income (Expense)

Other Income (Expense), Net

Other income (expense), net was $1.5 million of expense in the third quarter of fiscal 2022 compared with $6.5 million of income in the third quarter of fiscal 2021.

The expense in fiscal 2022 was primarily due to unrealized losses on investments.

The income in fiscal 2021 was primarily due to $5.2 million of payroll tax credits resulting from the CARES Act along with unrealized gains on investments.

Other income (expense), net was $0.5 million of expense in the first nine months of fiscal 2022 compared with $8.0 million of income in the first nine months of fiscal 2021.

The expense in fiscal 2022 was primarily due to exchange rate losses.

The income in fiscal 2021 was primarily due to the payroll tax credits noted above along with unrealized gains on investments.

Our effective tax rate was 24.8% and 25.9% for the third quarter and nine months ended January 22, 2022, respectively, compared with 27.7% and 26.4% for the third quarter and nine months ended January 23, 2021, respectively.

The effective tax rate in the third quarter and nine months ended January 23, 2021, was impacted by a non-deductible fair value adjustment of the contingent consideration liability related to our Joybird acquisition.

Our Corporate and Other operating loss increased $7.3 million in the first quarter of fiscal 2023, compared with the same period a year ago primarily due Joybird's operating loss resulting from an increase in freight costs, higher plant costs associated with the opening of a second manufacturing facility, and increased investments in marketing to drive customer acquisition and awareness.

Our effective tax rate was 26.5% for the first quarter of fiscal 2023, compared with 25.9% for the first quarter of fiscal 2022.

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

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We believe these sources remain adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, and fulfill other cash requirements for day-to-day operations and capital expenditures.

We had cash, cash equivalents and restricted cash of $240.0 million at January 22, 2022, compared with $394.7 million at April 24, 2021.

In addition, we had investments to enhance our returns on cash of $29.8 million at January 22, 2022, compared with $32.5 million at April 24, 2021.

We had cash, cash equivalents and restricted cash of $241.4 million at July 30, 2022, compared with $248.9 million at April 30, 2022.

In addition, we had investments to enhance our returns on cash of $24.9 million at July 30, 2022, compared with $27.2 million at April 30, 2022.

The following table illustrates the main components of our cash flows:

Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/30/2022 7/24/2021

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Net cash provided by operating activities $ 33,104 $ 6,163

$ 45,192 $ 249,831

Net cash used for investing activities (25,938) (19,519)

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Change in cash, cash equivalents and restricted cash $ (7,419) $ (58,477)

(1) The decrease in net cash provided by operating activities year over year is primarily due to the significant increase in customer deposits during fiscal 2021 resulting from a surge in written sales once retail stores reopened, along with a significant increase in inventory balances in fiscal 2022 to support increased sales demand and manufacturing capacity.

Operating Activities

During the first nine months of fiscal 2022, net cash provided by operating activities was $45.2 million.

Our cash provided by operating activities was primarily attributable to net income generated during the period partially offset by an increase in working capital.

The increase in working capital was led by higher inventory to ensure input material availability to support increased sales demand and manufacturing capacity.

During the first quarter of fiscal 2023, net cash provided by operating activities was $33.1 million.

Our cash provided by operating activities was primarily attributable to net income, adjusted for non-cash items, and a $25.1 million decrease in receivables.

This was partially offset by a $37.2 million decrease in other liabilities primarily due to a $24.2 million decline in customer deposits as delivered sales outpaced written sales in our Retail segment and the payout of our fiscal 2022 incentive compensation awards during the first quarter of fiscal 2023.

Investing Activities

During the first nine months of fiscal 2022, net cash used for investing activities was $77.0 million, primarily due to the following:

• Cash used for capital expenditures in the period was $58.6 million, compared with $26.7 million during the first nine months of fiscal 2021, which primarily related to plant upgrades to our upholstery manufacturing and distribution facilities in Neosho, Missouri, improvements to our retail stores, new upholstery manufacturing capacity in Mexico, and technology upgrades.

Spending on these items will continue into the fourth quarter, with full year fiscal 2022 capital expenditures expected to be in the range of $80 to $85 million.

During the first quarter of fiscal 2023, net cash used for investing activities was $25.9 million, primarily due to the following:

• Cash used for capital expenditures in the period was $21.0 million compared with $19.3 million during the first quarter of fiscal 2022, which primarily related to improvements to our retail stores, new store openings, and plant upgrades to our upholstery manufacturing and distribution facilities in Neosho, Missouri.

Spending on these items will continue in fiscal 2023 with full year fiscal 2023 capital expenditures expected to be in the range of $85 to $95 million.

We have no material contractual commitments outstanding for future capital expenditures.

• Cash used for acquisitions was $24.8 million, related to the acquisition of the Furnico manufacturing business and the Alabama, Chattanooga, Tennessee, and Long Island, New York retail businesses.

• Cash used for acquisitions was $7.2 million, related to the acquisition of the Denver, Colorado retail business.

Financing Activities

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 and working capital.

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 million.

On October 15, 2021, we entered into a 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 an increase, up to an additional amount of $100 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 January 22, 2022, we have no borrowings outstanding under the Credit Facility.

As of July 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 January 22, 2022, we were in compliance with our financial covenants under the Credit Facility.

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

We believe our cash on hand, in addition to our available Credit Facility, will provide adequate liquidity for our business operations over the next 12 months.

The Credit Facility replaces 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.

During the first nine months of fiscal 2022, net cash used for financing activities was $122.3 million, primarily due to the following:

• Our board of directors has authorized the repurchase of company stock and we spent $75.6 million in the first nine months of fiscal 2022 to repurchase 2.1 million shares.

On August 17, 2021, the board of directors approved a 6.5 million increase in its share repurchase authorization and as of January 22, 2022, 7.9 million shares remained available for repurchase pursuant to this authorization.

• Cash paid for holdback payments made on prior period acquisitions was $23.0 million, which primarily included contingent consideration and guaranteed payments related to the acquisition of Joybird and guaranteed payments related to the acquisition of the Seattle, Washington business.

During the first quarter of fiscal 2023, net cash used for financing activities was $13.8 million, primarily due to the following:

• Our board of directors has authorized the repurchase of company stock and we spent $5.0 million in the first quarter of fiscal 2022 to repurchase 0.2 million shares.

As of July 30, 2022, 7.3 million shares remained available for repurchase pursuant to this authorization.

• Cash paid to our shareholders in quarterly dividends was $7.1 million.

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Exchange Rate Changes

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash decreased by $0.6 million from the end of fiscal year 2021 to the end of the third quarter of fiscal 2022.

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash decreased by $0.8 million from the end of fiscal year 2022 to the end of the first quarter of fiscal 2023.

These changes impacted our cash balances held in Canada, Thailand, and the United Kingdom.

During the third quarter of fiscal 2022, there were no material changes to the information about our contractual obligations and commitments shown in the table contained in our Annual Report on Form 10-K for the fiscal year ended April 24, 2021.

During the first quarter of fiscal 2023, there were no material changes to the information about our contractual obligations and commitments shown in the table contained in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

We do not expect our continuing compliance with existing federal, state and local statutes dealing with protection of the environment to have a material effect on our capital expenditures, earnings, competitive position or liquidity.

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We disclosed our critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

There were no material changes to our critical accounting policies or estimates during the nine months ended January 22, 2022.

There were no material changes to our critical accounting policies or estimates during the quarter ended July 30, 2022.

Recent Accounting Pronouncements

See Note 1, Basis of Presentation, to the consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting standards and other new accounting standards.

See Note 1, Basis of Presentation, to the consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting standards and other new accounting standards.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the first nine months of fiscal 2022, there were no material changes from the information contained in Item 7A of our Annual Report on Form 10-K for the fiscal year ended April 24, 2021.

During the first quarter of fiscal 2023, there were no material changes from the information contained in Item 7A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis