What changed in this filing

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Item 1. Financial Statements

2023-02-21 compared with 2022-11-30 · 99 added, 49 removed, 560 unchanged (21% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENT OF INCOME

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except per share data) 1/28/2023 1/22/2022 1/28/2023 1/22/2022

10 unchanged sentences

Net income 31,577 29,082 117,296 94,706

Net income attributable to noncontrolling interests ( 702 ) ( 842 ) ( 1,154 ) ( 1,542 )

Net (income) loss attributable to noncontrolling interests 149 ( 615 ) ( 1,005 ) ( 2,157 )

Net income attributable to La-Z-Boy Incorporated $ 31,726 $ 28,467 $ 116,291 $ 92,549

6 unchanged sentences

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022

2 unchanged sentences

Currency translation adjustment 5,441 ( 651 ) ( 72 ) ( 1,902 )

Net unrealized loss on marketable securities, net of tax ( 289 ) ( 498 ) ( 203 ) ( 50 )

Net unrealized gain (loss) on marketable securities, net of tax 287 ( 140 ) 84 ( 190 )

Net pension amortization, net of tax 36 56 109 175

44 unchanged sentences

CONSOLIDATED STATEMENT OF CASH FLOWS

Six Months Ended

Nine Months Ended

(Unaudited, amounts in thousands) 1/28/2023 1/22/2022

2 unchanged sentences

Adjustments to reconcile net income to cash provided by operating activities

(Gain)/loss on disposal of assets 1 ( 3,151 )

(Gain)/loss on disposal and impairment of assets 6,161 ( 3,149 )

(Gain)/loss on sale of investments 155 ( 340 )

2 unchanged sentences

Amortization of right-of-use lease assets 57,548 53,949

Lease impairment 1,347 —

Equity-based compensation expense 8,456 8,887

60 unchanged sentences

At October 29, 2022 $ 43,136 $ 347,036 $ 495,003 $ ( 10,517 ) $ 9,128 $ 883,786

Net income — — 31,726 — ( 149 ) 31,577

Other comprehensive income (loss) — — — 4,337 1,427 5,764

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 4 ( 7 ) ( 57 ) — — ( 60 )

Stock option and restricted stock expense — 3,377 — — — 3,377

Dividends declared and paid ($ 0.1815 /share)

— — ( 7,866 ) — — ( 7,866 )

Dividends declared not paid ($ 0.1815 /share)

— — ( 74 ) — — ( 74 )

At January 28, 2023 $ 43,140 $ 350,406 $ 518,732 $ ( 6,180 ) $ 10,406 $ 916,504

(Unaudited, amounts in thousands) Common

20 unchanged sentences

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 11 353 ( 6 ) — — 358

Purchases of 434 shares of common stock

Repurchases of 434 shares of common stock

( 434 ) ( 196 ) ( 14,370 ) — — ( 15,000 )

5 unchanged sentences

At October 23, 2021 $ 44,200 $ 336,920 $ 398,335 $ ( 2,153 ) $ 8,380 $ 785,682

Net income — — 28,467 — 615 29,082

Other comprehensive income (loss) — — — ( 836 ) 101 ( 735 )

Stock issued for stock and employee benefit plans, net of cancellations and withholding tax 8 204 ( 12 ) — — 200

Repurchases of 703 shares of common stock

( 703 ) ( 363 ) ( 23,940 ) — — ( 25,006 )

Stock option and restricted stock expense — 2,533 — — 2,533

Dividends declared and paid ($ 0.165 /share)

— — ( 7,223 ) — — ( 7,223 )

Dividends declared not paid ($ 0.165 /share)

— — ( 50 ) — — ( 50 )

At January 22, 2022 $ 43,505 $ 339,294 $ 395,577 $ ( 2,989 ) $ 9,096 $ 784,483

(1) Non-controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.

8 unchanged sentences

The interim results reflected in the accompanying financial statements are not necessarily indicative of the results of operations that will occur for the full fiscal year ending April 29, 2023.

At October 29, 2022, we owned investments in two privately-held companies consisting of non-marketable preferred shares, warrants to purchase common shares, and convertible notes.

At January 28, 2023, 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.

Accounting pronouncements adopted in fiscal 2023

We did not adopt any Accounting Standards Updates ("ASUs") in fiscal 2023.

We did not adopt any Accounting Standards Updates ("ASUs") in the first nine months of fiscal 2023.

Accounting pronouncements not yet adopted

3 unchanged sentences

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

Torreón Closure

During the third quarter of fiscal 2023, we made the decision to close our manufacturing facility in Torreón, Mexico as part of our initiative to drive improved efficiencies through optimized staffing levels within our plants.

Torreón was the last facility to begin operating as part of our broader Mexico manufacturing expansion in fiscal 2021 and 2022 and accounted for approximately 3 % of our La-Z-Boy branded production.

As a result of this action, charges were recorded within the Wholesale segment in the third quarter of fiscal 2023 of $ 9.2 million in selling, general, and administrative expense for the impairment of various assets, primarily long-lived assets, and $ 0.9 million in cost of sales, primarily related to severance.

To determine the impairment of our long-lived assets, which included fixed assets utilized by the facility and the right-of-use-lease asset, we calculated the fair value of the Torreón asset group using the income approach based on the expected future cash flows associated with the facility, primarily those associated with an assumed sublease.

Based on this evaluation, we recorded an impairment charge as the difference between the asset group's fair value and its carrying value.

None of the below acquisitions were significant to our consolidated financial statements, and, therefore, pro-forma financial information is not presented.

1 unchanged sentence

Each of the following Retail acquisitions completed in fiscal 2023 and 2022 reflect 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.

Barboursville, West Virginia acquisition

On December 12, 2022, we completed our acquisition of the Barboursville, West Virginia business that operates one independently owned La-Z-Boy Furniture Galleries ® store.

This acquisition did not have a meaningful impact on our consolidated financial statements.

Spokane, Washington acquisition

4 unchanged sentences

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 $ 1.2 million related to these reacquired rights.

We recorded an indefinite-lived intangible asset of $ 1.2 million related to these reacquired rights.

We also recognized $ 3.0 million of goodwill in our Retail segment related primarily to synergies we expect from the integration of the acquired store and future benefits of these synergies.

10 unchanged sentences

Prior Year Acquisitions

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 adjustments.

We paid total cash of $ 8.0 million in the third quarter of fiscal 2022 and the remaining consideration includes forgiveness of accounts receivable and payments based on working capital adjustments.

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 adjustments and in the third and fourth quarters of fiscal 2022, we paid $ 13.9 million of cash 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.

37 unchanged sentences

Translation adjustment ( 295 ) ( 126 ) — ( 421 )

Balance at October 29, 2022 (1)

Balance at January 28, 2023 (1)

$ 19,912 $ 129,423 $ 55,446 $ 204,781

17 unchanged sentences

Translation adjustment — — ( 95 ) ( 35 ) ( 130 )

Balance at October 29, 2022 $ 1,155 $ 2,993 $ 32,647 $ 1,845 $ 38,640

Balance at January 28, 2023 $ 1,155 $ 2,793 $ 33,317 $ 1,915 $ 39,180

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

28 unchanged sentences

The following table summarizes sales of marketable securities:

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022

17 unchanged sentences

Accrued expenses and other current liabilities $ 345,360 $ 496,393

The decrease in customer deposits and deferred revenue during the first six months of fiscal 2023 was primarily a result of working down the significant backlog built up in prior periods back to pre-pandemic levels.

Customer deposits and deferred revenue decreased during the first nine months of fiscal 2023 as we continue to work down the backlog built up in prior periods back to pre-pandemic levels.

Product Warranties

8 unchanged sentences

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

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands) 1/28/2023

1 unchanged sentence

Balance as of the beginning of the period $ 28,357 $ 25,068 $ 27,036 $ 23,636

Acquisitions — 634 — 634

Accruals during the period 8,663 7,271 24,942 21,158

1 unchanged sentence

Balance as of the end of the period $ 29,298 $ 26,361 $ 29,298 $ 26,361

(1) $ 17.8 million and $ 16.4 million is recorded in accrued expenses and other current liabilities as of October 29, 2022, and April 30, 2022, respectively, while the remainder is included in other long-term liabilities.

(1) $ 18.5 million and $ 16.4 million is recorded in accrued expenses and other current liabilities as of January 28, 2023, and April 30, 2022, respectively, while the remainder is included in other long-term liabilities.

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

1 unchanged sentence

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

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022

23 unchanged sentences

Restricted Stock .

We granted 239,883 shares of restricted stock units to employees during the first quarter of fiscal 2023 and we also have restricted stock awards outstanding from previous grants.

We granted 256,128 shares of restricted stock units to employees during the first nine months of fiscal 2023 and we also have restricted stock awards outstanding from previous grants.

We issue restricted stock at no cost to employees and account for restricted stock awards as equity-based awards because when they vest, they will be settled in common shares.

4 unchanged sentences

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

The weighted-average fair value of the restricted stock that was awarded in the first six months of fiscal 2023 was $ 24.44 per share, the market value of our common shares on the dates of grant.

The weighted-average fair value of the restricted stock that was awarded in the first nine months of fiscal 2023 was $ 24.58 per share, the market value of our common shares on the dates of grant.

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 the earlier of the date a director leaves the board or one year from the grant date.

Restricted stock units granted to our non-employee directors are offered at no cost to the directors and vest the earlier of the date a director ceases to be a member of the board (for any reason other than the termination of service for cause) or the-one year anniversary of the grant date.

During the second quarter of fiscal 2023, we granted 36,656 restricted stock units to our non-employee directors.

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 $ 26.19 .

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 $ 26.19 .

Performance Shares.

4 unchanged sentences

In the event of an employee's termination during the vesting period, the potential right to earn shares under this program is generally forfeited and we have elected to recognize forfeitures as an adjustment to compensation expense in the same period in which 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.

taking into account the probability that we will satisfy the performance goals.

The fair value of each share of the awards we granted in fiscal 2023 that vest based on attaining performance goals was $ 22.43 , the market value of our common shares on the date we granted the awards less the value of the dividends we expect to pay shareholders before the shares vest.

4 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The activity in accumulated other comprehensive income (loss) for the quarters ended October 29, 2022, and October 23, 2021, is as follows:

The activity in accumulated other comprehensive income (loss) for the quarters ended January 28, 2023, and January 22, 2022, is as follows:

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

Balance at July 30, 2022 $ ( 3,602 ) $ ( 212 ) $ ( 3,502 ) $ ( 7,316 )

Balance at October 29, 2022 $ ( 6,551 ) $ ( 501 ) $ ( 3,465 ) $ ( 10,517 )

Changes before reclassifications 4,014 303 — 4,317

2 unchanged sentences

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated 4,014 287 36 4,337

Balance at January 28, 2023 $ ( 2,537 ) $ ( 214 ) $ ( 3,429 ) $ ( 6,180 )

Balance at October 23, 2021 $ 2,340 $ 320 $ ( 4,813 ) $ ( 2,153 )

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

Changes before reclassifications ( 752 ) ( 201 ) — ( 953 )

2 unchanged sentences

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated ( 752 ) ( 140 ) 56 ( 836 )

Balance at October 23, 2021 $ 2,340 $ 320 $ ( 4,813 ) $ ( 2,153 )

The activity in accumulated other comprehensive income (loss) for the six months ended October 29, 2022 and October 23, 2021, is as follows:

Balance at January 22, 2022 $ 1,588 $ 180 $ ( 4,757 ) $ ( 2,989 )

The activity in accumulated other comprehensive income (loss) for the nine months ended January 28, 2023 and January 22, 2022, is as follows:

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

4 unchanged sentences

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated ( 576 ) 84 109 ( 383 )

Balance at October 29, 2022 $ ( 6,551 ) $ ( 501 ) $ ( 3,465 ) $ ( 10,517 )

Balance at January 28, 2023 $ ( 2,537 ) $ ( 214 ) $ ( 3,429 ) $ ( 6,180 )

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

3 unchanged sentences

Other comprehensive income (loss) attributable to La-Z-Boy Incorporated ( 1,453 ) ( 190 ) 175 ( 1,468 )

Balance at October 23, 2021 $ 2,340 $ 320 $ ( 4,813 ) $ ( 2,153 )

Balance at January 22, 2022 $ 1,588 $ 180 $ ( 4,757 ) $ ( 2,989 )

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 non-controlling interest were as follows:

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022

Balance as of the beginning of the period $ 9,128 $ 8,380 $ 8,897 $ 8,648

Net income 702 842 1,154 1,542

Net income (loss) ( 149 ) 615 1,005 2,157

Other comprehensive loss 1,427 101 504 ( 449 )

13 unchanged sentences

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

Quarter Ended October 29, 2022 Quarter Ended October 23, 2021

Quarter Ended January 28, 2023 Quarter Ended January 22, 2022

(Unaudited, amounts in thousands) Wholesale Retail Corporate

11 unchanged sentences

Consolidated Net Sales $ 572,723 $ 571,573

Six Months Ended October 29, 2022 Six Months Ended October 23, 2021

Nine Months Ended January 28, 2023 Nine Months Ended January 22, 2022

(Unaudited, amounts in thousands) Wholesale Retail Corporate

14 unchanged sentences

This gross revenue includes sales to La-Z-Boy Furniture Galleries ® stores (including company-owned stores), operators of La-Z-Boy Comfort Studio ® locations, England Custom Comfort Center locations, other major dealers, independent retailers, and the end consumer.

Stationary Upholstery Furniture - Includes gross revenue for upholstered furniture, such as sofas, loveseats, chairs, sectionals, modulars, and ottomans that do not have a mechanism.

Stationary Upholstery Furniture - Includes gross revenue for upholstered furniture, such as sofas, loveseats, chairs, sectionals, modulars, and ottomans that do not have a mechanism for reclining or extension.

15 unchanged sentences

$ 190,005 $ 322,239

(1) During the six months ended October 29, 2022, we recognized revenue of $ 274.3 million related to our contract liability balance at April 30, 2022.

(1) During the nine months ended January 28, 2023, we recognized revenue of $ 292.7 million related to our contract liability balance at April 30, 2022.

Segment Information

17 unchanged sentences

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

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands) 1/28/2023 1/22/2022 1/28/2023 1/22/2022

19 unchanged sentences

Income before income taxes $ 43,654 $ 38,673 $ 159,742 $ 127,765

Our effective tax rate was 25.8 % and 26.2 % for the second quarter and six months ended October 29, 2022, respectively, compared with 26.6 % and 26.3 % for the second quarter and six months ended October 23, 2021, respectively.

Our effective tax rate was 27.7 % and 26.6 % for the third quarter and nine months ended January 28, 2023, respectively, compared with 24.8 % and 25.9 % for the third quarter and nine months ended January 22, 2022, respectively.

The effective tax rate in the third quarter and first nine months of fiscal 2022 was lower partially due to non-taxable gains on corporate owned life insurance and state taxes.

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

1 unchanged sentence

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

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except per share data) 1/28/2023 1/22/2022 1/28/2023 1/22/2022

13 unchanged sentences

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

For the second quarter and six months ended October 29, 2022, we excluded options to purchase 1.5 million shares from the diluted share calculation.

For the second quarter and six months ended October 23, 2021, we excluded options to purchase 0.3 million shares from the diluted share calculation.

For the third quarter and nine months ended January 28, 2023, we excluded options to purchase 1.5 million shares from the diluted share calculation.

For the third quarter and nine months ended January 22, 2022, we excluded options to purchase 0.2 million shares from the diluted share calculation.

Fair Value Measurements

8 unchanged sentences

We measure non-financial assets such as other intangible assets, goodwill, and other long-lived assets at fair value when there is an indicator of impairment, and we record them at fair value only when we recognize an impairment loss.

The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at October 29, 2022 and April 30, 2022.

Refer to Note 1, Basis of Presentation, for additional information.

The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at January 28, 2023 and April 30, 2022.

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

At October 29, 2022

At January 28, 2023

Fair Value Measurements

13 unchanged sentences

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

At October 29, 2022 and April 30, 2022, 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.

At January 28, 2023 and April 30, 2022, 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 October 29, 2022 and 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.

At January 28, 2023 and 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 of these equity investments (preferred shares and warrants) is not readily determinable and therefore, we estimate the fair value as cost 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.

There were no changes to the fair value of our Level 3 assets during the six months ended October 29, 2022.

During the third quarter of fiscal 2023, we invested an additional $ 0.2 million in convertible notes in one of these privately-held start-up companies.

There were no other changes to the fair value of our Level 3 assets during the nine months ended January 28, 2023.

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

1 unchanged sentence

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 6.8 %.

The fair value of our contingent consideration liability as of October 29, 2022 reflects our expectation that no additional consideration will be owed based on our most recent financial projections and the terms of the earnout agreement.

The fair value of our contingent consideration liability as of January 28, 2023 reflects our expectation that no additional consideration will be owed based on our most recent financial projections and the terms of the earnout agreement.

As a result, during the second quarter of fiscal 2023, we reduced the fair value of the contingent consideration liability by its full carrying value of $ 0.8 million which was recorded as a favorable impact to selling, general and administrative expense in the consolidated statement of income.

There were no other changes to the fair value of our Level 3 liabilities during the six months ended October 29, 2022.

There were no other changes to the fair value of our Level 3 liabilities during the nine months ended January 28, 2023.

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

What changed 10-Q

Item 1. Financial Statements