What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-02-21 compared with 2022-11-30 · 85 added, 74 removed, 138 unchanged (54% 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 October 29, 2022, our supply chain operations included the following:

• Five major manufacturing locations and ten regional distribution centers in the United States and five facilities in Mexico to support our speed-to-market and customization strategy

As of January 28, 2023, our supply chain operations included the following:

• Five major manufacturing locations and ten regional distribution centers in the United States and four facilities in Mexico to support our speed-to-market and customization strategy

• A logistics company that distributes a portion of our products in the United States

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

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.

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

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◦ In total, our proprietary floor space includes approximately 12.5 million square feet worldwide.

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

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

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

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Our strategic initiatives to leverage and reinvigorate our iconic La-Z-Boy brand center on a renewed focus on leveraging the compelling La-Z-Boy comfort message, accelerating our omni-channel offering, and identifying additional consumer-base growth opportunities.

Our marketing platform featuring celebrity brand ambassador Kristen Bell drives brand recognition and injects youthful style and sensibility into our marketing campaign, which enhances the appeal of our brand with a younger consumer base.

Our marketing platform featuring celebrity brand ambassador Kristen Bell is designed to drive brand recognition and inject youthful style and sensibility into our marketing campaign, which is intended to enhance the appeal of our brand with a younger consumer base.

Further, our goal is to connect with consumers along their purchase journey through multiple means, whether online or in person.

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• Expanding the reach of our branded distribution channels, which include the La-Z-Boy Furniture Galleries ® store network and the La-Z-Boy Comfort Studio ® locations, our store-within-a-store format .

While the consumer’s purchase journey may start digitally, our consumers also demonstrate an affinity for visiting our stores to shop, allowing us to frequently deliver the flagship La-Z-Boy Furniture Galleries ® store, or La-Z-Boy Comfort Studio ® , experience and provide design services.

While the consumer’s purchase

journey may start digitally, our consumers also demonstrate an affinity for visiting our stores to shop, allowing us to frequently deliver the flagship La-Z-Boy Furniture Galleries ® store, or La-Z-Boy Comfort Studio ® , experience and provide design services.

We expect our strategic initiatives in this area to generate growth in our Retail segment through an increased company-owned store count and in our Wholesale segment as our proprietary distribution network expands.

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Results of Operations

Fiscal 2023 Second Quarter Compared with Fiscal 2022 Second Quarter

Fiscal 2023 Third Quarter Compared with Fiscal 2022 Third Quarter

La-Z-Boy Incorporated

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change

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Operating margin 7.5% 6.9% 8.8% 7.7%

Consolidated sales increased $35.4 million, or 6%, and $114.8 million, or 10% in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

The increase in sales for both periods reflects the realization of pricing and surcharge actions taken to counteract rising material and freight costs over the past year.

The benefit from these pricing actions, along with a favorable shift in product and channel mix, offset a decline in delivered unit volume.

Consolidated sales increased $1.2 million, or 0.2%, and $115.9 million, or 7% in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

The increase in sales for both periods reflects the realization of pricing and surcharge actions taken to counteract rising raw material and freight costs, along with a favorable impact from product and channel mix as sales in our Retail business grew.

These increases in sales more than offset a decline in delivered unit volume.

Operating Margin

Operating margin, which is calculated as operating income as a percentage of sales, increased 70 basis points and 140 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 390 basis points and 270 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix improved gross margin by 270 basis points and 220 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, driven by growth of our Retail segment, which has a higher gross margin than our Wholesale segment.

◦ Compared with the same periods a year ago, gross margin in the second quarter and first six months of fiscal 2023 benefited from pricing and surcharge actions taken in prior periods.

◦ Higher raw material costs driven by global supply chain challenges and higher plant-related costs due to inefficiencies resulting from lower unit volume negatively impacted gross margin in the second quarter and first six months of fiscal 2023, compared with the same periods a year ago.

• Selling, general and administrative ("SG&A") expenses as a percentage of sales increased 320 basis points and 130 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix increased SG&A expense as a percentage of sales by 200 basis points and 160 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, driven by growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.

◦ SG&A expense as a percentage of sales was further impacted during the second quarter of fiscal 2023 by increased investments in marketing to pre-pandemic levels, as a percentage of sales, to drive written sales.

Operating margin, which is calculated as operating income as a percentage of sales, increased 60 basis points and 110 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 460 basis points and 330 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix improved gross margin by 290 basis points and 240 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, driven by growth of our Retail segment, which has a higher gross margin than our Wholesale segment.

◦ Compared with the same periods a year ago, gross margin in the third quarter and first nine months of fiscal 2023 benefited from pricing and surcharge actions taken in prior periods.

◦ The gross margin in the first nine months of fiscal 2023 was negatively impacted by higher freight and raw material costs driven by global supply chain challenges.

These costs have decreased during the fiscal year, resulting in in a gross margin benefit in the third quarter of fiscal 2023 compared with the same period last year.

• Selling, general and administrative ("SG&A") expenses as a percentage of sales increased 400 basis points and 220 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix increased SG&A expense as a percentage of sales by 80 basis points and 150 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, driven by growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.

◦ Charges related to the closure of our Torreón, Mexico manufacturing facility resulted in a 160 basis point and 50 basis point increase in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ SG&A expense as a percentage of sales was impacted during the third quarter and first nine months of fiscal 2023 by increased investments in marketing, to pre-pandemic levels as a percentage of sales, to drive written sales.

The third quarter of fiscal 2023 was further impacted by higher selling expenses, as a percentage of sales, primarily driven by higher written sales in our Retail segment.

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

Wholesale Segment

Quarter Ended Six Months Ended

Retail Segment

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change

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Operating margin 17.6% 12.2% 16.8% 12.0%

The Wholesale segment’s sales increased $7.1 million, or 2% and $55.5 million, or 7% in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods 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 dealers delaying receipt of finished goods due to warehouse constraints.

The Retail segment’s sales increased $54.1 million, or 27%, and $168.0 million, or 29% in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, led by a 23% and 24% increase in delivered same-store sales for each respective period.

Additionally, the Retail segment benefited from a $14.3 million and a $44.1 million increase in the third quarter and first nine months of fiscal 2023, respectively, from sales related to our retail store acquisitions that occurred in fiscal 2022 and fiscal 2023.

Written same-store sales increased 3% but decreased 8% in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

The decrease in the first nine months of fiscal 2023 reflects softer demand across the industry driven by economic uncertainty and weaker consumer sentiment relative to the prior period which saw significant increases in consumer furniture demand.

Although these challenging industry trends continued through the third quarter of fiscal 2023, the benefit of pricing actions taken in prior periods and strong store-level execution with improved conversion drove an increase in written sales compared with the same period last year.

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

Operating Margin

The Wholesale segment's operating margin decreased 120 basis points and 10 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

• Gross margin increased 190 basis points and 150 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Gross margin increased 400 basis points and 530 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, from pricing and surcharge actions taken in response to rising raw material costs resulting from global supply challenges.

◦ The impact of rising raw material costs noted above led to a 120 basis point and 220 basis point decrease in gross margin, in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Higher costs related to plant inefficiencies due to lower unit volumes drove a 110 basis point and 160 basis point decrease in gross margin in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

• SG&A expense as a percentage of sales increased 310 basis points and 160 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago primarily due to increased marketing expense to pre-pandemic levels, as a percentage of sales.

Additionally, the second quarter and first six months of fiscal 2022 included a gain resulting from the sale of our Newton, Mississippi manufacturing facility, resulting in a comparative 70 basis point and 40 basis point increase in SG&A as a percentage of sales in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

Retail Segment

Quarter Ended Six Months Ended

The Retail segment's operating margin increased 540 basis points and 480 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

• Gross margin increased 110 basis points and 40 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, primarily due to pricing actions taken by the Retail business to offset increases in product costs.

• SG&A expense as a percentage of sales decreased 430 basis points and 440 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, primarily due to higher delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses.

Wholesale Segment

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change

Sales $ 252,152 $ 192,420 31.0% $ 488,173 $ 374,267 30.4 %

Sales to external customers $ 291,170 $ 328,533 $ 934,511 $ 973,973

Intersegment sales 116,433 94,748 361,141 281,899

Total Sales 407,603 423,281 (3.7)% 1,295,652 1,255,872 3.2 %

Operating income 16,940 27,639 (38.7)% 81,558 89,098 (8.5) %

Operating margin 4.2% 6.5% 6.3% 7.1%

The Retail segment’s sales increased $59.7 million, or 31%, and $113.9 million, or 30% in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, led by a 25% increase in delivered same-store sales for each respective period.

Additionally, the Retail segment benefited from a $17.1 million and a $29.4 million increase in the second quarter and first six months of fiscal 2023, respectively, from sales related to our retail store acquisitions that occurred in fiscal 2022 and fiscal 2023.

Written same-store sales decreased 10% and 13% in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, reflecting softer demand across the industry driven by economic uncertainty and weaker consumer sentiment.

However, compared to the pre-pandemic second quarter of fiscal 2020, written same-store sales have increased at a compound annual growth rate of 4%.

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

The Wholesale segment’s sales decreased $15.7 million, or 4% but increased $39.8 million, or 3% in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

Over the same periods, intercompany sales from our Wholesale segment to our Retail segment increased 23% and 28%, respectively.

Total sales in both periods benefited from the realization of pricing and surcharge actions taken in response to rising manufacturing costs, combined with favorable channel and product mix reflecting the shift to our La-Z-Boy Furniture Galleries ® network.

These benefits more than offset a decline in delivered volume in 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, but only partially offset lower delivered volume in the third quarter of fiscal 2023.

Operating Margin

The Retail segment's operating margin increased 400 basis points and 440 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

• Gross margin increased 80 basis points and was flat in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

The increase in the second quarter of fiscal 2023 was primarily due to pricing actions taken by the Retail business to offset increases in product costs.

• SG&A expense as a percentage of sales decreased 320 basis points and 440 basis points in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, primarily due to higher delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses.

The Wholesale segment's operating margin decreased 230 basis points and 80 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

• Gross margin increased 300 basis points and 200 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Gross margin increased 250 basis points and 520 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, from pricing and surcharge actions taken in response to rising raw material costs resulting from global supply challenges in prior periods.

◦ Declining freight costs drove an 80 basis point and 40 basis point increase in gross margin during the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

◦ Higher raw material costs led to a 160 basis point decrease in gross margin during the first nine months of fiscal 2023 compared with same period a year ago.

◦ Gross margin decreased 100 basis points in the first nine months of fiscal 2023, compared with the same period a year ago, due to higher costs related to plant inefficiencies during the first half of fiscal 2023.

• SG&A expense as a percentage of sales increased 530 basis points and 280 basis points in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago

◦ Reduced fixed cost leverage and an increase in marketing expense to pre-pandemic levels, as a percentage of sales, contributed to higher SG&A expense as a percentage of sales in the third quarter of fiscal 2023 and, to a lesser extent, in the first nine months of fiscal 2023, compared with the same periods a year ago.

◦ Additionally, charges related to the closure of our Torreón, Mexico manufacturing facility in the third quarter of fiscal 2023, resulted in a 230 basis point and 70 basis point increase in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

Corporate and Other

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change

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Operating loss (18,303) (12,254) (49.4)% (48,047) (29,629) (62.2) %

Corporate and Other sales decreased $1.4 million in the second quarter of fiscal 2023 and increased $3.7 million in the first six months of fiscal 2023 compared with the same periods a year ago.

The change in sales was primarily led by Joybird sales which decreased 5% to $38.2 million, in the second quarter of fiscal 2023 and increased 2% to $80.8 million in the first six months of fiscal 2023.

While Joybird sales benefited from pricing actions and increased online conversion, overall volume declined primarily due to slowing online traffic and demand challenges consistent with those recently experienced across the e-commerce home furnishings industry, along with changes in campaign execution with a key marketing partner which have since been reversed.

Written sales for Joybird were down 27% and 9% in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, reflecting both the items noted above.

Intercompany eliminations increased in the second quarter and first six months of fiscal 2023 compared with the same periods a year ago due to higher sales from our Wholesale segment to our Retail segment.

Corporate and Other sales decreased $16.5 million and $12.7 million in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago.

The change in sales was primarily led by Joybird sales which decreased 35% to $28.9 million and 11% to $109.7 million in the third quarter and first nine months of fiscal 2023, respectively.

While Joybird sales benefited from increased online conversion, overall delivered volume declined due to lower written sales from the prior sequential quarter combined with slowing online traffic and demand challenges consistent with those recently experienced across the e-commerce home furnishings industry.

Written sales for Joybird were down 21% and 14% in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, reflecting the items noted above.

Intercompany eliminations increased in the third quarter and first nine months of fiscal 2023 compared with the same periods a year ago due to higher sales from our Wholesale segment to our Retail segment.

Operating Loss

Our Corporate and Other operating loss increased $5.1 million and $12.4 million in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago.

• The increase in operating loss was primarily due to Joybird's operating loss resulting from lower sales volume, an unfavorable shift in product mix, higher input costs and increased investments in marketing to drive customer acquisition and awareness.

• Partially offsetting the above, changes in the fair value of the Joybird contingent consideration liability relative to changes made during fiscal 2022, resulted in a comparative $1.3 million decrease in operating loss during the second quarter and first six months of fiscal 2023.

Our Corporate and Other operating loss increased $6.0 million and $18.4 million in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, primarily due to Joybird's operating loss resulting from lower sales volume and higher input costs.

Additionally, operating loss was impacted in the first nine months of fiscal 2023 by increased investments in marketing to drive customer acquisition and awareness.

Non-Operating Income (Expense)

Interest Income

Interest income was $1.0 million and $1.4 million higher in the second quarter and first six months of fiscal 2023, respectively, compared with the same periods a year ago, primarily driven by higher interest rates.

Interest income was $1.2 million and $2.6 million higher in the third quarter and first nine months of fiscal 2023, respectively, compared with the same periods a year ago, primarily driven by higher interest rates.

Other Income (Expense), Net

Other income (expense), net was de minimis in both the second quarter and first six months of fiscal 2023.

Other income (expense), net was $1.0 million and $0.9 million of income in the second quarter and first six months of fiscal 2022, respectively, primarily due to unrealized gains on investments.

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.

Other income (expense), net was $1.1 million and $0.8 million of expense in the third quarter and first nine months of fiscal 2023, respectively, primarily due to exchange rate losses.

Other income (expense), net was $1.5 million and $0.5 million of expense in the third quarter and first nine months of fiscal 2022, respectively, primarily due to unrealized losses on investments and exchange rate losses, 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.

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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 $207.9 million at October 29, 2022, compared with $248.9 million at April 30, 2022.

In addition, we had investments to enhance our returns on cash of $19.0 million at October 29, 2022, compared with $27.2 million at April 30, 2022.

We had cash, cash equivalents and restricted cash of $284.0 million at January 28, 2023, compared with $248.9 million at April 30, 2022.

In addition, we had investments to enhance our returns on cash of $15.8 million at January 28, 2023, compared with $27.2 million at April 30, 2022.

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

Six Months Ended

Nine Months Ended

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

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Operating Activities

During the first six months of fiscal 2023, net cash provided by operating activities was $31.0 million.

Our cash provided by operating activities was primarily attributable to net income, adjusted for non-cash items.

This was partially offset by a $52.4 million decrease in customer deposits, as we work down our backlog to pre-pandemic levels, and a $36.8 million increase in inventory, primarily due to challenges in supply chain availability from prior periods impacting the timing of receiving inventory and the flow of finished goods to our customers.

During the first nine months of fiscal 2023, net cash provided by operating activities was $127.1 million.

Our cash provided by operating activities was primarily attributable to net income, adjusted for non-cash items and a $42.5 million decrease in receivables.

This was partially offset by a $61.2 million decrease in customer deposits, as we continue to work down our backlog to pre-pandemic levels.

Investing Activities

During the first six months of fiscal 2023, net cash used for investing activities was $44.1 million, primarily due to the following:

• Cash used for capital expenditures in the period was $40.4 million compared with $33.3 million during the first six months 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.

During the first nine months of fiscal 2023, net cash used for investing activities was $58.0 million, primarily due to the following:

• Cash used for capital expenditures in the period was $57.4 million compared with $58.6 million during the first nine months 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 $75 to $80 million.

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

• Cash used for acquisitions was $11.7 million, related to the acquisition of the Denver, Colorado and Spokane, Washington retail businesses.

• Cash used for acquisitions was $11.9 million, primarily related to the acquisition of the Denver, Colorado and Spokane, Washington retail businesses.

• Proceeds from the sale of investments, net of investment purchases, was $11.2 million.

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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 October 29, 2022, we have no borrowings outstanding under the Credit Facility.

As of January 28, 2023, 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 October 29, 2022, we were in compliance with our financial covenants under the Credit Facility.

As of January 28, 2023, 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.

During the first six months of fiscal 2023, net cash used for financing activities was $25.9 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 six months of fiscal 2022 to repurchase 0.2 million shares.

As of October 29, 2022, 7.3 million shares remained available for repurchase pursuant to this authorization.

During the first nine months of fiscal 2023, net cash used for financing activities was $33.9 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 nine months of fiscal 2022 to repurchase 0.2 million shares.

As of January 28, 2023, 7.3 million shares remained available for repurchase pursuant to this authorization.

• Cash paid to our shareholders in quarterly dividends was $22.0 million.

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Exchange Rate Changes

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash decreased by $1.8 million from the end of fiscal year 2022 to the end of the second quarter of fiscal 2023.

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

During the second 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.

From the end of fiscal year 2022 to the end of the third quarter of fiscal 2023, changes in exchange rates had a de minimis impact on our cash, cash equivalents, and restricted cash, slightly impacting our cash balances held in Canada, Thailand, and the United Kingdom.

During the third 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 six months ended October 29, 2022.

There were no material changes to our critical accounting policies or estimates during the nine months ended January 28, 2023.

Recent Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the first six months 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.

During the first nine months 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