LA-Z-BOY INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We have prepared this Management’s Discussion and Analysis as an aid to understanding our financial results. It should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes to Consolidated Financial Statements. After a cautionary note regarding forward-looking statements, we begin with an introduction to our key businesses and then provide discussions of our results of operations, liquidity and capital resources, and critical accounting policies. Cautionary Note Regarding Forward-Looking Statements La-Z-Boy Incorporated and its subsidiaries (individually and collectively, "we," "our," "us," "La-Z-Boy" or the "Company") make "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, business and industry and the effect of the coronavirus ("COVID") pandemic on our business operations and financial results. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may include words such as "anticipates," "believes," "continues," "estimates," "expects," "feels," "forecasts," "hopes," "intends," "plans," "projects," "likely," "seeks," "short-term," "non-recurring," "one-time," "outlook," "target," "unusual," or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," or "may." A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak to our views only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial performance. Our actual future results and trends may differ materially from those we anticipate depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our Annual Report for the fiscal year ended April 30, 2022, under Item 1A, "Risk Factors" and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in our Annual Report for the fiscal year ended April 30, 2022 or any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason. Introduction Our Business We are the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the United States . The La-Z-Boy Furniture Galleries ® stores retail network is the third largest retailer of single-branded furniture in the United States . We manufacture, market, import, export, distribute and retail upholstery furniture products under the La-Z-Boy ® , England, Kincaid ® , and Joybird ® tradenames. 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 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 • A wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland • An upholstery manufacturing business in the United Kingdom • A global trading company in Hong Kong which helps us manage our Asian supply chain by establishing and maintaining relationships with our Asian suppliers, as well as identifying efficiencies and savings opportunities 23 Table of Contents 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: one that operates a manufacturing facility and another that operates a wholesale sales office. 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: to furniture retailers or distributors in the United States, Canada, and approximately 55 other countries, including the United Kingdom, China, Australia, South Korea and New Zealand, directly to consumers through retail stores that we own and operate, and through our websites, www.la-z-boy.com and www.joybird.com. • The centerpiece of our retail distribution strategy is our network of 346 La-Z-Boy Furniture Galleries ® stores and 519 La-Z-Boy Comfort Studio ® locations, each dedicated to marketing our La-Z-Boy branded products. We consider this dedicated space to be “proprietary.” ◦ La-Z-Boy Furniture Galleries ® stores help consumers furnish their homes by combining the style, comfort, and quality of La-Z-Boy furniture with our available design services. We own 167 of the La-Z-Boy Furniture Galleries ® stores, while the remainder are independently owned and operated. ◦ La-Z-Boy Comfort Studio ® locations are defined spaces within larger independent retailers that are dedicated to displaying and selling La-Z-Boy branded products. All 519 La-Z-Boy Comfort Studio ® locations are independently owned and operated. ◦ In total, we have approximately 7.6 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded products in North America. ◦ We also have approximately 3.0 million square feet of floor space outside of the United States and Canada dedicated to selling La-Z-Boy branded products. • Our other brands, England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets, with slightly over half of Hammary’s sales originating through the La-Z-Boy Furniture Galleries ® store network. ◦ Kincaid and England have their own dedicated proprietary in-store programs with 630 outlets and approximately 1.9 million square feet of proprietary floor space. ◦ 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 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. The foundation of our strategic initiatives is driving profitable sales growth in all areas of our business. We plan to drive growth in the following ways: • Leveraging and reinvigorating our brand with a consumer focus and expanded omni-channel presence. 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 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. We are driving change throughout our digital platforms to improve the user experience, with a specific focus on the ease with which customers browse through our broad product assortment, customize products to their liking, find stores to make a purchase, or purchase at www.la-z-boy.com. • 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 24 Table of Contents 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. We are not only focused on growing the number of locations, but also on upgrading existing store locations to our new concept designs. • 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 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 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, 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. We believe there is significant growth potential for our consumer brands through these retail channels. Our strategic initiatives focus on enhancing our enterprise capabilities to support the growth of our consumer brands and improving the agility of our supply chain so that it can more broadly support all our consumer brands. Our reportable operating segments include the Wholesale segment and the Retail segment. • Wholesale Segment . Our Wholesale segment consists primarily of three operating segments: La-Z-Boy, our largest operating segment, our England subsidiary, and our casegoods operating segment that sells furniture under three brands: American Drew ® , Hammary ® and Kincaid ® . The Wholesale segment also includes our international wholesale and manufacturing businesses. We aggregate these operating segments into one reportable segment because they are economically similar and meet the other aggregation criteria for determining reportable segments. Our Wholesale segment manufactures and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas and imports casegoods (wood) furniture, such as bedroom sets, dining room sets, entertainment centers and occasional pieces. The Wholesale segment sells directly to La-Z-Boy Furniture Galleries ® stores, operators of La-Z-Boy Comfort Studio ® locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers. • Retail Segment . Our Retail segment consists of one operating segment comprised of our 167 company-owned La-Z-Boy Furniture Galleries ® stores. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other accessories, to end consumers through these stores. • Corporate & Other. Corporate & Other includes the shared costs for corporate functions, including human resources, information technology, finance and legal, in addition to revenue generated through royalty agreements with companies licensed to use the La-Z-Boy ® brand name on various products. We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segments, including our global trading company in Hong Kong and Joybird, an e-commerce retailer that manufactures upholstered furniture, such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports casegoods (wood) furniture, such as occasional tables and other accessories. Joybird sells to the end consumer primarily online through its website, www.joybird.com. None of the operating segments included in Corporate & Other meet the requirements of reportable segments. 25 Table of Contents Results of Operations Fiscal 2023 Third Quarter Compared with Fiscal 2022 Third Quarter La-Z-Boy Incorporated 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 $ 572,723 $ 571,573 0.2% $ 1,788,146 $ 1,672,245 6.9 % Operating income 42,840 39,487 8.5% 157,366 127,971 23.0 % Operating margin 7.5% 6.9% 8.8% 7.7% Sales 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 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. 26 Table of Contents 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 Sales $ 251,157 $ 197,052 27.5% $ 739,330 $ 571,319 29.4 % Operating income 44,203 24,102 83.4% 123,855 68,502 80.8 % Operating margin 17.6% 12.2% 16.8% 12.0% Sales 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 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 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% Sales 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. 27 Table of Contents Operating Margin 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 Nine Months Ended (Unaudited, amounts in thousands, except percentages) 1/28/2023 1/22/2022 % Change 1/28/2023 1/22/2022 % Change Sales $ 33,510 $ 49,979 (33.0)% $ 125,877 $ 138,626 (9.2) % Intercompany eliminations (119,547) (98,739) (21.1)% (372,713) (293,572) (27.0) % Operating loss (18,303) (12,254) (49.4)% (48,047) (29,629) (62.2) % Sales 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 $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. 28 Table of Contents Non-Operating Income (Expense) Interest Income 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 $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. Income Taxes 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. Liquidity and Capital Resources Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash from operations, and amounts available under our credit facility. 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 $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: Nine Months Ended (Unaudited, amounts in thousands) 1/28/2023 1/22/2022 Cash Flows Provided By (Used For) Net cash provided by operating activities $ 127,052 $ 45,192 Net cash used for investing activities (57,965) (77,036) Net cash used for financing activities (33,894) (122,288) Exchange rate changes (4) (593) Change in cash, cash equivalents and restricted cash $ 35,189 $ (154,725) Operating Activities 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 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. 29 Table of Contents • 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. Financing Activities 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 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 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 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. Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. We expect the board to continue declaring regular quarterly cash dividends for the foreseeable future, but it may discontinue doing so at any time. • Cash paid for holdback payments made on prior-period acquisitions was $5.0 million for the guaranteed payments related to the acquisition of Joybird. Exchange Rate Changes 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. Other 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. Critical Accounting Policies 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 28, 2023. Recent Accounting Pronouncements 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. 30 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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.