What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-20 compared with 2023-11-29 · 84 added, 72 removed, 167 unchanged (48% 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 28, 2023, our supply chain operations included the following:

As of January 27, 2024, our supply chain operations included the following:

• Five major manufacturing locations and 15 distribution centers in the United States and four facilities in Mexico to support our speed-to-market and customization strategy

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As part of this initiative, we made the decision to shift upholstery production from our Ramos, Mexico operations to our other upholstery plants and relocate our cut and sew operations back to Ramos, Mexico, resulting in the permanent closure of our leased cut and sew facility in Parras, Mexico.

As a result of these actions, charges were recorded within the Wholesale segment in the second quarter of fiscal 2024, totaling $3.6 million in cost of sales, primarily related to severance, and $3.0 million in SG&A expense for the accelerated depreciation of fixed assets.

As a result of these actions, charges were recorded within the Wholesale segment in the second and third quarters of fiscal 2024, totaling $3.8 million in cost of sales, primarily related to severance, and $3.0 million in SG&A expense for the accelerated depreciation of fixed assets.

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

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Results of Operations

Fiscal 2024 Second Quarter Compared with Fiscal 2023 Second Quarter

Fiscal 2024 Third Quarter Compared with Fiscal 2023 Third Quarter

La-Z-Boy Incorporated

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change

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Operating margin 6.5% 7.5% 6.7% 8.8%

Consolidated sales decreased $99.9 million, or 16%, and $222.3 million, or 18%, in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

Sales in the first six months of fiscal 2023 were fueled by the delivery of a significant backlog resulting from heightened demand in prior periods.

As a result, the decrease in sales during the second quarter and first six months of fiscal 2024 reflects a return to industry-wide seasonal trends relative to a historically high comparative period.

To a lesser extent, sales also decreased in the second quarter and first six months of fiscal 2024 as a result of selective pricing and promotional actions taken to maintain competitiveness.

Consolidated sales decreased $72.3 million, or 13%, and $294.7 million, or 16%, in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

Sales in the first nine months of fiscal 2023 were fueled by the delivery of a significant backlog resulting from heightened demand in prior periods.

As a result, the decrease in sales during the third quarter and first nine months of fiscal 2024 reflects a return to industry-wide seasonal trends relative to a historically high comparative period combined with a challenging consumer environment.

Additionally, volume in the third quarter of fiscal 2024 was negatively impacted by winter weather events in January, which caused temporary shutdowns of our U.S.

manufacturing facilities, delivery delays, and reduced store traffic throughout much of the central U.S.

To a lesser extent, sales also decreased in the third quarter and first nine months of fiscal 2024, as a result of selective pricing on products and delivery services, along with promotional actions, taken to maintain competitiveness.

Operating Margin

Operating margin, which is calculated as operating income as a percentage of sales, decreased 350 basis points and 250 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 270 basis points and 360 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix improved gross margin by 70 basis points in the first six months of fiscal 2024 compared with the same period a year ago, driven by relative growth of our Retail segment, which has a higher gross margin than our Wholesale segment.

◦ Lower input costs, led by declining raw material costs and favorable duty expense, improved gross margin in the second quarter and first six months of fiscal 2024, compared with the same periods a year ago.

As input costs continued to decline, we took selective pricing and promotional actions to maintain competitiveness, which partially offset these benefits.

◦ Compared with the same period a year ago, gross margin in the first six months of fiscal 2024 further benefited from a favorable shift in product mix toward higher priced products.

◦ During the second quarter of fiscal 2024 we recognized $3.6 million in severance-related charges as part of our global supply chain optimization initiative, resulting in a 70 basis point and 40 basis point decrease in gross margin in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

• SG&A expenses as a percentage of sales increased 620 basis points and 610 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix increased SG&A expense as a percentage of sales by 60 basis points in the first six months of fiscal 2024 compared with the same period a year ago, driven by relative growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.

◦ As a part of our global supply chain optimization initiatives, during the first quarter of fiscal 2024 we recognized a $1.2 million gain related to the settlement of our Torreón, Mexico lease obligation on previously impaired long-lived assets and during the second quarter of fiscal 2024, we recognized $3.0 million in accelerated depreciation related to long-lived assets at our Ramos, Mexico facility.

Together, these items resulted in a 60 basis point and 20 basis point increase in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2024, respectively.

◦ The remaining increase in SG&A expense as a percentage of sales was primarily driven by lower delivered sales relative to selling expenses and fixed costs as total SG&A expenses were up $1.4 million and down $5.8 million in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 100 basis points and 210 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 150 basis points and 300 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Lower input costs, led by improved sourcing and reduced commodity prices, drove an increase in gross margin in the third quarter and first nine months of fiscal 2024, compared with the same periods a year ago.

◦ Gross margin in the third quarter and first nine months of fiscal 2024 further benefited from a shift in product mix within our Joybird business toward higher margin products.

◦ Partially offsetting the items above, plant inefficiencies resulting from winter weather events in January of fiscal 2024, which caused temporary shutdowns of our U.S.

manufacturing facilities, and transition costs

related to our supply chain optimization initiative in Mexico drove a decline in gross margin during the third quarter and first nine months of fiscal 2024, compared with the same periods a year ago.

◦ Gross margin decreased further from selective pricing and promotional actions taken in the third quarter and first nine months of fiscal 2024 to maintain competitiveness.

• SG&A expenses as a percentage of sales increased 250 basis points and 510 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ During the third quarter and first nine months of fiscal 2023, we recognized charges of $9.2 million related to the closure of our Torreón, Mexico manufacturing facility.

During the first nine months of fiscal 2024 we recognized $3.0 million in accelerated depreciation related to long-lived assets at our Ramos, Mexico facility.

Additionally, the first nine months of fiscal 2024 includes a $1.2 million gain related to the settlement of our Torreón, Mexico lease obligation on previously impaired long-lived assets.

Together, these items resulted in a 160 basis point and 40 basis point decrease in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively.

◦ Absent the items above, while SG&A expenses were down $2.8 million and $10.5 million in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, lower delivered sales relative to selling expenses and fixed costs drove an increase in SG&A expense as a percentage of sales over the same respective periods.

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

Retail Segment

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change

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Operating margin 10.9% 17.6% 12.7% 16.8%

The Retail segment’s sales decreased $37.8 million, or 15%, and $65.6 million, or 13%, in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago, primarily due to a decline in delivered same-store sales resulting from the adverse comparison to historic sales levels in the prior year, which were fueled by the delivery of previously built backlog.

The decrease in delivered same-store sales was partially offset by a $5.7 million and $13.7 million increase in sales during the second quarter and first six months of fiscal 2024, respectively, from our retail store acquisitions that occurred in fiscal 2023 and fiscal 2024.

While delivered sales were down relative to the same periods last year, written sales were up 3% and 5% in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

The increases were driven by relatively flat and a 1% increase in written same-store sales for the second quarter and first six months of fiscal 2024, respectively, with the remainder primarily attributable to acquired retail stores.

The Retail segment’s sales decreased $46.5 million, or 18%, and $112.1 million, or 15%, in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, primarily due to a decline in delivered same-store sales resulting from the adverse comparison to historic sales levels in the prior year, which were fueled by the delivery of previously built COVID-related backlog.

Additionally, sales in the third quarter of fiscal 2024 were negatively impacted by winter weather events in January which caused delivery delays and reduced store traffic throughout much of the central U.S.

The decrease in delivered same-store sales was partially offset by a $7.3 million and $18.7 million increase in sales during the third quarter and first nine months of fiscal 2024, respectively, from our retail store acquisitions that occurred in fiscal 2023 and fiscal 2024.

Written same-store sales were down 8% and 2% in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, due in part to the winter weather events noted above, which negatively impacted our retail store traffic across much of the central U.S., combined with an overall challenging consumer environment.

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 decreased 350 basis points and 280 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

• Gross margin increased 90 basis points and 120 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago, primarily due to prior period pricing actions taken by the Retail business which were realized as products were delivered to consumers.

• SG&A expense as a percentage of sales increased 440 basis points and 400 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago, primarily due to lower delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses.

The Retail segment's operating margin decreased 670 basis points and 410 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

• Gross margin increased 110 basis points and 120 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, primarily due to prior period pricing actions which were realized as products were delivered to consumers, combined with a favorable shift in product mix towards higher margin products.

• While SG&A expenses were down in the third quarter and first nine months of fiscal 2024 compared with the same periods a year ago, SG&A expenses as a percentage of sales increased 780 basis points and 530 basis points over the

same respective periods, primarily due to lower delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses.

Wholesale Segment

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change

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Operating margin 6.4% 4.2% 6.4% 6.3%

The Wholesale segment’s sales decreased $81.3 million, or 18%, and $189.6 million, or 21%, in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

The Wholesale segment’s sales decreased $51.2 million, or 13%, and $240.8 million, or 19%, in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

Over the same periods, intercompany sales from our Wholesale segment to our Retail segment decreased 18% and 19%, respectively.

The decrease in sales primarily reflects a decline in delivered unit volume as the significant backlog built up in prior periods returns to pre-pandemic levels and the industry returns to typical seasonality.

To a lesser extent, sales also decreased in the second quarter and first six months of fiscal 2024, as a result of selective pricing and promotional actions taken to maintain competitiveness.

Additionally, volume in the third quarter of fiscal 2024 was negatively impacted by winter weather events in January, which caused temporary shutdowns of our U.S.

manufacturing facilities.

Operating Margin

The Wholesale segment's operating margin decreased 270 basis points and 90 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

• Gross margin increased 250 basis points and 360 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Favorable input costs, including declining raw material costs and duty expense, drove a 610 basis point and 490 basis point increase in gross margin during the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

With the continued decline in input costs, we took selective pricing and promotional actions to maintain competitiveness, resulting in a 250 basis point and 150 basis point decrease in gross margin, compared with the same respective periods of the prior year.

◦ Gross margin in the first six months of fiscal 2024 also benefited 60 basis points from a favorable shift in product mix towards higher priced products.

◦ During the second quarter of fiscal 2024 we recognized $3.6 million in severance-related charges as part of our global supply chain optimization initiative, resulting in a 100 basis point and 50 basis point decrease in gross margin in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

• SG&A expense as a percentage of sales increased 520 basis points and 450 basis points in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Reduced fixed cost leverage contributed to higher SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Higher marketing expense in support of our Long Live the Lazy campaign launch drove a 230 basis point and 160 basis point increase in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

The Wholesale segment's operating margin increased 220 basis points and 10 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

• Gross margin increased 170 basis points and 300 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Lower input costs, led by improved sourcing and reduced commodity prices, drove a 490 basis point and 440 basis point increase in gross margin during the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Gross margin in the first nine months of fiscal 2024 also benefited 50 basis points from a favorable shift in product mix towards higher margin products.

◦ Partially offsetting the items above, plant inefficiencies resulting from winter weather events which caused temporary shutdowns of our U.S.

manufacturing facilities and transition costs related to our supply chain optimization initiative in Mexico led to a 190 basis point and 90 basis point decrease in gross margin during the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Gross margin further decreased 110 basis points and 130 basis points, in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, from selective pricing and promotional actions taken to maintain competitiveness.

• SG&A expense as a percentage of sales decreased 50 basis points and increased 290 basis points in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ During the third quarter and first nine months of fiscal 2023, we recognized charges of $9.2 million related to the closure of our Torreón, Mexico manufacturing facility.

During the first nine months of fiscal 2024, we recognized $3.0 million in accelerated depreciation related to long-lived assets at our Ramos, Mexico facility.

Additionally, the first nine months of fiscal 2024 includes a $1.2 million gain related to the settlement of our Torreón, Mexico lease obligation on previously impaired long-lived assets.

Together, these items resulted in an 230 basis point and 50 basis point decrease in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively.

◦ Reduced fixed cost leverage contributed to higher SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

◦ Higher marketing expense in support of our Long Live the Lazy campaign launch drove a 120 basis point and 140 basis point increase in SG&A expense as a percentage of sales in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago.

Investments in this campaign support all La-Z-Boy branded products, including those sold through our Retail segment.

Together, these items resulted in an 80 basis point and 30 basis point increase in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2024, respectively.

Corporate and Other

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/27/2024 1/28/2023 % Change 1/27/2024 1/28/2023 % Change

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Operating loss (12,463) (18,303) 31.9% (46,477) (48,047) 3.3 %

Corporate and Other sales decreased $7.4 million and $16.1 million in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago.

The change in sales was primarily led by Joybird sales which decreased $5.8 million to $32.3 million and $12.9 million to $67.9 million in the second quarter and first six months of fiscal 2024, respectively, largely due to lower delivered volume resulting from continued demand challenges.

Compared with the respective periods a year ago, written sales for Joybird were up 5% in the second quarter of fiscal 2024, resulting from effective marketing investments driving higher website traffic, but down 8% in the first six months of fiscal 2024.

Intercompany eliminations decreased in the second quarter and first six months of fiscal 2024 compared with the same periods a year ago due to lower sales from our Wholesale segment to our Retail segment.

Corporate and Other sales increased $4.6 million and decreased $11.5 million in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, primarily led by Joybird sales.

Joybird sales increased $5.2 million to $34.0 million in the third quarter of fiscal 2024, primarily due to a favorable shift in product mix towards higher priced products but decreased $7.8 million to $101.9 million during the first nine months of fiscal 2024, largely due to demand challenges experienced over the last 12 months.

Compared with the respective periods a year ago, written sales for Joybird were down 14% and 10% in the third quarter and first nine months of fiscal 2024, respectively.

Intercompany eliminations decreased in the third quarter and first nine months of fiscal 2024 compared with the same periods a year ago due to lower sales from our Wholesale segment to our Retail segment.

Operating Loss

Our Corporate and Other operating loss decreased $2.3 million in the second quarter of fiscal 2024, but increased $4.3 million in the first six months of fiscal 2024, compared with the same periods a year ago.

The second quarter of fiscal 2024 benefited from improved Joybird operating performance while the first six months of fiscal 2024 experienced lower operating profit from our global trading company in Hong Kong.

Additionally, Corporate and Other's operating loss includes intercompany inventory profit elimination adjustments which were favorable in the second quarter but unfavorable during the first six months of fiscal 2024, compared with the same periods a year ago.

Our Corporate and Other operating loss decreased $5.8 million and $1.6 million in the third quarter and first nine months of fiscal 2024, respectively, primarily from improved Joybird operating performance partially offset by unfavorable intercompany inventory profit elimination adjustments.

Additionally, the first nine months of fiscal 2024 experienced lower operating profit from our global trading company in Hong Kong.

Non-Operating Income (Expense)

Interest Income

Interest income was $2.9 million and $5.5 million higher in the second quarter and first six months of fiscal 2024, respectively, compared with the same periods a year ago, primarily driven by higher interest rates on higher cash balances.

Our effective tax rate was 26.5% for both the second quarter and first six months of fiscal 2024 compared with 25.8% and 26.2% for the second quarter and first six months of fiscal 2023.

Interest income was $2.1 million and $7.6 million higher in the third quarter and first nine months of fiscal 2024, respectively, compared with the same periods a year ago, primarily driven by higher interest rates on higher cash balances.

Our effective tax rate was 20.2% and 24.5% for the third quarter and first nine months of fiscal 2024, respectively, compared with 27.7% and 26.6% for the third quarter and first nine months of fiscal 2023, respectively.

The reduced effective tax rate in the third quarter of fiscal 2024 was primarily the result of favorable return to provision adjustments from the prior year.

Absent these discrete items, the effective tax rate would have been 25.6% for the third quarter of fiscal 2024.

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, including fiscal 2024 contractual obligations.

We had cash, cash equivalents and restricted cash of $333.5 million at October 28, 2023, compared with $346.7 million at April 29, 2023.

In addition, we had investments to enhance our returns on cash of $8.7 million at October 28, 2023, compared with $11.6 million at April 29, 2023.

We had cash, cash equivalents and restricted cash of $333.2 million at January 27, 2024, compared with $346.7 million at April 29, 2023.

In addition, we had investments to enhance our returns on cash of $7.7 million at January 27, 2024, compared with $11.6 million at April 29, 2023.

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

Six Months Ended

Nine Months Ended

(Unaudited, amounts in thousands) 1/27/2024 1/28/2023

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Operating Activities

During the first six months of fiscal 2024, net cash provided by operating activities was $56.9 million, an increase of $25.9 million compared with the prior year, mainly due to a smaller reduction in customer deposits, reflecting a reduced backlog, partially offset by lower net income.

Our cash provided by operating activities in fiscal 2024 was primarily attributable to net income, adjusted for non-cash items, partially offset by a $22.8 million decrease in other liabilities, mainly due to the payout of our fiscal 2023 incentive compensation awards during the first quarter of fiscal 2024, along with a $13.8 million decrease in customer deposits reflecting the reduced backlog.

During the first nine months of fiscal 2024, net cash provided by operating activities was $105.4 million, a decrease of $21.7 million compared with the prior year, mainly due to lower net income and a smaller reduction in receivables, partially offset by a smaller reduction in customer deposits, reflecting a reduced backlog.

Our cash provided by operating activities in fiscal 2024 was primarily attributable to net income, adjusted for non-cash items, partially offset by a $13.6 million decrease in other liabilities, mainly due to the payout of our fiscal 2023 incentive compensation awards during the first quarter of fiscal 2024, along with an $8.0 million decrease in customer deposits reflecting the reduced backlog.

Investing Activities

During the first six months of fiscal 2024, net cash used for investing activities was $25.3 million, a decrease of $18.8 million compared with the prior year primarily due to lower capital expenditures and higher proceeds from asset sales.

During the first nine months of fiscal 2024, net cash used for investing activities was $54.0 million, a decrease of $3.9 million compared with the prior year primarily due to lower capital expenditures and higher proceeds from asset sales, partially offset by increased spend on acquisitions.

Cash used for investing activities in fiscal 2024 included the following:

• Cash used for capital expenditures in the period was $26.5 million compared with $40.4 million during the first six months of fiscal 2023, which is primarily related to La-Z-Boy Furniture Galleries ® (new stores and remodels) and upgrades at our manufacturing and distribution facilities.

• Cash used for capital expenditures in the period was $38.0 million compared with $57.4 million during the first nine months of fiscal 2023, which was primarily related to La-Z-Boy Furniture Galleries ® (new stores and remodels) and upgrades at our manufacturing and distribution facilities.

We anticipate that spending on these items will continue in fiscal 2024 with full year fiscal 2024 capital expenditures expected to be in the range of $50 to $60 million.

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

• Cash used for acquisitions was $7.3 million, primarily related to the acquisition of the Colorado Springs, Colorado and Lafayette, Louisiana retail businesses.

• Cash used for acquisitions was $26.3 million, primarily related to the acquisition of the Illinois and Indiana, Colorado Springs, Colorado and Lafayette, Louisiana retail businesses.

• Proceeds from the sale of investments, net of investment purchases was $5.5 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 28, 2023, we have no borrowings outstanding under the Credit Facility.

As of January 27, 2024, 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 28, 2023, we were in compliance with our financial covenants under the Credit Facility.

As of January 27, 2024, we were in compliance with our financial covenants under the Credit Facility.

We believe our cash and cash equivalents, short-term investments, and cash from operations, 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 2024, net cash used for financing activities was $43.9 million, an increase of $17.9 million compared with the prior year, primarily due to higher share repurchases.

During the first nine months of fiscal 2024, net cash used for financing activities was $64.5 million, an increase of $30.6 million compared with the prior year, primarily due to higher share repurchases, partially offset by proceeds from exercised stock options.

Cash used for financing activities in fiscal 2024 included the following:

• Our board of directors has authorized the repurchase of company stock and we spent $20.0 million in the first six months of fiscal 2024 to repurchase 0.7 million shares.

As of October 28, 2023, 6.6 million shares remained available

for repurchase pursuant to this authorization.

With the operating cash flows we anticipate generating in fiscal 2024, we expect to continue repurchasing Company stock.

• Our board of directors has authorized the repurchase of company stock and we spent $40.0 million in the first nine months of fiscal 2024 to repurchase 1.3 million shares.

As of January 27, 2024, 6.0 million shares remained available for repurchase pursuant to this authorization.

With the operating cash flows we anticipate generating in fiscal 2024, we

expect to continue repurchasing Company stock subject to market conditions and other factors as deemed relevant by our board of directors.

• Cash paid to our shareholders in quarterly dividends was $24.2 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.

We expect the board to continue declaring regular quarterly cash dividends for the foreseeable future, but it may discontinue doing so at any time at the board's discretion.

• Proceeds from exercised stock options, net of stock issued and taxes withheld as part of our employee benefit plans, was $6.2 million.

• Cash paid for holdback payments made on prior-period acquisitions was $5.0 million for a guaranteed payment related to the acquisition of Joybird.

Exchange Rate Changes

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash decreased by $0.9 million for the six months ended October 28, 2023.

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash decreased by $0.3 million for the nine months ended January 27, 2024.

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

During the second quarter of fiscal 2024, there were no material changes to the information about our contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023.

During the third quarter of fiscal 2024, there were no material changes to the information about our contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023.

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 29, 2023.

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

There were no material changes to our critical accounting policies or estimates during the nine months ended January 27, 2024.

Recent Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the first six months of fiscal 2024, 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 29, 2023.

During the first nine months of fiscal 2024, 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 29, 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 2. Management’s Discussion and Analysis