What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-20 compared with 2024-02-20 · 85 added, 112 removed, 139 unchanged (59% of the section changed)

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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.

We are the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the United States .

We are the leading global producer of reclining chairs and one of the largest manufacturer/distributors 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 .

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In addition, we import, distribute and retail accessories and casegoods (wood) furniture products under the Kincaid ® , American Drew ® , Hammary ® , and Joybird ® tradenames.

As of January 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

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

• Five major manufacturing locations and 14 distribution centers in the United States and three 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

• An upholstery manufacturing business in the United Kingdom and a wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland

• 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.

As a result of this action, charges were recorded within the Wholesale segment in the third and fourth quarters of fiscal 2023, totaling $9.2 million in selling, general and administrative ("SG&A") expense for the impairment of various assets, primarily long-lived assets, and $1.6 million in cost of sales, primarily related to severance.

During the first quarter of fiscal 2024, we terminated our lease on the Torreón facility and recognized a $1.2 million gain in SG&A expense within the Wholesale segment related to the settlement of our lease obligation on the previously impaired long-lived assets.

During the second quarter of fiscal 2024, we announced further actions intended to drive efficiencies and optimize our manufacturing capacity in our global supply chain operations.

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 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.

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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 12.2 million square feet worldwide.

• Joybird sells product primarily online and also has limited retail showroom floor space through 12 small-format stores in key urban markets.

• Joybird sells product primarily online and has 12 small-format stores in key urban markets.

Century Vision Strategy

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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.

We launched our new brand campaign and marketing platform in fiscal 2024, Long Live the Lazy , with compelling messaging designed to increase recognition and consideration of the brand.

We leverage our consumer insights to develop and deliver on-trend upholstered furniture, particularly in the motion and reclining categories.

We launched our new brand campaign and marketing platform in fiscal 2024, Long Live the Lazy , with compelling, consumer-inspired, messaging designed to increase recognition and consideration of the brand.

We expect this new messaging will enhance the appeal of our brand with a broader consumer base.

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• Growing our La-Z-Boy Furniture Galleries ® store network .

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 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

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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.

We are prioritizing growth of our company-owned Retail business 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 distribution centers, where we see opportunity for growth, or where we believe we have opportunities for further market penetration.

Additionally, we are testing potential store formats to expand our reach to value-seeking consumers and currently operate two Outlet by La-Z-Boy stores.

We are prioritizing growth of our company-owned Retail business by opportunistically acquiring existing La-Z-Boy Furniture Galleries ® stores and opening new La-Z-Boy Furniture Galleries ® stores where we see opportunity for growth, or where we believe we have opportunities for further market penetration.

• Expanding the reach of our wholesale distribution channels.

Consumers experience the La-Z-Boy brand in many channels including the La-Z-Boy Furniture Galleries ® store network and the La-Z-Boy Comfort Studio ® locations, our store-within-a-store format.

While consumers increasingly interact with the brand 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.

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.

Consumers experience the La-Z-Boy brand in many channels including the La-Z-Boy Furniture Galleries ® store network and in the La-Z-Boy Comfort Studio ® locations, our store-within-a-store format.

While consumers increasingly interact with the brand digitally, our consumers 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.

In addition to our branded distribution channels, approximately 2,200 other dealers sell La-Z-Boy products, which include some of the best-known names in the industry, providing us the benefit of multi-channel distribution.

We believe there is significant growth potential for our consumer brands through these retail channels.

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Our Retail segment consists of one operating segment comprised of our 188 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.

The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other home furnishings accessories, to end consumers through these stores.

• 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

American Drew ® , Hammary ® and Kincaid ® .

The Wholesale segment also includes our international wholesale and manufacturing businesses.

Our Wholesale segment consists primarily of four operating segments:

La-Z-Boy, our largest operating segment, our England subsidiary, our casegoods operating segment that sells furniture under three brands (American Drew ® , Hammary ® , and Kincaid ®) , and our international operating segment, which includes our international La-Z-Boy 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.

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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.

Joybird sells to the end consumer primarily online through its website, www.joybird.com, and through small-format stores in key urban markets.

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

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Results of Operations

Fiscal 2024 Third Quarter Compared with Fiscal 2023 Third Quarter

Fiscal 2025 First Quarter Compared with Fiscal 2024 First Quarter

La-Z-Boy Incorporated

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

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/27/2024 7/29/2023 % Change

Sales $ 495,532 $ 481,651 2.9%

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Operating margin 6.5% 7.2%

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.

Consolidated sales increased $13.9 million, or 3%, in the first quarter of 2025, compared with the same period a year ago.

The increase in sales was primarily driven by higher delivered volume to external customers within our Wholesale segment along with incremental sales resulting from our Retail acquisitions.

These increases were partially offset as the first quarter of fiscal 2024 included residual backlog deliveries within our Retail segment from prior periods.

Operating Margin

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.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 70 basis points in the first quarter fiscal 2025, compared with the same period a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 40 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

◦ The improvement in gross margin during the first quarter of fiscal 2025 compared with the same period a year ago was primarily due to lower input costs, led by reduced commodity prices, improved sourcing, and favorable duty expense.

◦ Partially offsetting the item above, changes in our consolidated mix led to a 100 basis point decrease in gross margin in the first quarter of fiscal 2025 compared with the same period a year ago, driven by a higher percentage of sales in our Wholesale segment, which has a lower gross margin than our Retail segment.

• SG&A expenses as a percentage of sales increased 110 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

◦ The increase in SG&A expense as a percentage of sales during the first quarter of fiscal 2025 compared with the same period a year ago was primarily due to reduced fixed cost leverage within our Retail segment, resulting from lower delivered sales relative to selling expenses and fixed cost increases supporting our long-term strategy of investing in store expansion and growth of our Retail segment.

◦ Partially offsetting the item above, changes in our consolidated mix led to a 110 basis point decrease in SG&A expenses as a percentage of sales in the first quarter of fiscal 2025 compared with the same period a year ago, driven by a higher percentage of sales in our Wholesale segment, which has a lower SG&A expense as a percentage of sales than our Retail segment.

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

Retail Segment

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

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/27/2024 7/29/2023 % Change

Sales $ 202,370 $ 208,243 (2.8)%

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Operating margin 10.2% 14.1%

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.

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The Retail segment’s sales decreased $5.9 million, or 3%, in the first quarter of fiscal 2025 compared with the same period a year ago, primarily due to a decline in delivered same-store sales, as the prior year benefited from the delivery of residual backlog from prior periods.

The decrease in delivered same-store sales was partially offset by a $10.5 million increase in sales during the first quarter of fiscal 2025 from our retail store acquisitions that occurred in fiscal 2024 and fiscal 2025.

Written same-store sales were down 3% in the first quarter of fiscal 2025 compared with the same period a year ago, primarily due to softer industry-wide demand as a result of a challenging macroeconomic 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 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.

The Retail segment's operating margin decreased 390 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

• Gross margin increased 10 basis points in the first quarter of fiscal 2025 compared with the same period a year ago, as promotional activity was more than offset by a favorable shift in product mix towards higher priced products.

• SG&A expenses as a percentage of sales increased 400 basis points in the first quarter of fiscal 2025 compared with the same period a year ago, primarily due to lower delivered sales relative to selling expenses and fixed cost increases supporting our long-term strategy of investing in store expansion and growth of our Retail segment.

Wholesale Segment

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

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/27/2024 7/29/2023 % Change

Sales to external customers $ 256,020 $ 236,251

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Operating margin 6.8% 7.0%

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.

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.

The Wholesale segment’s sales increased $17.4 million, or 5%, in the first quarter of fiscal 2025 compared with the same period a year ago.

Over the same period, intercompany sales from our Wholesale segment to our Retail segment decreased 2%.

The increase in sales primarily reflects higher delivered volume to external customers including the addition of new major wholesale dealers, partially offset by lower delivered volume in our casegoods businesses.

Operating Margin

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.

The Wholesale segment's operating margin decreased 20 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

• Gross margin increased 30 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

◦ Lower input costs, led by reduced commodity prices, improved sourcing, and favorable duty expense drove a 160 basis point increase in gross margin during the first quarter of fiscal 2025 compared with the same period a year ago.

◦ Partially offsetting the item above, an unfavorable shift in channel mix towards external customers, which generally carry products with a lower gross margin than products sold to Furniture Galleries, led to a 120 basis point decrease in gross margin during the first quarter of fiscal 2025 compared with the same period a year ago.

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• SG&A expense as a percentage of sales increased 50 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

During the first quarter of fiscal 2024 we terminated our lease on the Torreón, Mexico facility and recognized a $1.2 million gain related to the settlement of our lease obligation on previously impaired long-lived assets, resulting in a comparative 40 basis point increase in SG&A expense as a percentage of sales.

Corporate and Other

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

Quarter Ended

(Unaudited, amounts in thousands, except percentages) 7/27/2024 7/29/2023 % Change

Sales $ 38,708 $ 40,061 (3.4)%

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Operating loss (12,278) (18,241) 32.7%

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.

Corporate and Other sales decreased $1.4 million in the first quarter of fiscal 2025 compared with the same period a year ago, primarily led by Joybird sales.

Joybird sales decreased $1.0 million to $34.6 million in the first quarter of fiscal 2025, as higher delivered volume was more than offset by promotional activity.

Written sales for Joybird increased 9% in the first quarter of fiscal 2025, compared with the same period a year ago.

Intercompany eliminations decreased in the first quarter of fiscal 2025 compared with the same period a year ago due to lower sales from our Wholesale segment to our Retail segment.

Operating Loss

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.

Our Corporate and Other operating loss decreased $6.0 million in the first quarter of fiscal 2025 primarily from favorable intercompany inventory profit elimination adjustments and improved Joybird operating performance, partially offset by lower intercompany operating profit from our global trading company in Hong Kong.

Non-Operating Income (Expense)

Interest Income

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.

Interest income was $1.4 million higher in the first quarter of fiscal 2025, compared with the same period a year ago, primarily driven by higher interest rates.

Our effective tax rate was 25.5% for the first quarter of fiscal 2025 compared with 26.5% for the first quarter of fiscal 2024.

The reduced effective tax rate in the first quarter of fiscal 2025 was partially the result of tax benefits from the vesting of stock-based compensation.

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 2025 contractual obligations.

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.

We had cash, cash equivalents and restricted cash of $342.3 million at July 27, 2024, compared with $341.1 million at April 27, 2024.

In addition, we had investments to enhance our returns on cash of $4.5 million at July 27, 2024, compared with $6.8 million at April 27, 2024.

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

Nine Months Ended

Quarter Ended

(Unaudited, amounts in thousands) 7/27/2024 7/29/2023

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Operating Activities

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.

During the first quarter of fiscal 2025, net cash provided by operating activities was $52.3 million, an increase of $26.4 million compared with the same period a year ago, mainly due to an increase in customer deposits in fiscal 2025 resulting from higher written sales compared with a decrease in customer deposits in fiscal 2024 due to the normalization of backlog.

Additionally, the first quarter of fiscal 2025 included the payout of our fiscal 2024 incentive compensation awards which were lower than the payout from the prior year.

Our cash provided by operating activities in fiscal 2025 was primarily attributable to net income, adjusted for non-cash items, a decrease in receivables, and an increase in customer deposits, partially offset by an increase in inventory.

Investing Activities

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.

During the first quarter of fiscal 2025, net cash used for investing activities was $17.2 million, an increase of $4.5 million compared with the same period a year ago, primarily due to lower proceeds from asset sales.

Cash used for investing activities in fiscal 2025 included the following:

• 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.

• Cash used for capital expenditures in the period was $15.6 million compared with $13.5 million during the first quarter of fiscal 2024, which is primarily related to La-Z-Boy Furniture Galleries ® (new stores and remodels) and upgrades at our manufacturing facilities and market showrooms.

We anticipate that spending on these items will continue in fiscal 2025 with full year fiscal 2025 capital expenditures expected to be in the range of $70 to $80 million.

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

• 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.

• Cash used for acquisitions was $6.8 million, primarily related to the acquisition of the Davenport, Iowa retail business.

• Proceeds from the sale of investments, net of investment purchases, was $5.1 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 January 27, 2024, we have no borrowings outstanding under the Credit Facility.

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

As of July 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 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.

During the first quarter of fiscal 2025, net cash used for financing activities was $34.3 million, an increase of $14.4 million compared with the same period a year ago, primarily due to higher share repurchases, partially offset by proceeds from exercised stock options.

Cash used for financing activities in fiscal 2025 included the following:

• 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.

• Our board of directors has authorized the repurchase of company stock and we spent $33.7 million in the first quarter of fiscal 2025 to repurchase 0.9 million shares.

As of July 27, 2024, 4.7 million shares remained available for repurchase pursuant to this authorization.

With the operating cash flows we anticipate generating in fiscal 2025, we

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

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• Proceeds from exercised stock options, net of stock issued and taxes withheld as part of our employee benefit plans, was $7.9 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 $0.3 million for the nine months ended January 27, 2024.

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $0.4 million for the quarter ended July 27, 2024.

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

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.

During the first quarter of fiscal 2025, 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 27, 2024.

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 27, 2024.

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

There were no material changes to our critical accounting policies or estimates during the quarter ended July 27, 2024.

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.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

During the first quarter of fiscal 2025, 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 27, 2024.

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