La-Z-Boy Incorporated Annual Report 2010

FY2010 Annual Report · La-Z-Boy Incorporated
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2010 ANNUAL REPORT

S hare hold e rs ’ Meet ing

Wednesday, August 18, 2010
11:00 AM EDT

La-Z-Boy Auditorium

1284 North Telegraph Road
Monroe, Michigan USA

The Terra Recliner

2010 ANNUAL REPORT •  La-Z-Boy Incorporated

    To
Our Shareholders

A year of demarcation. 
A year of performance.
A new operating environment. 
A platform for growth.  

in 

Fiscal  2010  was,  without  question,  one 
the  most  challenging  years  La-Z-Boy  
of 
Incorporated  has 
its  82-year 
faced 
history,  but  it  was  also  the  year  when  the 
transformation  of  our  company  came  to  life. 
Working  against  significant  macroeconomic  headwinds, 
we turned in a solid operating performance, outpaced our 
industry peers and emerged as a stronger player in what 
is  a  very  different  environment.  We  demonstrated  the 
resiliency of our company as well as our ability to adapt to 
change and thrive in a very dynamic marketplace.

Today, La-Z-Boy is operating from a greatly strengthened 
and  more  efficient  platform  —  one  that  is  enabling 
profitability in the current low-volume environment and 
one  that  will  allow  us  to  capitalize  on  any  upturn  in  the 
economy.  Although  we  are  pleased  with  what  we  have 
accomplished to this point, there is still much to be done 
and  we  will  work  to  achieve  positive  results  across  all 
areas  of  our  enterprise.  Fortunately,  the  all-consuming 
and  singular  focus  on  weathering  the  storm  of  the  past 
18  months  is  behind  us  and  our  current  focus  is  very 
different. Though  we  will  never  relax  our  drive  to  create 
the most efficient operating platform possible, our main 
goal now is to accelerate growth opportunities. We intend 
to  drive  profitable  growth  and  increased  market  share 
through  the  strength  of  our  strong  network  of  branded 
distribution, the La-Z-Boy® brand itself, innovation, retail 
excellence and an improved consumer experience.

Fiscal 2010 Results

La-Z-Boy posted a 4% decline in sales for fiscal 2010 and 
earned $0.62 per share. While we are not satisfied with our 
level  of  earnings,  we  are  pleased  to  have  reported  four 
quarters  of  increasing  profitability  against  a  backdrop 
of  sales  declines  and  losses  endemic  throughout  the 

industry. The performance we demonstrated during this 
time  period  is  a  testament  to  the  strategies  developed 
and executed over the past few years, which transformed 
us  into  the  different  company  that  we  are  today  —  one 
with  a  new  business  structure  that  will  enable  us  to 
effectively compete in this marketplace. 

Beginning several years ago, we made significant changes 
to  our  operations  to  garner  manufacturing  efficiencies, 
changed  the  sourcing  of  certain  component  parts 
to  ensure  our  domestic  production  facilities  remain 
competitive,  sold  non-core  companies  to  enable  us  to 
focus on the La-Z-Boy® brand — the growth engine of our 
company  —  and  streamlined  our  Regional  Distribution 
Centers, expanding the program to include independent 
dealers. We  also  transitioned  our  casegoods  business  to 
be primarily an importer, marketer and distributor in the 
midst of an industry-wide migration to Asia and improved 
our  company-owned  retail  performance.  And  when  the 
credit and financial markets imploded 18 months ago, we 
acted swiftly and decisively, made difficult but necessary 
decisions and significantly reduced our cost structure to 
be in line with what quickly became a much lower-volume 
environment.  All  these  moves  changed  the  complexion 
of  our  company,  but  were  essential  to  ensure  long-term 
success and profitability. 

Furthermore,  our 
long-standing  philosophy  of  fiscal 
conservatism  played  a  vital  role  in  our  performance  this 
past  year.  In  addition  to  running  lean  operations,  we 
strengthened  our  balance  sheet  and  ended  the  year 
with  $108  million 
in  cash,  up  from  $17.4  million 
at  the  end  of  fiscal  2009,  and  reduced  our  debt  to 
$48 million — the lowest level of debt our company has 
had in over 20 years. These improvements in our balance 
sheet  will  afford  La-Z-Boy  greater  financial  flexibility 
in any potential economic scenario. 

La-Z-Boy Incorporated  (cid:116)  2010 ANNUAL REPORT

1

    To
Our Shareholders, continued

And,  finally,  we  were  fortunate  in  this  macroeconomic 
environment  to  have  the  best  possible  positioning  with 
respect  to  our  product  line,  brand  and  price  points.  
During  difficult  economic  times,  upholstery  tends  to 
fare  better  than  casegoods,  given  it  is  more  fashion-
oriented  with  changing  styles,  and  it  also  has  a  shorter  
replacement  cycle. The  strength  of  the  La-Z-Boy®  brand, 
built  over  an  80-year  period,  is  an  advantage  as  history  
has shown us that consumers tend to return to brands they 
trust  during  challenging  times.  And,  during  this  period  
of  significantly  reduced  consumer  confidence,  having  a 
line concentrated at mid-price points is a plus.

In the remainder of this letter, we will discuss our vision 
for  the  future,  including  how  we  will  capitalize  on  our 
improved positioning and ensure La-Z-Boy is on a path of 
growth and sustainable profitability.

Operational Excellence

73%

14% RETAIL

73% UPHOLSTERY

13% 
CASEGOODS

113%

14%

Approximately  five  years  ago,  La-Z-Boy 
embarked  upon  a  lean  journey  — 
one that has made lean a part of 
our company’s DNA, permeating 
every  facet  of  our  corporate 
culture.  Each  year  we  identify 
projects, both large and small, to 
reduce costs and eliminate waste 
so  that  our  operating  structure 
becomes  even  more  efficient.  And, 
while  many  large  initiatives  have  been 
FISCAL 2010
completed and are contributing greatly 
SALES MIX
to our performance, our ongoing focus 
on  operational  excellence  remains  strong.  Although 
we  are  passionate  with  respect  to  cost  reductions,  
lowering  our  cost  structure  does  not  imply  we  will 
compromise on quality; rather, it means we will be more 
efficient in our quest to continually improve the comfort 
and  quality  of  our  products  while  staying  true  to  our 
intended brand promise to the consumer: fast delivery of 
custom-ordered furniture.

2

La-Z-Boy Incorporated  (cid:116)  2010 ANNUAL REPORT

Perhaps  the  most  notable  initiative  contributing  to  our 
results in fiscal 2010 was the benefit from the conversion 
of  our  La-Z-Boy®  branded  facilities  to  the  cellular 
production process. A capital-intensive undertaking that 
required three years of implementation, it is now bearing 
fruit  and  enabling  our  upholstery  segment  to  operate 
with industry-leading margins. In addition to decreasing 
production  costs  while  improving  quality,  the  cellular 
process  has  enabled  us  to  increase  our  throughput  and 
speed, a key to our brand promise. 

Another central element with respect to delivering custom 
furniture quickly to the consumer is our new Cut and Sew 
Center  (CSC)  in  Mexico,  which  assembles  cut-and-sew 
kits for our custom-ordered La-Z-Boy furniture. Over the 
past  18-month  period,  we  transitioned  substantially  all 
cutting and sewing for custom orders to the new facility. 
Today,  with  more  than  1,250  employees  in  Mexico,  the 
operation is ramping up and is expected to deliver annual 
cost  savings  in  the  range  of  $15  million  to  $17  million, 
depending on volume levels. 

These  two  major  projects  are  greatly  enhancing  our 
production  efficiencies  and  will  allow  us  to  remain 
competitive while fueling our profitability. Although 
we source some component parts from outside the 
United States, full assembly and production continues 
at  our  five  U.S.-based  La-Z-Boy  facilities,  enabling  us 
to offer the consumer special-order capability through 
more than 1,000 fabric and leather choices and the luxury 
of  delivering  custom  furniture  to  her  home  quickly. 
We  believe  this  is  a  key  differentiator  and  competitive 
advantage for La-Z-Boy Incorporated. 

Our  two  other  upholstery  companies,  Bauhaus  and 
England, which operate in niche markets, also contributed 
to  the  upholstery  segment’s  positive  performance 
throughout the year. Both companies have implemented 
many lean practices throughout their operations and the 
results are demonstrable.

Our commitment 

to a branded 

distribution 

strategy remains 

stronger than ever.

In  our  casegoods  segment,  we  made  a  number  of 
moves  over  the  past  year  to  improve  our  efficiency,  as 
this  business  has  been  harder  hit  by  the  recessionary 
environment, with consumers opting to postpone larger-
ticket  casegood  purchases.  First,  we  consolidated  our 
remaining two domestic manufacturing facilities into one 
operation in Hudson, North Carolina. And, 
second,  we  vacated  an  expensive  leased 
warehouse and moved the operation to a 
company-owned facility. These moves will 
save the company $5 million on an annual 
basis,  a  portion  of  which  we  benefited 
from  in  fiscal  2010. We  also  consolidated 
our  American  Drew/Lea  operation  with 
Hammary at the end of the fiscal year and 
believe the newly combined organization 
will provide our customers with a one-stop 
solution for bedroom, dining room, youth, 
home office and occasional furniture. This 
consolidation  also  will  allow  us  to  strengthen  our  sales, 
marketing and merchandising teams under one umbrella 
and garner increased efficiencies.

Although  the  above  highlights  the  major  initiatives 
we  have  undertaken  to  strengthen  our  operations 
and  performance,  there  are  a  myriad  of  other  projects 
underway  and  we  have  no  intention  of  diminishing 
our  focus  on  operational  management;  instead,  our 
concentration remains on how to best leverage our lower-
cost platform for growth.

The Path Forward

Our top-line growth initiatives can be broken down into 
three core areas:

1. Building the branded distribution channel; 
2. Improving the overall customer experience; and 
3. Enhancing our already-strong brand platform.

Branded Distribution

Our  commitment  to  a  branded  distribution  strategy 
remains  stronger  than  ever  as  we  continue  to  believe  it 
will play an integral role in the improved performance of 
our company. As the distribution landscape continues to 
contract, with more and more furniture stores closing their 
doors, branded distribution will enable us to maintain our 

penetration in the marketplace while giving the consumer 
the best possible shopping experience.

As  the  economy  begins  to  strengthen,  we  intend  to 
grow our network of La-Z-Boy Furniture Galleries® stores. 
In  areas  with  less-dense  population,  we  will  build  our 
presence  through  the  Comfort  Studio® 
format,  a  “store-within-a-store”  concept 
requiring less  floor  space  than  a  La-Z-Boy 
Furniture  Galleries®  store,  to  showcase  a 
representative sampling of our collection. 
Today,  representing  the  cornerstone  of 
our  distribution  network  are  306  La-Z-Boy 
  510  
Furniture  Galleries®  stores  and 
Comfort  Studios®.  We  believe 
the 
combination  of  these  outlets  could  reach 
beyond  1,000 
representing 
approximately  8.5  million  square  feet 
of  floor  space  dedicated  to  La-Z-Boy 

locations, 

throughout North America. 

In  our  company-owned  retail  segment,  we  have  made 
significant progress, reducing our losses by 43% in fiscal 
2010 compared with last year. This is reflective of a new 
management  team  that  has  implemented  increased  
levels  of  accountability,  discipline  and 
leadership 
throughout  the  operation.  Although  we  note  the 
improvement 
in  our  performance,  we  will  not  be  
satisfied until we make the segment profitable. 

We    believe  we  have  established  a  solid  model  —  one 
where  our  structure  within  each  store  is  lean  and  our  
sales  teams  are  focused  on  improving  close  ratios, 
the  average  transaction  and  gross  margin.  However, 
we  need  a  lift  in  overall  volume  to  make  this  segment 
profitable due to the high fixed-cost structure related to 
expensive  leases  in  the  markets  in  which  our  company-
owned  retail  segment  operates.  Over  the  past  decade, 
we  acquired  good,  but  expensive,  markets  when  we 
grew  our  company-owned  retail  presence  and  opened 
numerous stores at the peak of the real estate boom, so 
at  this  juncture,  overcoming  our  high  real  estate  costs 
is  a  primary  objective.  In  this  environment,  increasing 
volume  remains  challenging,  but  our  marketing  initiatives  
are helping to drive traffic to our stores and we believe our 
retail segment is on the right track, poised for growth  and 
profitability as the economy improves. 

La-Z-Boy Incorporated  (cid:116)  2010 ANNUAL REPORT

3

 
 
 
    To
Our Shareholders, continued

that 

the  meantime,  we  believe 

integrated 
In 
retailing  —  the  combined  entity  of  retail  and  wholesale 
upholstery  —  is  a  winning  strategy  for  La-Z-Boy,  as  it 
allows  us  to  capitalize  on  the  blended  wholesale  and 
retail  margins.  And,  because  we  are  confident  that 
branded  distribution  is  the  best  growth  vehicle  for  our 
company  and  that  the  markets  in  which  the  company-
important  to 
owned  retail  segment  operates  are 
penetrate,  we  expect  that,  when  we  reach  a  break-even 
level in the retail segment, our overall results will be much 
stronger as a result of this model. 

We are focused 

on enhancing 

every touch 

point with 

customers.

international 

We  also  believe  that  growth  opportunities  
limited  to  North  
for  La-Z-Boy  are  not 
America.  Our 
business, 
though  still  relatively  small  in  relation  to 
the  overall  enterprise,  grew  substantially 
in  the  past  year.  We  have  a  significant 
in  Australia,  New 
and  growing  presence 
Zealand  and  the  United  Kingdom,  and 
are  making 
into  several  other  
markets.  A  large  portion  of  the  product  for 
international  markets  comes  from  a 
our 
joint venture La-Z-Boy plant in Thailand. Our production  
at  this  facility  increased  greatly  over  the  past  year  
and we have recently added to capacity again to ensure 
we  can  keep  up  with  what  we  expect  to  be  higher  
demand,  as  we  further  develop  our  brand  in  markets 
around the world.

inroads 

Customer Experience

Two  years  ago  we 
implemented  a  system  which 
allows  us  to  track  our  customers’  overall  loyalty  to  the  
La-Z-Boy®  brand  and  their  satisfaction  across  all  aspects  
of the brand experience, from the interaction in the store 
and  the  delivery  process  to  their  satisfaction  with  our 
product. This system has provided us invaluable insights 
into  how  our  customers  interact  with  our  dealers’  stores 
and products and the issues they sometimes experience. 
information  to  guide  our  Total  
We  are  using  that 

4

La-Z-Boy Incorporated  (cid:116)  2010 ANNUAL REPORT

Customer Care initiative, which is focused on enhancing 
every touch point with customers, as well as on making 
it easier for them to interact and communicate with us to 
resolve any issues they experience. 

Many  of  those  touch  points  occur  in  our  La-Z-Boy 
Furniture  Galleries®  stores,  so  it  is  imperative  that  we  
provide  a  shopping  experience  and  environment  
which  meets  and  exceeds  our  customers’  needs.  
We  want  to  ensure  that  we  present  consumers  with 
not  only  an  improved  furniture  shopping 
experience  that  helps  them  see  our  full 
range  of  comfortable  and  stylish  furniture, 
but  also  one  that  more  strongly  leverages 
those areas which make us unique, including 
customization  and  complimentary  in-home 
design. We  will  continue  to  work  to  evolve  
the store concept to ensure that it is relevant  
to the consumer.

And,  finally, 
in  order  for  any  brand  or 
company to remain relevant to its customers, 
it must find ways to innovate. We are proud of 
our heritage of innovation, beginning with our founders’ 
invention  of  the  entire  reclining  category  and  then  its 
reinvention with the rocker recliner. Our intent is to again 
make innovation a hallmark of our company and plan for 
it to be a key driver of growth for us over the coming years. 

Brand and Marketing Platform

We have highlighted many times before that one of the 
most  powerful  assets  we  have  is  the  La-Z-Boy®  brand. 
Today, our belief in the strength of that asset is as strong 
as ever. That is one of the reasons that we maintained a 
strong commitment to marketing spending over the past 
year. This increased our share of voice in an environment 
where  competitors  were  significantly  curtailing  their 
marketing investment, highlighted what makes La-Z-Boy 
different,  drove  traffic  to  our  stores  and  retail  partners,  
results  
and  contributed  to  our  same-store  sales 
outpacing those of the industry as a whole. 

We  remain  committed  to  supporting  the  brand  with 
strong  spending  both  at  the  national  level  and  in  our 
retail markets. We also are committed to ensuring that 
our  brand  creative  platform  itself  is  as  effective  as 
possible. As with our store format, we have embarked on 
a process to identify how we can make our messaging 
even  more  powerful.  Our  challenge  is  to  convince 
female shoppers that La-Z-Boy provides a full range of 
comfortable  and  stylish  furniture  beyond  just  recliners 
and  reclining  sofas.  We  will  continue  to  evolve  our 
advertising  messages  to  address  this  issue  and  ensure 
that  we  make  the  La-Z-Boy  name  synonymous  with 
family and living rooms.

Board of Directors

In January 2010, we announced that Janet L. Gurwitch 
and Edwin J. Holman had joined our Board of Directors, 
temporarily  expanding  the  board  to  13,  until  August  
when two of our long-term directors, Rocque E. Lipford  
and  Jack  L.  Thompson,  will  no  longer  be  eligible 
for  reelection  to  the  board  under  the  company’s  
governance  guidelines  and  will  retire  upon  the 
completion of their current three-year terms.

Both  Janet  and  Ed  are  high-caliber,  seasoned  retail 
executives  who  will  undoubtedly  bring  significant 
expertise  and  perspective  to  our  company  as  we  
continue to pursue our integrated retail strategy during 
a period of overall industry transition. Both have spent 
their  entire  careers  working  in  the  fashion  segment 
of  the  retail  arena  and  they  are  already  making  an 
important  contribution  to  our  strategic  planning  as 
retail becomes a larger part of our business.

Janet  is  the  Chairman  of  Gurwitch  Consulting  Group 
LLC and was the Co-founder and Chief Executive Officer  
of  Laura  Mercier  Cosmetics,  a  leading  global  brand  of  
high-end  niche  cosmetics,  which  she  and  her  partner, 
Neiman  Marcus,  later  sold  to  Alticor.  Prior  to  founding 
Laura  Mercier  Cosmetics,  Gurwitch  was  Executive  Vice 
President of Neiman Marcus, after beginning her career at 
Foley’s Department store, where she rose to the position  
of Senior Vice President of Merchandising. 

Ed  is  the  Chairman  of  The  Pantry,  Inc.,  the  leading 
independently  operated  convenience  store  chain  in 

the  southeastern  U.S.  He  is  also  the  Chairman  of  RGIS 
International,  a  portfolio  company  of  the  Blackstone  
Group.  Previously,  he  was  the  Chairman  and  Chief  
Executive Officer of Macy’s Central, a division of Macy’s 
Inc.  He  was  also  the  Chairman  and  Chief  Executive 
Officer  of  Galyans  Trading  Company,  which  operated 
a  chain  of  sporting  goods  and  outdoors  stores  and,  
prior  to  that,  was  the  President  and  Chief  Operating 
Officer  of  Bloomingdales,  a  division  of  Federated 
Department Stores.

The  appointments  of  both  Janet  and  Ed  exemplify  the 
importance  of  succession  planning  throughout  our 
organization. They also are indicative of the  commitment 
we  have  to  expand  our  board  with  members  whose  
varying  backgrounds,  areas  of  expertise  and  skill  sets 
benefit our company and its shareholders. 

We would like to take this opportunity to thank Rocque 
and  Jack  for  their  dedication  and  commitment  to  
La-Z-Boy  Incorporated  during  their  nearly  40  years 
of  combined  service  on  our  board.  Both  gentlemen 
contributed  greatly  to  our  company  throughout  their 
tenure,  providing  sage  guidance  and  counsel,  while 
helping to usher our company through many different 
cycles,  particularly  those  that  impacted  the  furniture 
industry  over  the  past  decade.  They  are  outstanding 
individuals  who  exhibit  the  highest  level  of  integrity 
and they will be missed. We were fortunate to have had  
them serve on our board and we wish them all the best. 

We are proud of the progressive nature of the corporate 
governance  policies  established  by  our  Board  of  
Directors.  Our  board  is  comprised  of  all  but  one 
independent  director  who  meet  after  each  regularly 
scheduled  board  meeting.  Independent  directors  also 
serve  on  the  key  committees  of  Audit,  Compensation, 
and  Nominating 
Corporate  Governance. 
Additionally,  this  past  year  we  established  a  Risk 
Oversight Committee to supplement the board’s role in 
ensuring the oversight of risk management throughout 
the  corporation.  We  are  fully  committed  to  upholding 
the highest standards of corporate governance for our 
organization  and  will  strive  to  maintain  a  leadership 
position in this very important facet of public-company 
life and stewardship.

and 

La-Z-Boy Incorporated  (cid:116)  2010 ANNUAL REPORT

5

    To
Our Shareholders, continued

The Future

While we anticipate the furniture industry will continue to 
face macroeconomic headwinds in the immediate future, 
we believe the tsunami of the last decade, during which 
we experienced a sea change in our industry, is behind us. 
The  operating  environment  for  furniture  manufacturing 
and distribution has seemingly absorbed all the changes 
and  disruptions,  and  La-Z-Boy  has  weathered  the  storm 
by  adjusting  its  business  model  to  operate  in  this  new 
climate.  However,  we  clearly  learned  during  this  period 
not to take anything for granted and, because of that, we 
have contingency plans in place for different industry and 
macroeconomic scenarios. 

Our  balance  sheet  is  strong,  our  operations  are  efficient 
and we have a talented team working to increase our sales 
and move our company forward. While there are still levers 

to pull and push to fine-tune our business and strengthen 
our entire enterprise, we are resolute in our intention to 
return value to our shareholders and remain on a path of 
profitable growth. 

We would like to take this opportunity to thank our Board 
of  Directors,  employees,  shareholders,  customers  and 
suppliers  for  their  tremendous  support  over  what  was 
a  very  difficult  year. We  appreciate  their  dedication  and 
commitment to La-Z-Boy Incorporated and look forward 
to  continued  progress  as  we  capitalize  on  our  winning 
brand, market position and platform for growth. 

James W. Johnston 
Chairman of the Board 

Kurt L. Darrow 
President and Chief Executive Officer

The Reese Reclining Sofa

6

La-Z-Boy Incorporated  (cid:116)  2010 ANNUAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the ﬁscal year ended April 24, 2010

COMMISSION FILE NUMBER 1-9656

LA-Z-BOY INCORPORATED

(Exact name of registrant as speciﬁed in its charter)

MICHIGAN
(State or other jurisdiction of
incorporation or organization)

1284 North Telegraph Road, Monroe, Michigan
(Address of principal executive offices)

38-0751137
(I.R.S. Employer
Identiﬁcation No.)

48162-3390
(Zip Code)

Registrant’s telephone number, including area code (734) 242-1444

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Common Shares, $1.00 Par Value

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as deﬁned in rule 405 of the Securities Act. Yes (cid:2) No (cid:3)

Indicate by check mark if the Registrant is not required to ﬁle reports pursuant to Section 13 or 15(d) of the Exchange Act.
Yes (cid:2) No (cid:3)

Indicate by check mark whether the Registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to ﬁle such
reports), and (2) has been subject to such ﬁling requirements for the past 90 days. Yes (cid:3) No (cid:2)

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the Registrant was required to submit and post such ﬁles). Yes (cid:2) No (cid:2)

Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the Registrant’s knowledge, in deﬁnitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3)

Indicate by check mark whether the Registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler or a smaller
reporting company. See the deﬁnitions of ‘‘large accelerated ﬁler,’’ ‘‘accelerated ﬁler,’’ and ‘‘smaller reporting company’’ in
Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated ﬁler □ Accelerated ﬁler (cid:3)

Non-accelerated ﬁler □

Smaller reporting company □

Indicate by check mark whether the Registrant is a shell company (as deﬁned in Rule 12b-2 of the Exchange Act). Yes (cid:2) No (cid:3)

Based on the closing price on the New York Stock Exchange on October 23, 2009, the aggregate market value of Registrant’s
common shares held by non-affiliates of the Registrant on that date was $458.8 million.

The number of common shares outstanding of the Registrant was 51,778,891 as of June 7, 2010.

(1) Portions of the Registrant’s Proxy Statement to be ﬁled with the Securities and Exchange Commission pursuant to Regulation

14A for its 2010 Annual Meeting of Shareholders are incorporated by reference into Part III.

DOCUMENTS INCORPORATED BY REFERENCE:

LA-Z-BOY INCORPORATED
FORM 10-K ANNUAL REPORT FISCAL 2010

TABLE OF CONTENTS

Cautionary Statement Concerning Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . .

2

Page
Number(s)

PART I

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A.
Item 1B. Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Removed and Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5.

Item 6.
Item 7.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneﬁcial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3
9
11
11
12
12
13

14
17

20
37
38

74
74
74

75
75

75
75
75

PART IV

Item 15.

Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76

Note: The responses to Items 10 through 14 will be included in the Company’s deﬁnitive proxy statement to
be ﬁled pursuant to Regulation 14A for the 2010 Annual Meeting of Shareholders. The required information is
incorporated into this Form 10-K by reference to that document and is not repeated herein.

1

Cautionary Statement Concerning Forward-Looking Statements

We are making forward-looking statements in this report. Generally, forward-looking statements include
information concerning possible or assumed future actions, events or results of operations. More speciﬁcally,
forward-looking statements may include information regarding:

future income, margins and cash ﬂows
future growth
adequacy and cost of ﬁnancial resources

future economic performance
industry and importing trends
management plans

Forward-looking statements also include those preceded or followed by the words ‘‘anticipates,’’ ‘‘believes,’’
‘‘estimates,’’ ‘‘hopes,’’ ‘‘plans,’’ ‘‘intends’’ and ‘‘expects’’ or similar expressions. With respect to all forward-
looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those anticipated or projected due to a number of factors. These
factors include, but are not limited to: (a) changes in consumer conﬁdence and demographics; (b) continued
economic recession; (c) changes in the real estate and credit markets and the potential impacts on our
customers and suppliers; (d) the impact of political unrest internationally, terrorism or war; (e) continued
energy and other commodity price changes; (f) the impact of logistics on imports; (g) the impact of interest
rate and currency exchange rate changes; (h) operating factors, such as supply, labor or distribution disruptions
including changes in operating conditions, product recalls or costs; (i) effects of restructuring actions;
(j) changes in the domestic or international regulatory environment; (k) the impact of adopting new accounting
principles; (l) the impact from severe weather or other natural events such as hurricanes, earthquakes and
tornadoes; (m) the ability to procure fabric rolls and leather hides or cut and sewn fabric and leather sets
domestically or abroad; (n) ﬂuctuations in our stock price; (o) impact of IT system failures; and (p) those
matters discussed in Item 1A of this Annual Report and other factors identiﬁed from time-to-time in our
reports ﬁled with the Securities and Exchange Commission. We undertake no obligation to update or revise
any forward-looking statements, either to reﬂect new developments or for any other reason.

2

PART I

ITEM 1. BUSINESS.

Edward M. Knabusch and Edwin J. Shoemaker started Floral City Furniture in 1927, and in 1928 the newly
formed company introduced its ﬁrst recliner. In 1941, we were incorporated as La-Z-Boy Chair Company in
the state of Michigan, and in 1996 the name was changed to La-Z-Boy Incorporated. The La-Z-Boy name is
the most recognized brand in the furniture industry. La-Z-Boy Incorporated operates in three business
segments — the Upholstery Group, the Casegoods Group and the Retail Group.

La-Z-Boy is the largest reclining-chair manufacturer in the world and one of North America’s largest
manufacturers of upholstered furniture. We also manufacture and import casegoods (wood) furniture products
for resale in North America. In addition, we have 68 company owned and operated retail stores located in
eight markets in the United States. La-Z-Boy Incorporated markets furniture for every room of the home.
According to the May 2010 Top 100 ranking by Furniture Today, which is an industry trade publication, the
second largest retailer of single-brand upholstered furniture in the U.S. is the La-Z-Boy Furniture Galleries(cid:5)
stores retail network.

Principal Products and Industry Segments

Our reportable operating segments are the Upholstery Group, the Casegoods Group and the Retail Group.

In terms of revenue, our largest segment is the Upholstery Group, which includes La-Z-

Upholstery Group.
Boy, our largest operating unit. Also included in the Upholstery Group are the operating units England and
Bauhaus. This group primarily manufactures and sells upholstered furniture to furniture retailers and
proprietary stores. Upholstered furniture includes recliners and motion furniture, sofas, loveseats, chairs,
ottomans, sleeper sofas, sectionals and modulars.

Casegoods Group. Our Casegoods Group is primarily an importer, marketer and distributor of casegoods
(wood) furniture. The operating units in the Casegoods Group consist of two groups, one including American
Drew, Lea and Hammary, and the second being Kincaid. Casegoods product include tables, chairs,
entertainment centers, headboards, dressers, accent pieces and some coordinated upholstered furniture.
Retail Group. The Retail Group consists of 68 company-owned La-Z-Boy Furniture Galleries(cid:5) stores located
in eight markets ranging from the Midwest to the East Coast of the United States and also including
Southeastern Florida. The Retail Group sells upholstered furniture, as well as casegoods and other accessories
to end consumers through the retail network.

Additional detailed information regarding our segments and the products which comprise the segments is
contained in Note 15 to our consolidated ﬁnancial statements and our ‘‘Management’s Discussion and
Analysis’’ section, both of which are included in this report.

Raw Materials and Parts

The principal raw materials for the Upholstery Group are purchased cover (primarily fabrics and leather),
polyester batting and non-chloroﬂuorocarbonated polyurethane foam for cushioning and padding, lumber and
plywood for frames and steel for motion mechanisms which total about 82% of our total raw material costs.
We purchase about 68% of our polyurethane foam from one supplier, although this supplier has several
facilities across the United States that ship to our plants.

Purchased cover is the largest raw material cost for this segment, representing about 44% of the Upholstery
Group’s total material costs. We purchase cover from a variety of sources, but we do rely on a limited number
of major suppliers. If one of these sources experienced ﬁnancial or other difficulties we could experience
temporary disruptions in our manufacturing process until another source could be found. Our cover is
purchased either in a raw state (a roll or hide), then cut and sewn into parts in our plants or as cut-and-sewn
parts from third-party offshore suppliers. The cover material costs are 55% fabric rolls and hides and 45% for
cut-and-sewn parts. There are four primary suppliers of cut-and-sewn leather and fabric products, and the
majority of our purchased cut-and-sewn sets come from China. One supplier manufactures the majority of the
leather cut-and-sewn parts we receive from China. During the third quarter of ﬁscal 2009, we began shifting
our domestic cutting and sewing operations to our facility in Mexico. At the end of ﬁscal 2010 almost 90% of

3

our domestic fabric cutting and sewing operations had been transferred to our facility in Mexico. We expect to
complete the transfer of our remaining domestic fabric cutting and sewing operations and our domestic leather
cutting and sewing operations during ﬁscal 2011. We expect all of our cut-and-sewn parts to be supplied from
our Mexican facility or from suppliers in China given the lower labor costs in these areas and the lack of
competitively priced domestic sources.

As the economy improves we expect raw material costs to rise due to suppliers’ inability to meet increases in
demand as capacity was reduced during the downturn of the economy. Steel, wood, and polyurethane
manufacturers and the shipping industries all have reduced capacities and a major increase in business could
force upward pricing pressures.

Our Casegoods Group is primarily an importer, marketer and distributor of casegoods furniture. In ﬁscal 2010,
our two remaining Casegoods Group’s manufacturing facilities were consolidated into one plant. The principal
raw materials used by our Casegoods Group are hardwoods, plywood and chip wood, veneers and liquid
stains, paints and ﬁnishes and decorative hardware. Hardwood lumber and purchased hardwood components
are the Casegoods Group’s largest raw material costs, representing about 50% of the segment’s total raw
material costs, on domestically manufactured product.

Finished Goods Imports

Our Casegoods Group is primarily an importer of wood furniture. This import model is effective due to low
labor and overhead costs associated with manufacturing casegoods product overseas. We have continued to
make changes to our model in order to improve our service performance levels by improving our supply chain
management and distribution networks, which includes the merger of our Hammary operations with our
American Drew/Lea operations.

During ﬁscal 2010 prices on imported casegoods were ﬂat compared to the second half of ﬁscal 2009. Prior to
the second half of ﬁscal 2009 we were experiencing higher prices on imported casegoods due to increases
related to higher labor, raw materials, currency valuations and transportation costs. We are also expecting
increases in prices on imported casegoods during ﬁscal 2011 due to increases in labor and raw material costs,
as well as increased transportation costs.

During ﬁscal 2010 and 2009, about 71% and 72%, respectively, of our casegoods ﬁnished goods sales were
imported. Imported ﬁnished goods, for all our segments, represented approximately 11% of our ﬁscal 2010
consolidated sales.

Seasonal Business

We believe that the demand for furniture generally reﬂects sensitivity to overall economic conditions,
including, but not limited to unemployment rates, housing market conditions and consumer conﬁdence.
Historically, our Upholstery Group experiences lower levels of sales during the ﬁrst half of our ﬁscal year and
higher levels of sales during the second half of our ﬁscal year. Our Casegoods Group historically experiences
a lower level of sales during the ﬁrst quarter of our ﬁscal year and a higher level of sales during our second
ﬁscal quarter. Our Retail Group historically experiences a higher level of sales during the third quarter of our
ﬁscal year, primarily because of the holidays and a lower level of sales during our ﬁrst ﬁscal quarter. We
believe variations to these historical patterns are a result of economic conditions during those periods and not
a change in our historical patterns.

During ﬁscal 2010, our Upholstery and Casegoods Groups experienced its highest level of sales during our
fourth ﬁscal quarter, whereas our Retail Group experienced their highest level of sales during our third ﬁscal
quarter. All three of our segments experienced their lowest level of sales for ﬁscal 2010 during our ﬁrst ﬁscal
quarter.

When possible, we schedule production to maintain uniform manufacturing activity throughout the year.
However, we shut down our domestic plants in July to perform routine maintenance on our equipment. A
majority of our manufacturing facilities will shut down their production for at least one week in July 2010.

4

Economic Cycle and Purchasing Cycle

The success of our business, to a signiﬁcant extent, depends upon the level of consumer conﬁdence. A number
of economic conditions affect consumer conﬁdence, including, among other things, the general state of the
economy, general business conditions, uncertainty in the housing and credit markets, consumer debt levels,
interest rates, taxation and unemployment levels.

While we are pleased with the progress in our Upholstery Group and Retail Group, we are concerned about
the overall decrease in demand for casegoods products. We believe that consumers are postponing purchases
of casegoods product because those products tend to be higher ticket purchases compared to upholstered
furniture. We are continuing to modify our cost structure in our Casegoods Group to reduce operating
expenses and be proﬁtable on lower volumes. Our Retail Group is continuing to modify its cost structure to
reduce operating expenses and increase sales volume in order to reduce losses and become proﬁtable.

In terms of our product segments, upholstered furniture has a shorter life cycle and exhibits a less volatile
sales pattern over an economic cycle than does casegoods. This is because upholstered furniture is typically
more fashion and design oriented, and is often purchased one or two pieces at a time. In contrast, casegoods
products are longer-lived, less fashion-oriented, and frequently purchased in groupings or ‘‘suites,’’ resulting in
a much larger cost to the consumer.

Practices Regarding Working Capital Items

With the exception of company-owned stores and regional distribution centers discussed below, we do not
carry signiﬁcant amounts of upholstered ﬁnished goods in inventory as these goods are usually built to order.
However, we generally build or import casegoods inventory to stock, in order to attain manufacturing
efficiencies and/or to meet delivery requirements of customers. This results in higher levels of ﬁnished
casegoods inventories than upholstery products. Our company-owned La-Z-Boy Furniture Galleries(cid:5) stores
maintain ﬁnished goods inventory at the stores.

Over the past few years we have created four regional distribution centers and opened a ﬁfth distribution
center in the ﬁrst quarter of ﬁscal 2011. We created these distribution centers in order to streamline our
warehousing and distribution processes for our La-Z-Boy Furniture Galleries(cid:5) store network, which includes
both company-owned stores and independently owned stores. Our move to distribution centers allowed us to
reduce the number of individual warehouses needed to supply our retail outlets and helped us manage our
inventory levels. As of April 24, 2010, our 4 regional distribution centers had eliminated 25 smaller
warehouses, some of which were company operated and some of which were independently operated.

During ﬁscal 2010 and 2009, we made a concerted effort to manage our inventory levels to be more in-line
with our sales volume. Our consolidation of casegoods warehouses and the creation of our distribution centers
allowed us to be more effective in our management of inventory levels. Our overall inventory levels have
declined 24% over the past two years. The changes mentioned above, as well as the overall decrease in our
sales volume over the past two years resulted in the decline in our inventory levels.

In ﬁscal 2010 our Upholstery Group experienced an increase in inventory levels compared to ﬁscal 2009 as a
result of the positive sales trend in the second half of ﬁscal 2010. Offsetting this was a decrease in inventory
levels for our Casegoods Group due to the signiﬁcant decline in sales volume.

During ﬁscal 2010 our accounts receivables increased by $17.2 million as a result of the positive sales trend
in the second half of ﬁscal 2010. Additionally, economic conditions in ﬁscal 2009 resulted in increases to our
allowance for bad debts of $10.4 million in ﬁscal 2009, thereby decreasing our net accounts receivable level
for that period. During the second half of ﬁscal 2009, we experienced a sudden decrease in sales when
compared to the second half of ﬁscal 2008. The sudden deterioration in economic conditions at that time
affected the liquidity of some of our customers and their ability to pay outstanding past due balances, which
resulted in our decision to record additional bad debt expense during the second half of ﬁscal 2009 and in the
full ﬁscal 2009 year. Additionally, during ﬁscal 2010 and ﬁscal 2009 we determined a portion of our
receivables to be uncollectible and wrote them off against our provision for bad debts.

5

Customers

We sell to a signiﬁcant number of furniture retailers primarily throughout the United States and Canada.
Additionally, we sell to a number of furniture retailers outside of North America. We also sell to consumers
through our company-owned La-Z-Boy Furniture Galleries(cid:5) stores. We did not have any single customer
whose purchases amounted to more than 4% of our ﬁscal year 2010 sales for either the Upholstery Group or
the Casegoods Group. Sales in our Upholstery and Casegoods Groups are almost entirely to furniture retailers.
The Retail Group sales are to end-consumers.

We have formal agreements with many of our retailers for them to display and merchandise products from
one or more of our operating units and sell them to consumers in dedicated retail space, either in stand-alone
stores or in dedicated galleries or studios within their stores. We consider these stores, as well as our own
retail stores, to be ‘‘proprietary.’’ For our Upholstery and Casegoods Groups, our 2010 customer mix was
about 52% proprietary, 16% major dealers (for example, Art Van Furniture, Berkshire Hathaway, Havertys
Furniture, Raymour & Flanigan Furniture) and 32% other independent retail customers.
Currently, we own 68 stand-alone La-Z-Boy Furniture Galleries(cid:5) stores. Additionally, we have agreements
with independent dealers for 238 stand-alone La-Z-Boy Furniture Galleries(cid:5) stores, of which 29 stores are
owned by Variable Interest Entities (VIEs) which we consolidate. These stores also sell accessories that are
purchased from approved vendors. The success of our product distribution relies heavily on having retail ﬂoor
space that is dedicated to displaying and marketing our product. This distribution system originated with our
La-Z-Boy Furniture Galleries(cid:5) stores network, which continues to have the largest number of proprietary
stores and galleries among our other operating units. According to the May 2010 Top 100 ranking by
Furniture Today, which is an industry trade publication, the second largest retailer of single-brand upholstered
furniture in the U.S. is the La-Z-Boy Furniture Galleries(cid:5) stores retail network. In addition to the stand-alone
La-Z-Boy Furniture Galleries(cid:5) stores, the La-Z-Boy brand also has a distribution model known as Comfort
Studios(cid:5). Comfort Studios(cid:5) are deﬁned spaces within a larger independent retailer that are dedicated to
displaying La-Z-Boy branded furniture with the average size of the space being about 5,000 square feet.
Currently there are 510 Comfort Studios(cid:5) in our distribution system. Our proprietary distribution also includes
in-store galleries for England, Kincaid and Lea’s La-Z-Boy KidzTM. Total ‘‘proprietary’’ ﬂoor space is
approximately 8.8 million square feet.

Maintaining, updating, and expanding, when appropriate, our proprietary distribution is a key part of our
marketing strategy. While we will continue to maintain and update our current stores, given the current
economic climate, the La-Z-Boy Furniture Galleries(cid:5) store network plans to be opportunistic in opening new
stores during ﬁscal 2011. We select dealers for this proprietary distribution based on the management and
ﬁnancial qualiﬁcations of those dealers. The location of these proprietary stores is based on the potential for
distribution in a speciﬁc geographical area. This proprietary method of distribution is beneﬁcial to La-Z-Boy,
our dealers and the consumer. For La-Z-Boy, it allows us to have a concentration of marketing of our product
by sales personnel dedicated to our entire product line, and only that line. For our dealers who join this
proprietary group, it allows them to take advantage of practices that have proven successful based on past
experiences of other proprietary dealers. As a part of this, we facilitate forums and communications for these
dealers to share best practices among their peers. For our consumers, these stores provide a full-service
shopping experience with knowledgeable sales associates and in-home design consultants to support their
purchasing process. The La-Z-Boy Furniture Galleries(cid:5) stores dealers and the Comfort Studios(cid:5) retailers are
responsible for displaying and merchandising the product in the dedicated retail space.

Orders and Backlog

Upholstery orders are primarily built to a speciﬁc dealer order (stock order) or a special order with a down
payment from a consumer (sold orders). Casegoods are primarily produced to our internal order (not a
customer or consumer order), which results in higher ﬁnished goods inventory on hand. Our Upholstery Group
and Casegoods Group typically ship products within 30 days of the order release date.

As of April 24, 2010, and April 25, 2009, Upholstery Group backlogs were approximately $65.5 million and
$57.4 million, respectively. Our Casegoods Group backlogs as of April 24, 2010, and April 25, 2009, were
approximately $19.3 million and $10.1 million, respectively. The increase in the Upholstery Group backlog
from ﬁscal 2009 was due to our positive sales trend experienced in the second half of ﬁscal 2010. The

6

increase in the Casegoods Group backlog from ﬁscal 2009 was a result of new introductions to our casegoods
product line. The measure of backlog at a point in time may not be indicative of future sales performance,
therefore we do not rely entirely on backlogs to predict future sales. For most operating units, an order cannot
be canceled after it has been selected for production.

Competitive Conditions

We are currently the third largest manufacturer/distributor of residential (bedroom, dining room, living and
family room) furniture in the United States, as measured by annual sales volume, according to industry trade
publication Furniture Today.

In the Upholstery Group, the largest competitors are Ashley, Bassett Furniture, Berkline, Bernhardt,
Ethan Allen, Flexsteel, Furniture Brands International, Klaussner, Natuzzi, and Palliser.

In the Casegoods Group, our main competitors are Ashley, Bernhardt, Ethan Allen, Furniture Brands
International, Hooker Furniture, Stanley Furniture, and Universal. Additionally, there are market pressures
related to foreign manufacturers entering the United States market, as well as by increased direct purchasing
from overseas by some of the larger United States retailers.
The La-Z-Boy Furniture Galleries(cid:5) stores operate in the retail furniture industry throughout North America;
consequently, they have different competitors. La-Z-Boy Furniture Galleries(cid:5) stores competitors include but
are not limited to: Ashley, Bassett Furniture Direct, Ethan Allen, Thomasville Home Furnishings Stores,
several other regional competitors (for example Art Van Furniture, Raymour & Flanigan Furniture, and
Havertys Furniture), and family-owned independent furniture stores.

In addition to the larger competitors listed above, a substantial number of small and medium-sized ﬁrms
operate within our business segments, all of which are highly competitive.

During the past couple of years there has been an increase in alternative distribution affecting our retail
markets. Companies such as Costco, Home Depot, IKEA, Sam’s Club, Target, Wal-Mart, Williams Sonoma,
and others are now offering products that compete with some of our product lines. The increased ability to
purchase furniture products on-line through various furniture manufacturers’ and retailers’ websites has
increased competition. Additionally, we compete in the mid-to-upper price point product lines. A shift in
consumer tastes and trends to lower price point products could affect our competitive condition.

We compete primarily by emphasizing our brand names and the value, comfort, quality, and styling of our
products. In addition, we remain committed to innovation within the furniture industry while striving to
provide exceptional dealer support, outstanding customer service and efficient on-time delivery while operating
in the mid-to-upper price segment of the furniture market. Also, maintaining, updating and expanding our
proprietary distribution system is a key initiative for us in striving to remain competitive with others in the
furniture industry.

Research and Development Activities

We provide information regarding our research and development activities in Note 1 to our consolidated
ﬁnancial statements, which is included in Item 8 of this report.

Trademarks, Licenses and Patents

We own several trademarks including La-Z-Boy, our most valuable. The La-Z-Boy trademark is essential to
the upholstery and retail segments of our business. To protect our trademarks we have registered them in the
United States and various other countries where our products are sold. The trademarks remain valid for as
long as they are used properly for identiﬁcation purposes, and we actively monitor the correct use of our
trademarks. We license the use of the La-Z-Boy trademark on furniture sold outside the United States. We
also license the use of the La-Z-Boy trademark on contract office furniture, outdoor furniture and on non-
furniture products in the United States for the purpose of enhancing brand awareness. In addition, we license
our proprietary dealers to use our La-Z-Boy trademark in connection with the sale of our products and related
services, on their signs, and in other ways, which we consider to be a key part of our marketing strategies. We
provide more information about those dealers above, under ‘‘Customers.’’

7

We hold a number of patents that we actively enforce but we believe that the loss of any single patent or
group of patents would not materially impact our business.

Compliance with Environmental Regulations

Our manufacturing operations involve the use and disposal of certain substances regulated under
environmental protection laws, and we are involved in a small number of remediation actions and site
investigations concerning such substances. Based on a review of all currently known facts and our experience
with previous environmental matters, we have recorded expense in respect of probable and reasonably
estimable losses arising from environmental matters and currently do not anticipate any material loss.

Employees

We employed about 8,290 full-time equivalent persons as of April 24, 2010. The Upholstery Group employed
about 6,786, the Casegoods Group employed about 483, the Retail Group employed about 458, with the
remainder being non-segment personnel, which includes our VIEs. The majority of our employees are
employed on a full-time basis. As of April 25, 2009, we had about 7,730 full-time equivalent employees.

Financial Information About Foreign and Domestic Operations and Export Sales

In ﬁscal 2010, our direct export sales, including sales in Canada, were approximately 12% of our total sales.
We have a manufacturing joint venture in Thailand, which distributes furniture in Australia, New Zealand, the
United Kingdom, Thailand and other countries in Asia. In addition, we have a sales and marketing joint
venture in Asia, which sells and distributes furniture in China, Japan and Korea among other Asian countries.

We also have a facility in Mexico which provides cut and sewn sets for our domestic upholstery
manufacturing facilities. Information about sales in the United States and in Canada and other countries is
contained in Note 15 to our consolidated ﬁnancial statements, which is included in Item 8 of this report. Our
property, plant, and equipment in the United States were $123.4 million and $131.6 million at the end of ﬁscal
2010 and ﬁscal 2009, respectively. The property, plant, and equipment in foreign countries was $15.5 million
and $15.3 million in ﬁscal 2010 and ﬁscal 2009, respectively.

See Item 1A of this report for information about the risks attendant to our foreign operations.

Internet Availability

Available free of charge through our internet website are links to our Forms 10-K, 10-Q, 8-K, proxy
statements on Schedule 14A and amendments to those reports. These reports can be found on our internet
website www.la-z-boy.com as soon as reasonably practicable after being electronically ﬁled with, or furnished
to, the Securities and Exchange Commission (SEC). Copies of any materials we ﬁle with the SEC can also be
obtained free of charge through the SEC’s website at www.sec.gov. The information on our website is not part
of this report.

8

ITEM 1A. RISK FACTORS.

Our business is subject to a variety of risks. You should carefully consider the risk factors detailed below in
conjunction with the other information contained in this document. Interest rates, consumer conﬁdence,
housing starts and the overall housing market, increased unemployment, tightening of the ﬁnancial and
consumer credit markets, downturns in the economy and other general economic factors that affect many other
businesses are particularly signiﬁcant to us because our principal products are consumer goods.

A continued economic downturn could have a negative material impact on our sales, results of
operations and cash ﬂows.

Over the past few years, negative changes in economic conditions, including high unemployment, volatile
capital markets, decreases in the housing and real estate markets and tightening of consumer lending had a
negative impact on our sales, results of operations and cash ﬂows. A prolonged continuation of these
conditions or a further economic downturn may cause our current and potential customers to delay their
purchases or affect their ability to pay, which could have a negative long-term impact on our sales, results of
operation and cash ﬂows.

Our current retail markets and others we may acquire in the future may not achieve the growth and
proﬁtability we anticipated when we acquired them. We could incur charges for the impairment of long-
lived assets if we cannot meet our earnings expectations for these markets.

We may remodel and relocate existing stores, as well as close underperforming stores. Proﬁtability will
depend on increased retail sales justifying the cost of remodeling and relocating these stores to support the
lease carrying costs and our ability to reduce support costs as a percent of sales in advertising, selling and
administration. In addition, while we are not currently planning on acquiring any new retail markets, we may
acquire additional retail markets in the future, and if we do, they may be subject to many of the same risks.
We may also incur additional costs upon acquiring new markets that could negatively impact our results of
operations.

Availability of foreign sourcing and economic uncertainty in countries outside of the United States in
which we operate or purchase product from could adversely affect our business and results of
operations.

We have operations in countries outside the United States, some of which are located in emerging markets.
Long-term economic and political uncertainty in some of the countries in which we operate, such as Mexico
and Thailand, could result in the disruption of markets and negatively affect our business. We have been
increasing our offshore capabilities to provide ﬂexibility in product offerings and pricing to meet competitive
pressures. Our Casegoods Group is primarily an importer of products manufactured by foreign sources. In
addition, our Upholstery Group purchases cut and sewn fabric and leather sets from foreign sourced vendors.
Our sourcing partners may not be able to produce these goods in a timely fashion, or the quality of their
product may be rejected by us, causing delays in shipping to our customers for casegoods and manufacturing
disruptions in our upholstery plants due to not receiving rolled fabric, leather hides, and fabric and leather cut
and sewn sets. The majority of our cut and sewn leather sets purchased in China are purchased from one
supplier. Additionally we receive cut and sewn sets from our facility located in Mexico. All of our cut and
sewn sets will be supplied from Mexico and China after we are fully transitioned to our Mexican facility.

There are other risks that are inherent in our non-U.S. operations, including the potential for changes in socio-
economic conditions, changes in laws and regulations, including import, export, labor and environmental laws,
tariffs and trade barriers, monetary and ﬁscal policies, investments, taxation, and exchange controls.
Additionally, unsettled political conditions, possible terrorist attacks, organized crime and public health
concerns present a risk to our non-U.S. operations. All of these items could make it more difficult to service
our customers or cause disruptions in our plants that could reduce our sales, earnings, or both in the future.

Changes in regulations of our international operations could adversely affect our business and results of
operations.

Because we have operations outside of the United States and because we sell product in various countries, we
are subject to many laws governing international relations, including those that prohibit improper payments to

9

government officials and restrict where we can do business, what information or products we can supply to
certain countries and what information we can provide to a non-U.S. government, including but not limited to
the Foreign Corrupt Practices Act and the U.S. Export Administration Act. Violations of these laws, which are
complex, may result in criminal penalties or sanctions that could have a material adverse effect on our
business and results of operations. Although we have implemented policies and procedures designed to ensure
compliance with these laws, there can be no assurance that our employees, contractors, or agents will not
violate our policies.

Fluctuations in the price, availability and quality of raw materials could cause delays that could result
in our inability to provide goods to our customers or could increase our costs, either of which could
decrease our earnings.

We use various types of wood, fabrics, leathers, upholstered ﬁlling material, steel, and other raw materials in
manufacturing furniture. Because we are dependent on outside suppliers for our raw material needs,
ﬂuctuations in the price, availability and quality of the raw materials we use could have a negative effect on
our cost of sales and our ability to meet our customers’ demands. Inability to meet our customers’ demands
could result in the loss of future sales, and we may not always be able to pass along price increases to our
customers due to competitive and marketing pressures. Since we have a higher concentration in upholstery
sales (73%) than most of our competitors, the effects of steel, polyurethane foam and fabric price increases or
quantity shortages are more signiﬁcant for our business than for most other furniture companies. About 68%
of our polyurethane foam comes from one supplier, although this supplier has several facilities across the
United States. A natural disaster or severe weather that affects this supplier could result in delays in shipments
of polyurethane foam to our plants. We have attempted to minimize this risk by requiring a minimum of 60
days worth of production of the principal raw material to be stored at an off-site facility.

A change in the ﬁnancial condition of some of our domestic and foreign fabric suppliers could impede their
ability to provide these products to us in a timely manner. In addition, upholstered furniture is highly fashion
oriented, and if we are not able to acquire sufficient fabric variety, or if we are unable to predict or respond to
changes in fashion trends, we may lose sales and have to sell excess inventory at reduced prices. This would
lower our earnings as well as reduce our sales.

Business failures of large dealers or customers could result in a decrease in our future sales and earnings.

Although we have no customers who individually represent 4% or more of the annual sales of any of our
segments, business failures or consolidation of large dealers or customers could result in a decrease in our
future sales and earnings.

Healthcare reform legislation could have an impact on our business.

The recently enacted Patient Protection and Affordable Care Act (the ‘‘Patient Act’’) as well as other
healthcare reform legislation being considered by Congress and state legislatures may have an impact on our
business. While we are currently evaluating the effects of the Patient Act on our business, the impact on the
healthcare industry is extensive and includes, among other things, having the federal government assume a
greater role in the health care system, expanding healthcare coverage in the United States, mandating basic
healthcare beneﬁts and imposing regulations on businesses who provide or do not provide healthcare insurance
to their employees. Our current assessment is that this legislation will most likely increase our employee
healthcare-related costs. While the true cost of the recent healthcare legislation enacted will occur after 2013
due to provisions of the legislation being phased in over time, changes to our healthcare costs structure could
have a signiﬁcant impact on our business.

Climate change legislation could have an impact on our results of operations.

Climate change legislation has not yet been ﬁnalized or adopted, so any evaluation of its impact on our
operations is speculative. We are a signiﬁcant user of electricity, so any legislation that increases the operating
costs of coal ﬁred power plants will likely increase our operating expenses, although not disproportionately to
our competitors or others in the industry. It is likely that cap and trade legislation regarding greenhouse gases
will impose costs on carbon dioxide emissions from plants. Additionally, gasoline production will likely
receive even greater cost allocations under cap and trade legislation. Increased costs associated with this type

10

of legislation could have an adverse impact on our cost of raw materials or could result in increase costs
associated with maintaining or updating our manufacturing facilities. New laws or regulations resulting in
steep increases in the cost of fuel, or new technologies resulting in steep decreases in such costs, would affect
our costs and the cost to our customers purchasing from us. If our costs increased, we might not always be
able to pass along such increases to our customers due to competitive and marketing pressures, but we would
expect our competitors to be similarly affected.

Failure to address product safety concerns could adversely affect our sales and results of operations.

If our product offerings do not meet applicable safety standards or our customers’ expectations regarding
safety, we could experience lost sales, experience increased costs and be exposed to legal risk and damages to
our reputation. All of our suppliers must comply with applicable product safety laws and we are somewhat
dependent on them to ensure that the products we buy comply with all safety standards. We attempt to
minimize this risk by performing our own independent testing of the products we buy from our suppliers.
Events that give rise to actual or perceived product safety concerns could expose us to government
enforcement action or private litigation and result in costly product recalls and other liabilities. In addition,
negative perceptions regarding the safety of the products we sell could cause our customers to purchase
furniture from a different source, resulting in lost sales, which could affect our results of operations.

Inability to maintain and enhance our brand and respond to changes in our current and potential
customers’ tastes and trends in a timely manner could adversely affect our business and operating
results.

The success of our business depends on our ability to maintain and enhance our brands to grow our business
by retaining current customers and attracting new customers. Additionally, because furniture product is
extremely fashion oriented, changes in consumers taste and trends and the resultant change in our product mix
could adversely impact our business and operating results. We attempt to minimize these risks by maintaining
a strong advertising and marketing campaign promoting both our brands and our current product designs,
styles, quality and prices. If these efforts are unsuccessful or we incur substantial costs in connection with
these efforts, our business, operating results and ﬁnancial or competitive condition could be adversely affected.

We rely extensively on computer systems to process transactions, summarize results and manage our
business. Disruptions in both our primary and back-up systems could adversely affect our business and
operating results.

Our primary and back-up computer systems are subject to damage or interruption from power outages,
computer and telecommunications failures, computer viruses, security breaches, natural disasters and usage
errors by employees. Interruptions of our critical business computer systems and/or failure of our back-up
systems could negatively impact our sales or result in longer production times. Additionally, if our critical
business computer systems or our back-up systems are damaged or cease to function properly, we may have
to make a signiﬁcant investment to ﬁx or replace them.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

We owned or leased approximately 11.0 million square feet of manufacturing, warehousing distribution
centers, office, showroom, and retail facilities, and had approximately 2.2 million square feet of idle facilities
at the end of ﬁscal 2010. Of the 11.0 million square feet occupied at the end of ﬁscal 2010, our Upholstery
Group occupied approximately 6.4 million square feet, our Casegoods Group occupied approximately
2.4 million square feet, our Retail Group occupied approximately 1.3 million square feet and our
non-segmented operations occupied the balance.

We sold several idle facilities during ﬁscal years 2010 and 2009. Our active facilities are located in Arkansas,
California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Massachusetts,
Michigan, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania,
Rhode Island, Tennessee, Utah, Virginia, Washington D.C., Toronto (Canada), Coahuila (Mexico) and

11

Bangkok (Thailand). Most of them are less than 50 years old, and all of them are well maintained and
insured. We do not expect any major land or building additions will be needed to increase capacity in the
foreseeable future for our manufacturing operations. We own all of our domestic plants, some of which have
been ﬁnanced under long-term industrial revenue bonds, and our Thailand plant and we lease the majority of
our retail stores and regional distribution centers, as well as our manufacturing facility in Mexico. For
information on terms of operating leases for our properties, see Note 9 to our consolidated ﬁnancial
statements, which is included in Item 8 of this report.

ITEM 3. LEGAL PROCEEDINGS.

We are involved in various legal proceedings arising in the ordinary course of our business. Based on a
review of all currently known facts and our experience with previous legal matters, we have recorded expense
in respect of probable and reasonably estimable losses arising from legal matters and currently do not
anticipate any material additional loss.

ITEM 4. [REMOVED AND RESERVED.]

12

EXECUTIVE OFFICERS OF REGISTRANT

Listed below are the names, ages and current positions of our executive officers and, if they have not held
those positions for at least ﬁve years, their former positions during that period with us or other companies. All
executive officers serve at the pleasure of the board of directors.

Kurt L. Darrow, age 55

•

President and Chief Executive Officer since September 2003

Steven M. Kincaid, age 61

•

•

Senior Vice President of La-Z-Boy and President of Casegoods since November 2003

President, Kincaid Furniture Company, Incorporated since June 1983

Louis M. Riccio, Jr., age 47

•

•

•

Senior Vice President of La-Z-Boy and Chief Financial Officer since July 2006

Treasurer from April 2007 through August 2007 and February 2010 through April 2010

Vice President and Corporate Controller from February 2002 through June 2006

Otis S. Sawyer, age 52

•

•

•

•

Senior Vice President of La-Z-Boy and President of Non-Branded Upholstery since February 2008

President, England, Incorporated since February 2008

Senior Vice President Corporate Operations from May 2006 through February 2008

Vice President and Chief Information Officer from August 2004 through April 2006

Mark S. Bacon, Sr., age 47

•

•

Senior Vice President of La-Z-Boy and Chief Retail Officer since October 2008

Executive Vice President of Sales, Commercial and Operations of The Pep Boys — Manny, Moe &
Jack from March 2004 through September 2007

13

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our common shares during the fourth quarter of ﬁscal year 2010.

Recent Sales of Unregistered Securities

There were no sales of unregistered securities during ﬁscal year 2010.

Equity Plans

The table below provides information concerning our compensation plans under which common shares may be
issued.

Equity Compensation Plan Information as of April 24, 2010

Number of securities
to be issued
upon exercise of
outstanding options
(i)

Weighted-average
exercise prices of
outstanding options
(ii)

Number of
securities remaining
available for future
issuance under equity
compensation plans
(excluding securities
reﬂected in
column (i))
(iii)

Plan category

Equity compensation plans approved by

shareholders . . . . . . . . . . . . . . . . . . . .

3,048,045(1)

$10.41

974,340(2)

Note 1: These options were issued under our 2004 Long-Term Equity Award Plan and our 1997 Incentive
Stock Option Plan. No additional options can be awarded under the 1997 plan, but 466,770 are still
outstanding under the 1997 plan.
Note 2: This amount is the aggregate number of shares available for future issuance under our 2004 Long-
Term Equity Award Plan, which has a stock option component, a restricted stock component and a
performance award component, and our Restricted Stock Plan for Non-Employee Directors. The long-term
equity award plan provides for awards of stock options, restricted stock, and performance awards (awards of
our common stock based on achievement of pre-set goals over a performance period) to selected key
employees. The non-employee directors’ plan provides for grants of 30-day options on our common shares.
The total shown above consists of: (a) a maximum of 823,540 shares that may be granted under the long-term
equity award plan; and (b) 150,800 shares available for future issuance under the non-employee directors’
plan. We discontinued awards under the non-employee directors’ plan in ﬁscal 2009.

14

Performance Graph

The graph below shows the return for our last ﬁve ﬁscal years that would have been realized (assuming
reinvestment of dividends) by an investor who invested $100 on April 30, 2005 in our common shares, in the
S&P 500 Composite Index and in the Dow Jones U.S. Furnishings Index.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among La-Z-Boy Incorporated, The S&P 500 Index
And The Dow Jones U.S. Furnishings Index

$160

$140

$120

$100

$80

$60

$40

$20

$0

4/05

4/06

4/07

4/08

4/09

4/10

La-Z-Boy Incorporated

S&P 500

Dow Jones US Furnishings

*$100 invested on 4/30/05 in stock or index, including reinvestment of dividends.
Fiscal year ended April 30.

Company/Index/Market

La-Z-Boy Incorporated . . . . . . . . . . .
S&P 500 Composite Index . . . . . . . . .
Dow Jones U.S. Furnishings Index . . .

2005

$100
$100
$100

2006

2007

2008

2009

2010

$133.54
$115.42
$111.92

$105.43
$133.00
$107.68

$ 60.08
$126.78
$ 74.56

$25.54
$82.01
$50.38

$125.20
$113.87
$ 86.43

15

Dividend and Market Information

The New York Stock Exchange is the principal market in which our common stock is traded. The tables
below show the high and low sale prices of our common stock on the New York Stock Exchange during each
quarter of our last two ﬁscal years, as well as the dividends we paid during each quarter.

Fiscal 2010 Quarter Ended
July 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 24 . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal 2009 Quarter Ended
July 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 25 . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High
$ 6.60
$10.29
$11.63
$15.46

High
$ 7.93
$11.76
$ 5.78
$ 2.23

Market Price

Low
$1.81
$6.11
$6.57
$9.04

Market Price

Low
$5.84
$4.50
$1.20
$0.53

Close
$ 6.59
$ 8.90
$11.35
$14.75

Close
$7.60
$4.61
$1.21
$2.17

Dividends
Paid
$0.00
$0.00
$0.00
$0.00
$0.00

Dividends
Paid
$0.04
$0.04
$0.02
$0.00
$0.10

Our credit agreement would prohibit us from paying dividends if our ‘‘excess availability,’’ as deﬁned in the
credit agreement, falls below $30 million. As of April 24, 2010, we had $90.6 million of excess availability
under the credit agreement. Refer to Note 8 of the consolidated ﬁnancial statements in Item 8 for further
discussion of our credit agreement. In the fourth quarter of ﬁscal 2009 we suspended our quarterly dividend in
order to conserve cash and increase our ﬁnancial ﬂexibility. The payment of future cash dividends is within
the discretion of our Board of Directors and will depend, among other factors, on our earnings, capital
requirements and operating and ﬁnancial condition, as well as excess availability under the credit agreement.

Shareholders

We had about 17,400 shareholders of record at June 11, 2010.

16

ITEM 6. SELECTED FINANCIAL DATA.

The following table presents our selected ﬁnancial data. The table should be read in conjunction with Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8,
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. This information is
derived from our audited ﬁnancial statements and should be read in conjunction with those statements,
including the related notes.

Consolidated Five-Year Summary of Financial Data

(52 weeks)
4/24/2010
$1,179,212

(52 weeks)
4/25/2009
$1,226,674

(52 weeks)
4/26/2008
$1,450,941

(52 weeks)
4/28/2007
$1,621,460

(52 weeks)
4/29/2006
$1,699,806

802,344
2,141
804,485
374,727
331,491
1,293
—
—
—
41,943
2,972
724
4,436
590

44,721
12,670
32,051
—
32,051
487
32,538

51,732
0.62

879,889
9,818
889,707
336,967
373,502
2,642
7,503
5,541
42,136
(94,357)
5,581
2,504
8,124
(7,998)

(97,308)
25,112
(122,420)
—
(122,420)
(252)
$ (122,672)

51,460
(2.39)

$

0.62

$
— $
$

6.61
9.8%
31.8%
3.6%
28.3%
2.7%

(2.39)
0.10
5.87
(32.3)%
27.5%
(7.7)%
(25.8)%
(10.0)%

1,053,785
5,057
1,058,842
392,099
397,713
3,078
—
—
8,426
(17,118)
13,899
3,614
7,147
5,393

(14,863)
(7,214)
(7,649)
(6,000)
(13,649)
(277)
$ (13,926)

$

$
$
$

51,408
(0.16)

(0.27)
0.40
8.71
(1.6)%
27.0%
(1.2)%
48.5%
(0.5)%

1,191,463
3,371
1,194,834
426,626
387,431
7,662
—
—
—
31,533
10,206
3,952
3,430
727

1,275,053
8,479
1,283,532
416,274
379,059
—
—
—
22,695
14,520
11,540
3,101
—
(933)

29,436
9,933
19,503
(15,629)
3,874
(29)
3,845

51,475
0.38

0.07
0.48
9.41
3.9%
26.3%
1.9%
33.7%
1.2%

$

$

$
$
$

$

$

$
$
$

5,148
10,758
(5,610)
2,549
(3,061)
(215)
(3,276)

51,801
(0.11)

(0.07)
0.44
9.83
(1.1)%
24.5%
0.9%
209.0%
(0.3)%

$

$

$
$
$

25,246
$
$
10,986
$ 138,857

24,142
$
$
15,625
$ 146,896

25,323
$
$
27,386
$ 168,325

. . . . . . .
. . . . . . .
. . . . . . .

$ 280,830
2.9 to 1
$ 608,818

$ 221,752
2.8 to 1
$ 549,207

$ 264,238
2.6 to 1
$ 766,857

27,678
$
$
25,811
$ 181,170

$ 314,471
2.4 to 1
$ 877,068

$ 113,172
$ 151,248
$ 486,098

29,613
$
$
27,991
$ 208,412

$ 346,911
2.6 to 1
$ 955,422

$ 174,680
$ 185,682
$ 511,278

36.3%
26.6%

31,900
13,400

46,917
$
$
47,983
$ 346,240

52,148
$
$
60,872
$ 306,432

99,578
$
$ 104,370
$ 451,374

13.9%
12.2%

19.9%
16.6%

23.1%
18.8%

31.1%
23.7%

17,400
8,290

16,700
7,730

20,200
10,060

23,900
11,700

(Dollar amounts in thousands, except per share data)
Fiscal Year Ended
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Cost of goods sold .
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Restructuring .

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Total cost of sales .
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Gross proﬁt .

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Selling, general and administrative .
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Write-down of long-lived assets .
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Write-down of trade names .
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Write-down of goodwill.
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Interest expense .
Interest income .
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Income from Continued Dumping and Subsidy Offset Act, net . .
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Other income (expense), net .
Income (loss) from continuing operations before income
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Income (loss) from continuing operations .
. . . . . . .
Income (loss) from discontinued operations (net of tax) . . . .
. . . . . . .
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.
Net (income) loss attributable to noncontrolling interests . . . . .
Net income (loss) attributable to La-Z-Boy Incorporated . .

Net income (loss) .

taxes .

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per share .

Diluted weighted average shares .
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Diluted income (loss) from continuing operations per share . . .
Diluted net income (loss) attributable to La-Z-Boy Incorporated
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Dividends declared per share .
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Book value of year-end shares outstanding .
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Return on average total equity* .
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Gross proﬁt as a percent of sales .
Operating proﬁt (loss) as a percent of sales .
.
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.
Effective tax rate* .
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Return on sales*.
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Depreciation and amortization .
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Capital expenditures.
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Property, plant and equipment, net .

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Working capital .
Current ratio** .
Total assets . . .

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Long-term debt .
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Total debt .
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Total equity . . .
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Debt to equity ratio*** .
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Debt to capitalization ratio**** .

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Employees .

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Based on income (loss) from continuing operations
Equal to total current assets divided by total current liabilities
Equal to total debt divided by total equity

*
**
***
**** Equal to total debt divided by total debt plus total equity

17

Unaudited Quarterly Financial Information Fiscal 2010

(Dollar amounts in thousands, except per share data)
Fiscal Quarter Ended

(13 weeks)
7/25/2009

(13 weeks)
10/24/2009

(13 weeks)
1/23/2010

(13 weeks)
4/24/2010

$262,671

$300,707

$305,094

$310,740

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales

Cost of goods sold. . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Interest income. . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continued Dumping and Subsidy

Offset Act, net

. . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . .
Income tax expense. . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .

Net (income) loss attributable to noncontrolling

181,549
736
182,285
80,386
77,622
301
2,463
980
276

—
711
2,470
439
2,031

204,962
663
205,625
95,082
84,862
520
9,700
831
199

—
236
9,304
3,762
5,542

365

206,895
392
207,287
97,807
83,527
201
14,079
577
140

4,436
(593)
17,485
6,547
10,938

208,938
350
209,288
101,452
85,480
271
15,701
584
109

—
236
15,462
1,922
13,540

38

132

interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(48)

Net income attributable to La-Z-Boy

Incorporated. . . . . . . . . . . . . . . . . . . . . .

$ 1,983

$

5,907

$ 10,976

$ 13,672

Diluted weighted average shares . . . . . . . . . . . . .

51,479

51,755

51,845

52,101

Diluted net income attributable to La-Z-Boy

Incorporated per share . . . . . . . . . . . . . . . . . .

$

0.04

$

0.11

$

0.21

$

0.26

18

Unaudited Quarterly Financial Information Fiscal 2009

(Dollar amounts in thousands, except per share data)
Fiscal Quarter Ended

(13 weeks)
7/26/2008

(13 weeks)
10/25/2008

(13 weeks)
1/24/2009

(13 weeks)
4/25/2009

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales

Cost of goods sold. . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of long-lived assets . . . . . . . . . . . . .
Write-down of trade names . . . . . . . . . . . . . . . .
Write-down of goodwill . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Interest income. . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continued Dumping and Subsidy

Offset Act, net

. . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . .
Earnings (loss) before income taxes . . . . . . . . .
Income tax expense (beneﬁt) . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . .

Net (income) loss attributable to noncontrolling

interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to La-Z-Boy

$321,652

$331,948

$288,576

$284,498

235,596
5,795
241,391
80,261
91,435
781
—
—
1,292
(13,247)
1,495
932

—
143
(13,667)
(5,107)
(8,560)

243,090
2,236
245,326
86,622
101,665
687
—
—
408
(16,138)
1,651
630

—
(685)
(17,844)
36,757
(54,601)

207,809
1,664
209,473
79,103
93,501
741
7,036
5,541
40,436
(68,152)
1,386
323

8,124
(7,433)
(68,524)
(4,263)
(64,261)

193,394
123
193,517
90,981
86,901
433
467
—
—
3,180
1,049
619

—
(23)
2,727
(2,275)
5,002

(86)

(34)

(287)

155

Incorporated . . . . . . . . . . . . . . . . . . . . . . .

$ (8,646)

$ (54,635)

$ (64,548)

$

5,157

Diluted weighted average shares . . . . . . . . . . . . .

51,428

51,458

51,475

51,478

Diluted net income (loss) attributable to La-Z-Boy
Incorporated per share . . . . . . . . . . . . . . . . . .

$

(0.17)

$

(1.06)

$

(1.25)

$

0.10

19

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Our Management’s Discussion and Analysis is an integral part of understanding our ﬁnancial results. This
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated
Financial Statements and related Notes to Consolidated Financial Statements. We begin the Management’s
Discussion and Analysis with an introduction to La-Z-Boy Incorporated’s key businesses, strategies and
signiﬁcant operational events in ﬁscal 2010. We then provide a discussion of our results of operations,
liquidity and capital resources, critical accounting policies and other matters.

Introduction

La-Z-Boy Incorporated manufactures, markets, imports, distributes and retails upholstery products and
casegoods (wood) furniture products. Our La-Z-Boy brand is the most recognized brand in the furniture
industry, and we are the leading global producer of reclining chairs. We own 68 La-Z-Boy Furniture
Galleries(cid:5) stores, which are retail locations dedicated to marketing our La-Z-Boy branded product. These
68 stores are part of the larger network of La-Z-Boy Furniture Galleries(cid:5) stores, which includes a total of
306 stores, the balance of which are independently owned and operated. The network constitutes the industry’s
largest single-branded upholstered furniture retailer in North America. These stores combine the style, comfort
and quality of La-Z-Boy furniture with our in-home design service to help consumers furnish their homes. In
addition to our La-Z-Boy Furniture Galleries(cid:5) store network, the La-Z-Boy brand also has a distribution
model known as Comfort Studios(cid:5). Comfort Studios(cid:5) are deﬁned spaces within a larger independent retailer
that are dedicated to displaying La-Z-Boy branded furniture with the average size of the space being about
5,000 square feet. As of April 24, 2010, we had 510 Comfort Studios(cid:5). Additionally, our Kincaid, England
and Lea operating units also have in-store gallery programs.

In addition to our company-owned stores, we consolidate certain of our independent dealers who did not have
sufficient equity to carry out their principal business activities without our ﬁnancial support. These dealers are
referred to as Variable Interest Entities (‘‘VIEs’’). At the end of ﬁscal 2010, we had three VIEs, operating
29 stores, in our Consolidated Statement of Operations. At the end of ﬁscal 2009, we had three VIEs,
operating 30 stores, in our Consolidated Statement of Operations.

Our reportable operating segments are the Upholstery Group, the Casegoods Group and the Retail Group.

In terms of revenue, our largest segment is the Upholstery Group, which includes La-Z-

Upholstery Group.
Boy, our largest operating unit. Also included in the Upholstery Group are the operating units Bauhaus and
England. This group primarily manufactures and sells upholstered furniture to furniture retailers and
proprietary stores. The Upholstery Group sells furniture mainly to La-Z-Boy Furniture Galleries(cid:5) stores,
general dealers and department stores. Upholstered furniture includes recliners and motion furniture, sofas,
loveseats, chairs, ottomans and sleeper sofas.

Casegoods Group. Our Casegoods Group is primarily an importer, marketer and distributor of casegoods
(wood) furniture. The operating units in the Casegoods Group consist of two groups, one including American
Drew, Lea, and Hammary, the second being Kincaid. Casegoods products include tables, chairs, entertainment
centers, headboards, dressers, accent pieces and some coordinated upholstered furniture.
Retail Group. The Retail Group consists of 68 company-owned La-Z-Boy Furniture Galleries(cid:5) stores located
in eight markets ranging from the Midwest to the East Coast of the United States and also including
Southeastern Florida. The Retail Group sells upholstered furniture, as well as casegoods and other accessories
to end consumers through the retail network.

Signiﬁcant Operational Events in Fiscal 2010

The furniture industry as a whole faced challenging economic conditions during ﬁscal 2010 and ﬁscal 2009
which affected sales volumes. In ﬁscal 2010, we recorded net sales of $1.2 billion, a 3.9% decrease compared
to ﬁscal 2009. The majority of our decrease in sales volume came from our Casegoods Group, which
continues to be more negatively impacted by the economic climate. We believe consumers are continuing to
postpone purchases of casegoods product because these products tend to be a higher ticket purchase than
upholstered furniture. Our Upholstery Group sales were ﬂat compared to ﬁscal 2009 and our Retail Group had
a slight decrease in sales volume for ﬁscal 2010 compared to ﬁscal 2009. However the Upholstery and Retail

20

Groups had increases in sales volumes in the second half of ﬁscal 2010 compared to the second half of ﬁscal
2009. We believe the somewhat improved economy and the strength of and the inherent quality associated
with the La-Z-Boy brand, as well as our decision to maintain a strong advertising presence throughout the
challenging economic conditions were the principal reasons for the improvement in our Upholstery and Retail
Groups during the second half of ﬁscal 2010.

While our business has experienced a decline in sales volumes, we have been able to increase our
consolidated operating margin to 3.6% in ﬁscal 2010 from (7.7)% in ﬁscal 2009. Our operating margin
improvement was the result of a 6.7 percentage point improvement in our Upholstery Group’s operating
margin and an 8.8 percentage point improvement in our Retail Group’s operating margin, offset by a
0.5 percentage point decrease in our Casegoods Group’s operating margin. We believe our conversion to
cellular manufacturing and various restructurings we have completed in recent years have resulted in improved
operating margins for our Upholstery Group. Additionally, we continued to focus on increasing our gross
margin and reducing selling and administrative costs in our Retail Group, which enabled us to improve our
operating margin even on lower sales volume. The steep decline in sales volume for our Casegoods Group,
which outpaced our reduction in operating costs, resulted in a decrease in operating margin for our Casegoods
Group. Our Casegoods Group continues to focus on reducing costs to be more in line with the sales volume
by consolidating manufacturing facilities and warehouses, as well as administrative functions.

The consolidation of our casegoods manufacturing facilities was completed in the ﬁrst quarter of ﬁscal 2010
and the conversion of our other casegoods facility to a warehouse was completed in the fourth quarter of
ﬁscal 2010. We converted the other casegoods facility to a warehouse in order to reduce our costs by vacating
an expensive leased warehouse. Additionally, in the fourth quarter of ﬁscal 2010 our American Drew, Lea, and
Hammary operations were merged. At the end of ﬁscal 2010, almost 90% of our domestic fabric cut and sew
operations had been transferred to our facility in Mexico, with the balance expected to be transitioned during
ﬁscal 2011. We also expect to transition our leather cut and sew operations to our facility in Mexico during
ﬁscal 2011.

Our ﬁscal 2009 consolidated operating margin included 3.9 percentage points for the write-down of goodwill
and trade names, 1.0 percentage points for restructuring and 0.6 percentage points for the write-down of long-
lived assets.

In addition to our positive earnings, we increased our cash and equivalents to $108.4 million as of April 24,
2010, compared to $17.4 million as of April 25, 2009. We have also decreased our total debt to $48.0 million
and increased our cash provided by operating activities by $38.0 million during ﬁscal 2010 to $89.7 million.

21

Results of Operations
Fiscal Year 2010 Compared to Fiscal Year 2009

La-Z-Boy Incorporated

(Amounts in thousands, except percentages)

(52 weeks)
4/24/2010

(52 weeks)
4/25/2009

Consolidated sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated operating income (loss) . . . . . . . . . . . . . . . . . . . .
Consolidated operating margin . . . . . . . . . . . . . . . . . . . . . . . .

$1,179,212
41,943

$1,226,674
(94,357)

3.6%

(7.7)%

Percent
change

(3.9)%
144.5%

Consolidated sales decreased $47.5 million due to the continued challenging economic climate. The
challenging conditions coupled with our decision to limit our exposure and credit support to certain
independent dealers was reﬂected in our overall decrease in sales for ﬁscal 2010 compared to ﬁscal 2009.

•

•

•

Our ﬁscal 2010 gross margin increased by 4.3 percentage points mainly due to the efficiencies
gained in our upholstery plants, the restructurings completed in our Casegoods Group and improved
pricing and merchandising in our retail stores.

Our ﬁscal 2010 operating margin included 0.3 percentage points of restructuring charges, whereas
our ﬁscal 2009 operating margin included 3.9 percentage points for the write-down of goodwill and
trade names, 1.0 percentage points of restructuring charges and 0.6 percentage points for the write-
down of long-lived assets.

A decrease in our bad debt expense resulted in a 1.5 percentage point improvement in our operating
margin. The decrease in bad debt expense was a result of the stabilization of the ﬁnancial
performance of our dealers during ﬁscal 2010 compared to ﬁscal 2009. The sudden deterioration in
economic conditions during ﬁscal 2009 affected the liquidity of some of our customers and their
ability to pay outstanding past due balances, which resulted in increased bad debt expense during
that time period.

Upholstery Group

(Amounts in thousands, except percentages)

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(52 weeks)
4/24/2010

$904,871
96,392

(52 weeks)
4/25/2009

$899,204
35,947

10.7%

4.0%

Percent
change

0.6%
168.2%

Sales

Our Upholstery Group sales were ﬂat compared to ﬁscal 2009. We believe the strength of the La-Z-Boy
brand and the inherent quality associated with the brand allowed us to gain market share during this time of
economic distress. Additionally, we continued to focus on various sales initiatives and maintained a strong
advertising presence throughout the challenging economic climate.

• While our Upholstery Group sales were ﬂat for the full ﬁscal 2010 year compared with the full

ﬁscal 2009 year, sales comparisons trended upward in the second half of our ﬁscal year. Sales for
our Upholstery Group increased by 14.8% in the second half of ﬁscal 2010, compared with the
second half of ﬁscal 2009.

•

In ﬁscal 2009 the reporting of the retail warehouse operations was changed from the Retail Group to
the Upholstery Group. Since the warehouse operations were expanded to incorporate the
warehousing, staging and delivery of independent La-Z-Boy Furniture Galleries(cid:5) dealers’ products
as well as for our Retail Group, the reporting of those warehouses was more appropriately included
in our La-Z-Boy wholesale operating unit which is a part of our Upholstery Group. As a result of
this change, sales and operating proﬁt that were previously recorded within our Upholstery Group

22

for product sold to our Retail Group and still in inventory were reversed. A one-time adjustment was
recorded in ﬁscal 2009 that reduced inter-company sales for the Upholstery Group by $12.1 million
during that period, with a corresponding offset recorded in our eliminations line. This adjustment did
not affect our consolidated sales.

•

The adjustment mentioned above was partially offset by an increase in sales resulting from a change
in contractual relationships with our third party carriers as reported in our Form 10-K for the ﬁscal
year ended April 26, 2008. This change resulted in an increase of $11.0 million of sales for our
Upholstery Group in ﬁscal 2009.

Operating Margin

Our Upholstery Group operating margin increased 6.7 percentage points in ﬁscal 2010.

•

•

•

•

•

Efficiencies realized in our domestic upholstery manufacturing facilities resulted in an increase in
our operating margin of 3.3 percentage points. Our conversion to cellular manufacturing and our
various restructurings completed in recent years resulted in more efficient capacity utilization.

Although we incurred rising raw material costs in the fourth quarter of ﬁscal 2010, for the full ﬁscal
year, decreases in raw material costs for our Upholstery Group resulted in a 2.1 percentage point
improvement in our operating margin.

A decrease in our bad debt expense for our Upholstery Group resulted in a 1.8 percentage point
improvement in our operating margin.

In ﬁscal 2009, the Upholstery Group operating income was reduced by $3.3 million due to the one-
time adjustment for inter-company proﬁt resulting from the previously mentioned change in
reporting of the retail warehouse operations. This adjustment did not affect our consolidated
operating results.

In ﬁscal 2009 our Upholstery Group operating proﬁt increased by $1.5 million as a result of the
change in third party freight carrier contracts as noted previously in our sales discussion.

Casegoods Group

(Amounts in thousands, except percentages)

(52 weeks)
4/24/2010

(52 weeks)
4/25/2009

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$146,706
(243)
(0.2)%

$178,000
554
0.3%

Percent
change

(17.6)%
(143.9)%

Sales

The $31.3 million decrease in sales volume occurred across all of our casegoods operating units due to weak
consumer demand. The challenging economic climate had a negative impact on consumers’ discretionary
spending. We believe that consumers are postponing purchases of casegoods product to a greater extent than
upholstered furniture because casegoods product tends to be a higher ticket purchase compared to upholstered
furniture. In spite of reduced demand, we were able to reduce our sales discounts, which resulted in a
1.6 percentage point increase in sales for our Casegoods Group.

Operating Margin

Our Casegoods Group basically broke even on a 17.6% decrease in sales volume. The 0.5 percentage point
decrease in operating margin in ﬁscal 2010 was a result of the overall decrease in sales volume experienced
across all of our casegoods operating units. The decrease in sales volume outpaced our reduction in operating
costs and improvement in gross margin.

23

Retail Group

(Amounts in thousands, except percentages)

(52 weeks)
4/24/2010

(52 weeks)
4/25/2009

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$153,620
(19,825)

$160,838
(34,841)

(12.9)%

(21.7)%

Percent
change

(4.5)%
43.1%

Sales

•

•

The $7.2 million decrease in sales was mostly the result of a 15.2% decrease in sales in the ﬁrst
quarter of ﬁscal 2010 compared to the ﬁrst quarter of ﬁscal 2009. There were only slight decreases
in sales for the second and third quarter of ﬁscal 2010 compared to the second and third quarter of
ﬁscal 2009, with a slight increase in sales in the fourth quarter of ﬁscal 2010 compared to ﬁscal
2009.

The improvement in sales for our Retail Group in the latter part of ﬁscal 2010 was due to increased
traffic and a 10% increase in our average ticket, as well as better product merchandising.

Operating Margin

Our Retail Group operating margin increased 8.8 percentage points in ﬁscal 2010.

•

•

•

•

Our Retail Group experienced a 1.1 percentage point improvement in gross proﬁt margin.

Changes made to our selling structure resulted in a 4.7 percentage point improvement in our Retail
Group’s operating margin.

A decrease in occupancy related expenses for our Retail Group resulted in a 0.9 percentage point
improvement in our Retail Group’s operating margin. This was mainly a result of improved utility
management and a decrease in common area maintenance charges for our leased facilities.

A decrease in advertising expense for our Retail Group resulted in a 0.7 percentage point
improvement in our Retail Group’s operating margin, as we continued to focus on cost effectiveness
of our advertising expenses.

VIEs/Corporate and Other

Our VIEs’ sales increased to $53.2 million in ﬁscal 2010, compared to $50.9 million in ﬁscal 2009.
Additionally, our VIEs’ operating income improved to $0.1 million in ﬁscal 2010, compared to an operating
loss of $5.8 million in ﬁscal 2009 mainly due to operational improvements made at our Toronto, Ontario VIE.

Our Corporate and Other operating loss increased $8.4 million due in part to a $2.7 million decrease in
realized gains on property sales. Additionally, a $6.3 million increase in costs for bonus and stock incentives
as a result of our improved performance and higher stock price, resulted in an increase in our Corporate and
Other operating loss.

Income from Continued Dumping and Subsidy Offset Act

We received $4.4 million and $8.1 million in payments and funds related to the anti-dumping order on
wooden bedroom furniture from China during ﬁscal 2010 and ﬁscal 2009, respectively, for duties collected on
imports entered into the United States before September 30, 2007. The Continued Dumping and Subsidy
Offset Act (‘‘CDSOA’’) provides for distribution of monies collected by U.S. Customs and Border Protection
from anti-dumping cases to domestic producers that supported the anti-dumping petition. In view of the
uncertainties associated with this program, we are unable to predict the amounts, if any, we may receive in the
future under CDSOA.

Interest Expense

Interest expense for ﬁscal 2010 was $2.6 million less than ﬁscal 2009 due to a $56.8 million decrease in our
average debt. Our weighted average interest rate increased 1.5 percentage points in ﬁscal 2010 compared to
ﬁscal 2009 due to fees associated with the unused portion of our credit facility weighting the overall effective

24

interest rate more heavily. Interest expense is expected to be less in ﬁscal 2011 compared to ﬁscal 2010 as we
expect to continue to maintain our relatively low level of debt and interest rates remain at historically low
levels.

Other Income/(Expense)

Other income (expense), net, was income of $0.6 million for ﬁscal 2010, compared to expense of $8.0 million
for ﬁscal 2009. During ﬁscal 2010, we recognized $0.1 million related to gains on the sale of investments,
compared to $5.3 million of losses during ﬁscal 2009. Of the $5.3 million for ﬁscal 2009, $5.1 million was an
impairment charge related to available-for-sale marketable securities used to fund future obligations of one of
our non-qualiﬁed retirement plans. The impairment charge was recorded because those losses were considered
other-than-temporary.

Income Taxes

Our effective tax rate for ﬁscal 2010 was 28.3%. During ﬁscal 2010 we realized a reduction of our tax asset
valuation reserves which lowered our tax rate by 5.3 percentage points. The reduction in our valuation
reserves was due to the utilization of some tax assets which were previously reserved in addition to reversals
of reserves as a result of improved operating performance in certain state tax jurisdictions.

Our effective tax rate for ﬁscal 2009 was (25.8)%. During ﬁscal 2009 we recorded a substantial valuation
reserve against our federal, state, and foreign deferred tax assets, which more than offset the tax beneﬁt of our
losses and reduced our effective tax rate from 35.0% to (12.5)%. Our rate was further reduced to (25.8)% as a
result of a non-deductible goodwill impairment charge and other adjustments.

Results of Operations
Fiscal Year 2009 Compared to Fiscal Year 2008

La-Z-Boy Incorporated

(Amounts in thousands, except percentages)

(52 weeks)
4/25/2009

(52 weeks)
4/26/2008

Consolidated sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated operating loss . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated operating margin . . . . . . . . . . . . . . . . . . . . . . . .

$1,226,674
(94,357)

$1,450,941
(17,118)

(7.7)%

(1.2)%

Percent
change

(15.5)%
(451.2)%

Consolidated sales decreased $224.3 million due in large part to the challenging economic conditions
including the weak retail environment, record low consumer conﬁdence, an uncertain housing market and a
deteriorating credit environment. Our consolidated operating margin decreased 6.5 percentage points in ﬁscal
2009.

•

Our ﬁscal 2009 operating margin included 3.9 percentage points for the write-down of goodwill and
trade names, 1.0 percentage points of restructuring charges and 0.6 percentage points for the write-
down of long-lived assets. Our ﬁscal 2008 operating margin included 0.6 percentage points of
restructuring charges and 0.6 percentage points for the write-down of goodwill and trade names.
With the signiﬁcant decline in sales volume in ﬁscal 2009 compared to ﬁscal 2008, coupled with the
write-down of goodwill, trade names and long-lived assets, we were unable to reduce our ﬁxed
selling, general and administrative expenses to maintain our operating margin.

Upholstery Group

(Amounts in thousands, except percentages)

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(52 weeks)
4/25/2009

$899,204
35,947

(52 weeks)
4/26/2008

$1,084,418
70,661

4.0%

6.5%

Percent
change

(17.1)%
(49.1)%

25

Sales

Our Upholstery Group sales decrease was primarily a result of the challenging economic conditions.

•

•

•

Sales price increases, net of changes in our discounting resulted in a 2.8% increase in sales.

In ﬁscal 2009 the reporting of the retail warehouse operations was changed from the Retail Group to
the Upholstery Group. Since the warehouse operations were expanded to incorporate the
warehousing, staging and delivery of independent La-Z-Boy Furniture Galleries(cid:5) dealers’ products
as well as for our Retail Group, the reporting of those warehouses was more appropriately included
in our La-Z-Boy wholesale operating unit which is a part of our Upholstery Group. As a result of
this change, sales and operating proﬁt that were previously recorded within our Upholstery Group
for product sold to our Retail Group and still in inventory were reversed. A one-time adjustment was
recorded in ﬁscal 2009 that reduced inter-company sales for the Upholstery Group by $12.1 million
during that period, with a corresponding offset recorded in our eliminations line. This adjustment did
not affect our consolidated sales.

The decline in sales volume was partially offset by an increase in sales resulting from a change in
contractual relationships with our third party carriers as reported in our Form 10-K for the ﬁscal
year ended April 26, 2008. This change resulted in an increase of $11.0 million of sales for the
Upholstery Group in ﬁscal 2009.

Operating Margin

Our Upholstery Group operating margin decreased 2.5 percentage points in ﬁscal 2009. With a $185.2
million decrease in sales volume and a $14.8 million increase in bad debt expense, we were unable to
maintain our operating margin. The increase in bad debt expense was a result of the sudden deterioration in
economic conditions during ﬁscal 2009 that affected the liquidity of some of our customers and their ability to
pay outstanding past due balances, which resulted in our decision to record additional bad debt expense.

•

•

•

•

Increased costs associated with steel, polyurethane foam, plywood, fabric and leather negatively
impacted our Upholstery Group operating margin.

In ﬁscal 2009, the Upholstery Group operating income was reduced by $3.3 million due to the one-
time adjustment for inter-company proﬁt resulting from the previously mentioned change in
reporting of the retail warehouse operations. This adjustment did not affect our consolidated
operating results.

In ﬁscal 2009 our Upholstery Group operating proﬁt increased by $1.5 million as a result of the
change in third party freight carrier contracts as noted previously in our sales discussion.

Selling price increases resulted in a 3.4 percentage point improvement in our Upholstery Group
operating margin, however the signiﬁcant decrease in volume more than offset the beneﬁt received
from increasing our sales prices.

Casegoods Group

(Amounts in thousands, except percentages)

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(52 weeks)
4/25/2009

$178,000
554
0.3%

(52 weeks)
4/26/2008

$213,896
10,151

4.7%

Percent
change

(16.8)%
(94.5)%

Sales

The $35.9 million decrease in sales volume occurred across all of our casegoods operating units due to weak
consumer demand and the challenging economic conditions.

Operating Margin

Our Casegoods Group operating margin decreased 4.4 percentage points in ﬁscal 2009. With a 16.8% decrease
in sales volume, we were unable to reduce our costs enough to maintain our operating margin.

26

Retail Group

(Amounts in thousands, except percentages)

(52 weeks)
4/25/2009

(52 weeks)
4/26/2008

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$160,838
(34,841)

$190,180
(40,265)

(21.7)%

(21.2)%

Percent
change

(15.4)%
13.5%

Sales

The $29.3 million decrease in sales was related to the challenging economic conditions, which had an
extremely negative effect on the home furnishings market.

Operating Margin

Our Retail Group operating margin decreased 0.5 percentage points in ﬁscal 2009. The decrease primarily
resulted from the ﬁxed occupancy costs of our retail operations coupled with the decline in sales, partially
offset by selling price increases, reduced advertising expense and reduced warehousing costs.

VIEs/Corporate and Other

Our VIEs’ sales decreased $1.1 million in ﬁscal 2009, compared to ﬁscal 2008. Additionally, our VIEs’
operating loss increased to $5.8 million in ﬁscal 2009, compared to $3.8 million in ﬁscal 2008.

Our Corporate and Other operating loss decreased $14.7 million due in part to a $3.1 million increase in
realized gains on property sales. Additionally, during the ﬁrst six months of ﬁscal 2008, we continued a retail
test market program which increased our ﬁscal 2008 expenses by $2.4 million. This program was not repeated
in ﬁscal 2009. The remaining decrease was a result of our overall reduction in selling, general and
administrative expenses, in particular professional fees, which decreased $3.0 million during ﬁscal 2009
compared to ﬁscal 2008.

Income from Continued Dumping and Subsidy Offset Act

We received $8.1 million and $7.1 million in payments and funds related to the anti-dumping order on
wooden bedroom furniture from China, during ﬁscal 2009 and ﬁscal 2008, respectively, for duties collected on
imports entered into the United States before September 30, 2007. The Continued Dumping and Subsidy
Offset Act (‘‘CDSOA’’) provides for distribution of monies collected by U.S. Customs and Border Protection
from anti-dumping cases to domestic producers that supported the anti-dumping petition.

Interest Expense

Interest expense decreased $8.3 million for ﬁscal 2009 compared to ﬁscal 2008. Interest expense for ﬁscal
2008 included a $6.0 million make-whole premium paid to our private placement note-holders when we
settled the notes with the proceeds from our credit facility obtained in the fourth quarter of ﬁscal 2008.
Additionally, interest expense decreased in ﬁscal 2009 due to a $37.4 million decrease in our average debt and
a 0.7 percentage point decrease in our weighted average interest rate.

Other Income/(Expense)

Other income (expense), net, was $8.0 million of expense during ﬁscal 2009, compared to $5.4 million of
income during ﬁscal 2008. The majority of the decrease was due to a recognized loss of $5.3 million in ﬁscal
2009 compared to a gain on sale of investments in ﬁscal 2008 of $3.8 million. Of the $5.3 million loss,
$5.1 million was the result of an impairment we recognized in the third quarter of ﬁscal 2009. In ﬁscal 2009
we recognized a loss on our investments due to the losses being considered other-than-temporary. We sold
several investments in ﬁscal 2008 generating gains of $3.8 million in order to utilize capital loss carry-
forwards.

27

Income Taxes

Our effective tax rate was (25.8)% in ﬁscal 2009 compared to 48.5% in ﬁscal 2008. During ﬁscal 2009 we
recorded a substantial valuation reserve against the majority of our federal, state, and foreign deferred tax
assets, which reduced our effective tax rate by 47.5 percentage points. In addition during ﬁscal 2009, the
effective tax rate was reduced by 10.6 percentage points by the impairment of goodwill recorded during the
year. During ﬁscal 2008 we realized a beneﬁt from the prior years’ losses of our European joint venture. In
addition, the effective tax rate was signiﬁcantly affected by the foreign tax rate differential primarily related to
the dividend from our operating unit in the United Kingdom. The rate for ﬁscal 2008 also was unfavorably
impacted due to the decrease in the cash surrender value of company owned life insurance policies, which
resulted in an expense under accounting rules but no deductions for income tax purposes.

Discontinued Operations

We had no discontinued operations during ﬁscal 2009. During ﬁscal 2008, our discontinued operations
recognized a loss of $6.0 million after-tax. During the second quarter of ﬁscal 2008, we completed the sale
of our Clayton Marcus operating unit and the sale of our Pennsylvania House trade name. The stock of
Clayton Marcus was sold to Rowe Fine Furniture, Incorporated, resulting in a loss of about $5.8 million or
$3.6 million after-tax. Of this loss, about $3.4 million pre-tax related to the intangible assets of Clayton
Marcus. The Pennsylvania House trade name was sold to Universal Furniture for $1.7 million, resulting in a
pre-tax charge of about $0.6 million ($0.4 million net of taxes). We also recorded an additional loss of
$3.0 million to adjust the inventory to fair value due to the liquidation of the remaining inventory at
discounted prices.

Restructuring

In ﬁscal 2009, we committed to a restructuring plan to consolidate our casegoods manufacturing plants in
North Carolina related to our Kincaid and American Drew/Lea operations and convert one of the facilities into
a distribution center. The consolidation of these plants was completed in the ﬁrst quarter of ﬁscal 2010 and
the conversion of the distribution center was completed in the fourth quarter of ﬁscal 2010. In connection with
this plan, we recorded pre-tax restructuring charges of $2.8 million and $0.2 million in ﬁscal 2010 and ﬁscal
2009, respectively, classiﬁed in total cost of sales, covering severance and beneﬁts and other restructuring
costs.

During ﬁscal 2008, we committed to a restructuring plan to consolidate all of our North American cutting and
sewing operations in Mexico and transfer production from our Tremonton, Utah, plant, to our ﬁve remaining
La-Z-Boy branded upholstery manufacturing facilities. Our Utah facility ceased operations during the ﬁrst
quarter of ﬁscal 2009 and production was shifted to our remaining manufacturing facilities. As of the end of
ﬁscal 2010 we had about 1,260 employees at our Mexican facility, with almost 90% of our fabric cutting and
sewing operations coming from our Mexican facility, compared to 8% at the end of ﬁscal 2009. During ﬁscal
2010, we had a net reduction of estimated restructuring liabilities of $0.7 million classiﬁed in total cost of
sales. The reduction of estimated restructuring liabilities related to a decrease in our estimated healthcare costs
for this plan. During ﬁscal 2009, we had restructuring charges of $7.7 million classiﬁed in total cost of sales,
covering severance and beneﬁts ($3.1 million) and other restructuring costs ($4.6 million). During ﬁscal 2008,
we had restructuring charges of $2.6 million classiﬁed in total cost of sales, covering severance and beneﬁts
for this plan. Other restructuring costs include transportation, freight surcharges and other transition costs as
we moved production to other plants.

During ﬁscal 2007 and ﬁscal 2008, several of our retail warehouses were consolidated into larger facilities and
several underperforming stores were closed. In ﬁscal 2010, ﬁscal 2009, and ﬁscal 2008 we had restructuring
charges of $1.3 million, $1.6 million, and $3.0 million, respectively, classiﬁed as an operating expense line
item below selling, general and administrative (SG&A), due to contract terminations relating to these actions.

In ﬁscal 2009, we committed to a restructuring plan to close our plant in Sherman, Mississippi, related to our
Bauhaus operations. The closure of this plant was completed in the fourth quarter of ﬁscal 2009. In
connection with this plan, we recorded pre-tax restructuring charges of $0.6 million in ﬁscal 2009 classiﬁed
in total cost of sales covering severance and beneﬁts ($0.2 million) and the write-down of ﬁxed assets
($0.4 million).

28

In ﬁscal 2009, we announced a plan to reduce our company-wide employment to be more in line with sales
volume. In connection with this plan, we recorded pre-tax restructuring charges of $1.0 million in ﬁscal 2009
classiﬁed as an operating expense line item below SG&A, covering severance and beneﬁts.

In ﬁscal 2009, we committed to a restructuring plan to close the operations of our La-Z-Boy U.K. subsidiary
due to a change in our strategic direction for this operation. The closure of this operation occurred in the
second quarter of ﬁscal 2009. In connection with this plan, we recorded pre-tax restructuring charges of
$1.9 million in ﬁscal 2009, covering the write-down of inventory ($1.2 million) classiﬁed in total cost of
sales, the write-down of ﬁxed assets and other restructuring charges ($0.7 million) classiﬁed as an operating
expense line item below SG&A.

In ﬁscal 2007, we committed to a restructuring plan which included the closures of two upholstery
manufacturing facilities, the closure of a rough mill lumber operation, the consolidation of operations at
another upholstery facility and the elimination of a number of positions throughout the remainder of the
organization. This plan occurred in the fourth quarter of ﬁscal 2007 and the ﬁrst quarter of ﬁscal 2008. During
ﬁscal 2009, we had restructuring reversals of $0.5 million, classiﬁed as an operating expense line item below
SG&A, relating to these activities due to lower beneﬁt costs than originally estimated. During ﬁscal 2008, we
had restructuring charges of $2.5 million, classiﬁed in total cost of sales covering severance and beneﬁts.

Long-lived Asset Write-down

During the third quarter of ﬁscal 2009, we evaluated the recoverability of our long-lived assets of our key
asset groups. Based on the results of the review it was determined that the expected future undiscounted cash
ﬂows of the assets of our Upholstery Group and Casegoods Group substantially exceeded their carrying value
in ﬁscal 2009 and therefore no impairment existed. Because of the historical operating losses of our Retail
Group and the decline in real estate values in ﬁscal 2009, we recorded impairments on some of the assets of
our Retail Group. As of the end of the third quarter of ﬁscal 2009, we had $39.9 million in long-lived assets
for our Retail Group. Of this $39.9 million, fair value exceeded carrying value for $20.4 million of these
assets. For the remaining $19.5 million, we recorded an impairment charge of $7.0 million during the
third quarter of ﬁscal 2009.

For the seven retail facilities that we owned, which accounted for $17.9 million in value as of the end of
ﬁscal 2009, third party appraisals were utilized to determine the fair value of the stores. For the remaining
retail facilities we utilized a discounted cash ﬂow model over the remaining life of the lease, as well as
comparable market data, to determine fair value. Our cash ﬂow model assumed an economic recovery in our
ﬁscal 2011 and used a 16% discount rate based on the market participant’s view of our industry’s weighted
average cost of capital. The impairment charge recorded in ﬁscal 2009 was based on current market conditions
and the current fair value of those assets. Changes in economic conditions could result in a need to evaluate
whether the fair value of the long-lived assets of our retail stores has deteriorated further which could result in
additional impairment charges. The net book value of our retail ﬁxed assets was $28.5 million as of April 24,
2010.

In addition, during ﬁscal 2009 we recorded a non-cash impairment charge of $0.5 million relating to two of
our retail properties that were held for sale. One of those properties was subsequently leased during ﬁscal
2010 and the other property was still held for sale at April 24, 2010.

Write-down of Intangibles

During the third quarter of ﬁscal 2009, we evaluated the goodwill of our Upholstery and Retail Groups and
the trade names of our Casegoods Group. Due to the steep decline in our stock price and its negative impact
on our market capitalization at that time, we recognized a $40.4 million non-cash impairment charge relating
to the goodwill in our Retail and Upholstery Groups and a $5.5 million non-cash impairment charge relating
to the trade names in our Casegoods Group during the third quarter of ﬁscal 2009.

During the second quarter of ﬁscal 2009, we reorganized the Toronto, Ontario, retail market which we
consolidated as a VIE. As a result of this plan we recorded a non-cash impairment charge of $0.4 million
which represented the entire goodwill balance of this market.

29

In ﬁscal 2009, we closed the operations of our La-Z-Boy U.K. subsidiary due to a change in our strategic
direction for this operation. As a result of this plan, during the ﬁrst quarter of ﬁscal 2009, we recorded a non-
cash impairment charge of $1.3 million which represented the entire goodwill amount of the operating unit.

During the second quarter of ﬁscal 2008, we evaluated the goodwill of our South Florida retail market as a
result of the decision to delay our planned store openings in this market. This delay was the result of a slow
housing market causing a double-digit decline in sales in the market over the previous twelve months. We
recognized a $5.8 million non-cash impairment charge for the full amount of the goodwill of this retail market
in the second quarter of ﬁscal 2008.

We performed our ﬁscal 2010 annual fourth quarter testing of our remaining trade names and found no
additional impairments. As of the end of ﬁscal 2009 we had no goodwill remaining.

Business Outlook

While our results and other public data points indicate the beginning of improved industry conditions, we
remain cautious going into ﬁscal 2011. Sales growth and cost-savings initiatives will need to be balanced
against various macroeconomic factors, including relatively low consumer conﬁdence levels, ongoing high
unemployment and volatility within the housing market, as well as headwinds relating to raw material price
increases versus last year. Against this backdrop, we will continue to manage our business aggressively. We
believe our company is well positioned to compete in this environment and we are focused on improving our
operations across all business segments.

As it relates to the ﬁrst quarter, we are experiencing a signiﬁcant delta in raw material costs when compared
with the year-ago period, and we expect cost savings initiatives, including efficiencies from the Mexico Cut
and Sew Center, to accelerate as we move through the year as volumes increase and projects are completed.
Additionally, as a result of normal seasonality factors, our ﬁrst quarter, which ends in July, is typically the
weakest in terms of sales and proﬁts as the furniture industry, in general, experiences weaker demand
throughout the summer. Accordingly, our plants shut down for one week for vacation, yielding 12 weeks of
shipping versus the normal 13 weeks.

Liquidity and Capital Resources

Our sources of liquidity include cash and equivalents, cash from operations and amounts available under our
credit facility. These sources have been adequate for day-to-day operations and capital expenditures. We had
cash and equivalents of $108.4 million at April 24, 2010, compared to $17.4 million at April 25, 2009. Our
positive earnings in ﬁscal 2010 resulted in the majority of our increase in cash and equivalents during ﬁscal
2010. Also in ﬁscal 2010, the transfer of obligations of our wholly-owned insurance company to our parent
company released the restriction on $17.5 million in cash, which positively impacted our liquidity during
ﬁscal 2010.

Under our revolving credit facility we have certain covenants and restrictions, including a 1.05 to 1.00 ﬁxed
charge coverage ratio requirement which would become effective only if excess availability on the revolving
credit facility fell below $30.0 million. Excess availability is the difference between our eligible accounts
receivable and inventory less the total of our outstanding letters of credit, other reserves as denoted in our
credit agreement and our outstanding borrowings on our revolving credit facility. We do not expect to fall
below the required excess availability threshold in the next twelve months. As of April 24, 2010, we had
$30.0 million outstanding on our credit facility and $90.6 million of excess availability, compared to
$35.0 million outstanding on our credit facility and $65.0 million of excess availability as of April 25, 2009.
As of April 24, 2010, we would have been in compliance with the ﬁxed charge coverage ratio requirement
had it been in effect.

Our borrowing capacity is based on eligible trade accounts receivables and inventory of the company. During
ﬁscal 2010, our accounts receivable increased, while our inventory levels decreased slightly and the amount
outstanding on our credit facility decreased. As it relates to our borrowing capacity, the majority of the
increase in our accounts receivable were classiﬁed as eligible trade accounts receivable. As a result, the
capacity to borrow on our credit facility increased during ﬁscal 2010. Periodically, our lenders have the option
to change the advance rates on inventory and accounts receivable and to adjust reserves, which could have a
negative impact on our availability.

30

Unsettled credit markets have caused some lenders to reduce or cease to provide funding to borrowers.
However, our lenders have not indicated to us that they would not honor their obligations under our credit
facility. Our access to the credit facility could be negatively affected by decreases in our operating results or
decreases in those assets on which our borrowing capacity is based.

Capital expenditures for ﬁscal 2010 were $11.0 million compared with $15.6 million during ﬁscal 2009. As of
April 24, 2010, there are no material purchase commitments for capital expenditures, which are expected to be
in the range of $15.0 million to $18.0 million in ﬁscal 2011. We expect restructuring costs from our plan to
transition our domestic cutting and sewing operations to Mexico and our ongoing costs for our closed retail
facilities to impact cash by $1.3 million during ﬁscal 2011.

We believe our present cash balance of $108.4 million, cash ﬂows from operations and current availability
under our credit facility of $90.6 million will be sufficient to fund our business needs, including our ﬁscal
2011 contractual obligations of $49.9 million.

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

(Amounts in thousands)
Cash Flows Provided By (Used For)
Operating activities
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash add backs and changes in deferred taxes. . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended

4/24/2010

4/25/2009

$ 32,051
33,787
3,434
20,387
89,659

$(122,420)
150,188
12,460
11,460
51,688

Investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,009

(2,008)

Financing activities
Net decrease in debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other ﬁnancing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used for ﬁnancing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12,890)
1,035
(11,855)

(41,345)
(5,177)
(46,522)

Exchange rate changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(756)
$ 91,057

(901)
2,257

$

Operating Activities

During ﬁscal 2010, net cash provided by operating activities was $89.7 million, compared with $51.7 million
in ﬁscal 2009. The main reason for our increase in cash ﬂows from operations was our net income in ﬁscal
2010 versus our net loss in ﬁscal 2009, as well as increased cash ﬂow from working capital. Cash ﬂow from
working capital reﬂects favorable changes in our customer deposits, bonus accruals, inventory and income
taxes. These favorable impacts to our cash provided by working capital were offset by an increase in our
accounts receivable during ﬁscal 2010 due to positive sales trends during ﬁscal 2010, as opposed to the
negative sales trend in ﬁscal 2009.

Investing Activities

During ﬁscal 2010, net cash provided by investing activities was $14.0 million, compared with $2.0 million
cash used for investing activities during ﬁscal 2009. The increase in net cash provided by investing activities
resulted primarily from the $17.5 million decrease in restricted cash during ﬁscal 2010, compared to the
$18.2 million increase in restricted cash during ﬁscal 2009. Additionally, capital expenditures in ﬁscal 2010
were $11.0 million, compared to $15.6 million in ﬁscal 2009. During ﬁscal 2010, $8.8 million in proceeds
were received from the sale of investments, offset by investment purchases of $4.9 million. In comparison,
during ﬁscal 2009 $34.7 million in proceeds were received from the sale of investments, offset by investment
purchases of $11.3 million. Additionally, proceeds from the disposal of assets decreased by $5.7 million in
ﬁscal 2010, compared to ﬁscal 2009.

31

Financing Activities

We used $11.9 million of cash for ﬁnancing activities in ﬁscal 2010 compared to $46.5 million during ﬁscal
2009. Our ﬁnancing activities in ﬁscal 2010 included a net pay down of debt of $12.9 million, compared to a
net pay down of debt of $41.3 million in ﬁscal 2009. In addition to these ﬁnancing activities, ﬁscal 2009 also
included dividend payments of $5.2 million.

Other

The following table summarizes our contractual obligations of the types speciﬁed:

(Amounts in thousands)
Long-term debt obligations. . . . . . . . . . . .
Capital lease obligations . . . . . . . . . . . . .
Operating lease obligations. . . . . . . . . . . .
Interest obligations* . . . . . . . . . . . . . . . .
Pension contribution obligations** . . . . . .
Total contractual obligations . . . . . . . . .

Total
$ 47,247
736
337,585
5,899
2,500
$393,967

Payments by Period

Less than
1 Year

$

698
368
43,676
2,660
2,500
$49,902

1 − 3
Years
$ 37,503
368
75,637
3,068
—
$116,576

4 − 5
Years
$ 7,954
—
64,042
150
—
$72,146

More than
5 Years

$

1,092
—
154,230
21
—
$155,343

*

For our variable interest rate obligations, the interest rate projected for future periods is the average rate
for the current ﬁscal quarter projected over such future ﬁscal periods. For our ﬁxed rate obligations, it is
the ﬁxed rate over the term of such obligation. We have assumed that the debt outstanding at the end of
our current ﬁscal period will be outstanding over the entire term of the various agreements, however this
amount could signiﬁcantly increase or decrease based on the amount of debt we borrow or pay in future
periods.

** For our pension contribution obligations, we are not statutorily required to make a contribution until our

ﬁscal 2012. However in order to receive tax beneﬁts, we expect to make this contribution during ﬁscal
2011 and therefore have included it in our ‘‘Less than 1 Year’’ category. Funding projections beyond that
are not practical to estimate.

The balance sheet at the end of ﬁscal 2010 reﬂected a $2.5 million liability for uncertain income tax positions.
We expect that a portion of this liability will be settled within the next twelve months. The amount to be
resolved within the next twelve months is composed of gross unrecognized tax beneﬁts of $0.5 million and
interest of $0.1 million, net of deferred tax beneﬁts of $0.2 million and penalties of $0.2 million. The
remaining balance, to the extent it is ever paid, will be paid as tax audits are completed or settled. These were
not included in our obligations table above because the timing of when they will be settled is difficult to
estimate.

Realization of these deferred tax assets is dependent on generating sufficient future taxable income. Valuation
allowances of $46.5 million associated with certain U.S. federal and state deferred tax assets could be reduced
in the latter part of ﬁscal 2011 based on the level of taxable income generated in ﬁscal 2011.

Our debt-to-capitalization ratio was 12.2% at April 24, 2010, and 16.6% at April 25, 2009. Capitalization is
deﬁned as total debt plus total equity.

Our Board of Directors has authorized the repurchase of company stock. As of April 24, 2010, 5.4 million
additional shares could be purchased pursuant to this authorization. We did not purchase any shares during
ﬁscal 2010.

We have guaranteed various leases and notes of dealers with proprietary stores. The total amount of these
guarantees was $2.1 million at April 24, 2010. Of this, $1.8 million will expire within one year and
$0.3 million in one to three years. At the end of ﬁscal 2010, we had $33.3 million in open purchase orders
with foreign casegoods, leather and fabric sources. Our open purchase orders that have not begun production
are cancelable.

32

During ﬁscal 2010 we were not required and we did not make any contributions to our deﬁned beneﬁt plan.
However, in order to receive tax beneﬁts we expect to make a $2.5 million contribution to our deﬁned beneﬁt
plan during ﬁscal 2011, although this contribution is not required until ﬁscal 2012.

Continuing compliance with existing federal, state and local statutes dealing with protection of the
environment is not expected to have a material effect upon our capital expenditures, earnings, competitive
position or liquidity.

Critical Accounting Policies

An appreciation of our critical accounting policies is necessary to understand our ﬁnancial results. These
policies may require management to make difficult and subjective judgments regarding uncertainties and, as a
result, such estimates may signiﬁcantly impact our ﬁnancial results. These policies were identiﬁed as critical
because they are broadly applicable within our operating units. The expenses and accrued liabilities or
allowances related to certain of these policies are initially based on our best estimates at the time of original
entry in our accounting records. Adjustments are recorded when our actual experience differs from the
assumptions underlying the estimates. These adjustments could be material if our experience were to change
signiﬁcantly in a short period of time. We make frequent comparisons of actual experience to our assumptions
in order to mitigate the likelihood of material adjustments.

Revenue Recognition and Related Allowances

During the ﬁrst quarter of ﬁscal 2009, our largest division revised certain shipping agreements with third-party
carriers such that risk of loss transfers to our customers upon shipment rather than upon delivery. For the
remainder of the company, shipping terms using third-party carriers are FOB shipping point. Accordingly,
substantially all of our shipments with third-party carriers are recognized as revenue upon shipment of the
product. In all cases, for product shipped on our company-owned trucks, revenue is recognized upon delivery.
This revenue includes amounts billed to customers for shipping. Provisions are made at the time revenue is
recognized for estimated product returns and warranties, as well as other incentives that may be offered to
customers. We import certain products from foreign ports, which are shipped directly to our domestic
customers. In this case, revenue is not recognized until title is assumed by our customer, which is normally
after the goods pass through U.S. Customs.

Incentives offered to customers include cash discounts, advertising agreements and other sales incentive
programs. Cash discounts and other sales incentives are recorded as a reduction of revenues when the revenue
is recognized. Our advertising agreements give customers advertising allowances based on revenues and are
recorded when the revenue is recognized as a reduction to revenue.

On a quarterly basis, our management team reviews all signiﬁcant accounts as to their past due balances, as
well as collectability of the outstanding trade accounts receivable for possible write off. It is our policy to
write off the accounts receivable against the allowance account when we deem the receivable to be
uncollectible. Additionally, for those dealers that are signiﬁcantly past due, we review their sales orders and
ship product when collectability of the incremental sale is reasonably assured.

The allowance for doubtful accounts reﬂects our best estimate of probable losses inherent in the accounts and
notes receivable balances. We determine the allowance based on known troubled accounts, historical
experience and other currently available evidence.

Investments

We evaluate our investments periodically for possible other-than-temporary impairments by reviewing factors
such as the length of time and extent to which fair value has been below cost basis, the ﬁnancial condition of
the issuer and our ability and intent to hold the investment for a period of time which may be sufficient for
anticipated recovery of market value. If the impairment is determined to be other-than-temporary, the amount
of the impairment is recognized as part of earnings. If the impairment is determined to be temporary, then the
resulting change in market value is recorded as part of other comprehensive income in our statement of
shareholders’ equity.

33

Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset or asset group may not be recoverable. Our assessment of recoverability is based
on our best estimates using quoted market prices, as well as analysis of the undiscounted projected future cash
ﬂows by asset groups in order to determine if the fair value of our long-lived assets exceed their carrying
value. Our asset groups consist of our operating units in our Upholstery and Casegoods Group (La-Z-Boy,
England, Bauhaus, American Drew and Lea, Hammary, Kincaid) and each of our retail stores.

Trade Names

Trade names are tested at least annually for impairment by comparing their fair value to their carrying values.
The fair value for each trade name is estimated based upon management’s estimates using a royalty savings
approach, which is based on the principle that, if the business did not own the asset, it would have to license
it in order to earn the returns that it was earning. The fair value is calculated based on the present value of the
royalty stream that the business was saving by owning the asset.

In the fourth quarter of ﬁscal 2010, we performed our annual testing on our trade names and found no
impairments.

Other Loss Reserves

We have various other loss exposures arising from the ordinary course of business, including inventory
obsolescence, health insurance, litigation, environmental claims, and product liability. Establishing loss
reserves requires estimates and the judgment of management with respect to risk and ultimate liability. We use
legal counsel or other experts, including actuaries as appropriate, to assist in developing estimates. Due to the
uncertainties and potential changes in facts and circumstances, additional charges related to these reserves
could be required in the future.

We have various excess loss coverages for auto, product liability and workers’ compensation. Our deductibles
generally do not exceed $1.0 million.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the ﬁnancial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax
credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or settled. In periods when deferred
tax assets are recorded, we are required to estimate whether recoverability is more likely than not, based on
forecasts of taxable earnings in the related tax jurisdiction. We consider historical and projected future
operating results, the eligible carry-forward period, tax law changes, tax planning opportunities and other
relevant considerations when making judgments about realizing the value of our deferred tax assets.

Pensions

We maintain a deﬁned beneﬁt pension plan for eligible factory hourly employees at one operating unit. This
plan has been frozen for new participants since January 1, 2001, but active participants still earn service cost.
Annual net periodic expense and beneﬁt liabilities under our deﬁned beneﬁt plans are determined on an
actuarial basis using various assumptions and estimates including discount rates, long-term rates of return,
estimated remaining years of service and estimated life expectancy. Each year, we compare the actual
experience to the more signiﬁcant assumptions used; if warranted, we make adjustments to the assumptions.

Our pension plan discount rate assumption is evaluated annually. The discount rate is based upon a single rate
developed after matching a pool of high quality bond payments to the plan’s expected future beneﬁt payments.
We utilized a discount rate of 5.85% at April 24, 2010, compared with a rate of 7.15% at April 25, 2009, and
6.60% at April 26, 2008. The same methodology was utilized for ﬁscal 2010, ﬁscal 2009 and ﬁscal 2008.

Pension beneﬁts are funded through deposits with trustees and satisfy, at a minimum, the applicable funding
regulations. The expected long-term rates of return on fund assets are based upon actual historical returns
modiﬁed for known changes in the markets and any expected changes in investment policy.

34

Besides evaluating the discount rate used to determine our pension obligation, we also evaluate our
assumption relating to the expected return on plan assets annually. In selecting the expected long-term rate of
return on assets, we considered the average rate of earnings expected on the funds invested or to be invested
to provide the beneﬁts of these plans. This included considering the trust’s asset allocation, investment
strategy, and the expected returns likely to be earned over the life of the plans. The rate of return assumption
as of April 24, 2010, and April 25, 2009, was 8.0%. The expected rate of return assumption as of April 24,
2010, will be used to determine pension expense for ﬁscal 2011.

Our long-term stated investment objective is to maximize the investment return with the least amount of risk
through a combination of capital appreciation and income. The strategic asset allocation targets are 65%
equities and 35% ﬁxed income within a range of 5% of the target.

Our non-qualiﬁed retirement plan was not required to be funded at April 24, 2010; however, we hold
investments in a Rabbi trust that support the liability of the plan. We are not required to make any
contributions to the qualiﬁed deﬁned beneﬁt plan in ﬁscal 2011.

We expect that the ﬁscal 2011 pension expense for the deﬁned beneﬁt pension plan, after considering all
relevant assumptions will be $2.5 million compared with $3.9 million in ﬁscal 2010. We do not believe that a
25 basis point change in our discount rate or our expected return on plan assets would have a material impact
on our ﬁnancial statements.

Financial Guarantees and Product Warranties

We have provided secured and unsecured ﬁnancial guarantees relating to leases and notes in connection with
certain La-Z-Boy Furniture Galleries(cid:5) stores which are not operated by the company. The guarantees are
generally for real estate leases and have remaining terms from one to three years. These guarantees enhance
the credit of these dealers. The dealer is required to make periodic fee payments to compensate us for our
guarantees. We would be required to perform under these agreements only if the dealer were to default on the
lease or note.

We have, from time to time, entered into agreements which resulted in indemnifying third parties against
certain liabilities, mainly environmental obligations. We believe that judgments, if any, against us related to
such agreements would not have a material effect on our business or ﬁnancial condition.

Our accounting policy for product warranties is to accrue an estimated liability at the time the revenue is
recognized. We estimate future warranty claims based on claim experience and any additional anticipated
future costs on previously sold product. Our liability incorporates the cost of repairs including materials
consumed, labor and overhead amounts necessary to perform the repair and any costs associated with delivery
of the repaired product to the customer. Considerable judgment is used in the determination of our estimate. If
actual costs were to differ signiﬁcantly from our estimates, we would record the impact of these unforeseen
costs in subsequent periods.

Variable Interest Entities

Financial accounting standards require the ‘‘primary beneﬁciary’’ of a VIE to include the VIE’s assets,
liabilities and operating results in its consolidated ﬁnancial statements. In general, a VIE is a corporation,
partnership, limited-liability company, trust or any other legal structure used to conduct activities or hold
assets that either (a) has an insufficient amount of equity to carry out its principal activities without additional
subordinated ﬁnancial support, (b) has a group of equity owners that are unable to make signiﬁcant decisions
about its activities, or (c) has a group of equity owners that do not have the obligation to absorb losses or the
right to receive returns generated by its operations.

La-Z-Boy Furniture Galleries(cid:5) stores that are not operated by us are operated by independent dealers. These
stores sell La-Z-Boy manufactured products as well as various accessories purchased from approved La-Z-Boy
vendors. Most of these independent dealers have sufficient equity to carry out their principal operating
activities without subordinated ﬁnancial support. However, there are certain independent dealers that we have
determined may not have sufficient equity. In some cases we have extended credit beyond normal trade terms
to the independent dealers, made direct loans, entered into leases and/or guaranteed certain leases.

35

We evaluate our transactions and relationships with our La-Z-Boy Furniture Galleries(cid:5) dealers on a quarterly
basis to determine if any of our independent dealers qualify as a variable interest entity and additionally
whether we are the primary beneﬁciary for any of the dealers who do qualify as a variable interest entity. We
also evaluate our current VIEs on a quarterly basis to determine if they no longer qualify as a variable interest
entity.

Based on the criteria for consolidation of VIEs, we have consolidated several dealers where we were the
primary beneﬁciary based on the fair value of our variable interests. All of our consolidated VIEs were
recorded at fair value on the date we became the primary beneﬁciary. In ﬁscal 2010, all earnings and losses
attributed to these VIEs were recorded as Net income (loss) attributable to noncontrolling interests. Prior to
ﬁscal 2010, all losses of the VIEs in excess of their equity were recorded as Net income (loss) and all
earnings of these VIEs to the extent of recouping the losses were recorded as Net income (loss). Earnings in
excess of losses were attributed to equity owners and were recorded as minority interest.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the value of the award and is
recognized as expense over the vesting period. Determining the fair value of stock-based awards at the grant
date requires judgment, including estimating expected dividends, future stock-price volatility, expected option
lives and the amount of share-based awards that are expected to be forfeited. We do not expect that changes
in these assumptions would have a material impact on our results of operations.

The fair value of each option grant was estimated using a Black-Scholes option-pricing model. Expected
volatility was estimated based on the historical volatility of our common shares. The average expected life
was based on the contractual term of the stock option and expected employee exercise and post-vesting
employment termination trends. The risk-free rate was based on U.S. Treasury issues with a term equal to the
expected life assumed at the date of grant. Forfeitures were estimated at the date of grant based on historical
experience.

Regulatory Developments

Continued Dumping and Subsidy Offset Act of 2000

The Continued Dumping and Subsidy Offset Act of 2000 (‘‘CDSOA’’) provides for distribution of monies
collected by U.S. Customs and Border Protection (‘‘CBP’’) from anti-dumping cases to domestic producers
that supported the anti-dumping petition. The Dispute Settlement Body of the World Trade Organization
(‘‘WTO’’) ruled that such payments violate the United States’ WTO obligations. In response to that ruling, on
February 8, 2006, the President signed legislation passed by Congress that repeals CDSOA distributions to
eligible domestic producers for duties collected on imports entered into the United States after September 30,
2007. The government set aside CDSOA funds in connection with two court cases involving challenges to the
CDSOA on constitutional grounds, from which appellate proceedings are continuing. In 2009, the U.S. Court
of Appeals for the Federal Circuit (‘‘Federal Circuit’’) issued a decision in one of those cases holding that the
CDSOA does not violate the Constitution’s free speech and equal protection guarantees. On October 15, 2009,
the Federal Circuit denied en banc review of its decision and, on December 28, 2009, a petition for writ of
certiorari was ﬁled with the U.S. Supreme Court. On May 17, 2010, the Supreme Court denied review of the
Federal Circuit’s decision. There have been numerous cases before the U.S. Court of International Trade and
the Federal Circuit that have been stayed in light of the litigation discussed above. The resolution of these
cases will have a signiﬁcant impact on the amount of additional CDSOA funds we receive.

In view of the uncertainties associated with this program, we are unable to predict the amounts, if any, we
may receive in the future under CDSOA. However, assuming CDSOA distributions continue, these
distributions could be material depending on the results of legal appeals and administrative reviews and our
actual percentage allocation.

36

Climate Change Legislation

Except for the potential effects of severe weather, which we discuss in Item 1A in regard to foreign sourcing
and the availability of raw materials, we do not believe that future climate change or existing or pending laws,
regulations, international accords, or business trends relating to climate change are reasonably likely to have a
material effect on our business or ﬁnancial condition. We currently utilize trucking to transport goods to our
distribution centers and in some instances to our customers. In most cases, our customers utilize trucking to
obtain goods from us. New laws or regulations resulting in steep increases in the cost of fuel, or new
technologies resulting in steep decreases in such costs, would affect our costs and the cost to our customers
purchasing from us. If our costs increased, we might not always be able to pass along such increases to our
customers due to competitive and marketing pressures, but we would expect our competitors to be similarly
affected.

Recent Accounting Pronouncements

Refer to Note 1 of the consolidated ﬁnancial statements in Item 8 for detailed information regarding
accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risk from changes in interest rates. Our exposure to interest rate risk results from
our variable rate debt under which we had $23.4 million of borrowings at April 24, 2010. In May 2008, we
entered into an interest rate swap agreement to mitigate the impact of changes in interest rates on $20.0
million of our ﬂoating rate debt. Management estimates that a one percentage point change in interest rates
would not have a material impact on our results of operations for ﬁscal 2011 based upon the current levels of
exposed liabilities.

We are exposed to market risk from changes in the value of foreign currencies. Substantially all of our
purchases outside of North America are denominated in U.S. dollars. Our exposure to changes in the value of
foreign currencies results from the assets of our Mexico subsidiary, which totaled $5.7 million at April 24,
2010. Management estimates that a 10% change in the value of the peso would not have a material impact on
our results of operations for ﬁscal 2011 based upon the current asset levels.

37

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Management’s Report to our Shareholders

Management’s Responsibility for Financial Information

Management of La-Z-Boy Incorporated is responsible for the preparation, integrity and objectivity of
La-Z-Boy Incorporated’s consolidated ﬁnancial statements and other ﬁnancial information contained in this
Annual Report on Form 10-K. Those consolidated ﬁnancial statements were prepared in conformity with
accounting principles generally accepted in the United States of America. In preparing those consolidated
ﬁnancial statements, Management was required to make certain estimates and judgments, which are based
upon currently available information and Management’s view of current conditions and circumstances.

The Audit Committee of the Board of Directors, which consists solely of independent directors, oversees our
process of reporting ﬁnancial information and the audit of our consolidated ﬁnancial statements. The Audit
Committee is informed of the ﬁnancial condition of La-Z-Boy Incorporated and regularly reviews
Management’s critical accounting policies, the independence of our independent auditors, our internal controls
and the objectivity of our ﬁnancial reporting. Both the independent auditors and the internal auditors have free
access to the Audit Committee and meet with the Audit Committee periodically, both with and without
Management present.

On September 11, 2009, La-Z-Boy Incorporated’s Chief Executive Officer submitted his annual certiﬁcation to
the New York Stock Exchange stating that he was not aware of any violation by the corporation of the
Exchange’s corporate governance listing standards. La-Z-Boy ﬁled the certiﬁcations by its Chief Executive
Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to
its Annual Report on Form 10-K for the ﬁscal year ended April 24, 2010.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over ﬁnancial
reporting, as such term is deﬁned in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal controls over ﬁnancial reporting based upon the
framework in ‘‘Internal Control — Integrated Framework’’ issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our
internal control over ﬁnancial reporting was effective as of April 24, 2010. The effectiveness of the
Company’s internal control over ﬁnancial reporting as of April 24, 2010, has been audited by
PricewaterhouseCoopers, LLP, an independent registered public accounting ﬁrm, as stated in their report
which appears herein.

Kurt L. Darrow
President and Chief Executive Officer

Louis M. Riccio, Jr.
Senior VP and Chief Financial Officer

38

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of La-Z-Boy Incorporated:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
operations, changes in equity and cash ﬂows present fairly, in all material respects, the ﬁnancial position of
La-Z-Boy Incorporated and its subsidiaries at April 24, 2010 and April 25, 2009, and the results of their
operations and their cash ﬂows for each of the three years in the period ended April 24, 2010 in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion, the
Company maintained, in all material respects, effective internal control over ﬁnancial reporting as of April 24,
2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible
for these ﬁnancial statements, for maintaining effective internal control over ﬁnancial reporting and for its
assessment of the effectiveness of internal control over ﬁnancial reporting, included in Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express opinions on these ﬁnancial
statements and on the Company’s internal control over ﬁnancial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the ﬁnancial statements are free of material misstatement and whether effective internal control
over ﬁnancial reporting was maintained in all material respects. Our audits of the ﬁnancial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements,
assessing the accounting principles used and signiﬁcant estimates made by management, and evaluating the
overall ﬁnancial statement presentation. Our audit of internal control over ﬁnancial reporting included
obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 1 to the accompanying consolidated ﬁnancial statements, effective April 26, 2009, the
Company changed its accounting and reporting for noncontrolling interests and earnings per share in ﬁscal
2010. As discussed in Note 17 to the accompanying consolidated ﬁnancial statements the Company changed
its method of accounting for uncertainties in income taxes effective April 29, 2007.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance
regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over ﬁnancial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial
statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
Detroit, Michigan
June 14, 2010

39

LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS

(Amounts in thousands, except per share data)
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales

Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of long-lived assets . . . . . . . . . . . . . . . . . . . . . . .
Write-down of trade names . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continued Dumping and Subsidy Offset Act, net. . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations before income taxes .
Income tax expense (beneﬁt) . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . .

Loss from discontinued operations (net of tax of $(3,990) in

2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interests . . . . . .
Net income (loss) attributable to La-Z-Boy Incorporated . . . . .
Basic average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic income (loss) from continuing operations per share . . . . . .
Discontinued operations per share (net of tax) . . . . . . . . . . . . . .
Basic net income (loss) attributable to La-Z-Boy Incorporated per
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted average shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted income (loss) from continuing operations per share. . . . .
Discontinued operations per share (net of tax) . . . . . . . . . . . . . .
Diluted net income (loss) attributable to La-Z-Boy Incorporated

per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended

(52 weeks)
4/24/2010
$1,179,212

(52 weeks)
4/25/2009
$1,226,674

(52 weeks)
4/26/2008
$1,450,941

802,344
2,141
804,485
374,727
331,491
1,293
—
—
—
41,943
2,972
724
4,436
590
44,721
12,670
32,051

—
32,051
487
32,538
51,533

0.63
—

0.63
51,732

0.62
—

0.62

$

$

$

$

$

$

879,889
9,818
889,707
336,967
373,502
2,642
7,503
5,541
42,136
(94,357)
5,581
2,504
8,124
(7,998)
(97,308)
25,112
(122,420)

1,053,785
5,057
1,058,842
392,099
397,713
3,078
—
—
8,426
(17,118)
13,899
3,614
7,147
5,393
(14,863)
(7,214)
(7,649)

—
(122,420)
(252)
$ (122,672)
51,460

(6,000)
(13,649)
(277)
$ (13,926)
51,408

$

$

$

$

(2.39)
—

(2.39)
51,460

(2.39)
—

(2.39)

0.10

$

$

$

$

$

(0.16)
(0.11)

(0.27)
51,408

(0.16)
(0.11)

(0.27)

0.40

— $

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

40

LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET

(Amounts in thousands, except par value)
Current assets

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net of allowance of $20,258 in 2010 and $28,385 in 2009 . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes − current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes − long term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets, net of allowance of $942 in 2010 and $4,309 in 2009 . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current liabilities

Current portion of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingencies and commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity

Common shares, $1 par value − 150,000 authorized; 51,770 outstanding in

2010 and 51,478 outstanding in 2009 . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total La-Z-Boy Incorporated shareholders’ equity . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of

4/24/2010

4/25/2009

$108,421
—
165,038
134,187
2,305
18,159
428,110
138,857
3,100
458
38,293
$608,818

$

1,066
54,718
91,496
147,280
46,917
—
68,381
—

51,770
201,873
108,707
(20,251)
342,099
4,141
346,240
$608,818

$ 17,364
18,713
147,858
140,178
795
22,872
347,780
146,896
3,100
—
51,431
$549,207

$

8,724
41,571
75,733
126,028
52,148
724
63,875
—

51,478
205,945
67,431
(22,559)
302,295
4,137
306,432
$549,207

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

41

LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS

(Amounts in thousands)
Cash ﬂows from operating activities

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to cash provided by

operating activities

(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of long-lived assets. . . . . . . . . . . . . . . . . . . . . .
Write-down of trade names . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of investments . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets from businesses held for sale (net of

tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of discontinued operations (net of tax) . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense. . . . . . . . . . . . . . . . . . . .
Change in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4/24/2010

Fiscal Year Ended
4/25/2009

4/26/2008

$ 32,051

$(122,420)

$ (13,649)

(538)
—
—
—
—

—
—
3,434
6,535
25,246
5,236
(17,287)
5,991
4,187
13,147
14,349
(2,692)
57,608

(2,813)
7,503
5,541
42,136
5,140

—
—
12,460
25,254
24,142
3,819
27,223
36,995
2,946
(14,544)
(41,160)
39,466
174,108

270
—
—
8,426
—

2,159
3,696
8,135
8,550
25,323
4,527
20,956
23,471
(1,385)
(10,394)
(24,580)
(6,266)
62,888

Net cash provided by operating activities . . . . . . . . . . . . . .

89,659

51,688

49,239

Cash ﬂows from investing activities

Proceeds from disposals of assets. . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of discontinued operations . . . . . . . . . . . .
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of investments . . . . . . . . . . . . . . . . . . .
Change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other long-term assets . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) investing activities . . . . . . .

Cash ﬂows from ﬁnancing activities

Proceeds from debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock issued/(canceled) for stock and employee beneﬁt plans . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for ﬁnancing activities . . . . . . . . . . . . . . . .

3,338
—
(10,986)
(4,933)
8,833
17,507
250
14,009

41,817
(54,707)
1,035
—
(11,855)

9,060
—
(15,625)
(11,330)
34,675
(18,207)
(581)
(2,008)

50,794
(92,139)
—
(5,177)
(46,522)

Effect of exchange rate changes on cash and equivalents. . . . . . .
Change in cash and equivalents. . . . . . . . . . . . . . . . . . . . . . . .
Cash acquired from consolidation of VIEs . . . . . . . . . . . . . . . .
Cash and equivalents at beginning of period . . . . . . . . . . . . . . .
Cash and equivalents at end of period . . . . . . . . . . . . . . . . . . .

(756)
91,057
—
17,364
$108,421

(901)
2,257
631
14,476
$ 17,364

8,761
4,169
(27,386)
(34,562)
35,580
160
(705)
(13,983)

93,861
(144,790)
(269)
(20,746)
(71,944)

109
(36,579)
—
51,055
$ 14,476

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

42

LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Common
Shares
$51,377

Capital in
Excess of
Par Value
$208,283

Retained
Earnings
$ 222,273

Accumulated
Other
Comprehensive
Income (Loss)
$ 1,376

Non-
Controlling
Interests
$2,789

Total
$ 486,098

(Amounts in thousands)

At April 28, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comprehensive loss

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on marketable securities arising during the

period (net of tax of $0.1 million) . . . . . . . . . . . . . . . .
Reclassiﬁcation adjustment for gain on marketable securities
included in net income (net of tax of $1.4 million) . . . . .
Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial gain (net of tax of $0.2 million) . . . . . . . . . .
Total comprehensive loss . . . . . . . . . . . . . . . . . . . . . .

Stock issued for stock and employee beneﬁt plans, net of

cancellations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock option, performance-based and restricted stock

expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declarerd . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in noncontrolling interest. . . . . . . . . . . . . . . . . .
Impact of adoption of accounting standards relating to

uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . .
At April 26, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comprehensive loss

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on marketable securities arising during the

period (net of tax of $0.4 million) . . . . . . . . . . . . . . . .
Reclassiﬁcation adjustment for loss on marketable securities
included in net loss . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of cash ﬂow hedge . . . . . . . . . . . . . .
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive loss . . . . . . . . . . . . . . . . . . . . . .

Stock issued for stock and employee beneﬁt plans, net of

cancellations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock option, restricted stock and performance based stock

expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in noncontrolling interest upon consolidation of VIE
and other changes in noncontrolling interests . . . . . . . . .
Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . .
At April 25, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comprehensive income

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on marketable securities arising during the

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassiﬁcation adjustment for gain on marketable securities
included in net income . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of cash ﬂow hedge . . . . . . . . . . . . . .
Net pension amortization and net actuarial loss . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . .

Stock issued for stock and employee beneﬁt plans, net of

cancellations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock option, restricted stock and performance based stock

expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in noncontrolling interest . . . . . . . . . . . . . . . . . .
At April 24, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . .

51

(3,422)

3,102

4,527

51,428

209,388

(20,746)

(2,500)
188,203

(122,672)

50

(7,262)

7,077

3,819

51,478

205,945

(5,177)
67,431

32,538

(13,926)

(222)

(2,420)
(209)
532

277

92

140

(15,876)

(269)

4,527
(20,746)
140

(2,500)
451,374

(144,444)

(135)

3,819

995
(5,177)
306,432

(943)

3,298

252

(408)

(4,332)

5,180
233
(723)
(21,974)

995

(22,559)

4,137

(487)

401

2,685

(97)
(766)
146
340

292

(9,294)

8,738

5,222

$51,770

$201,873

$ 108,707

$(20,251)

34,760

(264)

90
$4,141

5,222
90
$ 346,240

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies

The following is a summary of signiﬁcant accounting policies followed in the preparation of these
consolidated ﬁnancial statements. Our ﬁscal year ends on the last Saturday of April. Fiscal years 2010, 2009
and 2008 included 52 weeks.

Principles of Consolidation

The consolidated ﬁnancial statements include the accounts of La-Z-Boy Incorporated and its majority-owned
subsidiaries (‘‘the Company’’). All signiﬁcant inter-company transactions have been eliminated. Additionally,
the consolidated ﬁnancial statements include the accounts of certain entities in which the company holds a
controlling interest based on exposure to economic risks and potential rewards (variable interests) for which it
is the primary beneﬁciary.

New accounting standards deﬁne a noncontrolling interest, previously called a minority interest, as the portion
of equity in a subsidiary that is not attributable, directly or indirectly, to a parent. This standard requires,
among other things, that a noncontrolling interest be clearly identiﬁed, labeled and presented in the
consolidated balance sheet as equity, but separate from the parent’s equity; and that the amount of
consolidated net income attributable to the parent and to the noncontrolling interest be clearly identiﬁed and
presented on the face of the consolidated statement of operations. Effective April 26, 2009, we adopted this
standard and applied it retrospectively which affected only presentation and disclosure. As a result, we
reclassiﬁed noncontrolling interests in the amount of $4.1 million from other long-term liabilities and
accumulated other comprehensive loss to equity in the April 25, 2009, Consolidated Balance Sheet. Certain
reclassiﬁcations to the Consolidated Statement of Operations were made to prior period amounts to conform to
the presentation of the current period under this standard. Recorded amounts for prior periods previously
presented as Net income (loss), which are now presented as Net income (loss) attributable to La-Z-Boy
Incorporated, have not changed as a result of this adoption.

During the third quarter of ﬁscal 2010, we corrected our historical ﬁnancial statements related to one of our
VIEs. This VIE previously amortized leasehold improvements over a period that exceeded the appropriate
useful life in accordance with our accounting policy. The cumulative effect was a $3.3 million reduction to
ﬁxed assets and retained earnings as of April 25, 2009, to record the previously unrecognized amortization.
The correction resulted in an increase in our net loss for the ﬁscal years ended April 29, 2006, April 26, 2008,
and April 25, 2009, of $0.2 million, $0.4 million and $1.3 million, respectively, as well as a decrease in our
net income for the ﬁscal year ended April 28, 2007, of $0.3 million. We determined that the cumulative
impact of this correction was material to our ﬁscal 2010 year. However, we determined that the corrections
were not material, either individually or in the aggregate, to any of our historical ﬁscal years or interim
periods. Consequently, we revised our historical ﬁnancial statements for the prior periods. Because our
analysis concluded that these corrections were immaterial to any prior period, we did not amend our previous
ﬁlings with the Securities and Exchange Commission.

44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies − (continued)

The following tables set forth the impact of the immaterial corrections to our consolidated statements of
operations for the ﬁscal years ended April 25, 2009, and April 26, 2008, and our consolidated balance sheet as
of April 25, 2009:

(Amounts in thousands, except per share data)
Net loss attributable to La-Z-Boy Incorporated . . . . . . . . . . . . .
Diluted net loss attributable to La-Z-Boy Incorporated per share .

(Amounts in thousands, except per share data)
Net loss attributable to La-Z-Boy Incorporated . . . . . . . . . . . . .
Diluted net loss attributable to La-Z-Boy Incorporated per share .

(Amounts in thousands)
Property, plant and equipment, net. . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Use of Estimates

4/25/2009
(as previously
reported)
$(121,347)
(2.36)
$

4/26/2008
(as previously
reported)
$(13,537)
(0.27)
$

4/25/2009
(as previously
reported)
$150,234
$ 70,769

Year Ended 4/25/2009

Adjustments
$(1,325)
$ (0.03)

4/25/2009
(as adjusted)
$(122,672)
(2.39)
$

Year Ended 4/26/2008

4/26/2008
(as adjusted)
$(13,926)
(0.27)
$

Adjustments
$ (389)
$(0.00)

As of 4/25/2009

Adjustments
$(3,338)
$(3,338)

4/25/2009
(as adjusted)
$146,896
$ 67,431

The consolidated ﬁnancial statements are prepared in conformity with accounting principles generally accepted
in the United States of America, which require management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, sales and expenses for the reporting periods. Some of the more
signiﬁcant estimates include depreciation, valuation of inventories, valuation of trade names, valuation of
deferred taxes, allowances for doubtful accounts, sales returns, legal, environmental, restructuring, product
liability, insurance reserves and warranty accruals. Actual results could differ from those estimates.

New Pronouncements

In June 2008, the Financial Accounting Standards Board (FASB) issued authoritative guidance for determining
whether instruments granted in share-based payment transactions are participating securities. This guidance
requires that unvested share-based payment awards containing non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) be included in the computation of earnings per share pursuant to the
two-class method for all periods presented. See Note 20 for more information regarding our earnings per
share. We adopted this guidance on April 26, 2009. The adoption of this guidance resulted in a reduction of
$0.01 per share for both basic and diluted earnings per share on net income (loss) attributable to La-Z-Boy
Incorporated for the year ended April 24, 2010.

In December 2008, the FASB issued authoritative guidance for employers’ disclosures about postretirement
beneﬁt plan assets. This guidance expands the disclosures related to postretirement beneﬁt plan assets to
include disclosures concerning a company’s investment policies for beneﬁt plan assets and categories of plan
assets. This guidance further expands the disclosure requirements to include the fair value of plan assets,
including the levels within the fair value hierarchy and any concentrations of risk related to the plan assets.
This guidance was effective for and we adopted this guidance for our ﬁscal 2010 year end. As this guidance
only required expanded disclosure, the adoption did not have a material impact on our consolidated ﬁnancial
statements.

45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies − (continued)

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for transfers of
ﬁnancial assets. This amendment requires greater transparency and additional disclosures for transfers of
ﬁnancial assets and the entity’s continuing involvement with them and changes the requirements for
derecognizing ﬁnancial assets. In addition, this amendment eliminates the concept of a qualifying
special-purpose entity (‘‘QSPE’’). This amendment is effective for our ﬁscal 2011 year end and interim
periods within that year. We are currently evaluating the impact this amendment will have on our consolidated
ﬁnancial statements and disclosures.

In June 2009 and December 2009, the FASB issued amendments to the consolidation guidance applicable to
variable interest entities (‘‘VIEs’’). The guidance affects all entities currently within the scope of FASB
ASC 810, Consolidation, as well as QSPEs that are currently excluded from the scope of FASB ASC 810,
Consolidation. Accordingly, we will need to reconsider our previous FASB ASC 810, Consolidation,
conclusions, including (1) whether we are the VIE’s primary beneﬁciary, and (2) what type of ﬁnancial
statement disclosures are required. This amendment is effective for our ﬁscal 2011 year end and interim
periods within that year. We believe that this amendment will result in one of our current VIEs, with assets of
$11.9 million as of April 24, 2010, and sales of $20.4 million in ﬁscal 2010, being de-consolidated during the
ﬁrst quarter of ﬁscal 2011.

In July 2009, the FASB issued the Accounting Standards Codiﬁcation (‘‘Codiﬁcation’’), which became the
single source of authoritative generally accepted accounting principles (GAAP) in the United States, other
than rules and interpretive releases issued by the Securities and Exchange Commission (SEC). The
Codiﬁcation is a reorganization of current GAAP into a topical format that eliminates the current GAAP
hierarchy and instead establishes two levels of guidance — authoritative and non-authoritative. All
non-grandfathered, non-SEC accounting literature that is not included in the Codiﬁcation will become non-
authoritative. All references to authoritative accounting literature in our ﬁnancial statements beginning in the
second quarter of ﬁscal 2010 were referenced in accordance with the Codiﬁcation. There were no changes to
the content of our ﬁnancial statements or disclosures as a result of implementing the Codiﬁcation.

In August 2009, the FASB issued amendments for the fair value measurement of liabilities. This amendment
provides clariﬁcation that in circumstances in which a quoted price in an active market for the identical
liability is not available, an entity is required to measure fair value using speciﬁed techniques. This
amendment also clariﬁes that when estimating the fair value of a liability, a reporting entity is not required to
include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the
transfer of the liability. Additionally, this amendment clariﬁes that both a quoted price in an active market for
the identical liability at the measurement date and the quoted price for the identical liability when traded as an
asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair
value measurements. We adopted these amendments in our third quarter of ﬁscal 2010. These amendments did
not have a material impact on our consolidated ﬁnancial statements and disclosures.

In October 2009, the FASB issued amendments to the criteria for separating consideration in
multiple-deliverable arrangements. These amendments will establish a selling price hierarchy for determining
the selling price of a deliverable. The amendments will require that a vendor determine its best estimate of
selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a
standalone basis. These amendments will eliminate the residual method of allocation and require that
arrangement consideration be allocated at the inception of the arrangement to all deliverables using the
relative selling price method. These amendments will also expand disclosures related to vendor’s multiple-
deliverable revenue arrangements. These amendments will be effective for our ﬁscal 2012 year end. We are
currently evaluating the impact these amendments will have on our consolidated ﬁnancial statements and
disclosures.

In January 2010, the FASB issued amendments to the accounting and reporting for decreases in ownership of
a subsidiary. This amendment provides guidance in regards to how an entity is required to account for a
decrease in its ownership interest of a subsidiary that does not result in a change of control of the subsidiary
as an equity transaction. This amendment also requires expanded disclosures about the deconsolidation of a

46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies − (continued)

subsidiary. This amendment was effective for and we adopted this amendment in our third quarter of ﬁscal
2010. This amendment did not have a material impact on our consolidated ﬁnancial statements and
disclosures.

In January 2010, the FASB issued amendments to the disclosure requirements for fair value measurements.
This amendment requires new disclosures in regards to transfers in and out of Levels 1 and 2 of the fair value
hierarchy and disclosures regarding purchases, sales, issuances and settlements within Level 3 of the
hierarchy. Additionally, this amendment clariﬁes existing fair value disclosure requirements by requiring
entities to provide fair value measurement disclosures for each class of assets and liabilities, as well as the
inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value
measurements. This amendment will be effective for our ﬁrst quarter of ﬁscal 2011. The adoption of this
amendment is not expected to have a material impact on our consolidated ﬁnancial statements.

Cash and Equivalents

For purposes of the consolidated balance sheet and statement of cash ﬂows, we consider all highly liquid debt
instruments purchased with initial maturities of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the last-in, ﬁrst-out (‘‘LIFO’’)
basis for approximately 64% and 68% of our inventories at April 24, 2010, and April 25, 2009, respectively.
Cost is determined for all other inventories on a ﬁrst-in, ﬁrst-out (‘‘FIFO’’) basis. The FIFO method of
accounting is mainly used for our Retail Group’s inventory and our smaller Upholstery Group companies. We
record a proﬁt elimination entry against our Retail Group’s inventory that reduces the inventory to net
realizable value in consolidation.

Property, Plant and Equipment

Items capitalized, including signiﬁcant betterments to existing facilities, are recorded at cost. Computer
software costs are capitalized based on total costs and are depreciated over three to ten years. All maintenance
and repair costs are expensed when incurred. Depreciation is computed using principally straight-line methods
over the estimated useful lives of the assets.

Disposal and Impairment of Long-Lived Assets

Retirement or dispositions of long-lived assets are recorded based on carrying value and proceeds received.
Any resulting gains or losses are recorded as an operating line item in selling, general and administrative
expenses. We review the carrying value of our long-lived assets for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable.

Trade Names

We test indeﬁnite lived intangibles for impairment on an annual basis as of the end of our ﬁscal year, or more
frequently if events or changes in circumstances indicate that the asset might be impaired. See Note 5 for
additional information on our trade names.

Investments

Available-for-sale securities are recorded at fair value with the net unrealized gains and losses (that are
deemed to be temporary) reported as a component of other comprehensive income. Realized gains and losses
and charges for other-than-temporary impairments are included in determining net income, with related
purchase costs based on the ﬁrst-in, ﬁrst-out method. For impairments that are other-than-temporary, an
impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its
fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of
the investment then becomes the new amortized cost basis of the investment and is not adjusted for
subsequent recoveries in fair value.

47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies − (continued)

Life Insurance

Life insurance policies are recorded at the amount that could be realized under the insurance contract as of the
date of our consolidated balance sheet. These assets are classiﬁed as other long-term assets on our balance
sheet. The change in cash surrender or contract value is recorded as income or expense during each period.

Revenue Recognition and Related Allowances

During the ﬁrst quarter of ﬁscal 2009, our largest division revised certain shipping agreements with third-party
carriers such that risk of loss transfers to our customers upon shipment rather than upon delivery. For the
remainder of the company, shipping terms using third-party carriers are FOB shipping point. Accordingly,
substantially all of our shipments with third-party carriers are recognized upon shipment of the product. In all
cases, for product shipped on our company-owned trucks, revenue is recognized upon delivery. This revenue
includes amounts billed to customers for shipping. Provisions are made at the time revenue is recognized for
estimated product returns and warranties, as well as other incentives that may be offered to customers. We
import certain products from foreign ports, which are shipped directly to our domestic customers. In this case,
revenue is not recognized until title is assumed by our customer, which is normally after the goods pass
through U.S. Customs.

Incentives offered to customers include cash discounts, advertising agreements and other sales incentive
programs. Cash discounts and other sales incentives are recorded as a reduction of revenues when the revenue
is recognized. Our advertising agreements give customers advertising allowances based on revenues and are
recorded when the revenue is recognized as a reduction to revenue.

Trade accounts receivable arise from the sale of products on trade credit terms. On a quarterly basis, our
management team reviews all signiﬁcant accounts as to their past due balances, as well as collectability of the
outstanding trade accounts receivable for possible write off. It is our policy to write off the accounts
receivable against the allowance account when we deem the receivable to be uncollectible. Additionally, for
those dealers that are signiﬁcantly past due, we review their sales orders and ship product when collectability
of the incremental sale is reasonably assured.

The allowance for doubtful accounts reﬂects our best estimate of probable losses inherent in the accounts and
notes receivable balances. We determine the allowance based on known troubled accounts, historical
experience and other currently available evidence.

Cost of Sales

Our cost of sales consists primarily of the cost to manufacture or purchase our merchandise, inspection costs,
internal transfer costs, in-bound freight costs, outbound shipping costs, as well as warehousing costs,
occupancy costs and depreciation expense related to our manufacturing facilities and equipment.

Selling, General and Administrative Expenses

SG&A expenses include the costs of selling our products and other general and administrative costs. Selling
expenses are primarily comprised of commissions, advertising, warranty, bad debt expense and compensation
and beneﬁts of employees performing various sales functions. Additionally, the occupancy costs of our retail
facilities and the warehousing costs of our regional distribution centers are included in SG&A. Other general
and administrative expenses included in SG&A are comprised primarily of compensation and beneﬁt costs for
administration employees and other administrative costs.

Research and Development Costs

Research and development costs are charged to expense in the periods incurred. Expenditures for research and
development costs were $7.9 million, $9.5 million and $9.5 million for the ﬁscal years ended April 24, 2010,
April 25, 2009, and April 26, 2008, respectively.

48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies − (continued)

Advertising Expenses

Production costs of commercials, programming and costs of other advertising, promotion and marketing
programs are charged to expense in the period incurred. A portion of our advertising program is a national
advertising campaign. This campaign is a shared advertising program with our La-Z-Boy Furniture Galleries(cid:5)
stores, which are reimbursing us for about 33% of the cost of the program. Because of this shared cost
arrangement, the advertising expense was reported as a component of SG&A and was partially offset by the
reimbursement of the dealers’ portion of the cost which was reported as a component of sales. Advertising
expenses were $45.1 million, $54.4 million and $63.4 million for the ﬁscal years ended April 24, 2010,
April 25, 2009, and April 26, 2008, respectively.

Operating Leases

We record expense on a straight-line basis for minimum lease payments starting with the beginning of the
lease term based on the date that we have the right to control the leased property. Additionally, any lease
payments that depend on an existing index or rate are initially included in our minimum lease payments. Our
minimum lease payments incorporate provisions for capital improvements and step rent provisions or rent
escalations.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the ﬁnancial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax
credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or settled.

In periods when deferred tax assets are recorded, we are required to estimate whether recoverability is more
likely than not, based on forecasts of taxable earnings in the related tax jurisdiction. We consider historical
and projected future operating results, the eligible carry-forward period, tax law changes, tax planning
opportunities and other relevant considerations when making judgments about realizing the value of our
deferred tax assets.

Foreign Currency Translation

The functional currency of our Mexico subsidiaries is the U.S. dollar. Gains and losses associated with
translating our Mexico subsidiary’s assets and liabilities are recorded in other income/(expense) in our
Consolidated Statement of Operations. The functional currency of each of our other foreign subsidiaries is the
respective local currency. Assets and liabilities of those subsidiaries whose functional currency is their local
currency are translated at the year-end exchange rates, and revenues and expenses are translated at average
exchange rates for the period. Resulting cumulative translation adjustments of $4.3 million at April 24, 2010,
and $5.1 million at April 25, 2009 are recorded as a component of shareholders’ equity in other
comprehensive income. When the foreign subsidiary has substantially ended operations, the remaining
translation adjustments are recognized in other income/(expense) in our Consolidated Statement of Operations.

Financial Instruments and Hedging

We have a derivative instrument consisting of an interest rate swap agreement that is used to ﬁx the interest
rate on a portion of the variable interest rate borrowings on our revolving credit facility. This agreement is
designated and accounted for as a cash ﬂow hedge. The effect of marking this contract to fair value is
recorded as a component of shareholders’ equity in other comprehensive income. The interest rate swap
agreement expires in May 2011. Refer to Note 22 of the consolidated ﬁnancial statements for detailed
information regarding our interest rate swap agreement.

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies − (continued)

Accounting for Stock-Based Compensation

We estimate the fair value of stock-based awards on the date of grant using an option-pricing model. The
value of the portion of the award that is ultimately expected to vest is recognized as expense over the
requisite service periods in our Consolidated Statement of Operations using a straight-line single-option
method. We account for deferred stock units as liability-based awards. The liability is initially measured and
recognized based on the market price of our common stock on the grant date. The liability is re-measured and
adjusted at the end of each reporting period until paid.

Reclassiﬁcations

Certain prior year information has been reclassiﬁed to be comparable to the current year presentation.

Insurance/Self-Insurance

We use a combination of insurance and self-insurance for a number of risks, including workers’ compensation,
general liability, vehicle liability and the company-funded portion of employee-related health care beneﬁts.
Liabilities associated with these risks are estimated in part by considering historical claims experience,
demographic factors, severity factors and other assumptions. Our workers’ compensation is an undiscounted
liability. We have various excess loss coverages for auto, product liability and workers’ compensation. Our
deductibles generally do not exceed $1.0 million.

Discontinued Operations

We classify a business component that has been disposed of or has been approved to be disposed of as a
discontinued operation. The results of operations of our discontinued operations, including any gains or losses
on disposition, are aggregated and presented on one line in the income statement. Accounting standards
require the reclassiﬁcation of amounts presented for prior years as discontinued operations.

Note 2: Restricted Cash

At April 24, 2010, we had no restricted cash, compared to $18.7 million at April 25, 2009, related to our
wholly-owned insurance company. Prior to April 25, 2009, restricted cash was primarily used to support our
liability for workers’ compensation claims and premiums. In the ﬁrst quarter of ﬁscal 2010 La-Z-Boy
Incorporated assumed the obligations related to our workers’ compensation and obtained regulatory approval
to transfer substantially all of the assets from our wholly-owned insurance company to La-Z-Boy
Incorporated. During the third quarter of ﬁscal 2010, the liability for the remaining insurance policy of our
wholly-owned insurance company was transferred to La-Z-Boy Incorporated. As a result of these changes,
restrictions on our cash were eliminated.

Note 3: Inventories

(Amounts in thousands)

4/24/2010

4/25/2009

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FIFO inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of FIFO over LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 60,913
11,018
86,963
158,894
(24,707)
$134,187

$ 53,498
11,281
101,147
165,926
(25,748)
$140,178

During ﬁscal 2010, inventory quantities in total were reduced. This reduction resulted in a liquidation of LIFO
inventory quantities carried at lower costs in prior years as compared to the cost of ﬁscal 2010 purchases, the
effect of which decreased cost of goods sold by approximately $1.5 million.

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4: Property, Plant and Equipment

(Amounts in thousands)

Buildings and building ﬁxtures . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
Information systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . .
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . .

Estimated
Useful Lives

3 − 40 years
3 − 30 years
3 − 10 years
3 − 40 years
3 − 10 years
3 − 20 years

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . .

4/24/2010

4/25/2009

$ 169,307
143,553
42,250
24,593
17,695
24,002
4,726
426,126
(287,269)
$ 138,857

$ 164,394
142,735
44,399
23,689
16,220
23,658
2,506
417,601
(270,705)
$ 146,896

Depreciation expense for the ﬁscal years ended April 24, 2010, April 25, 2009, and April 26, 2008, was $22.6
million, $23.6 million and $25.2 million, respectively.

Note 5: Trade Names and Goodwill

Trade names and goodwill are tested at least annually for impairment by comparing their fair value to their
carrying values. The fair value for each trade name is established based upon management’s estimates using a
royalty savings approach which is based on the principle that, if the business did not own the asset, it would
have to license it in order to earn the returns that it is earning. The fair value was calculated based on the
present value of the royalty stream that the business was saving by owning the asset. Additionally, goodwill is
tested for impairment by comparing the fair value of our operating units to their carrying values. The fair
value for each operating unit is established based upon the discounted cash ﬂows. In situations where the fair
value is less than the carrying value, indicating a potential impairment, a second comparison is performed
using a calculation of implied fair value of goodwill to measure the impairment.

Solely for purposes of establishing inputs for the fair value calculations described above related to goodwill
impairment testing, in the third quarter of ﬁscal 2009 we used a 16% discount rate to calculate the fair value
of our reporting units, which is higher than the 11% discount rate we used in our previous calculations given
the continued declining market conditions. The increase in our discount rate was primarily due to deteriorating
market conditions during the third quarter of ﬁscal 2009 when our business was impacted by signiﬁcant
declines in consumer demand. At that time our average market capitalization was below the book value of the
company. Accordingly, we reviewed the valuations of the goodwill for our Upholstery and Retail Groups, in
advance of our normal fourth quarter testing and we recorded an impairment charge of $40.4 million in the
third quarter of ﬁscal 2009.

In the fourth quarter of ﬁscal 2009 we deconsolidated an independent dealer that was previously consolidated
as a VIE. As a result of this VIE no longer being consolidated, $5.1 million in goodwill was removed from
our balance sheet.

In the third quarter of ﬁscal 2009, we completed a valuation of the tax reserves relating to the acquisitions of
the operating units in the Casegoods Group, and a reduction of the tax reserves was required. This reduction
was recorded as a reduction in trade names and totaled $0.4 million. Additionally, as a result of the decline in
consumer conﬁdence and challenging economic environment, we reviewed the valuations of our trade names.
It was determined that the carrying value of trade names exceeded their fair value and an impairment loss of
$5.5 million was recorded as a component of operating income.

During the second quarter of ﬁscal 2009, we reorganized our Toronto, Ontario, market which we consolidated
as a VIE. As a result, we recorded an impairment charge of $0.4 million which represented the entire goodwill
amount of this market.

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5: Trade Names and Goodwill − (continued)

During ﬁscal 2009, we closed the operations of our La-Z-Boy U.K. subsidiary. As a result, we recorded an
impairment charge of $1.3 million, during the ﬁrst quarter of ﬁscal 2009, which represented the entire
goodwill amount of this operating unit.

As of April 25, 2009, we had no goodwill remaining.

We completed our normal annual assessment of trade names in the fourth quarter of ﬁscal 2010, and
concluded that the fair values of our remaining trade names were greater than their carrying values and as
such, no impairment charges were necessary.

The following table summarizes the changes to goodwill and trade names during ﬁscal 2010 and ﬁscal 2009:

Fiscal 2010
(Amounts in thousands)

Trade names

Balance
as of 4/25/2009

Acquisitions,
Dispositions
and Other

Intangible
Write-Down

Balance
as of 4/24/2010

Casegoods Group . . . . . . . . . . . . . . . . .

$3,100

$ —

$ —

$3,100

Fiscal 2009
(Amounts in thousands)

Goodwill

Balance
as of 4/26/2008

Acquisitions,
Dispositions
and Other

Intangible
Write-Down

Balance
as of 4/25/2009

Upholstery Group . . . . . . . . . . . . . . . . .
Retail Group. . . . . . . . . . . . . . . . . . . . .
Corporate and Other*. . . . . . . . . . . . . . .
Consolidated . . . . . . . . . . . . . . . . . . .

$19,632
22,096
5,505
$47,233

$ —
—
(5,505)
$(5,505)

$(19,632)
(22,096)
—
$(41,728)

$ —
—
—
$ —

Trade names

Casegoods Group . . . . . . . . . . . . . . . . .

$ 9,006

$ (365)

$ (5,541)

$3,100

*

Corporate and Other includes goodwill from our VIEs.

52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6: Investments

Included in other long-term assets were investments of $11.0 million at April 24, 2010, of available-for-sale
marketable securities to fund future obligations of one of our non-qualiﬁed retirement plans. At April 25,
2009, included in other long-term assets were investments of $10.8 million of available-for-sale securities to
fund future obligations of one of our non-qualiﬁed retirement plans and our captive insurance company. All
unrealized gains or losses which have not been recognized as other-than-temporary losses were included in
accumulated other comprehensive loss within Shareholders’ Equity. The net unrealized gain was $2.8 million
at April 24, 2010, compared to a net unrealized gain of $0.4 million at April 25, 2009. In ﬁscal 2009 we
recognized $5.1 million of losses, recorded in other income (expense), net, related to other-than-temporary
impairments.

The following is a summary of available-for-sale securities at April 24, 2010, and April 25, 2009:

Fiscal 2010
(Amounts in thousands)

Gross
Unrealized Gains

Gross
Unrealized Losses

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities . . . . . . . . . . . . . . . . . . . . . . . .

$2,681
92
—
$2,773

$ (8)
(7)
—
$(15)

Fiscal 2009
(Amounts in thousands)

Gross
Unrealized Gains

Gross
Unrealized Losses

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities . . . . . . . . . . . . . . . . . . . . . . . .

$419
132
—
$551

$(153)
(44)
—
$(197)

Fair Value

$ 7,960
2,877
142
$10,979

Fair Value

$ 6,152
4,069
575
$10,796

The following table summarizes sales of available-for-sale securities (for the ﬁscal years ended):

(Amounts in thousands)

4/24/2010

4/25/2009

4/26/2008

Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,811
285
(184)

$29,986
1,468
(1,540)

$35,580
4,078
(213)

The fair value of ﬁxed income available-for-sale securities by contractual maturity was $0.1 million within
one year, $1.2 million within two to ﬁve years, $1.0 million within six to ten years and $0.6 million
thereafter.

Note 7: Accrued Expenses and Other Current Liabilities

(Amounts in thousands)

4/24/2010

4/25/2009

Payroll and other compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued product warranty, current portion . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . .

$42,978
8,564
11,912
28,042
$91,496

$32,632
9,179
9,277
24,645
$75,733

53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8: Debt

(Amounts in thousands)

4/24/2010

4/25/2009

Revolving credit facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30,000
11,486
5,761
736
47,983
(1,066)
$46,917

$35,000
16,841
8,456
575
60,872
(8,724)
$52,148

Our revolving credit facility is backed primarily by all of our accounts receivable, inventory, cash deposit and
securities accounts, and substantially all patents and trademarks, including the La-Z-Boy brand name.
Availability under our revolving credit facility ﬂuctuates based on a borrowing base calculation consisting of
eligible accounts receivable and inventory. This revolving credit facility includes affirmative and negative
covenants, and certain restrictions, including a ﬁxed charge coverage ratio that would become effective if our
excess availability under the revolving credit facility falls below $30 million. Excess availability is the
difference between our eligible accounts receivable and inventory less the total of our outstanding letters of
credit, other reserves as denoted in our revolving credit facility and our outstanding borrowings on our
revolving credit facility. As of April 24, 2010 our excess availability was $90.6 million. We do not expect to
fall below the required excess availability thresholds in the next twelve months. As of April 24, 2010, we
would have been in compliance with our 1.05 to 1.00 ﬁxed charge coverage ratio requirement had it been in
effect.

For our revolving credit facility, we are able to select interest rates based on LIBOR or the prime rate. Our
LIBOR spread ﬂuctuates between 1.75% and 2.25% based on liquidity. During ﬁscal 2010 this spread was
2.0% for the ﬁrst quarter and 1.75% for the remaining three quarters. Our prime rate spread ﬂuctuates
between 0.0% and 0.5% based on liquidity. During ﬁscal 2010 this spread was 0.0%. At April 24, 2010 our
borrowing rates ranged from 2.0% to 3.25%.

Our revolving credit facility contains customary events of default, including nonpayment of principal when
due, nonpayment of interest after a stated grace period; inaccuracy of representations and warranties;
violations of covenants; certain acts of bankruptcy and liquidation; defaults of certain material contracts;
certain ERISA-related events; certain material environmental claims; and a change in control (as deﬁned in
our credit agreement). In the event of a default under our credit agreement, the lenders may terminate the
commitments made under our credit agreement, declare amounts outstanding, including accrued interest and
fees, payable immediately, and enforce any and all rights and interests. In addition, following an event of
default, the lenders could exercise remedies with respect to the collateral including foreclosure and other
remedies available to secured creditors.

Industrial revenue bonds were used to ﬁnance the construction of some of our manufacturing facilities. The
facilities constructed from the bond proceeds are mortgaged as collateral for the bonds. Interest for these
bonds is at a variable rate and at April 24, 2010, was approximately 0.4%. Maturities range from June 2010 to
June 2023.

Other debt includes foreign and domestic debt as well as $1.9 million of VIE debt. Maturities range from
ﬁscal 2011 to ﬁscal 2025 with interest rates ranging from 3.0% to 8.9%.

Fair value of our debt approximates the carrying value.

Capital leases consist primarily of long-term commitments for the purchase of IT equipment and transportation
equipment and have maturities ranging from ﬁscal 2011 to ﬁscal 2013. Interest rates range from 7.7% to
8.6%.

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8: Debt − (continued)

Maturities of long-term debt, subsequent to April 24, 2010, are $1.1 million in ﬁscal 2011, $5.4 million in
ﬁscal 2012, $32.5 million in ﬁscal 2013, $0.4 million in ﬁscal 2014, $7.5 million in ﬁscal 2015 and
$1.1 million thereafter.

Cash paid for interest during ﬁscal years 2010, 2009 and 2008 was $2.6 million, $4.6 million and
$15.4 million, respectively.

Note 9: Operating Leases

We have operating leases for manufacturing facilities, executive and sales offices, warehouses, showrooms and
retail facilities, as well as for transportation and information technology equipment. The operating leases
expire at various dates through ﬁscal 2027. Certain transportation leases contain a provision for the payment
of contingent rentals based on mileage in excess of stipulated amounts. We have certain retail facilities which
we sublease to outside parties.

The future minimum rentals for all non-cancelable operating leases and future rental income from subleases
are as follows (for the ﬁscal years):

(Amounts in thousands)

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future
Minimum
Rentals

$ 43,676
40,106
35,531
32,640
31,402
154,230
$337,585

Future
Minimum
Income

$ 642
695
611
300
306
2,548
$5,102

Rental expense, rental income and contingent rentals for operating leases were as follows (for the ﬁscal years
ended):

(Amounts in thousands)

4/24/2010

4/25/2009

4/26/2008

Rental expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$53,023
492
—

$52,030
1,331
—

$52,240
1,547
12

Note 10: Retirement and Welfare

Eligible salaried employees are covered under a trusteed proﬁt sharing retirement plan. Discretionary cash
contributions to a trust are made annually based on proﬁts. We did not make any contributions during ﬁscal
2010 or ﬁscal 2009. We also maintain an Executive Qualiﬁed Deferred Compensation plan for eligible highly
compensated employees. An element of this plan is the Supplemental Executive Retirement Plan (‘‘SERP’’),
which allows contributions for eligible highly compensated employees. As of April 24, 2010, and April 25,
2009, we had $7.6 million and $8.2 million, respectively, of obligations for this plan included in other long-
term liabilities. We had life insurance contracts at April 24, 2010, and April 25, 2009, with cash surrender
values of $7.5 million and $7.6 million, respectively, included in other long-term assets related to this plan.

We maintain a non-qualiﬁed deﬁned beneﬁt retirement plan for certain former salaried employees. Included in
our liabilities were plan obligations of $14.7 million and $13.0 million at April 24, 2010, and April 25, 2009,
respectively. During ﬁscal 2010, the interest cost recognized for this plan was $0.9 million, the actuarial loss
recognized in Accumulated Other Comprehensive Income (Loss) was $1.8 million and the beneﬁt payments
during the year were $1.0 million. Beneﬁt payments are expected to be approximately $1.1 million annually
for the next eleven years. During ﬁscal 2009, the interest cost recognized for this plan was $0.8 million, the
actuarial gain recognized in Accumulated Other Comprehensive Income (Loss) was $0.5 million and the

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10: Retirement and Welfare − (continued)

beneﬁt payments during the year were $1.0 million. This plan is not funded and is excluded from the
obligation charts and disclosures that follow. We hold available-for-sale marketable securities to fund future
obligations of the plan in a Rabbi trust. We are not required to make any contributions to the deﬁned beneﬁt
plan in ﬁscal year 2011; however, we have the discretion to make contributions.

Voluntary 401(k) retirement plans are offered to eligible employees within certain U.S. operating units. For
most operating units, we make matching contributions based on speciﬁc formulas. We suspended the matching
contributions portion of these plans in the third quarter of ﬁscal 2009. This portion of the plan was re-instated
during the third quarter of ﬁscal 2010.

We also maintain a deﬁned beneﬁt pension plan for eligible factory hourly employees at some operating units.
This plan has been frozen for new participants since January 1, 2001, but active participants still earn service
cost. The measurement dates for the pension plan assets and beneﬁt obligations were April 24, 2010, April 25,
2009, and April 26, 2008, in the years presented.

During ﬁscal 2010, we recognized $2.2 million principally for pension amortization in Accumulated Other
Comprehensive Income (Loss) decreasing net actuarial losses in Accumulated Other Comprehensive Income to
$28.3 million pre-tax ($25.3 million after tax). During ﬁscal 2009, we recognized $22.5 million for net
actuarial losses in Other Comprehensive Income (Loss) increasing net actuarial losses in Accumulated Other
Comprehensive Income to $30.5 million pre-tax ($27.4 million after tax). In ﬁscal 2011, we expect to
amortize $1.8 million of unrecognized actuarial losses as a component of pension expense.

The net periodic pension cost and retirement costs for retirement plans were as follows (for the ﬁscal years
ended):

(Amounts in thousands)

4/24/2010

4/25/2009

4/26/2008

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . .
Proﬁt sharing/SERP*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401(k)* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total retirement costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,043
5,600
(4,825)
2,109
3,927
276
831
64
$ 5,098

$ 1,314
5,436
(6,915)
—
(165)
765
3,004
82
$ 3,686

$ 1,764
5,382
(7,354)
—
(208)
2,197
5,145
97
$ 7,231

*

Not determined by an actuary

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10: Retirement and Welfare − (continued)

The funded status of the deﬁned beneﬁt pension plan was as follows:

(Amounts in thousands)

4/24/2010

4/25/2009

Change in beneﬁt obligation
Beneﬁt obligation at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain)/loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneﬁts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneﬁt obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneﬁts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 79,785
1,043
5,600
14,237
(4,698)
95,967

62,816
19,422
(308)
(4,698)
77,232
$(18,735)

$ 83,475
1,314
5,436
(5,390)
(5,050)
79,785

88,843
(20,977)
—
(5,050)
62,816
$(16,969)

Amounts recognized in the Consolidated Balance Sheet consist of:

(Amounts in thousands)

4/24/2010

4/25/2009

Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(18,735)

$(16,969)

The actuarial assumptions were as follows (for the ﬁscal years ended):

4/24/2010

4/25/2009

4/26/2008

Discount rate used to determine beneﬁt obligations . . . . . . . . . .
Discount rate used to determine net beneﬁt cost . . . . . . . . . . . .
Long-term rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.9%
7.2%
8.0%

7.2%
6.6%
8.0%

6.6%
6.1%
8.0%

The discount rate is calculated by matching a pool of high quality bond payments to the plan’s expected
future beneﬁt payments. The long-term rate of return was determined based on the average rate of earnings
expected on the funds invested or to be invested to provide the beneﬁts of these plans. This included
considering the trust’s asset allocation, investment strategy, and the expected returns likely to be earned over
the life of the plans. This is based on our goal of earning the highest rate of return while maintaining
acceptable levels of risk. We strive to have assets within the plan that are diversiﬁed so that unexpected or
adverse results from one asset class will not have a signiﬁcant negative impact on the entire portfolio. This
basis is consistent with prior years.

The strategic asset allocation targets are 65% equities and 35% ﬁxed income within a range of 5% of the
target. Subsequent to April 24, 2010, our asset allocation was rebalanced in order to be within our target
ranges. The weighted average asset allocations at year end were as follows:

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70%
28%
2%
100%

64%
33%
3%
100%

4/24/2010

4/25/2009

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10: Retirement and Welfare − (continued)

The long-term stated investment objective of our deﬁned beneﬁt pension plan includes the following
objectives:

•

•

•

maximize the investment return with the least amount of risk through a combination of capital
appreciation and income;

diversify the portfolio among various asset classes with the goal of reducing volatility of return and
reducing principal risk; and

maintain liquidity sufficient to meet our deﬁned beneﬁt pension plan obligations.

Although it is the intent to, achieve a long-term above-average return, that intent does not include taking
extraordinary risks or engaging in investment practices not commonly considered prudent.

Risks of investing are managed through our asset allocation and diversiﬁcation. We monitor and re-assess all
investments on a quarterly basis. In order to control risk through portfolio diversiﬁcation, we have placed
portfolio market limits, which were discussed above as being within 5% of our target allocations. Investments
are rebalanced on a quarterly basis or more frequently as needed. The overall expected long-term rate of
return is determined by using long-term historical returns for equity and debt securities in proportion to their
weight in the investment portfolio.

The following table presents the fair value of the assets in our deﬁned beneﬁt pension plan at April 24, 2010.

(Amounts in thousands)

Level 1

Level 2

Level 3

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

380
41,867
—
$42,247

$ 1,086
11,942
21,957
$34,985

$—
—
—
$—

Level 1 retirement plan assets include U.S. currency held by a designated trustee and equity funds of common
and preferred securities issued by U.S. and non-U.S. corporations. These equity funds are traded actively on
exchanges and price quotes for these shares are readily available.

Level 2 retirement plan assets include cash and equivalents of commingled funds. Such investments are
generally valued using observable market data. Equity funds categorized as Level 2 include common trust
funds which are comprised of shares or units in open ended funds with active issuances and redemptions. The
value of these funds is determined based on the net asset value of the funds, the underlying assets of which
are publicly traded on exchanges. Price quotes for the assets held by these funds are readily available. Debt
funds categorized as Level 2 consist of corporate ﬁxed income securities issued by U.S. and non-U.S.
corporations and ﬁxed income securities issued directly by the U.S. Treasury or by government-sponsored
enterprises which are valued using a bid evaluation process with bid data provided by independent pricing
sources.

Our funding policy is to contribute to our deﬁned beneﬁt pension plan amounts sufficient to meet the
minimum funding requirement as deﬁned by employee beneﬁt and tax laws, plus additional amounts which
we determine to be appropriate. We expect to contribute approximately $2.5 million to our deﬁned beneﬁt
pension plan during ﬁscal 2011.

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10: Retirement and Welfare − (continued)

The expected beneﬁt payments by our pension plan for each of the next ﬁve ﬁscal years and for periods
thereafter are presented in the following table:

(Amounts in thousands)

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 to 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Beneﬁt
Payments

$ 5,304
4,763
4,894
5,050
5,213
35,639
$60,863

Note 11: Financial Guarantees and Product Warranties

We have provided ﬁnancial guarantees relating to notes and leases in connection with certain La-Z-Boy
Furniture Galleries(cid:5) stores which are not operated by the company. The guarantees are generally for real
estate leases and have remaining terms of one to three years. These guarantees enhance the credit of these
dealers.

We would be required to perform under these agreements only if the dealer were to default on the lease or
note. The maximum amount of potential future payments under these guarantees was $2.1 million as of
April 24, 2010, compared to $3.1 million as of April 25, 2009.

We have, from time to time, entered into agreements which resulted in indemnifying third parties against
certain liabilities, mainly environmental obligations. We believe that judgments, if any, against us related to
such agreements would not have a material effect on our business or ﬁnancial condition.

Our accounting policy for product warranties is to accrue an estimated liability at the time the revenue is
recognized. We estimate future warranty claims based on claim experience and any additional anticipated
future costs on previously sold products. Our liability incorporates the cost of repairs including materials
consumed, labor and overhead amounts necessary to perform the repair and any costs associated with delivery
of the repaired product to the customer. Over 90% of our warranty liability relates to our Upholstery Group
where we generally warrant our products against defects from one to ﬁve years for fabric and padding and up
to a lifetime on certain mechanisms and frames. Considerable judgment is used in the determination of our
estimate. If actual costs were to differ signiﬁcantly from our estimates, we would record the impact of these
unforeseen costs in subsequent periods.

During ﬁscal 2010, our warranty liability remained ﬂat compared with ﬁscal 2009 in a period of declining
sales due to changes in our claims experience indicating that the span in which we receive warranty requests
is lengthening. While the volume of claims has decreased in the past year resulting in a decrease in material
costs, this decrease has been partially offset by higher shipping costs as we have modiﬁed how we ship parts
to our customers in order to increase customer satisfaction. In addition, the closure of our Tremonton, Utah
plant and service center now requires us to ship warranty items across the country from other plants.

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

(Amounts in thousands)

4/24/2010

4/25/2009

Balance as of the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals and other adjustments during the year . . . . . . . . . . . . . . . . . . . . . . .
Settlements during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14,394
14,222
(13,843)
$ 14,773

$ 14,334
15,640
(15,580)
$ 14,394

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12: Contingencies and Commitments

We have been named as a defendant in various lawsuits arising in the ordinary course of business and as a
potentially responsible party at certain environmental clean-up sites. Based on a review of all currently known
facts and our experience with previous legal and environmental matters, we have recorded expense in respect
of probable and reasonably estimable losses arising from legal and environmental matters and currently do not
anticipate any material additional loss for legal or environmental matters.

Note 13: Stock-Based Compensation

In ﬁscal 2005, our shareholders approved a long-term equity award plan. This plan allows for awards in the
form of performance awards, restricted shares and non-qualiﬁed stock options. Under this plan, the aggregate
number of common shares that may be issued through awards of any form is 5.0 million. Under this plan,
0.8 million shares remain available to be granted.

The long-term equity award plan provide grants to certain employees to purchase common shares at a
speciﬁed price, which may not be less than 100% of the current market price of the stock at the date of grant.
Granted options generally become exercisable at 25% per year, beginning one year from the date of grant for
a term of ﬁve years. Granted options outstanding under the former employee incentive stock option plan
remain in effect and have a term of ﬁve or ten years.

Stock option expense recognized in Selling, General and Administrative expense for the years ended April 24,
2010 and April 25, 2009 was $2.4 million and $1.2 million, respectively. We received $1.0 million in cash
during ﬁscal 2010 for exercises of stock options. There were no exercises of stock options in ﬁscal 2009.

Plan activity for stock options under the above plans is as follows:

Outstanding at April 25, 2009 . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at April 24, 2010 . . . . . . . . . . . . . . . . . . . . . .
Exercisable at April 24, 2010 . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares
(In Thousands)
2,431
1,360
(79)
(603)
(61)
3,048
1,363

Weighted
Average
Exercise
Price
$15.48
4.37
13.01
17.21
8.43
10.41
$15.87

Weighted
Average
Remaining
Contractual
Term (Years)
2.5

2.8
1.7

As of April 24, 2010, there was $2.4 million of total unrecognized compensation cost related to non-vested
stock option awards which is expected to be recognized over a weighted-average remaining vesting term of all
unvested awards of 1.5 years. During the year ended April 24, 2010, 0.4 million shares vested.

The fair value of each option grant was estimated using a Black-Scholes option-pricing model. Expected
volatility was estimated based on the historical volatility of our common shares. The average expected life
was based on the contractual term of the stock option and expected employee exercise and post-vesting
employment termination trends. The risk-free rate was based on U.S. Treasury issues with a term equal to the
expected life assumed at the date of grant. Turnover rate was estimated at the date of grant based on historical
experience. There were no stock options granted during ﬁscal 2009. The fair value of employee stock options
granted during the ﬁrst quarter of ﬁscal 2010 and ﬁscal 2008 were calculated using the following assumptions:

Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4/24/2010
1.5%
—
4.0
80.7%
3.0%

$2.59

4/26/2008
5.0%
3.8%
4.0
35.0%
2.5%

$2.88

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13: Stock-Based Compensation − (continued)

Under the long-term equity award plan, the Compensation Committee of the Board of Directors is also
authorized to award restricted common shares to certain employees. The shares are offered at no cost to the
employees, and the plan requires that all shares be held in an escrow account for a period of three to ﬁve
years. In the event of an employee’s termination during the escrow period, the shares are returned to the
company at no cost to the company. Restricted stock issued is recorded based on the market value of our
common shares on the date of the award and the related compensation expense is recognized over the vesting
period. Expense relating to the restricted shares recorded in Selling, General and Administrative expense was
$1.9 million during ﬁscal 2010 and ﬁscal 2009. The unrecognized compensation cost at April 24, 2010, was
$2.8 million and is expected to be recognized over a weighted-average remaining contractual term of all
unvested awards of 1.7 years.

The following table summarizes information about non-vested share awards as of and for the year ended
April 24, 2010:

Non-vested shares at April 25, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at April 24, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

717
477
(100)
(55)
1,039

Number of
Shares
(In Thousands)

Weighted
Average
Grant Date
Fair Value

$ 9.47
4.61
14.11
7.76
$ 6.88

In addition to options and restricted shares, under the long-term equity award plan, the Compensation
Committee of the Board of Directors is authorized to award common shares to certain employees based on the
attainment of certain ﬁnancial goals over a given performance period. The shares are offered at no cost to the
employees. In the event of an employee’s termination during the vesting period, the potential right to earn
shares under this program is generally forfeited. The cost of performance-based awards is expensed over the
vesting period. Expense of $0.9 million and $0.7 million was recognized during ﬁscal 2010 and 2009,
respectively, for the performance period ended April 26, 2008. There were 0.2 million shares issued for this
award by the company on April 24, 2010. No shares were issued during ﬁscal 2009.

Awards under our deferred stock unit plan for non-employee directors are accounted for as liability-based
awards; the compensation expense is initially measured and recognized based on the market price of our
common stock on the grant date. The liability is re-measured and adjusted at the end of each reporting period
until paid. For purposes of dividends and for measuring the liability, each deferred stock unit is the equivalent
of one common share. As of April 24, 2010, we had 0.2 million deferred stock units outstanding, of which
0.1 million were granted in both ﬁscal 2010 and ﬁscal 2009. Expense relating to the deferred stock units
recorded in Selling, General and Administrative expense was $2.4 million and $0.2 million during ﬁscal 2010
and ﬁscal 2009, respectively.

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14: Total Comprehensive Income/(Loss)

The components of total comprehensive income (loss) are as follows:

(Amounts in thousands)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):

Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of cash ﬂow hedge . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on marketable securities arising

during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net pension amortization and net actuarial gain (loss) . . . . . . .
Total other comprehensive income (loss) . . . . . . . . . . . . . . . . .
Total comprehensive income (loss) before allocation to

noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interest . . .
Comprehensive income (loss) attributable to La-Z-Boy

4/24/2010

4/25/2009

4/26/2008

$32,051

$(122,420)

$(13,649)

(365)
146

2,588
340
2,709

(175)
(723)

848
(21,974)
(22,024)

(117)
—

(2,642)
532
(2,227)

34,760
86

(144,444)
156

(15,876)
(369)

Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$34,846

$(144,288)

$(16,245)

Note 15: Segment Information

Our reportable operating segments are the Upholstery Group, the Casegoods Group and the Retail Group.
During the second quarter of ﬁscal 2008, we completed the sale of our Clayton Marcus operating unit and our
Pennsylvania House trade name. These businesses were presented as discontinued operations and prior
ﬁnancial information was restated for the change in composition of our Upholstery and Casegoods Groups.

Upholstery Group. The operating units in the Upholstery Group are La-Z-Boy, England and Bauhaus. This
group primarily manufactures and sells upholstered furniture to furniture retailers. Upholstered furniture
includes recliners and motion furniture, sofas, loveseats, chairs, ottomans and sleeper sofas.

Casegoods Group. The operating units in the Casegoods Group consist of two groups, one including
American Drew, Lea, and Hammary, the second being Kincaid. This group primarily sells manufactured or
imported wood furniture to furniture retailers. Casegoods product includes tables, chairs, entertainment centers,
headboards, dressers, accent pieces and some coordinated upholstered furniture.

Retail Group. The Retail Group consists of 68 company-owned La-Z-Boy Furniture Galleries(cid:5) stores in
eight primary markets. The Retail Group sells upholstered furniture to end consumers, as well as casegoods
and other accessories.

Our largest customer represents less than 4.0% of each of our segments’ sales.

The accounting policies of the operating segments are the same as those described in Note 1. Segment
operating income is based on proﬁt or loss from operations before interest expense, other income (expense)
and income taxes. Identiﬁable assets are cash and equivalents, notes and accounts receivable, net inventories,
net property, plant and equipment, and trade names. Our unallocated assets include deferred income taxes,
corporate assets (including a portion of cash and equivalents), and various other assets. Substantially all of our
long-lived assets were located within the U.S. Sales are attributed to countries on the basis of the customer’s
location.

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15: Segment Information − (continued)

(Amounts in thousands)
Sales

4/24/2010

4/25/2009

4/26/2008

Upholstery Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Sales . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 904,871
146,706
153,620
53,173
4,583
(83,741)
$1,179,212

Operating Income (Loss)

Upholstery Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of long-lived assets . . . . . . . . . . . . . . . . . . . .
Write-down of trade names . . . . . . . . . . . . . . . . . . . . . . .
Write-down of goodwill. . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Operating Income (Loss) . . . . . . . . . . . . . .

Depreciation and Amortization

Upholstery Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Depreciation and Amortization . . . . . . . . . .

Capital Expenditures

Upholstery Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Capital Expenditures . . . . . . . . . . . . . . . . .

Assets

$

$

$

$

$

$

96,392
(243)
(19,825)
104
(31,051)
(3,434)
—
—
—
41,943

13,817
1,770
3,308
2,078
4,273
25,246

7,088
1,468
106
692
1,632
10,986

$ 899,204
178,000
160,838
50,856
4,775
(66,999)
$1,226,674

$

35,947
554
(34,841)
(5,771)
(22,606)
(12,460)
(7,503)
(5,541)
(42,136)
$ (94,357)

$

$

$

$

12,062
2,042
4,704
1,688
3,646
24,142

11,866
170
1,922
200
1,467
15,625

$1,084,418
213,896
190,180
51,934
1,108
(90,595)
$1,450,941

$

70,661
10,151
(40,265)
(3,839)
(37,265)
(8,135)
—
—
(8,426)
$ (17,118)

$

$

$

$

13,211
2,370
4,910
1,609
3,223
25,323

10,245
392
5,910
2,125
8,714
27,386

Upholstery Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 344,776
73,393
50,984
26,961
112,704
$ 608,818

$ 303,898
92,487
54,380
26,014
72,428
$ 549,207

$ 428,177
107,338
107,835
26,152
97,355
$ 766,857

Sales by Country

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88%
9%
3%
100%

88%
9%
3%
100%

89%
8%
3%
100%

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15: Segment Information − (continued)

During ﬁscal 2009, the reporting of the warehouse operations was changed to the Upholstery Group from the
Retail Group. Since the warehouse operations were expanded to incorporate the warehousing, staging and
delivery of independent La-Z-Boy Furniture Galleries(cid:5) dealers’ products as well as for our Retail Group, the
reporting of those warehouses was more appropriately included in our La-Z-Boy wholesale operating unit
which is part of our Upholstery Group. As a result of this change, sales and operating proﬁt that were
previously recorded within our Upholstery Group for product sold to our Retail Group and still in inventory
were reversed. A one-time adjustment was recorded in ﬁscal 2009 that reduced inter-company sales for the
Upholstery Group by $12.1 million and reduced inter-company proﬁt by $3.3 million in ﬁscal 2009. A
corresponding offset was recorded in our Elimination sales line and our Corporate and Other operating loss
line, relating to the one-time adjustment, during ﬁscal 2009. The adjustments did not affect our consolidated
sales or operating results.

Note 16: Restructuring

During the past several years, we have committed to various restructuring plans to rationalize our
manufacturing facilities, consolidate warehouse distribution centers and close underperforming retail facilities.
With these restructuring plans, we have written-down various ﬁxed assets. Additionally, we recorded charges
for severance and beneﬁts, contract terminations and other transition costs related to relocating and closing
facilities.

In the fourth quarter of ﬁscal 2009, we committed to a restructuring plan to consolidate our casegoods
manufacturing plants in North Carolina related to our Kincaid and American Drew/Lea operations and to
convert another facility into a distribution center. The consolidation of these plants occurred in the ﬁrst quarter
of ﬁscal 2010. The conversion of the distribution center was completed at the end of ﬁscal 2010. In
connection with these activities, we incurred $3.0 million in restructuring charges since the inception of this
plan for severance and beneﬁts, write-down of ﬁxed assets and other restructuring charges. In ﬁscal 2010 we
recorded pre-tax restructuring charges of $2.8 million, covering severance and beneﬁts and other restructuring
costs in connection with this plan. We do not expect to incur any additional charges related to this
restructuring plan. During ﬁscal 2009, the plan resulted in restructuring charges of $0.2 million, covering
severance and beneﬁts and the write-down of ﬁxed assets. These changes are expected to result in annual cost
savings of approximately $5.0 million based on current volume, with some savings recognized in ﬁscal 2010.

During ﬁscal 2008, we committed to a restructuring plan to consolidate all of our North American cutting and
sewing operations in Mexico and transfer production from our Tremonton, Utah, plant, to our ﬁve remaining
La-Z-Boy branded upholstery manufacturing facilities. Our Utah facility ceased operations during the ﬁrst
quarter of ﬁscal 2009 and production was shifted to our remaining manufacturing facilities. At the end of
ﬁscal 2010, we had about 1,260 employees at our Mexican facility. We have transferred almost 90% of our
domestic fabric cutting and sewing operations to our Mexican facility. In connection with these activities, we
have recorded $9.6 million in restructuring charges, net of reductions in our liability since the inception of this
plan for severance and beneﬁts, write-down of certain ﬁxed assets, and other restructuring costs. We expect to
incur additional pre-tax restructuring charges of $0.3 million during ﬁscal 2011. During ﬁscal 2010, we had a
net reduction of estimated restructuring liabilities of $0.7 million, covering severance and beneﬁts under this
plan. The reductions in our liability for restructuring charges relate to a decrease in our estimated healthcare
costs for this plan. During ﬁscal 2009, the plan resulted in restructuring charges of $7.7 million, covering
severance and beneﬁts ($3.1 million) and other restructuring costs ($4.6 million). Other restructuring costs
include transportation, freight surcharges and other transition costs as we moved production to other plants.
These changes are expected to result in annual cost savings of approximately $20 million, once fully
completed.

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16: Restructuring − (continued)

During ﬁscal 2007 and 2008, several of our warehouse distribution centers were consolidated into larger
facilities and several underperforming stores were closed. In ﬁscal 2010, we had restructuring charges of
$1.3 million related to contract terminations. During ﬁscal 2009, we had restructuring charges of $1.6 million
related to contract terminations. We expect to incur approximately $0.7 million of additional charges in ﬁscal
2011.

Additionally, during ﬁscal 2009, we committed to restructuring plans to close a plant in Sherman, Mississippi,
related to our Bauhaus operations, to reduce our company-wide employment to be more in line with our sales
volume, and to close the operations of our La-Z-Boy U.K. subsidiary. The closure of the plant in Sherman,
Mississippi, was completed in the fourth quarter of ﬁscal 2009. The closure of our La-Z-Boy U.K. subsidiary
occurred in the second quarter of ﬁscal 2009. In connection with these plans, we recorded pre-tax
restructuring charges of $3.5 million in ﬁscal 2009, covering severance and beneﬁts ($1.2 million), the write-
down of inventory ($1.2 million) and the write-down of ﬁxed assets and other restructuring charges
($1.1 million). We do not expect to incur any additional charges related to these restructuring plans.

During ﬁscal 2009 we had reductions in our liability of $0.5 million relating to our restructuring plans in
ﬁscal 2007. The reductions in our liability for restructuring charges relate to a decrease in our estimated
healthcare costs for this plan.

As of April 24, 2010, we had a remaining restructuring liability of $0.8 million which is expected to be
settled in ﬁscal 2011.

For the current ﬁscal year, restructuring liabilities along with charges to expense, cash payments or asset
write-downs for all of our restructuring actions were as follows:

Fiscal 2010

(Amounts in thousands)
Severance and beneﬁt-related costs . . . . . . . . . . .
Contract termination costs . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring . . . . . . . . . . . . . . . . . . . . .

4/25/09
Balance
$2,022
530
—
$2,552

Charges to
Expense *
$ (189)
1,293
2,330
$3,434

Cash
Payments
or Asset
Write-Offs
$(1,341)
(1,531)
(2,330)
$(5,202)

*

Charges to expense include $0.2 million of non-cash charges for contract termination costs.

Fiscal 2009

(Amounts in thousands)
Severance and beneﬁt-related costs . . . . . . . . . . .
Fixed asset write-downs, net of gains. . . . . . . . . .
Contract termination costs . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restructuring . . . . . . . . . . . . . . . . . . . . .

4/26/08
Balance
$2,842
—
939
—
$3,781

Charges to
Expense **
$ 4,149
512
1,528
6,271
$12,460

Cash
Payments
or Asset
Write-Offs
$ (4,969)
(512)
(1,937)
(6,271)
$(13,689)

4/24/10
Balance
$492
292
—
$784

4/25/09
Balance
$2,022
—
530
—
$2,552

** Charges to expense include $1.8 million of non-cash charges for contract termination costs, ﬁxed asset

and inventory write-downs. Inventory write-downs of $1.2 million are included in ‘‘Other.’’

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17: Income Taxes

We evaluate our deferred taxes to determine if a valuation allowance is required. Accounting standards require
that we assess whether a valuation allowance should be established based on the consideration of all available
evidence using a ‘‘more likely than not’’ standard with signiﬁcant weight being given to evidence that can be
objectively veriﬁed. Our prior year losses present the most signiﬁcant negative evidence as to whether we
need to record a valuation allowance against our net deferred tax assets.

Due to the cumulative losses that we sustained in the U.S., we recorded a $50.1 million increase to the
valuation allowance against the majority of the deferred tax assets of the U.S. operations in ﬁscal 2009. We
recorded an increase to the U.S. federal valuation allowance of $0.3 million in ﬁscal 2010. Additionally, we
recorded a decrease of $2.5 million principally for the reversal of the ﬁscal 2009 valuation allowance for state
deferred tax assets for a U.S. legal entity that is now considered more likely than not to be realized. We
maintain a valuation allowance against the majority of our ﬁscal 2010 U.S. deferred tax assets due to the
existence of cumulative losses. We also maintain a valuation allowance against our Canadian deferred tax
assets due to the existence of cumulative losses. A summary of the valuation allowance by jurisdiction is as
follows:

Jurisdiction
(Amounts in thousands)

U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4/25/2009
Valuation
Allowance

$45,678
16,064
3,000
$64,742

Change

$

347
(2,509)
140
$(2,022)

4/24/2010
Valuation
Allowance

$46,025
13,555
3,140
$62,720

Realization of these deferred tax assets is dependent on generating sufficient future taxable income. Valuation
allowances of $46.5 million associated with certain U.S. federal and state deferred tax assets could be reduced
in the latter part of ﬁscal 2011 based on the level of taxable income generated in ﬁscal 2011.

The deferred tax assets associated with loss carry forwards and the related expiration dates are as follows:

(Amounts in thousands)

U.S. federal capital loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Various U.S. state net operating losses . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ 2,140
12,211
3,140

Expiration

Fiscal 2013
Fiscal 2011 − 2030
Fiscal 2030

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17: Income Taxes − (continued)

The primary components of our deferred tax assets and (liabilities) were as follows:

(Amounts in thousands)

4/24/2010

4/25/2009

Assets
Deferred and other compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidation of variable interest entities . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income tax − net operating losses, credits and other . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee beneﬁts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal capital loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,363
5,803
8,256
3,232
12,863
356
3,439
2,617
2,140
3,140
6,302
2,415
4,872
(62,720)
8,078

(1,964)
(3,086)
(265)
(5,315)
$ 2,763

Our effective tax rate differs from the U.S. federal income tax rate for the following reasons:

$ 15,328
5,647
12,541
2,364
14,031
147
413
3,014
2,063
3,000
6,539
2,676
4,712
(64,742)
7,733

(1,964)
(4,903)
(795)
(7,662)
71

$

(% of pre-tax income)

Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (reduction) in income taxes resulting from:

State income taxes, net of federal beneﬁt . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESOP beneﬁt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . .
Change in value of life insurance contracts . . . . . . . . . . . . . .
Miscellaneous items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4/24/2010

4/25/2009

4/26/2008

35.0%

35.0%

35.0%

1.9
—
—
(5.3)
(0.3)
(1.5)
(1.5)
28.3%

—
(10.6)
0.1
(47.5)
(0.7)
(1.7)
(0.4)
(25.8)%

6.2
—
1.9
3.6
3.6
(2.0)
0.2
48.5%

For our Asian operating units, we continue to reinvest the earnings and consequently do not record a deferred
tax liability relative to the undistributed earnings. We have reinvested approximately $4.4 million of the
earnings. The potential deferred tax attributable to these earnings is not currently estimable.

67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17: Income Taxes − (continued)

Income tax expense applicable to continuing operations consists of the following components (for the ﬁscal
years ended):

(Amounts in thousands)

4/24/2010

4/25/2009

4/26/2008

State

Federal − current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign − current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,992
—
920
(2,253)
2,451
(440)
$12,670

$(12,988)
33,596
(207)
3,933
(926)
1,704
$ 25,112

$ (652)
(5,816)
(68)
(600)
(4)
(74)
$(7,214)

Income from continuing operations before income taxes consists of the following (for the ﬁscal years ended):

(Amounts in thousands)

4/24/2010

4/25/2009

4/26/2008

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$37,858
6,863
$44,721

$(85,198)
(12,110)
$(97,308)

$(14,803)
(60)
$(14,863)

We adopted new accounting provisions relating to uncertain tax positions on April 29, 2007. As a result of the
adoption, we recorded a $3.4 million increase in our liability for uncertain tax positions and related interest
and penalties ($2.5 million net of tax), which was accounted for as a cumulative effect of an accounting
change, reducing the opening balance of retained earnings. As of April 24, 2010, we had a gross unrecognized
tax beneﬁt of $4.8 million related to uncertain tax positions in various jurisdictions. A reconciliation of the
beginning and ending balance of these unrecognized tax beneﬁts is as follows:

(Amounts in thousands)

Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . .
Additions:

4/24/2010

4/25/2009

4/26/2008

$6,019

$7,231

$ 9,628

Positions taken during the current year . . . . . . . . . . . . . . . . . . .
Positions taken during the prior year. . . . . . . . . . . . . . . . . . . . .

211
81

Reductions:

Positions taken during the current year . . . . . . . . . . . . . . . . . . .
Positions taken during the prior year. . . . . . . . . . . . . . . . . . . . .
Decreases related to settlements with taxing authorities . . . . . . . .
Reductions resulting from the lapse of the statute of limitations . .
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . .

—
(899)
(54)
(553)
$4,805

73
118

(38)
—
(908)
(457)
$6,019

337
303

—
(1,317)
(721)
(999)
$ 7,231

We recognize interest and penalties associated with uncertain tax positions in income tax expense. Accrued
interest and penalties decreased by $0.1 million during ﬁscal year 2010. We had approximately $0.7 million
and $0.8 million accrued for interest and penalties as of April 24, 2010, and April 25, 2009, respectively.

It is reasonably possible that various issues relating to the $0.5 million of the total gross unrecognized tax
beneﬁts totaling $4.8 million as of April 24, 2010, will be resolved within the next twelve months. If
recognized, $1.8 million of the total $4.8 million of unrecognized tax beneﬁts would decrease our effective tax
rate. The majority of this accrual for uncertain income tax positions relates to issues with various state taxing
authorities. The issues related to our U.S. federal return are minimal, relating primarily to when income and
deductions are recognized for tax purposes.

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17: Income Taxes − (continued)

Our U.S. federal income tax returns for ﬁscal years 2006 and subsequent are still subject to audit. In addition,
we conduct business in various states and their potential audit periods range from our ﬁscal years ended
April 28, 2001, to April 24, 2010.

Cash paid for taxes (net of refunds received) during the ﬁscal years ended April 24, 2010, April 25, 2009, and
April 26, 2008, was $(0.2) million, $(2.2) million and $2.6 million, respectively.

Note 18: Variable Interest Entities

Financial accounting standards require the ‘‘primary beneﬁciary’’ of a VIE to include the VIE’s assets,
liabilities and operating results in its consolidated ﬁnancial statements. In general, a VIE is a corporation,
partnership, limited-liability company, trust or any other legal structure used to conduct activities or hold
assets that either (a) has an insufficient amount of equity to carry out its principal activities without additional
subordinated ﬁnancial support, (b) has a group of equity owners that are unable to make signiﬁcant decisions
about its activities, or (c) has a group of equity owners that do not have the obligation to absorb losses or the
right to receive returns generated by its operations.

La-Z-Boy Furniture Galleries(cid:5) stores that are not operated by us are operated by independent dealers. These
stores sell La-Z-Boy manufactured products as well as various accessories purchased from approved La-Z-Boy
vendors. Most of these independent dealers have sufficient equity to carry out their principal operating
activities without subordinated ﬁnancial support. However, there are certain independent dealers that we have
determined may not have sufficient equity. In some cases we have extended credit beyond normal trade terms
to the independent dealers, made direct loans, entered into leases and/or guaranteed certain loans or leases.

We evaluate our transactions and relationships with our La-Z-Boy Furniture Galleries(cid:5) dealers on a quarterly
basis to determine if any of our independent dealers qualify as a variable interest entity and additionally
whether we are the primary beneﬁciary for any of the dealers who do qualify as a variable interest entity. We
also evaluate our current VIEs on a quarterly basis to determine if they no longer qualify as a variable interest
entity.

Based on the criteria for consolidation of VIEs, we have consolidated dealers where we were the primary
beneﬁciary based on the fair value of our variable interests. All of our consolidated VIEs were recorded at fair
value on the date we became the primary beneﬁciary. In ﬁscal 2010, all earnings and losses attributed to these
VIEs were recorded as Net income (loss) attributable to noncontrolling interests. Prior to ﬁscal 2010, all losses
of the VIEs in excess of their equity were recorded as Net income (loss) and all earnings of these VIEs to the
extent of recouping the losses were recorded as Net income (loss). Earnings in excess of losses were
attributed to equity owners of the dealers and were recorded as minority interest.

We had three consolidated VIEs during ﬁscal 2010 representing 29 stores and three consolidated VIEs during
ﬁscal 2009 representing 30 stores.

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18: Variable Interest Entities − (continued)

The table below shows information concerning our consolidated VIEs during ﬁscal 2010 and ﬁscal 2009:

(Amounts in thousands)
Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of

4/25/09
$16,220
9,794
$26,014

$ 5,983
3,085
$ 9,068

4/24/10
$17,873
9,088
$26,961

$ 8,925
3,040
$11,965

Year Ended

(Amounts in thousands)
Net sales, net of inter-company eliminations . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4/24/10
$53,173
(1,333)

4/25/09
$50,856
(8,665)

In addition to our consolidated VIEs, we had signiﬁcant interests in three independent La-Z-Boy Furniture
Galleries(cid:5) dealers for which we were not the primary beneﬁciary. Our total exposure to losses related to these
dealers was $3.0 million, which consists of past due accounts receivable as well as notes receivable, net of
reserves and collateral on inventory and real estate. We do not have any obligations or commitments to
provide additional ﬁnancial support to these dealers for ﬁscal 2011.

Note 19: Discontinued Operations

We had no discontinued operations during ﬁscal 2010 and ﬁscal 2009. During ﬁscal 2008, we completed the
sale of our Clayton Marcus operating unit and our Pennsylvania House trade name. These dispositions were
accounted for as discontinued operations.

The results of the discontinued operations for Clayton Marcus and Pennsylvania House for ﬁscal 2008 were as
follows:

(Amounts in thousands)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of discontinued operations, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4/26/2008

$22,622
(2,304)
(3,696)

In the Consolidated Statement of Cash Flows, the cash ﬂows of discontinued operations were not reclassiﬁed
for ﬁscal 2008.

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 20: Earnings per Share

A reconciliation of the numerators and denominators used in the computations of basic and diluted earnings
per share were as follows:

(Amounts in thousands)
Numerator (basic and diluted):

Year Ended

4/24/2010

4/25/2009

4/26/2008

Net income (loss) attributable to La-Z-Boy Incorporated . . . . .
Income allocated to participating securities . . . . . . . . . . . . . .
Dividends on participating securities. . . . . . . . . . . . . . . . . . .
Net income (loss) available to La-Z-Boy Incorporated . . . . .

$32,538
(616)
—
$31,922

$(122,672)
—
(70)
$(122,742)

Year Ended

$(13,926)
—
(184)
$(14,110)

(Amounts in thousands)
Denominator:

4/24/2010

4/25/2009

4/26/2008

Basic common shares (based upon weighted average) . . . . . . .

51,533

51,460

51,408

Add:

Stock option dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted common shares . . . . . . . . . . . . . . . . . . . . . . . . . . .

199
51,732

—
51,460

—
51,408

Share-based payment awards that entitle their holders to receive non-forfeitable dividends prior to vesting are
considered participating securities. We granted restricted stock awards that contain non-forfeitable rights to
dividends on unvested shares; such stock awards are considered participating securities. As participating
securities, the unvested shares are required to be included in the calculation of our basic earnings per common
share, using the ‘‘two-class method.’’ The two-class method of computing earnings per common share is an
allocation method that calculates earnings per share for each class of common stock and participating security
according to dividends declared and participation rights in undistributed earnings. Unvested restricted stock
awards were previously included in our diluted share calculation using the treasury stock method. Due to their
anti-dilutive effect, we did not allocate any loss to the unvested stock awards (participating securities) for the
years ended April 25, 2009 and April 26, 2008.

The effect of options to purchase 1.7 million, 2.4 million and 2.7 million shares for the years ended April 24,
2010, April 25, 2009, and April 26, 2008, respectively, with a weighted average exercise price of $15.08,
$15.48 and $15.51, respectively, were excluded from the diluted share calculation because the exercise prices
of these options were higher than the weighted average share price for the ﬁscal years and would have been
anti-dilutive.

Note 21: Fair Value Measurements

Accounting standards require the categorization of ﬁnancial assets and liabilities, based on the inputs to the
valuation technique, into a three-level fair value hierarchy. The various levels of the fair value hierarchy are
described as follows:

•

•

•

Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted market
prices for identical assets and liabilities in an active market that we have the ability to access.

Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets that
are not active or model inputs that are observable for substantially the full term of the asset or
liability.

Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques
that require inputs that are both unobservable and signiﬁcant to the overall fair value measurement.

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 21: Fair Value Measurements − (continued)

Accounting standards require the use of observable market data, when available, in making fair value
measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level
within which the fair value measurement is categorized is based on the lowest level input that is signiﬁcant to
the fair value measurement.

In addition to assets and liabilities that are recorded at fair value on a recurring basis, we are required to
record assets and liabilities at fair value on a non-recurring basis. Non-ﬁnancial assets such as trade names
and long-lived assets are measured at fair value when there is an indicator of impairment and recorded at fair
value only when an impairment is recognized. We adopted the accounting standards for non-ﬁnancial assets
and liabilities as of the beginning of ﬁscal 2010. We did not measure any material assets or liabilities at fair
value on a nonrecurring basis during ﬁscal 2010.

The following table presents the fair value hierarchy for those assets measured at fair value on a recurring
basis as of April 24, 2010:

(Amounts in thousands)
Assets

Fair Value Measurements

Level 1

Level 2

Level 3

Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . .

$8,641

$2,338

$ —

Liabilities

Interest rate swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
$8,641

(577)
$1,761

—
$ —

We hold available-for-sale marketable securities to fund future obligations of one of our non-qualiﬁed
retirement plans. The fair value measurements for our available-for-sale securities are based upon quoted
prices in active markets, as well as through broker quotes and independent valuation providers, multiplied by
the number of shares owned exclusive of any transaction costs and without any adjustments to reﬂect
discounts that may be applied to selling a large block of the securities at one time.

We entered into a three year interest rate swap agreement in order to ﬁx a portion of our ﬂoating rate debt.
The fair value of the swap agreement was measured as the present value of all expected future cash ﬂows
based on the LIBOR-based swap yield curve as of the date of the valuation and considered counterparty non-
performance risk. These assumptions can be derived from observable data or are supported by observable
levels at which transactions are executed in the marketplace.

Note 22: Hedging Activities

During ﬁscal 2009, we entered into an interest rate swap agreement which we accounted for as a cash ﬂow
hedge. This swap hedges the interest on $20 million of ﬂoating rate debt. Under the swap, we are required to
pay 3.33% through May 16, 2011 and we receive three month LIBOR from the counterparty. This offsets the
three month LIBOR component of interest which we are required to pay under $20 million of ﬂoating rate
debt. Interest under this debt as of April 24, 2010, was three month LIBOR plus 1.75%.

We executed this interest rate cash ﬂow hedge in order to mitigate our exposure to variability in cash ﬂows
for the future interest payments on a designated portion of borrowings. The gains and losses are reﬂected in
accumulated other comprehensive loss (with an offset to the hedged item in other long-term liabilities) until
the hedged transaction impacts our earnings. Our interest rate swap agreement was tested for ineffectiveness
during the ﬁrst quarter of ﬁscal 2009 and was determined to be effective. Our agreement also qualiﬁed for the
‘‘short cut’’ method of accounting. We believe that our agreement continues to be effective and therefore no
gains or losses have been recorded in our earnings.

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 22: Hedging Activities − (continued)

For ﬁscal 2010, we deferred gains of $0.1 million into accumulated other comprehensive loss. For ﬁscal 2009,
we deferred losses of $0.7 million, into accumulated other comprehensive loss. The fair value of our interest
rate swap at April 24, 2010, and at April 25, 2009, was $0.6 million and $0.7 million, respectively, which was
included in other long-term liabilities.

Note 23: Income from Continued Dumping and Subsidy Offset Act

We recorded $4.4 million, $8.1 million and $7.1 million as Income from the Continued Dumping and Subsidy
Offset Act, net of legal expenses, during ﬁscal 2010, ﬁscal 2009, and ﬁscal 2008, respectively, from the
receipt of funds under the Continued Dumping and Subsidy Offset Act (‘‘CDSOA’’) of 2000 in connection
with the case involving wooden bedroom furniture from China. The CDSOA provides for distribution of
monies collected by U.S. Customs and Border Protection from anti-dumping cases to domestic producers that
supported the anti-dumping petition.

73

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures, as such term is deﬁned in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and
procedures are effective to ensure that information required to be disclosed in our periodic reports ﬁled under
the Exchange Act is recorded, processed, summarized and reported within the time periods speciﬁed by the
Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting. Our management’s report on
internal control over ﬁnancial reporting is included in Item 8 of this report.

Attestation Report of the Registered Public Accounting Firm. Our registered public accounting ﬁrm’s
attestation report on our internal control over ﬁnancial reporting is included in Item 8 of this report.

Changes in Internal Control over Financial Reporting. There were no changes in our internal controls over
ﬁnancial reporting during our fourth quarter of ﬁscal 2010 that have materially affected, or are reasonably
likely to materially affect, our internal control over ﬁnancial reporting.

ITEM 9B. OTHER INFORMATION

Replacement Change in Control Agreements

On June 11, 2010 the board of directors approved and adopted replacement change-in-control agreements for
our named executive officers. The material changes from the prior agreements are:

•

•

•

The protection period and the beneﬁts continuation period are reduced from three years to two years
for each participant except the chief executive officer.

The severance payout is reduced from three to two times earnings for each participant except the
chief executive officer.

The new agreements allow the participant to receive either the full agreed upon amount or a reduced
amount, depending on which produces larger after-tax payments to the participant.

Long-Term Equity Award Plan Amendment

On June 11, 2010 the board of directors approved an amendment to the La-Z-Boy Incorporated 2004 Long-
term Equity Award Plan prohibiting future awards under the plan if a new equity award plan is approved by
shareholders.

La-Z-Boy Incorporated Severance Plan for Named Executive Officers

On June 11, 2010 the board of directors approved and adopted a severance plan for our named executive
officers. The plan provides that in the case of a termination of employment without cause, we will, for a
period of two years (for the chief executive officer) or one year (for all other named executive officers), pay
the participant a monthly amount equal to his base pay at the time his employment terminated. In addition,
during that same time period, we will pay the participant the amount by which his COBRA premiums exceed
the health insurance premium the company charges its employees. Payments under the plan will be reduced
by any compensation the participant receives from a subsequent employer during the severance period. We
may reduce or recover severance payments if we later discover a participant’s actions that would have
constituted cause for termination.

The foregoing is only a summary of the agreements, amendment, and new plan. Please refer to the copies of
the agreements, amendment, and new plan ﬁled as exhibits to this report for more detailed information.

74

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

We have adopted a Code of Business Conduct, which applies to all of our officers, directors, and employees.
A current copy of the code is posted at our website ‘‘http://www.la-z-boy.com’’.

We provide some information about our executive officers in Part I of this report, under the heading
‘‘Executive Officers of Registrant.’’ All other information required to be reported under this item will be
included in our proxy statement for our 2010 annual meeting, and all of that information is incorporated in
this item by reference.

ITEM 11. EXECUTIVE COMPENSATION.

All information required to be reported under this item will be included in our proxy statement for our 2010
annual meeting, and all of that information is incorporated in this item by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.

The information required to be reported under Item 201(d) of Regulation S-K is contained in Item 5 of this
report. All other information required to be reported under this item will be included in our proxy statement
for our 2010 annual meeting, and all of that information is incorporated in this item by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.

All information required to be reported under this item will be included in our proxy statement for our 2010
annual meeting, and all of that information is incorporated in this item by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

All information required to be reported under this item will be included in our proxy statement for our 2010
annual meeting, and all of that information is incorporated in this item by reference.

75

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are ﬁled as part of this report:

(1) Financial Statements:

Consolidated Statement of Operations for each of the three ﬁscal years ended April 24, 2010,

April 25, 2009 and April 26, 2008

Consolidated Balance Sheet at April 24, 2010, and April 25, 2009

Consolidated Statement of Cash Flows for the ﬁscal years ended April 24, 2010, April 25,

2009, and April 26, 2008

Consolidated Statement of Changes in Shareholders’ Equity for the ﬁscal years ended

April 24, 2010, April 25, 2009, and April 26, 2008

Notes to Consolidated Financial Statements

Management’s Report to Our Shareholders

Report of Independent Registered Public Accounting Firm

(2) Financial Statement Schedules:

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

Schedule II — Valuation and Qualifying Accounts for each of the three ﬁscal years in the

period ended April 24, 2010

The Report of Independent Registered Public Accounting Firm and Schedule II immediately

following this item.

All other schedules are omitted because they are not applicable or not required because the

required information is included in the ﬁnancial statements or notes thereto.

Note: For all exhibits incorporated by reference, the SEC ﬁle number is 1-9656. Exhibits not incorporated by
reference are being ﬁled or furnished with this report.

(3) Exhibits:

The following exhibits are ﬁled or furnished as part of this report:

Exhibit
Number

(2)
(3.1)

(3.2)

(3.3)

(3.4)

(4.1)

Description

Not applicable
La-Z-Boy Incorporated Restated Articles of Incorporation (Incorporated by reference to an
exhibit to Form 10-Q for the quarter ended October 26, 1996)

Amendment to Restated Articles of Incorporation (Incorporated by reference to an exhibit to
Form 10-K/A ﬁled September 27, 1999)

La-Z-Boy Incorporated Amendment to Restated Articles of Incorporation effective August 22,
2008 (Incorporated by reference to an exhibit to Form 10-Q for the quarter ended October 25,
2008)

La-Z-Boy Incorporated Amended and Restated Bylaws (as of January 18, 2010) (Incorporated by
reference to an exhibit to Form 8-K ﬁled January 20, 2010)

Credit Agreement dated as of February 6, 2008, among La-Z-Boy Incorporated, certain of its
subsidiaries, the lenders named therein, and Wachovia Capital Finance Corporation (Central), as
administrative agent for the lenders (Incorporated by reference to an exhibit to Form 8-K ﬁled
February 12, 2008)

76

Exhibit
Number

(4.2)

(4.3)

(9)
(10.1)*

(10.2)*

(10.3)*

(10.4)*

(10.5)*

(10.6)*

(10.7)*

(10.8)*

(10.9)*

(10.10)*

(10.11)*

(10.12)*

Description

First Amendment to Credit Agreement dated April 1, 2008 among La-Z-Boy Incorporated, certain
of its subsidiaries, the lenders named therein, and Wachovia Capital Finance Corporation
(Central), as administrative agent for the lenders (Incorporated by reference to an exhibit to
Form 10-Q for the quarter ended July 25, 2009)
Second Amendment to Credit Agreement dated July 13, 2009 among La-Z-Boy Incorporated,
certain of its subsidiaries, the lenders named therein, and Wachovia Capital Finance Corporation
(Central), as administrative agent for the lenders (Incorporated by reference to an exhibit to
Form 10-Q for the quarter ended July 25, 2009)
Not applicable
La-Z-Boy Incorporated Restricted Stock Plan for Non-Employee Directors, amended and restated
through August 12, 2003 (Incorporated by reference to an exhibit to deﬁnitive proxy statement
dated July 9, 2003)
La-Z-Boy Incorporated Deferred Stock Unit Plan for Non-Employee Directors (Incorporated by
reference to an exhibit to Form 10-Q for the quarter ended October 25, 2008)
La-Z-Boy Incorporated 1997 Incentive Stock Option Plan (Incorporated by reference to an
exhibit to deﬁnitive proxy statement dated June 27, 1997)

Form of Change in Control Agreement in effect for: Kurt L. Darrow. Similar agreements are in
effect for Steven M. Kincaid, Louis M. Riccio, Jr., Otis Sawyer and Mark S. Bacon, Sr., expect
the provisions related to the periods for protection and beneﬁts are twenty-four months.
Form of Indemniﬁcation Agreement (covering all directors, including employee-directors)
(Incorporated by reference to an exhibit to Form 8-K, ﬁled January 22, 2009)
2005 La-Z-Boy Incorporated Executive Deferred Compensation Plan, amended and restated as of
November 18, 2008 (Incorporated by reference to an exhibit to Form 10-Q for the quarter ended
October 24, 2009)
La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan as amended through June 13, 2008
(Incorporated by reference to an exhibit to Form 10-K for the ﬁscal year ended April 26, 2008)
First 2009 Amendment to La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan effective
June 11, 2009 (Incorporated by reference to an exhibit to Form 10-K for the ﬁscal year ended
April 25, 2009)
Second 2009 Amendment to La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan
effective June 15, 2009 (Incorporated by reference to an exhibit to Form 10-K for the ﬁscal year
ended April 25, 2009)
First 2010 Amendment to La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan effective
June 11, 2010
Sample award agreement under the 2004 Long-Term Equity Award Plan (Incorporated by
reference to an exhibit to Form 10-K for the ﬁscal year ended April 29, 2006)

Executive Incentive Compensation Plan — Description as of June 16, 2006 (Incorporated by
reference to an exhibit to Form 10-K for the ﬁscal year ended April 29, 2006)

(10.13)*

La-Z-Boy Incorporated Severance Plan for Named Executive Officers

(11)

(12)

(13)

(14)
(16)
(18)

Statement regarding computation of per share earnings (See Note 20 to the Consolidated
Financial Statements included in Item 8)

Not applicable

Not applicable

Not applicable
Not applicable
Not applicable

77

Exhibit
Number

(21)
(22)
(23)
(24)
(31.1)
(31.2)
(32)
(33)
(34)
(35)
(99)
(100)
(101)

Description

List of subsidiaries of La-Z-Boy Incorporated
Not applicable
Consent of PricewaterhouseCoopers LLP (EDGAR ﬁling only)
Not applicable
Certiﬁcations of Chief Executive Officer pursuant to Rule 13a-14(a)
Certiﬁcations of Chief Financial Officer pursuant to Rule 13a-14(a)
Certiﬁcations pursuant to 18 U.S.C. Section 1350
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable

*

Indicates a management contract or compensatory plan or arrangement under which a director or
executive officer may receive beneﬁts.

78

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

To the Board of Directors of La-Z-Boy Incorporated:

Our audits of the consolidated ﬁnancial statements and of the effectiveness of internal control over
ﬁnancial reporting referred to in our report dated June 14, 2010 appearing in this Form 10-K also included an
audit of the ﬁnancial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this
ﬁnancial statement schedule presents fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated ﬁnancial statements.

PricewaterhouseCoopers LLP
Detroit, Michigan
June 14, 2010

79

LA-Z-BOY INCORPORATED AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)

Additions

Balance at
Beginning of
Year

Charged to
Costs and
Expenses

Charged to
Other
Accounts

Deductions

Balance at
End of Year

Description

Allowance for doubtful

accounts, deducted from
accounts and notes
receivable in the balance
sheet:

April 24, 2010 . . . . . . .
April 25, 2009 . . . . . . .
April 26, 2008 . . . . . . .

$32,694
20,743
15,577

$ 6,535
28,123(a)
8,550

$

—
—

$(18,029)(c)
(16,172)(c)
(3,384)(c)

$21,200
32,694
20,743

Allowance for deferred tax

assets:

April 24, 2010 . . . . . . .
April 25, 2009 . . . . . . .
April 26, 2008 . . . . . . .

$64,742
12,119
11,520

$ 5,830
52,623
3,449

$ —
—
(2,850)(b)

$ (7,852)
—
—

$62,720
64,742
12,119

Includes $2,869 related to accounts receivable from a VIE that was deconsolidated in ﬁscal 2009.

(a)
(b) Allowance of companies disposed of.
(c) Deductions, representing uncollectible accounts written off less recoveries of accounts receivable written

off in prior years.

80

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

DATE: June 14, 2010

LA-Z-BOY INCORPORATED

BY /s/ Kurt L. Darrow

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below, as of
June 14, 2010, by the following persons on behalf of the Registrant and in the capacities indicated.

/s/ J.W. Johnston
J.W. Johnston
Chairman of the Board of Directors

/s/ K.L. Darrow
K.L. Darrow
President and Chief Executive Officer, Director

/s/ R.M. Gabrys
R.M. Gabrys
Director

/s/ H.G. Levy
H.G. Levy
Director

/s/ W.A. McCollough
W.A. McCollough
Director

/s/ J.E. Kerr
J.E. Kerr
Director

/s/ E.J. Holman
E.J. Holman
Director

/s/ M.L. Mueller
M.L. Mueller
Vice President, Corporate Controller and Chief
Accounting Officer

/s/ J.H. Foss
J.H. Foss
Director

/s/ D.K. Hehl
D.K. Hehl
Director

/s/ R.E. Lipford
R.E. Lipford
Director

/s/ N.R. Qubein
N.R. Qubein
Director

/s/ J.L. Thompson
J.L. Thompson
Director

/s/ J.L. Gurwitch
J.L. Gurwitch
Director

/s/ L.M. Riccio, Jr.
L.M. Riccio, Jr.
Senior Vice President, Chief Financial Officer

81

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W. Alan McCollough 
Former Chairman and CEO, Circuit City Stores, Inc. 
Director of The Goodyear Tire & Rubber Company 
Director of VF Corporation

Nido R. Qubein 
President, High Point University 
Chairman, Great Harvest Bread Company 
Director of BB&T Corporation

Jack L. Thompson 
Chairman of the Board, The Plastics Group, Inc. 
Acting CEO, Union Corrugating Company

OTHER EXECUTIVES

R. Jack Richardson, Jr. 
President, American Drew, Lea and Hammary

James A. Wiygul 
President, Bauhaus

BOARD OF DIRECTORS

James W. Johnston 
Chairman of the Board, La-Z-Boy Incorporated

David K. Hehl 
Member, Cooley Hehl Wohlgamuth & Carlton, PLLC 

Edwin J. Holman 
Chairman of the Board, The Pantry, Inc. 
Chairman of the Board, RGIS International

Janet E. Kerr 
Professor of Law and Executive Director, The Palmer 
Center for Entrepreneurship and the Law at  
Pepperdine University School of Law 
Director of CKE Restaurants, Inc. 
Director of Tilly’s, Inc.

Dr. H. George Levy 
Otorhinolaryngologist

Rocque E. Lipford 

Greg A. Brinks 
VP and Treasurer

J. Douglas Collier 

Daniel F. Deland 

James P. Klarr 
Secretary and Corporate Counsel

Margaret L. Mueller 
VP, Corporate Controller and Assistant Treasurer

Steven P. Rindskopf 
VP Corporate Human Resources

R. Rand Tucker 
Assistant Secretary and Corporate Counsel

Kurt L. Darrow 

La-Z-Boy Incorporated

John H. Foss 
Retired Manufacturing Financial Executive 
Director of United Bancorp, Inc.

Richard M. Gabrys 
Retired Vice Chairman of Deloitte & Touche LLP 
Director of CMS Energy Corp. 
Director of Massey Energy Company 
Director of TriMas Corporation

Janet L. Gurwitch 
Chairman of Gurwitch Consulting Group, LLC

CORPORATE EXECUTIVES

Kurt L. Darrow 

Mark S. Bacon, Sr. 

Steven M. Kincaid 
Senior VP and President Casegoods and  
President, Kincaid

Louis M. Riccio, Jr. 

Otis S. Sawyer 
Senior VP and President Non-Branded Upholstery 
and President, England, Inc.

INVESTOR INFORMATION

Shareholder Services 
Inquiries regarding the Dividend Reinvestment Plan, 
dividend payments, stock transfer requirements, address 
changes and account consolidations should be addressed to 
the company’s stock transfer agent and registrar:

American Stock Transfer & Trust Company
59 Maiden Lane 
New York, NY 10038 
212-936-5100 
800-937-5449 
www.amstock.com/main

©2010 La-Z-Boy Incorporated

Stock Exchange 
La-Z-Boy Incorporated common shares are traded on the 
New York Stock Exchange under the symbol LZB.

Corporate Headquarters 
La-Z-Boy Incorporated
1284 North Telegraph Road 
Monroe, MI 48162-3390 
734-242-1444 
www.la-z-boy.com

Investor Relations and Financial Reports  
We will provide the Form 10-K to any shareholder who 
requests it. Security analysts, shareholders and investors 
may request information from:

Investor Relations 
La-Z-Boy Incorporated
1284 North Telegraph Road 
Monroe, MI 48162-3390 
investorrelations@la-z-boy.com 
734-241-2438

Except as noted, all designated trademarks and service marks utilized in this report are owned by La-Z-Boy Incorporated or its subsidiar y companies. 

La-Z-Boy Incorporated  •  2010 ANNUAL REPORT

 
 
 
1284 North Telegraph Road 
Monroe, Michigan, 48162-3390 USA

COMPANIES ONLINE

LA-Z-BOY.COM

AMERIC ANDRE W.COM

BAUHAUSUSA.COM

ENGLANDFURNITURE.COM

HAMMARY.COM

KINCAIDFURNITURE.COM

LEAFURNITURE.COM

LAZBOYKIDZ.COM

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