La-Z-Boy Incorporated Annual Report 2019

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FY2019 Annual Report · La-Z-Boy Incorporated

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2019

A N N U A L R E P O R T

One La-Z-Boy Drive

Monroe, Michigan 48162

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Junction Pyramid Bar by Hammary

Briar Sectional by Joybird

“In our tenth decade of business, our flexibility and agility allow us to embrace
continued and inevitable change within the furniture industry, ensuring we
maintain a leadership position for years to come.”

Five-Year Sales and Operating Margin

8.3%

8.2%

8.9%

8.8%

8.2%

7.8%

7.4%

$1,425

$1,525

$1,520

$1,584

$1,745

2015

2016*

2017

2018

2019

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

$1,800

$1,700

$1,600

$1,500

$1,400

$1,300
FY

Sales (in Millions)

GAAP Operating Margin

Non-GAAP Operating Margin**

*Fiscal 2016 includes 53 weeks. All other years presented include 52 weeks.
** See Reconciliation of GAAP to Non-GAAP Financial Measures at the end of this Annual Report on page 98.

Kurt L. Darrow
(Chairman)
Chairman, President and
Chief Executive Officer,
La-Z-Boy Incorporated

W. Alan McCollough
(Lead Director)
Former Chairman and
Chief Executive Officer,
Circuit City Stores, Inc.

BOARD OF DIRECTORS

Sarah M. Gallagher
Executive Advisor,
FitForCommerce, LLC

Edwin J. Holman
Former Chairman,
RGIS International

Janet E. Kerr
Vice Chancellor,
Pepperdine University

Michael T. Lawton
Former Executive Vice President
and Chief Financial Officer,
Domino’s Pizza, Inc.

H. George Levy, MD
Otorhinolaryngologist

Lauren B. Peters
Executive Vice President
and Chief Financial Officer,
Foot Locker, Inc.

Dr. Nido R. Qubein
President,
High Point University

CORPORATE AND OTHER EXECUTIVES

Kurt L. Darrow
Chairman, President and
Chief Executive Officer

Melinda D. Whittington
Senior Vice President and
Chief Financial Officer

Darrell D. Edwards
Senior Vice President and
Chief Operating Officer

Otis S. Sawyer
Senior Vice President and President
La-Z-Boy Portfolio Brands

Lindsay A. Barnes
Vice President, Corporate Controller
and Chief Accounting Officer

David B. Behen
Vice President and
Chief Information Officer

Greg A. Brinks
Vice President and Treasurer

Aaron T. Brown
Vice President Strategy
and Analytics

Terrence J. Linz
President La-Z-Boy Retail Division

Stephen K. Krull
Vice President, General Counsel
and Secretary

Dale E. Ulman
Vice President Tax

Katherine E. Vanderjagt
Vice President and Chief Human
Resources Officer

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, LLC

6201 15th Avenue
Brooklyn, NY 11219
877-573-3955
www.astfinancial.com

Stock Exchange
La-Z-Boy Incorporated common
shares are traded on the New
York Stock Exchange under
the symbol LZB.

World Headquarters
La-Z-Boy Incorporated
One La-Z-Boy Drive
Monroe, MI 48162
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.
Analysts, shareholders and investors
may request information from:

Investor Relations
La-Z-Boy Incorporated

One La-Z-Boy Drive
Monroe, MI 48162
investorrelations@la-z-boy.com
734-241-2438

©2019 La-Z-Boy Incorporated
Except as noted, all designated trademarks and service marks utilized in this
report are owned by La-Z-Boy Incorporated or its subsidiary companies.

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SUCCESSBracken, Marcos and Oxley lamps by La-Z-Boy

Dear Stakeholder,
Fiscal 2019 was an exciting and
productive year for La-Z-Boy Incorporated.
We further strengthened our well-established
manufacturing platform; delivered excellent
Retail performance; acquired the Arizona-based
La-Z-Boy Furniture Galleries® stores, the highest-
performing operation in the La-Z-Boy store network; more
significantly solidified our position in the e-commerce space
with our acquisition of Joybird, a premier direct-to-consumer
retailer and manufacturer of upholstered furniture; and set
the stage for ongoing long-term growth. In our tenth decade
of business, our flexibility and agility allow us to embrace
continued and inevitable change within the furniture industry,
ensuring we maintain a leadership position for years to
come. And, with a corporate mission of turning houses into
homes, we are mindful of our responsibility to nurture the
communities in which we operate as we strive to create
and return value to all stakeholders. We closed fiscal 2019
delivering strong operating margin performance and a 10%
sales increase to $1.75 billion. Additionally, we generated
$151 million in cash from operating activities and returned
a combined total of $46 million to shareholders through
dividends and share purchases.

With competition intensifying across the industry, we are
capitalizing on a solid foundation that leverages a strong
brand portfolio, a decades-long focus on innovation, a
world-class supply chain, retail excellence, and multi-channel
distribution, including more than 4,100 doors. And, our
strong financial position will allow us to make strategic
investments to drive growth across our entire enterprise,
fuel new ventures to tap into new markets, and weather
macroeconomic changes.

Southbury Collection by American Drew

Malibu Sofa by England

Shareholders’ Meeting

Tuesday, August 27, 2019
8:00 AM (Eastern)

Westin Detroit Metropolitan Airport

Wright Room, 2501 Worldgateway Place

Detroit, Michigan USA

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Five-Year Performance
($ in Millions)

$388**

SALES GROWTH

$39**

GAAP OPERATING
INCOME GROWTH

32%
SHARE PRICE INCREASE

$212
TOTAL SHARE
PURCHASES

$627
TOTAL CASH GENERATED
FROM OPERATING
ACTIVITIES

$99
TOTAL DIVIDENDS PAID
TO SHAREHOLDERS

$41**

NON-GAAP* OPERATING
INCOME GROWTH

See Reconciliation of GAAP to Non-GAAP Financial Measures at the end of this
Annual Report on page 98.

Five-year sales and opera.ting income growth is calculated as the sales / operating
income for fiscal 2019 less the sales / operating income for fiscal 2014.

INVESTING FOR A
PROSPEROUS FUTURE

The La-Z-Boy Furniture Galleries® Network

Today’s consumers expect an omni-channel offering,
and we are proud to provide them with a myriad of
options to research the La-Z-Boy branded product
online, utilize digital and in-person design resources, and
make purchases, either through an online channel —
La-Z-Boy.com, Wayfair or Amazon — or through a brick-
and-mortar site at a La-Z-Boy Furniture Galleries® store
or via a network of more than 2,400 other locations.
And, because having a strong omni-channel presence
is paramount to winning in this market, we continue
to invest in the vibrant La-Z-Boy Furniture Galleries®
store network where our core consumer demonstrates
a preference to shop. This past year, the company and its
independent dealer base expanded and strengthened the
quality of the La-Z-Boy Furniture Galleries® footprint across
North America with ongoing consumer-facing investments,
as the network continues to deliver improved performance.
And, we plan to extend our reach with additional locations
to provide consumers with a flagship La-Z-Boy Furniture
Galleries® store experience, including a knowledgeable and
professional sales staff, free Design Services, and our full
array of product and customization options.

Bexley Sofa by La-Z-Boy

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GROWTHCompany-Owned Retail

The company-owned La-Z-Boy Furniture
Galleries® stores delivered exceptional
performance for the fiscal year, achieving
5.7% delivered same-store sales growth
and nearly doubling operating profit.
This performance is a result of outstanding
execution at the store level and consumers
responding favorably to our product and
service offerings, including Design Services
and the ability to order custom furniture
with quick delivery.

We are also thrilled with the acquisition of
the Arizona La-Z-Boy Furniture Galleries®
stores, which further strengthened our
integrated retail model where we earn
a combined wholesale/retail profit.
A growing and vibrant market, Arizona has
one of the highest population growth rates
in the nation, and this group of stores is
the best-performing across the La-Z-Boy
Furniture Galleries® store network.
These stores have not missed a beat
since we acquired them, and our Retail
leadership team is working alongside the
Arizona team to better understand their
highly successful approach and leverage
those practices that are applicable across
the rest of the network.

$180

$150

$120

$90

$70

$60

$15

$30

$52

Capital Allocation
($ in Millions)

$16

$36

$22

$57

$77

$48

$23

$25

$18

$44

$36

$20

$21

$36

$0
FY

2015

2016*

2017

2018

2019

Cash used for Acquisitions

Capital Expenditures

Dividends

Share Purchases

*Fiscal 2016 includes 53 weeks. All other years include 52 weeks.

La-Z-Boy New Concept Store, Canton, Michigan

Marietta Chair by La-Z-Boy

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Eve Chair and Dixie Sofa by La-Z-Boy

Kristen Bell

As one of the most-recognized

brands in the industry, ongoing
investment in that brand equity is
vital in what has become a crowded

marketplace. In May, we introduced
Kristen Bell as our new brand ambassador
for the re-launch of the Live Life Comfortably®
campaign across multiple channels, including
TV, digital, print, La-Z-Boy social and web
platforms, and throughout the La-Z-Boy
Furniture Galleries® stores. We are delighted
with the initial consumer response, with
Kristen bringing a new energy to La-Z-Boy
with her vibrant personality, warmth, style,
quick wit, and focus on home and family.
With a robust social media following,
particularly among younger consumers,
Kristen is already bringing new eyes to the
brand as she highlights the wide variety of
comfortable, stylish and quality products
and services offered by La-Z-Boy.

“When I found out that La-Z-Boy
has really cute furniture and that
it is comfortable —
I thought, it’s kind of a match
made in heaven.”

-Kristen Bell

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LEGACYWorld-Class Supply Chain

Our premier global supply chain blends cost efficiency
and flexibility, providing for mass customization (some 175
frame styles with 900 fabric and leather covers) and speed
for the La-Z-Boy branded product to thousands of retail
partners and end consumers. Future strategic investments
across the supply chain platform, both domestically and
internationally, will ensure it remains the most capable and
nimble in the industry to continue to offer innovative and
stylish products with a value and quality quotient.

Long rooted in our heritage, innovation is core to
our identity. It adds value and differentiation in the
marketplace, and we are proud of our industry-leading
status. What started with the iconic recliner has evolved to
include many trail-blazing products, including our popular
duo® product line, which marries the sophisticated look of
stylish stationary furniture with motion. Our R&D team
recently moved into the newly built Innovation Center at
our campus in Dayton, Tennessee. This state-of-the-art
facility allows team members to work side by side with
their manufacturing counterparts to develop and test
new products, provides an inspiring place to work, and is
attracting some of the best engineering talent known to the
industry, enabling us to honor our legacy of innovation and
offer consumers a consistent stream of new products.

Although we operated in an uncertain tariff environment
for much of fiscal 2019, our blended supply chain, featuring
a U.S.-based manufacturing footprint coupled with global
sourcing of component parts, allowed us to maintain our
competitiveness within the industry. And, with increased
tariffs implemented in May 2019, we believe we will
continue to be well positioned versus our peers.

Petra Lamp by La-Z-Boy

Plank Road Dining Set by Kincaid

Liam Sofa by Joybird

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Joybird

One of the most exciting events of fiscal 2019 was the acquisition of
Joybird, which is providing La-Z-Boy with new consumers through a new
channel. An early winner in the lifestyle e-commerce segment, Joybird
produces mid-century modern furniture and offers a unique purchase
experience that resonates with millennials and Gen Xers. Just five years
old, Joybird has exhibited rapid growth and is driving to profitability.

Leveraging our supply chain expertise has already unlocked
pre-acquisition capacity constraints at Joybird’s Tijuana facility,
almost doubling it. Additionally, we are making several of Joybird’s

best-selling sofas at our plant in Dayton, Tennessee, to take advantage
of our nationwide distribution capabilities to shorten delivery times
and lower costs. While it is too early to determine how large

Joybird will become, it is our fastest-growing business today,

and we have confidence in its ability to become one of the
leading online destinations for unique and beautifully
crafted modern furniture, and to deliver long-term

value to our company.

“Just five years
old, Joybird has
exhibited rapid
growth ...”

Aime Sofa by Joybird

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FUTURECommitment to the World Around Us

As an iconic American brand providing quality
products and outstanding service to customers,
our commitment to corporate social responsibility is
unwavering. From providing employees with a safe,
inspiring, diverse and inclusive work environment
with established standards of integrity, to being
vigilant with regard to the environment and
integrating sustainable business practices to reduce
the impact of our operations both locally and globally,
La-Z-Boy understands its role to help make the
world a better place. Our goal is to craft high-quality
products, while having the least environmental
impact, with a focus on reducing waste, increasing
recycling and energy efficiency, and consuming
fewer resources. Additionally, we are proud of
our continued excellence in safety performance
across the organization. And, we are committed to
supporting the communities in which we operate,
with many philanthropic initiatives, through both our
La-Z-Boy Foundation and helping thousands of
families around the world with our decade-long
support of the Ronald McDonald House Charities®.
As the world evolves with new challenges, we are
dedicated to strengthening these practices every day.

LOOKING FORWARD

I am proud of the work our team has accomplished
this year. We are playing offense and implementing
creative solutions to optimize our portfolio of
powerhouse brands, maximize the reach and
efficiencies of our supply chain, and capture new
and different consumers. We are excited about the
future narrative of La-Z-Boy Incorporated and believe
the best is yet to come. We thank all stakeholders
for their ongoing commitment and support.

Kurt L Darrow

Chairman, President and
Chief Executive Officer

Alexandria Loveseat featured in new conserve™ fabric by La-Z-Boy

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Reegan Swivel Chair by La-Z-Boy

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

(Mark One)

FORM 10-K

(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended April 27, 2019
(cid:2) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from

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)

One La-Z-Boy Drive, Monroe, Michigan
(Address of principal executive offices)

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

48162-5138
(Zip Code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which
registered

Common Stock, $1.00 par value

LZB

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:1) No (cid:2)

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:1)

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:1) No (cid:2)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). Yes (cid:1) No (cid:2)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller
reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer (cid:1) Accelerated filer (cid:2) Non-accelerated filer (cid:2) Smaller reporting company (cid:2) Emerging growth company (cid:2)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:2)
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:1)

Based on the closing sales price as reported on the New York Stock Exchange on October 26, 2018, the aggregate market value
of registrant’s common stock held by non-affiliates of the registrant on that date was approximately $1,290,400,000.

The number of shares of common stock $1.00 par value of the registrant outstanding as of June 11, 2019 was 46,823,501.

DOCUMENTS INCORPORATED BY REFERENCE:

(1)

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A for its 2019 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

LA-Z-BOY INCORPORATED
FORM 10-K ANNUAL REPORT FISCAL 2019

TABLE OF CONTENTS

Cautionary Statement Concerning Forward-Looking Statements

PART I

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Information About Our Executive Officers

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

Item 6.
Item 7.

Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Item 7A.
Item 8.
Item 9.

Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

Item 9A.
Item 9B.

Controls and Procedures
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 Accounting Fees and Services

Item 15.
Item 16.

Exhibits, Financial Statement Schedules
Form 10-K Summary

PART IV

Page
Number(s)

4
11
16
16
16
16
17

18
20

25
42
43

90
90
90

91
91

91
92
92

93
95

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 2019 Annual Meeting of Shareholders. The
required information is incorporated into this Form 10-K by reference to that document and is not
repeated herein.

Cautionary Statement Concerning Forward-Looking Statements

La-Z-Boy Incorporated and its subsidiaries (individually and collectively, ‘‘we,’’ ‘‘our’’ or the
‘‘Company’’) make forward-looking statements in this report, and its representatives may make oral
forward-looking statements from time to time. 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 sales
— adequacy and cost of financial resources — management plans and strategic initiatives

— future economic performance
— industry and importing trends

Forward-looking statements also include those preceded or followed by the words ‘‘anticipates,’’
‘‘believes,’’ ‘‘estimates,’’ ‘‘hopes,’’ ‘‘plans,’’ ‘‘could,’’ ‘‘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 we anticipate or project due to a number of factors,
including: (a) changes in consumer confidence and demographics; (b) the possibility of a recession;
(c) changes in the real estate and credit markets and their effects on our customers, consumers and
suppliers; (d) international political unrest, terrorism or war; (e) volatility in energy and other
commodities prices; (f) the impact of logistics on imports and exports; (g) tax rate, interest rate, and
currency exchange rate changes; (h) changes in the stock market impacting our profitability and our
effective tax rate; (i) operating factors, such as supply, labor or distribution disruptions (e.g. port
strikes); (j) changes in legislation, including the tax code, or changes in the domestic or international
regulatory environment or trade policies, including new or increased duties, tariffs, retaliatory tariffs,
trade limitations and termination or renegotiation of bilateral and multilateral trade agreements
impacting our business; (k) adoption of new accounting principles; (l) fires, severe weather or other
natural events such as hurricanes, earthquakes, flooding, tornadoes and tsunamis; (m) our ability to
procure, transport or import, or material increases to the cost of transporting or importing, fabric rolls,
leather hides or cut-and-sewn fabric and leather sets domestically or abroad; (n) information technology
conversions or system failures and our ability to recover from a system failure; (o) effects of our brand
awareness and marketing programs; (p) the discovery of defects in our products resulting in delays in
manufacturing, recall campaigns, reputational damage, or increased warranty costs; (q) litigation arising
out of alleged defects in our products; (r) unusual or significant litigation; (s) our ability to locate new
La-Z-Boy Furniture Galleries(cid:3) stores (or store owners) and negotiate favorable lease terms for new or
existing locations; (t) the ability to increase volume through our e-commerce initiatives; (u) the impact
of potential goodwill or intangible asset impairments; and (v) 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 (the ‘‘SEC’’). We undertake no obligation to update or revise any
forward-looking statements, whether to reflect new information or new developments or for any other
reason.

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 in the state of
Michigan as La-Z-Boy Chair Company, and in 1996 we changed our name to La-Z-Boy Incorporated.
Today, our La-Z-Boy brand is one of the most recognized brands in the furniture industry.

We are the leading global producer of reclining chairs and the second largest manufacturer/distributor
of residential furniture in the United States. The La-Z-Boy Furniture Galleries(cid:3) stores retail network is
the third largest retailer of single-branded furniture in the United States. We manufacture, market,
import, export, distribute and retail upholstery furniture products under the La-Z-Boy(cid:3), England,
Kincaid(cid:3), and Joybird(cid:3) tradenames. In addition, we import, distribute and retail accessories and
casegoods (wood) furniture products under the Kincaid(cid:3), American Drew(cid:3), Hammary(cid:3), and Joybird(cid:3)
tradenames. We have seven major manufacturing locations and six regional distribution centers in the
United States and two facilities in Mexico to support our speed-to-market and customization strategy.
We operate a wholesale sales office that is responsible for distribution of our product in the United
Kingdom and Ireland. We also participate in two joint ventures in Thailand that support our
international businesses: one that operates a manufacturing facility and another that operates a
wholesale sales office. We operate a global trading company in Hong Kong which helps us manage our
Asian supply chain by establishing and maintaining relationships with our Asian suppliers, as well as
identifying efficiencies and savings opportunities. We also have contracts with several suppliers in Asia
to produce products that support our pure-import model for casegoods.

We sell our products to furniture retailers or distributors in the United States, Canada, and
approximately 60 other countries, including the United Kingdom, China, Australia, South Korea and
New Zealand, directly to consumers through stores that we own and operate and through our websites,
www.la-z-boy.com and www.joybird.com. The centerpiece of our retail distribution strategy is our
network of 353 La-Z-Boy Furniture Galleries(cid:3) stores and 550 La-Z-Boy Comfort Studio(cid:3) locations, each
dedicated to marketing our La-Z-Boy branded products. We consider this dedicated space to be
‘‘proprietary.’’ We own 156 of the La-Z-Boy Furniture Galleries(cid:3) stores. The remainder of the
La-Z-Boy Furniture Galleries(cid:3) stores, as well as all 550 La-Z-Boy Comfort Studio(cid:3) locations, are
independently owned and operated. La-Z-Boy Furniture Galleries(cid:3) stores help consumers furnish their
homes by combining the style, comfort, and quality of La-Z-Boy furniture with our available design
services. La-Z-Boy Comfort Studio(cid:3) locations are defined spaces within larger independent retailers
that are dedicated to displaying and selling La-Z-Boy branded products. In total, we have
approximately 7.8 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded
products in North America. We also have approximately 2.7 million square feet of floor space outside
of the United States and Canada dedicated to selling La-Z-Boy branded products. Our other brands,
England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets,
with approximately half of Hammary’s sales originating through the La-Z-Boy Furniture Galleries(cid:3) store
network. Kincaid and England have their own dedicated proprietary in-store programs with 590 outlets
and approximately 1.9 million square feet of floor space. In total, our proprietary floor space includes
approximately 12.4 million square feet worldwide. Joybird, which we acquired in the second quarter of
fiscal 2019, sells product almost exclusively online and has a limited amount of proprietary retail floor
space used as a showroom to develop its brand.

Principal Products and Industry Segments

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

Upholstery Segment. Our Upholstery reportable segment is our largest business segment and consists
primarily of two operating segments: La-Z-Boy, our largest operating segment, and the operating
segment for our England subsidiary. The Upholstery segment also includes our international wholesale
businesses. We aggregate these operating segments into one reportable segment because they are
economically similar and because they meet the other aggregation criteria for determining reportable
segments. Our Upholstery segment manufactures and imports upholstered furniture such as recliners
and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas. The
Upholstery segment sells directly to La-Z-Boy Furniture Galleries(cid:3) stores, operators of La-Z-Boy
Comfort Studio(cid:3) locations, England Custom Comfort Center locations, major dealers, and a wide cross-
section of other independent retailers.

Casegoods Segment. Our Casegoods segment consists of one operating segment that sells furniture
under three brands: American Drew(cid:3), Hammary(cid:3), and Kincaid(cid:3). The Casegoods segment is an
importer, marketer, and distributor of casegoods (wood) furniture such as bedroom sets, dining room
sets, entertainment centers and occasional pieces, and also manufactures some custom upholstered
furniture. The Casegoods segment sells directly to major dealers, as well as La-Z-Boy Furniture
Galleries(cid:3) stores, and a wide cross-section of other independent retailers.

Retail Segment. Our Retail segment consists of one operating segment comprised of our 156 company-
owned La-Z-Boy Furniture Galleries(cid:3) stores. The Retail segment primarily sells upholstered furniture,
in addition to some casegoods and other accessories, to the end consumer through these stores.

Corporate & Other. Corporate & Other includes the shared costs for corporate functions, including
human resources, information technology, finance and legal, in addition to revenue generated through
royalty agreements with companies licensed to use the La-Z-Boy(cid:3) brand name on various products. We
consider our corporate functions to be other business activities and have aggregated them with our
other insignificant operating segments including our global trading company in Hong Kong and Joybird,
an e-commerce retailer that manufactures and sells upholstered furniture such as sofas, loveseats,
chairs, ottomans, sleeper sofas and beds, and also imports and sells casegoods (wood) furniture such as
occasional tables and other accessories. Joybird sells to end consumers almost exclusively online
through its website, www.joybird.com. None of the operating segments included in Corporate & Other
meets the requirements of reportable segments at this time.

We have provided additional detailed information regarding our segments and their products in
Note 17 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 and parts used for manufacturing are purchased cover (primarily fabrics
and leather), polyester batting and polyurethane foam for cushioning and padding, lumber and plywood
for frames, steel for motion mechanisms, electrical components for power units and various other metal
components for fabrication of product. We purchase about 50% of our polyurethane foam from one
supplier, which has several facilities across the United States that deliver to our plants. We purchase
cover from a variety of sources, but we rely on a limited number of major suppliers. We purchase
approximately half of our cover in a raw state (fabric rolls or leather hides) and cut and sew it into
cover, and purchase the remainder in covers that have already been cut and sewn to our specifications
by third-party offshore suppliers. We buy cut-and-sewn leather and fabric products from five primary
suppliers. Of the products that we import, three suppliers that operate in China manufacture over 95%
of the leather cut-and-sewn sets, and three suppliers that also operate in China manufacture
approximately 90% of the fabric products. One of the five primary suppliers manufactures both leather
cut-and-sewn sets and fabric products. We use these suppliers primarily for their product design
capabilities, to leverage our buying power, and to control quality and product flow, in addition to their

ability to handle the volume of product we require to operate our business. If any of these suppliers
experience financial or other difficulties, we could experience temporary disruptions in our
manufacturing process until we obtain alternate suppliers.

We manage our Asian supply chain through our global trading company in Hong Kong, which works to
identify efficiencies, savings opportunities, and manage the relationship with our Asian suppliers.
During fiscal 2019, the prices of materials we use in our upholstery manufacturing process increased
during the first half of the year, but then retracted in the back half of the year. For the full fiscal year
2019, changes in raw material prices were flat compared with the prior year. We expect to experience
an increase in raw material costs in fiscal 2020 as well as increases in transportation costs. Additionally,
we expect that certain raw materials and parts may be subject to higher duties and tariffs in fiscal 2020,
including raw materials and parts we import from China. In response to these increases, we may
increase our selling prices to our customers or assess a material or duty surcharge during periods when
these increased prices or duties are in effect.

Finished Goods Imports

We import all of the casegoods (wood) furniture that we sell. In fiscal 2019, we purchased
approximately 55% of this imported product from three suppliers. We use these suppliers primarily to
leverage our buying power, to control quality and product flow, and because their capabilities align with
our product design needs. In addition, these suppliers have the ability to handle the volume of product
we require. If any of these suppliers experience financial or other difficulties, we could experience
disruptions in our product flow until we obtain alternate suppliers, which could be lengthy due to the
longer lead time required for sourced wood furniture from Asian manufacturers.

We use an all-import model for our casegoods furniture primarily to remain competitive for these
products. The prices we paid for these imported products, including associated transportation costs,
increased in fiscal 2019 compared with fiscal 2018, partially due to an increase in tariffs on certain
product imported from China. We import approximately 25% of our casegoods product from China,
and currently expect these product costs to increase more in fiscal 2020 than fiscal 2019 if the recent
tariff increase to 25% remains in effect throughout fiscal 2020. We are actively working on moving
sourcing of products out of China to reduce the tariff impact. Additionally, we are expecting higher
ocean freight costs in fiscal 2020 compared with fiscal 2019. We may increase our selling prices to help
offset the expected rise in transportation costs and may assess a material or duty surcharge on products
imported from China when these increased prices or duties are in effect. Looking across our business,
imported finished goods represented 8% of our consolidated sales in both fiscal 2019 and fiscal 2018.

Seasonal Business

We believe that the demand for furniture generally reflects sensitivity to overall economic conditions,
including consumer confidence, housing market conditions and unemployment rates. For our wholesale
businesses, the fourth quarter is historically the seasonally highest-volume sales quarter, closely followed
by our third quarter. For our retail and e-commerce businesses, which includes our company-owned
retail stores and Joybird, the third quarter is typically the seasonally highest-volume sales quarter.

During fiscal 2019, however, we experienced our largest sales volume quarter for our wholesale
businesses during the third quarter. We believe this experience was reflective of the overall trends in
the furniture industry and was not an indicator that our seasonal trends are changing for our wholesale
businesses, because in the first calendar quarter of 2019, which roughly aligns to our fiscal fourth
quarter, the furniture industry experienced negative growth for the first time since the 2008 recession.

We schedule production to maintain consistent manufacturing activity throughout the year whenever
possible. During the summer months, the furniture industry typically experiences weaker demand, and
as such we typically shut down our domestic plants for one week each fiscal year to perform routine

maintenance on our equipment. Accordingly, for our wholesale business, the first quarter is usually the
company’s weakest in terms of sales and earnings. Also driven by the seasonal slowdown in the
summer, our retail business typically experiences its lowest sales in the first quarter.

Economic Cycle and Purchasing Cycle

Our sales are impacted by the overall growth of the furniture industry, which is primarily influenced by
consumer discretionary spending and existing and new housing activity. In addition, consumer
confidence, employment rates, international trade policies, and other factors could affect demand.
Upholstered furniture has a shorter life cycle than casegoods furniture because upholstered furniture is
typically more fashion and design-oriented, and is often purchased one or two pieces at a time.
Purchases and demand for consumer goods, including upholstered furniture, fluctuate based on
consumer confidence. Casegoods products, in contrast, are longer-lived and frequently purchased in
groupings or ‘‘suites,’’ resulting in a much larger cost to the consumer. As a result, casegoods sales are
more sensitive to economic conditions, including growth or a slowdown in the housing market, whereas
upholstered furniture normally exhibits a less-volatile sales pattern over an economic cycle.

Practices Regarding Working Capital Items

The following describes our significant practices regarding working capital items.

Inventory: For our Upholstery segment, we maintain raw materials and work-in-process inventory at
our manufacturing locations. Finished goods inventory is maintained at our six regional distribution
centers as well as our manufacturing locations. Our regional distribution centers allow us to streamline
the warehousing and distribution processes for our La-Z-Boy Furniture Galleries(cid:3) store network,
including both company-owned stores and independently-owned stores. Our regional distribution
centers also allow us to reduce the number of individual warehouses needed to supply our retail outlets
and help us reduce inventory levels at our manufacturing and retail locations.

For our Casegoods segment, we import wood furniture from Asian vendors, resulting in long lead times
on these products. To address these long lead times and meet our customers’ delivery requirements, we
maintain higher levels of finished goods inventory in our domestic warehouses, as a percentage of sales,
of our casegoods products than our upholstery products.
Our company-owned La-Z-Boy Furniture Galleries(cid:3) stores have finished goods inventory at the stores
for display purposes.

Our Joybird business maintains raw materials, work-in-process, and finished goods inventory at their
manufacturing location. Additional finished goods inventory for Joybird is stored in a warehouse or
in-transit to the end consumer.

Our inventory increased $12.1 million during fiscal 2019 compared with fiscal 2018 primarily as a result
of the acquisitions we completed in fiscal 2019. We will continue to manage our inventory levels to
ensure they are appropriate relative to our sales volume, while maintaining our focus on service to our
customers.

Accounts Receivable: Our accounts receivable decreased $10.8 million as of year end fiscal 2019
compared with year end fiscal 2018. The decrease in accounts receivable was partially due to fourth
quarter sales in fiscal 2019 being lower than those in the fourth quarter of the prior year for our
Upholstery and Casegoods segments. We monitor our customers’ accounts and limit our credit
exposure to certain independent dealers and strive to decrease our days’ sales outstanding where
possible. Our days’ sales outstanding is a measure of the time needed to collect outstanding accounts
receivable once we have completed a sale. Our days’ sales outstanding decreased by approximately
three days during fiscal 2019.

Accounts Payable: Our accounts payable increased $3.0 million as of year end fiscal 2019 compared
with year end fiscal 2018. This increase was primarily due to the acquisitions completed in fiscal 2019.

Customer Deposits: We collect a deposit from our customers at the time a customer order is placed in
one of our company-owned retail stores or through our websites, www.la-z-boy.com and
www.joybird.com. Customer deposits increased $11.5 million as of fiscal year end 2019 compared with
year end fiscal 2018. This increase was primarily a result of the fiscal 2019 acquisitions.

Customers

Our wholesale customers are furniture retailers. While primarily located throughout the United States
and Canada, we also have customers located in various other countries, including the United Kingdom,
China, Australia, South Korea and New Zealand. Sales in our Upholstery and Casegoods segments are
almost entirely to furniture retailers, but we also sell directly to end consumers through our company-
owned La-Z-Boy Furniture Galleries(cid:3) stores that make up our Retail segment and through our
websites, www.la-z-boy.com and www.joybird.com.

We have formal agreements with many furniture 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 dedicated proprietary galleries or studios within their stores. We consider this
dedicated space to be ‘‘proprietary.’’ For our Upholstery and Casegoods segments, our fiscal 2019
customer mix based on sales was approximately 60% proprietary, 15% major dealers such as Art Van
Furniture, Nebraska Furniture Mart and Slumberland Furniture, and 25% other independent retailers.

The success of our product distribution model relies heavily on having retail floor space that is
dedicated to displaying and marketing our products. The 353-store La-Z-Boy Furniture Galleries(cid:3)
network is central to this approach. In addition, we sell product through proprietary space within other
retail furniture stores, primarily La-Z-Boy Comfort Studio(cid:3) locations, England Custom Comfort Center
locations, Kincaid Shoppes, and other international locations. Additionally, our Joybird business, which
sells product almost exclusively online to end consumers through its website, www.joybird.com, also has
a limited amount of proprietary retail floor space that it uses as a showroom to develop its brand.

Maintaining, updating, and, when appropriate, expanding our proprietary distribution network is a key
part of our overall sales and marketing strategy. We intend to not only increase the number of stores in
the network but also to continue to improve their quality, including upgrading old-format stores to our
new concept design through remodels and relocations. At the end of fiscal 2019, less than five percent
of the La-Z-Boy Furniture Galleries(cid:3) stores in the network have not been transitioned to our new
format. As we continue to maintain and update our current stores to improve the quality of the
network, the La-Z-Boy Furniture Galleries(cid:3) store network plans to open, relocate or remodel 20 to 25
stores during fiscal 2020, all of which will feature our new concept store designs.
We select independent dealers for our proprietary La-Z-Boy Furniture Galleries(cid:3) store network based
on factors such as their management and financial qualifications and the potential for distribution in
specific geographical areas. This proprietary distribution benefits La-Z-Boy, our dealers and our
consumers. It enables La-Z-Boy to concentrate our marketing with sales personnel dedicated to our
entire product line, and only that line and approved accessories. It also allows dealers that join this
proprietary group to take advantage of best practices, with which other proprietary dealers have
succeeded, and we facilitate forums for these dealers to share them. These La-Z-Boy Furniture
Galleries(cid:3) stores provide our consumers a full-service shopping experience with a large variety of
products, knowledgeable sales associates, and design service consultants.

Orders and Backlog

We typically build upholstery units based on specific dealer orders, either for dealer stock or to fill
consumers’ custom orders. We import casegoods product primarily to fill our internal orders, rather
than customer or consumer orders, resulting in higher finished goods inventory on hand as a
percentage of sales. Because the size of our backlog at a given time may not be indicative of our future
sales, we do not rely entirely on backlogs to predict future sales.

Our Upholstery segment backlogs as of April 27, 2019, and April 28, 2018, were approximately
$66.9 million and $69.7 million, respectively, which was driven by a decrease in orders during the last
few weeks of the current fiscal year as compared with the prior fiscal year. Our Casegoods segment
backlogs were $7.4 million and $7.3 million, or essentially flat, as of April 27, 2019, and April 28, 2018,
respectively. Our Corporate and Other backlog as of April 27, 2019, was $3.7 million which relates to
the addition of the Joybird business that we acquired in the second quarter of fiscal 2019.

Competitive Conditions

We are the second largest manufacturer/distributor of residential (living and family room, bedroom, and
dining room) furniture in the United States, as measured by annual sales volume.

Alternative distribution channels have increasingly affected our retail markets. Direct-to-consumer
brands, such as Article and Burrow, bypass brick and mortar retailers entirely or in some cases have
developed a product that can be shipped more easily than traditional upholstered furniture, thus
increasing competition for our products. The increased ability of consumers to purchase furniture
through various furniture manufacturers’ and digital-only retailers’ internet websites, including
companies such as Amazon, Hayneedle, QVC, and Wayfair, which operate with lower overhead costs
than a brick-and-mortar retailer, has also increased competition in the industry. Companies such as
Costco, Home Depot, IKEA, Sam’s Club, Target, Wal-Mart, and others, also offer products that
compete with some of our product lines.

The home furnishings industry competes primarily on the basis of product styling and quality, customer
service (product availability and delivery), price, and location. We compete primarily by emphasizing
our brand and the value, comfort, quality, and styling of our products. In addition, we remain
committed to innovation while striving to provide outstanding customer service, exceptional dealer
support, and efficient on-time delivery. Maintaining, updating, and expanding our proprietary
distribution system, including identifying desirable retail locations, is a key strategic initiative for us in
striving to remain competitive. We compete in the mid- to upper-mid price point, and a shift in
consumer taste and trends to lower-priced products could negatively affect our competitive position.

In the Upholstery segment, our largest competitors are Ashley, Bassett, Best Chair, Flexsteel,
Klaussner, Kuka, Man Wah, Natuzzi, and Southern Motion.

In the Casegoods segment, our main competitors are Bassett, Bernhardt, Hooker Furniture, and
Lacquer Craft. The Casegoods segment faces additional market pressures from foreign manufacturers
entering the United States market and increased direct purchases from foreign suppliers by large
United States retailers.
The La-Z-Boy Furniture Galleries(cid:3) stores operate in the retail furniture industry in the United States
and Canada, and different stores have different competitors based on their geographic locations.
Competitors include: Arhaus, Ashley, Bassett Furniture Direct, Bob’s Discount Furniture, Crate and
Barrel, Ethan Allen, Restoration Hardware, Havertys, Williams-Sonoma, several other regional
competitors (for example Art Van Furniture, Raymour & Flanigan Furniture, and Slumberland
Furniture), and family-owned independent furniture stores.

In our Corporate & Other segment, our Joybird business sells almost exclusively online and competes
primarily with Amazon, Article, CB2, Love Sac, Maiden Home, Wayfair and West Elm.

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

Trademarks, Licenses and Patents

We own the La-Z-Boy trademark, which is essential to the Upholstery and Retail segments of our
business, and the Joybird trademark, which is essential to our e-commerce business. We also own a
number of other trademarks that we utilize in marketing our products. We consider our La-Z-Boy
trademark to be among our most valuable assets and we have registered that trademark and others in
the United States and various other countries where our products are sold. These trademarks have a
perpetual life, subject to renewal. We license the use of the La-Z-Boy trademark to our major
international partners and dealers outside of North America. We also license the use of the La-Z-Boy
trademark on contract office furniture, outdoor furniture, and non-furniture products, as these
arrangements enhance our brand awareness, broaden the perceptions of La-Z-Boy, and create visibility
of the La-Z-Boy brand in channels outside of the residential furniture industry. In addition, we license
to our branded dealers the right 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, under ‘‘Customers.’’

We hold a number of United States and foreign patents that we actively enforce. We have followed a
policy of filing patent applications for the United States and select foreign countries on inventions,
designs and improvements that we deem valuable, but these patents do expire at various times.

While our intellectual property rights in the aggregate are important to the operation of our business,
we do not believe that any existing patent, license, trademark or other intellectual property right (other
than the La-Z-Boy trademark) is of such importance that its loss or termination would have a material
adverse effect on our business taken as a whole. We vigorously protect our trademarks and patents
against third-party infringement.

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 these substances. Based on a review of all currently known facts and our
experience with previous environmental matters, we currently do not believe it is probable that we will
have any additional loss for environmental matters that would be material to our consolidated financial
statements.

Employees

We employed approximately 9,700 full-time equivalent employees as of April 27, 2019, compared with
9,000 employees at the end of fiscal 2018. We employed approximately 7,400 employees in our
Upholstery segment, 200 in our Casegoods segment, 1,400 in our Retail segment, 400 in our Joybird
business, and the remaining employees are corporate personnel. We employ the majority of our
employees on a full-time basis.

Internet Availability

Our Forms 10-K, 10-Q, 8-K, proxy statements on Schedule 14A, and amendments to those reports are
available free of charge through links on our internet website, www.la-z-boy.com, as soon as reasonably
practicable after they are electronically filed with, or furnished to, the SEC. Copies of any materials we
file or furnish to 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 incorporated by reference into this report or any
other reports we file with, or furnish to, the SEC.

ITEM 1A. RISK FACTORS.

Our business is subject to a variety of risks. Economic downturns, interest rates, consumer confidence,
housing starts and the overall housing market, increased unemployment, tightening of the financial and
consumer credit markets, and other general economic factors that affect many other businesses are
particularly significant to us because our principal products are consumer goods. We also face risks
related to the protection, confidentiality and integrity of our information systems and data, which may
be subject to cybersecurity attacks and information security breaches. Further, the success of our
business is driven by our ability to respond to product and customer-trend shifts, our pricing
competitiveness as well as preserving our brand reputation. If we are unable to respond to or mitigate
these risks to our business, our operating results and financial or competitive condition could be
adversely affected.

The risks and uncertainties described below are those that we currently believe are most material and
may significantly affect our business. Additional risks and uncertainties of which we are unaware or that
we do not currently deem significant may also become important factors that affect us at a later date.
The risks and uncertainties described below should be carefully considered, together with the other
information provided in this document and our subsequent filings with the SEC. Any of the following
risks could significantly and adversely affect our business, results of operations, and financial condition.

Declines in certain economic conditions, which impact consumer confidence and consumer spending, could
negatively impact our sales and results of operations.

Our business is particularly sensitive to declines in general economic conditions because our principal
products are consumer goods. Downturns and prolonged negative conditions in the economy could
affect consumer spending habits by decreasing the overall demand for discretionary items, including
home furnishings. Consumer purchases of discretionary items, including our products, generally decline
during periods when disposable income is limited, unemployment rates increase or there is uncertainty
about future economic prospects. In the event of an economic downturn, consumer spending could
remain depressed for an extended period of time and improvement in our sales could lag behind an
economic recovery as consumers may defer the purchase of relatively higher-cost discretionary items.

Our business and our reputation could be adversely affected by cybersecurity incidents and the failure to
protect sensitive employee, customer, consumer, vendor or Company data, or to comply with evolving
regulations relating to our obligation to protect such data.

Cyber-attacks designed to gain access to sensitive information by breaching security systems of large
organizations leading to unauthorized release of confidential information have occurred over the last
several years at a number of major U.S. companies. Despite widespread recognition of the cyber-attack
threat and improved data protection methods, cyber-attacks on organizations continue to be persistent
and ever-changing, making it difficult to prevent and detect these attacks. Similar to many other
retailers, we receive and store certain personal information about our employees, customers,
consumers, and vendors. Additionally, we rely on third-party service providers to execute certain
business processes and maintain certain information technology systems and infrastructure, and we
supply such third-party providers with the personal information required for those services.

States and the federal government are increasingly enacting laws and regulations to protect consumers
against identity theft, and in the future we may be subject to state or federal data privacy laws, such as
the California Consumer Privacy Act of 2018 (the ‘‘CCPA’’). We are also subject to data privacy and
other similar laws and regulations in various foreign jurisdictions, such as the European Union. These
laws and regulations are emerging and evolving in various countries and the interpretation and
application of these laws and regulations in the United States, Europe and elsewhere often are
uncertain, contradictory and changing. For example, the European General Data Protection Regulation

(GDPR) applies to us, creating a range of new compliance obligations regarding the treatment of
personal data. In addition, the GDPR contains significant penalties for non-compliance. It is possible
that these laws may be interpreted or applied in a manner that is adverse to us, unforeseen, or
otherwise inconsistent with our practices or that we may not adequately adapt our internal policies
and/or procedures to evolving regulations, any of which could result in litigation, regulatory
investigations and potential legal liability, require us to change our practices in a manner adverse to
our business or limit access to our products and services in certain countries. As a result, our
reputation and brand, which is critical to our business operations, may be harmed, we could incur
substantial costs, and we could lose both consumers and revenue.

During fiscal 2019, we were subject, and will likely continue to be subject, to attempts to breach the
security of our networks and IT infrastructure through cyber-attack, malware, computer viruses, and
other means of unauthorized access. To the best of our knowledge, attempts to breach our systems have
not been successful to date. A breach of our systems that results in the unauthorized release of
sensitive data could adversely affect our reputation resulting in a loss of our existing customers and
potential future customers, lead to financial losses due to remedial actions or potential liability, possibly
including punitive damages, or we could incur regulatory fines or penalties. An electronic security
breach resulting in the unauthorized release of sensitive data from our information systems or those of
our third party service providers could also materially increase the costs we already incur to protect
against these risks. We continue to balance the additional risk with the cost to protect us against a
breach, and have taken steps to ensure that losses arising from a breach would be covered in part by
insurance that we carry.

Inability to maintain and enhance our brand and respond to changes in our current and potential consumers’
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 increase our
business by retaining consumers and attracting new ones. Furniture product is fashion oriented so
changes in consumers’ tastes and trends and the resultant change in our product mix, as well as failure
to offer our consumers multiple avenues for purchasing our products, could adversely affect our
business and operating results. We attempt to minimize these risks by maintaining strong advertising
and marketing campaigns promoting our brands. We also attempt to minimize our risk by updating our
current product designs, styles, quality, prices, and options to purchase our products in-store or online.
If these efforts are unsuccessful or require us to incur substantial costs, our business, operating results
and financial or competitive condition could be adversely affected.

Loss of market share and other financial or operational difficulties due to competition would likely result in a
decrease in our sales, earnings, and liquidity.

The residential furniture industry is highly competitive and fragmented. We currently compete with
many other manufacturers and retailers, including online retailers, some of which offer widely
advertised products, and others, several of which are large retail furniture dealers offering their own
store-branded products. Competition in the residential furniture industry is based on quality, style of
products, perceived value, price, service to the customer, promotional activities, and advertising. The
highly competitive nature of the industry means we are constantly subject to the risk of losing market
share, which would likely decrease our future sales, earnings, and liquidity. In addition, due to the large
number of competitors and their wide range of product offerings, we may not be able to differentiate
our products (through styling, finish, and other construction techniques) from those of our competitors.
Additionally, a majority of our sales are to distribution channels that rely on physical stores to
merchandise and sell our products and a significant shift in consumer preference toward purchasing
products online could have a materially adverse impact on our sales and operating margin. In the past
several fiscal years we have experienced lower traffic to our company-owned stores, similar to other

furniture retailers, as consumers have shifted to purchasing more furniture product online. We are
attempting to meet these consumers where they prefer to shop by expanding our online capabilities and
improving the user experience at www.la-z-boy.com to drive more traffic to both our online site and
our physical stores. We also acquired Joybird, a leading e-commerce retailer and manufacturer of
upholstered furniture. Joybird sells product almost exclusively online, where there is significant
competition for share of voice among online and direct-to-consumer brands. These and other
competitive pressures could cause us to lose market share, revenues and customers, increase
expenditures or reduce prices, any of which could have a material adverse effect on our results of
operations or liquidity.

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.

In manufacturing furniture, we use various types of wood, fabrics, leathers, upholstered filling material
including polyurethane foam, steel, and other raw materials. Because we are dependent on outside
suppliers for our raw materials, fluctuations in their price, availability, and quality could have a negative
effect on our cost of sales and our ability to meet our customers’ demands. Competitive and marketing
pressures may prevent us from passing along price increases to our customers, and the inability to meet
our customers’ demands could cause us to lose sales. We have a higher concentration in upholstery
sales, including motion furniture, than many of our competitors, and the effects of steel, polyurethane
foam, wood, electrical components for power units, leather and fabric price increases or quantity
shortages could have a significant negative impact to our business.

About 50% of our polyurethane foam comes from one supplier. This supplier has several facilities
across the United States, but severe weather or natural disasters could result in delays in shipments of
polyurethane foam to our plants.

A change in the financial condition of some of our domestic and foreign fabric suppliers could impede
their ability to provide products to us in a timely manner. Upholstered furniture is fashion oriented,
and if we were unable to acquire sufficient fabric variety, or to predict or respond to changes in fashion
trends, we might lose sales and have to sell excess inventory at reduced prices. Doing so would have a
negative effect on our sales and earnings.

Changes in United States trade policy, availability and cost of foreign sourcing, and economic uncertainty in
countries outside of the United States in which we operate or from which we purchase product, 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 the United Kingdom, Mexico and Thailand, could result in the disruption of markets and
negatively affect our business. Our Casegoods segment imports products manufactured by foreign
sources, mainly in China and Vietnam, and our Upholstery segment purchases cut-and-sewn fabric and
leather sets, electronic component parts, and some finished goods from Chinese and other foreign
vendors. Our cut-and-sewn leather sets are primarily purchased from four suppliers that operate in
China, and the majority of our fabric products are purchased from three suppliers that also operate in
China. One of these primary suppliers provides both cut-and-sewn leather sets and fabric products. Our
sourcing partners may not be able to produce goods in a timely fashion or the quality of their product
may lead us to reject it, causing disruptions in our domestic operations and delays in shipments to our
customers.

There are other risks that are inherent in our operations, including the potential for changes in socio-
economic conditions, changes in laws and regulations, including import, export, labor and

environmental laws, port strikes, tariffs, duties 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 operations. All of
these items could make servicing our customers more difficult or cause disruptions in our plants that
could reduce our sales, earnings, or both in the future.

Changes in the political environment in the United States may also have a material adverse effect on
our business in the future or require us to modify our current business practices. Because we
manufacture components in Mexico and purchase components and finished goods manufactured in
foreign countries, including China, we are subject to risks relating to increased tariffs on U.S. imports,
changes in the North American Free Trade Agreement, and other changes affecting imports. Recently,
the U.S. administration has enacted certain tariffs on many items sourced from China, including certain
furniture, accessories, furniture parts, and raw materials which are imported into the U.S. and that we
use in our domestic operations. We may not be able to fully or substantially mitigate the impact of
these tariffs, pass price increases on to our customers, or secure adequate alternative sources of
products or materials. The tariffs, along with any additional tariffs or retaliatory trade restrictions
implemented by other countries, could negatively impact customer sales, including potential delays in
product received from our vendors, our cost of goods sold and results of operations. Additionally, our
business in the United Kingdom could be affected by the United Kingdom’s exit from the European
Union, and our sales and margins there and in other foreign countries could be adversely affected by
the imposition in foreign countries of import bans, quotas, and increases in tariffs.

Our current retail markets and other markets that we enter in the future may not achieve the growth and
profitability we anticipate. We could incur charges for the impairment of long-lived assets, goodwill, or other
intangible assets if we fail to meet our earnings expectations for these markets.

From time to time we may acquire retail locations or other retail businesses, such as Joybird, and their
related assets. We also remodel and relocate existing stores, experiment with new store formats, and
close underperforming stores. Our assets include goodwill and other intangible assets acquired in
connection with these acquisitions. Profitability of acquired, remodeled, relocated, and new format
stores will depend on lease rates (for stores we lease) and retail sales and profitability justifying the
costs of acquisition, remodeling, and relocation. If we do not meet our sales or earnings expectations
for these stores, we may incur charges for the impairment of long-lived assets, the impairment of
goodwill, or the impairment of other intangible assets.

We operate a wholesale sales office that is responsible for distributing La-Z-Boy products in the United
Kingdom and Ireland. Our assets include goodwill and other intangible assets, including acquired
customer relationships, in connection with our acquisition of this business. If we do not meet our sales
or earnings expectations for this operation, we may incur charges for the impairment of goodwill or the
impairment of our intangible assets.

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

Our operations outside of the United States and sale of product in various countries subject us to U.S.
and foreign laws and regulations, including but not limited to, the UK Bribery Act 2010, the U.S.
Foreign Corrupt Practices Act, the U.S. Export Administration Act, and other anti-bribery and
anti-corruption statutes. These laws and regulations include prohibitions on improper payments to
government officials, restrictions on where we can do business, what products we can supply to certain
countries, and what information we can provide to certain governments. Violations of these laws, which
are complex, frequently changing, and are often subject to varying interpretation and enforcement, may
result in civil or criminal penalties or sanctions that could have a significant adverse effect on our
business and results of operations. Although we have implemented policies and procedures designed to

ensure compliance with these laws and regulations, there can be no assurance that our employees,
contractors, or agents will not violate our policies and procedures or otherwise comply with these laws
and regulations.

We rely extensively on information technology systems to process transactions, summarize results, and manage
our business and that of certain independent dealers. Disruptions in both our primary and back-up systems
could adversely affect our business and operating results.

Our primary and back-up information technology systems are subject to damage or interruption from
power outages, computer and telecommunications failures, viruses, phishing attempts, cyber-attacks,
malware and ransomware attacks, security breaches, natural disasters, and errors by employees. Though
losses arising from some of these issues would be covered by insurance, interruptions of our critical
business information technology systems or failure of our back-up systems could result in longer
production times or negatively impact customers resulting in damage to our reputation and a reduction
in sales. If our critical information technology systems or back-up systems were damaged or ceased to
function properly, we might have to make a significant investment to repair or replace them. If a
ransomware attack or other cybersecurity breach occurs, it is possible we could be prevented from
accessing our data which may cause interruptions or delays in our business, cause us to incur
remediation costs or require us to pay ransom to a hacker which takes over our systems, or damage our
reputation.

We may be subject to product liability claims or undertake to recall one or more products, which could
adversely affect our financial results and reputation.

Millions of our products, sold over many years, are currently used by consumers. We may be named as
a defendant in lawsuits instituted by persons allegedly injured while using one of our products. We have
insurance that we believe is adequate to cover such claims, but we are self-insured for the first
$1.5 million in liability and for all defense costs. Furthermore, such claims could damage our brands
and reputation and negatively affect our operating results. We have voluntarily recalled products in the
past, and while none of those recalls has resulted in a material expense or other significant adverse
effect, it is possible that recalls could result in future additional expense, penalties, and injury to our
brands and reputation, and negatively impact our operating results.

We make certain assumptions, judgments and estimates that impact the amounts reported in our consolidated
financial statements, which, if not accurate, may impact our financial results.

Certain assumptions, judgments and estimates impact amounts reported in our consolidated financial
statements, including but not limited to, inventories, goodwill, intangible assets, insurance and legal-
related liabilities, contingent consideration and income taxes. To derive our assumptions, judgements
and estimates, we use historical experience and various other factors that we believe are reasonable as
of the date we prepare our consolidated financial statements. Our contingent consideration liabilities,
resulting from certain acquisitions, are based on the expected future performance of the operations
acquired. Quarterly, we reassess the fair value of any contingent consideration. Changes in business
conditions or other events could materially change the projection of future cash flows or the discount
rate we used in the fair value calculation of the contingent consideration. Actual results could differ
materially from our estimates, and such differences may impact our financial results.

We may not be able to recruit and retain key employees and skilled workers in a competitive labor market.

If we cannot successfully recruit and retain key employees and skilled workers or we experience the
unexpected loss of those employees, our operations may be negatively impacted. A shortage of
qualified personnel may require us to enhance our compensation in order to compete effectively in the
hiring and retention of qualified employees. Additionally, our success depends on the skills, experience
and efforts of key personnel in our senior management, whose vision for our company, knowledge of
our business and expertise would be difficult to replace.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

We owned or leased approximately 12.2 million square feet of active manufacturing, warehousing and
distribution centers, office, showroom, and retail facilities, and had approximately 0.3 million square
feet of idle facilities, at the end of fiscal 2019. Of the 12.2 million square feet occupied at the end of
fiscal 2019, our Upholstery segment occupied approximately 7.0 million square feet, our Casegoods
segment occupied approximately 1.4 million square feet, our Retail segment occupied approximately
3.2 million square feet, and our Corporate and other operations occupied the balance.

Our active facilities and retail locations are located in Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia,
Washington D.C., Wisconsin, Coahuila and Tijuana (Mexico), Bangkok (Thailand), Alberta and
Manitoba (Canada), Dongguan (China), Hong Kong, and Berks (United Kingdom). We own all of our
domestic plants, and our joint venture owns our Thailand plant. We lease the majority of our retail
stores and regional distribution centers, as well as our manufacturing facilities in Mexico and our office
spaces in California, China, Hong Kong and the United Kingdom. For information on terms of
operating leases for our properties, see Note 10 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 we
currently do not believe it is probable that we will have any additional loss that would be material to
our consolidated financial statements.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

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. All executive
officers serve at the pleasure of the board of directors.

Kurt L. Darrow, age 64

(cid:127) Chairman, President and Chief Executive Officer since August 2011

Melinda D. Whittington, age 52

(cid:127) Senior Vice President and Chief Financial Officer since June 2018

(cid:127) Chief Financial Officer of Allscripts Healthcare Solutions, Inc., a healthcare practice management

and electronic health record technology company, from February 2016 through June 2017

(cid:127) Senior Vice President, Corporate Controller and Chief Accounting Officer of Kraft Foods Group

(now the Kraft Heinz Company), an American food company, from February 2015 through October
2015

(cid:127) Vice President, Corporate Controller and Chief Accounting Officer of Kraft Foods Group, Inc. (now

the Kraft Heinz Company) from January 2014 through February 2015

J. Douglas Collier, age 52

(cid:127) Senior Vice President, Chief Commercial Officer and President, International since May 2017

(cid:127) Senior Vice President, Chief Marketing Officer, and President, International from August 2014

through May 2017

(cid:127) Chief Marketing Officer and President, International from August 2011 through August 2014

Darrell D. Edwards, age 55

(cid:127) Senior Vice President and Chief Operating Officer since May 2019

(cid:127) Senior Vice President and Chief Supply Chain Officer from August 2014 through May 2019

(cid:127) Senior Vice President of Operations, Residential Division from May 2012 through August 2014

Otis S. Sawyer, age 61

(cid:127) Senior Vice President and President, La-Z-Boy Portfolio Brands since February 2017

(cid:127) Senior Vice President and President, England, Inc. from February 2008 through February 2017

(cid:127) President of La-Z-Boy Casegoods from November 2015 through February 2017

(cid:127) President of Non-Branded Upholstery from February 2008 through August 2014

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Dividend Information

Although we expect to continue to pay quarterly dividends, the payment of future cash dividends is
within the discretion of our board of directors and will depend on our earnings, capital requirements
and operating and financial condition, as well as excess availability under the credit agreement, among
other factors.

Shareholders

Our common stock trades on the New York Stock Exchange under the trading symbol ‘‘LZB’’. We had
approximately 2,213 registered holders of record of La-Z-Boy’s common stock as of June 11, 2019. (A
substantially greater number of holders of La-Z-Boy common stock are ‘‘street name’’ or beneficial
holders, whose shares of record are held by banks, brokers, and other financial institutions.)

Performance Graph

The graph below shows the cumulative total return for our last five fiscal years that would have been
realized (assuming reinvestment of dividends) by an investor who invested $100 on April 26, 2014, 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
Assumes Initial Investment of $100
April 2019

200.00

180.00

160.00

140.00

120.00

100.00

80.00

60.00

40.00

20.00

0.00

4/26/2014

4/25/2015

4/30/2016

4/29/2017

4/28/2018

4/27/2019

La-Z-Boy Incorporated

S&P 500 Index - Total Return

Dow Jones US Furnishings Index

14JUN201922002351

Company/Index/Market

2014

2015

2016

2017

2018

2019

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

$
$
$

100
100
100

$113.26
$115.98
$ 132.47

$ 108.05
$ 115.62
$ 140.17

$ 118.32
$ 136.33
$ 157.06

$ 126.28
$ 155.69
$ 139.26

$ 142.16
$ 174.89
$ 116.95

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Our board of directors has authorized the purchase of company stock. As of April 27, 2019, 5.9 million
shares remained available for purchase pursuant to this authorization. We spent $23.0 million in fiscal
2019 to purchase 0.8 million shares. During the fourth quarter of fiscal 2019, pursuant to the existing
board authorization, we adopted a plan to purchase company stock pursuant to Rule 10b5-1 of the
Securities Exchange Act of 1934. The plan was effective April 1, 2019. Under this plan, our broker has
the authority to purchase company shares on our behalf, subject to SEC regulations and the price,
market volume and timing constraints specified in the plan. The plan expires at the close of business on
July 26, 2019. With the cash flows we anticipate generating in fiscal 2020, we expect to continue being
opportunistic in purchasing company stock.

The following table summarizes our purchases of company stock during the fourth quarter of fiscal
2019:

(Shares in thousands)

Total
number of
shares
purchased(1)

Average
price paid
per share

Total number
of shares
purchased
as part of
publicly
announced
plan(2)

Maximum
number
of shares
that may yet
be purchased
under the
plan

Fiscal February (January 27 - March 2, 2019) . . . . .
Fiscal March (March 3 - March 30, 2019) . . . . . . .
. . . . . . . .
Fiscal April (March 31 - April 27, 2019)

Fiscal Fourth Quarter of 2019 . . . . . . . . . . . . . . . .

97 $
27 $
74 $

198 $

29.72
32.55
33.69

31.59

97
27
73

197

6,034
6,007
5,934

5,934

(1) In addition to the 197,243 shares purchased during the quarter as part of our publicly announced

director authorization described above, this column includes 913 shares purchased from employees
to satisfy their withholding tax obligations upon vesting of restricted shares and performance based
shares.

(2) On October 28, 1987, our board of directors announced the authorization of the plan to

repurchase company stock. The plan originally authorized 1.0 million shares, and since October
1987, 27.0 million shares were added to the plan for repurchase. The authorization has no
expiration date.

Recent Sales of Unregistered Securities

There were no sales of unregistered securities during fiscal year 2019.

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

(Amounts in thousands)
Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

(53 weeks)
4/30/2016

(52 weeks)
4/25/2015

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,745,401 $ 1,583,947 $ 1,520,060 $ 1,525,398 $ 1,425,395
918,251
Cost of sales . . . . . . . . . . . . . . . . . . . .

1,042,831

940,420

910,757

961,200

Gross profit . . . . . . . . . . . . . . . . . . .

702,570

622,747

609,303

584,978

507,144

Selling, general and administrative

expense . . . . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . .
Pension termination charge . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . .

Income from continuing operations

before income taxes . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . .

Income from continuing operations . .

Income from discontinued operations,

net of tax . . . . . . . . . . . . . . . . . . . . .

572,896

129,674
(1,542)
2,103
(32,671)
(2,237)

95,327
25,186

70,141

493,378

129,369
(538)
1,709
—
(1,650)

128,890
47,295

81,595

475,961

133,342
(1,073)
981
—
(2,510)

130,740
43,756

86,984

459,647

125,331
(486)
827
—
(629)

125,043
44,080

80,963

—

Net income . . . . . . . . . . . . . . . . . . .

70,141

81,595

86,984

80,963

Net income attributable to

401,327

105,817
(523)
1,030
—
(696)

105,628
36,954

68,674

3,297

71,971

noncontrolling interests . . . . . . . . . . .

(1,567)

(729)

(1,062)

(1,711)

(1,198)

Net income attributable to La-Z-Boy

Incorporated . . . . . . . . . . . . . . . . . $

68,574 $

80,866 $

85,922 $

79,252 $

70,773

Net income attributable to La-Z-Boy

Incorporated:
Income from continuing operations

attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . . . . . $
Income from discontinued

operations . . . . . . . . . . . . . . . . .

Net income attributable to La-Z-Boy

68,574 $

80,866 $

85,922 $

79,252 $

67,476

—

3,297

Incorporated . . . . . . . . . . . . . . . . . $

68,574 $

80,866 $

85,922 $

79,252 $

70,773

Consolidated Five-Year Summary of Financial Data (Continued)

(Amounts in thousands, except per share data)
Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

(53 weeks)
4/30/2016

(52 weeks)
4/25/2015

Basic weighted average shares . . . . .
Basic net income attributable to

La-Z-Boy Incorporated per share:
Income from continuing operations

attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . .
Income from discontinued

operations . . . . . . . . . . . . . .

Basic net income attributable to
La-Z-Boy Incorporated per
share . . . . . . . . . . . . . . . . . . . .

Diluted weighted average shares . . . .
Diluted net income attributable to

La-Z-Boy Incorporated per share:
Income from continuing operations

attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . .
Income from discontinued

operations . . . . . . . . . . . . . .

Diluted net income attributable to

La-Z-Boy Incorporated per
share . . . . . . . . . . . . . . . . . . . .

Dividends declared per share . . . . . .
Book value of year-end shares

outstanding(1) . . . . . . . . . . . . . . . .

46,828

47,621

48,963

50,194

51,767

1.46

1.69

1.75

1.57

—

1.30

0.06

1.46

1.69

1.75

1.57

1.36

47,333

48,135

49,470

50,765

52,346

1.44

1.67

1.73

1.55

—

1.44

0.50

14.53

1.67

0.46

13.08

1.73

0.42

12.17

1.55

0.36

11.09

1.28

0.06

1.34

0.28

10.33

(1) Equal to total La-Z-Boy Incorporated shareholders’ equity divided by the number of outstanding

shares on the last day of the fiscal year

Consolidated Five-Year Summary of Financial Data (Continued)

(Dollar amounts in thousands)
Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

(53 weeks)
4/30/2016

(52 weeks)
4/25/2015

10.6%
40.3%
7.4%
26.4%
4.0%

Return on average total equity(1)
. . . . . .
Gross profit as a percent of sales . . . . . .
Operating income as a percent of sales . .
Effective tax rate(2) . . . . . . . . . . . . . . . .
Return on sales(2) . . . . . . . . . . . . . . . . .
31,147
Depreciation and amortization . . . . . . . . $
150,745
Cash provided by operating activities . . . $
48,433
Capital expenditures . . . . . . . . . . . . . . . $
76,505
Cash used for acquisitions . . . . . . . . . . . $
22,957
Cash used for share repurchases . . . . . . $
23,508
Cash used for dividends . . . . . . . . . . . . $
200,523
Property, plant and equipment, net
. . . . $
302,482
Working capital
. . . . . . . . . . . . . . . . . . $
Current ratio(3) . . . . . . . . . . . . . . . . . . .
2.3 to 1
Total assets . . . . . . . . . . . . . . . . . . . . . $ 1,059,790
Long-term debt, excluding current

portion . . . . . . . . . . . . . . . . . . . . . . . $
Total debt . . . . . . . . . . . . . . . . . . . . . . $
Total equity . . . . . . . . . . . . . . . . . . . . . $
Debt to equity ratio(4) . . . . . . . . . . . . . .
Debt to capitalization ratio(5) . . . . . . . . .

19
199
696,976
—
—

13.3%
39.3%
8.2%
36.7%
5.2%

15.0%
40.1%
8.8%
33.5%
5.7%

14.9%
38.3%
8.2%
35.3%
5.3%

12.9%
35.6%
7.4%
35.0%
4.8%

31,767
$
$ 115,750
36,337
$
16,495
$
$
56,730
22,009
$
$ 180,882
$ 336,872
2.9 to 1
$ 892,967

29,132
$
$ 147,990
20,304
$
35,878
$
$
35,957
20,655
$
$ 169,132
$ 318,746
2.6 to 1
$ 888,855

26,517
$
$ 114,509
24,684
$
23,311
$
$
44,082
18,141
$
$ 171,590
$ 324,545
3.1 to 1
$ 800,029

$
22,283
$
97,909
$
70,319
$
1,774
$
51,853
14,513
$
$ 174,036
$ 321,560
3.1 to 1
$ 774,604

199
$
$
422
$ 625,216

296
$
$
515
$ 601,105

513
$
$
803
$ 557,212

433
$
$
830
$ 533,100

0.1%
0.1%

0.2%
0.2%

(1) Equal to income from continuing operations divided by average two year equity

(2) Based on income from continuing operations

(3) Equal to total current assets divided by total current liabilities

(4) Equal to total debt divided by total equity

(5) Equal to total debt divided by total debt plus total equity

Unaudited Quarterly Financial Information Fiscal 2019

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

(13 weeks)
7/28/2018

(13 weeks)
10/27/2018

(13 weeks)
1/26/2019

(13 weeks)
4/27/2019

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 384,695 $ 439,333 $ 467,582 $ 453,791
264,018
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

277,712

264,928

236,173

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense . . . . . . . . .

148,522
125,362

174,405
145,905

189,870
149,027

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension termination charge . . . . . . . . . . . . . . . . . . . ..
Other income (expense), net . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . .

23,160
(104)
602
—
892

24,550
5,599

18,951
(648)

28,500
(501)
392
—
(1,997)

26,394
6,045

20,349
(337)

40,843
(538)
540
—
(941)

39,904
10,730

29,174
(443)

189,773
152,602

37,171
(399)
569
(32,671)
(191)

4,479
2,812

1,667
(139)

Net income attributable to La-Z-Boy Incorporated . . $

18,303 $

20,012 $

28,731 $

1,528

Diluted weighted average common shares . . . . . . . . . .
Diluted net income attributable to La-Z-Boy

47,161

47,259

47,091

47,369

Incorporated per share . . . . . . . . . . . . . . . . . . . . . . $
Dividends declared per share . . . . . . . . . . . . . . . . . . . $

0.39 $
0.12 $

0.42 $
0.12 $

0.61 $
0.13 $

0.03
0.13

Unaudited Quarterly Financial Information Fiscal 2018

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

(13 weeks)
7/29/2017

(13 weeks)
10/28/2017

(13 weeks)
1/27/2018

(13 weeks)
4/28/2018

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

$ 357,079
217,976

$ 393,205
238,253

$ 413,638
251,140

$ 420,025
253,831

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense . . . . . . . . .

139,103
122,805

154,952
120,683

162,498
129,403

166,194
120,487

Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . .

16,298
(157)
343
1,749

18,233
6,489

11,744
(93)

34,269
(160)
376
(926)

33,559
10,353

23,206
(310)

33,095
(113)
444
(1,094)

32,332
20,047

12,285
(176)

45,707
(108)
546
(1,379)

44,766
10,406

34,360
(150)

Net income attributable to La-Z-Boy Incorporated . .

11,651

22,896

12,109

34,210

Diluted weighted average common shares . . . . . . . . . .
Diluted net income attributable to La-Z-Boy

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

48,846

48,297

47,757

47,472

$
$

0.24
0.11

$
$

0.47
0.11

$
$

0.25
0.12

$
$

0.72
0.12

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

RESULTS OF OPERATIONS.

We have prepared this Management’s Discussion and Analysis as an aid to understanding our financial
results. It should be read in conjunction with the accompanying Consolidated Financial Statements and
related Notes to Consolidated Financial Statements. We begin with an introduction to our key
businesses and then provide discussions of our results of operations, liquidity and capital resources, and
critical accounting policies. Our 2019, 2018 and 2017 fiscal years included 52 weeks.

Introduction

Our Business

We sell our products to furniture retailers or distributors in the United States, Canada, and
approximately 60 other countries, including the United Kingdom, China, Australia, South Korea and
New Zealand, directly to consumers through stores that we own and operate and through our websites,
www.la-z-boy.com and www.joybird.com. The centerpiece of our retail distribution strategy is our
network of 353 La-Z-Boy Furniture Galleries(cid:3) stores and 550 La-Z-Boy Comfort Studio(cid:3) locations, each
dedicated to marketing our La-Z-Boy branded products. We consider this dedicated space to be
‘‘proprietary.’’ We own 156 of the La-Z-Boy Furniture Galleries(cid:3) stores. The remainder of the
La-Z-Boy Furniture Galleries(cid:3) stores, as well as all 550 La-Z-Boy Comfort Studio(cid:3) locations, are
independently owned and operated. La-Z-Boy Furniture Galleries(cid:3) stores help consumers furnish their
homes by combining the style, comfort, and quality of La-Z-Boy furniture with our available design
services. La-Z-Boy Comfort Studio(cid:3) locations are defined spaces within larger independent retailers
that are dedicated to displaying and selling La-Z-Boy branded products. In total, we have
approximately 7.8 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded
products in North America. We also have approximately 2.7 million square feet of floor space outside
of the United States and Canada dedicated to selling La-Z-Boy branded products. Our other brands,
England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets,
with approximately half of Hammary’s sales originating through the La-Z-Boy Furniture Galleries(cid:3) store
network. Kincaid and England have their own dedicated proprietary in-store programs with 590 outlets
and approximately 1.9 million square feet of proprietary floor space. In total, our proprietary floor
space includes approximately 12.4 million square feet worldwide. Joybird, which we acquired in the
second quarter of fiscal 2019, sells product almost exclusively online and has a limited amount of
proprietary retail floor space it uses as a showroom to develop its brand.

Our goal is to deliver value to our shareholders over the long term through executing our strategic
initiatives. The foundation of our strategic initiatives is driving profitable sales growth in all areas of
our business.

We drive growth in the following ways:

(cid:127) Our branded distribution channels, which include the La-Z-Boy Furniture Galleries(cid:3) store network and
the La-Z-Boy Comfort Studio(cid:3) locations, our store-within-a-store format. We expect this initiative to
generate growth in our Retail segment through an increased company-owned store count and in
our wholesale Upholstery segment as our proprietary distribution network expands. We are not
only focused on growing the number of locations, but also on upgrading existing store locations to
our new concept designs.

(cid:127) Our company-owned retail business. We are growing this business by increasing same-store sales
through improved execution at the store level and by acquiring existing La-Z-Boy Furniture
Galleries(cid:3) stores and opening new La-Z-Boy Furniture Galleries(cid:3) stores, primarily in markets that
can be serviced through our regional distribution centers, where we see opportunity for growth, or
where we believe we have opportunities for further market penetration.

(cid:127) Our unique multi-channel distribution network. In addition to our branded distribution channels,

over 2,100 other dealers sell La-Z-Boy products, providing us the benefit of multi-channel
distribution. These outlets include some of the best-known names in the industry, including Art
Van, Nebraska Furniture Mart, and Slumberland. Our other brands, England, American Drew,
Hammary, and Kincaid, enjoy distribution through many of the same outlets. We believe there is
significant growth potential for our brands through these retail channels.

(cid:127) Our on-trend product including stationary upholstered furniture featured in our Live Life Comfortably(cid:3)
marketing campaign. While we are known for our iconic recliners, they account for less than half
of our sales in dollars, and we believe we have the potential to expand sales of our other products.
To stimulate growth, our Live Life Comfortably(cid:3) marketing campaign features a celebrity brand
ambassador, currently Kristen Bell, and focuses on expanding our digital marketing and
e-commerce capabilities to build traffic across our multiple digital and physical properties. We are
driving change throughout our digital platforms to improve the user experience, with a specific
focus on the ease by which customers browse through our broad assortment, customize products to
their liking, find stores to make a purchase, or purchase at www.la-z-boy.com.

(cid:127) Our innovative products, including stain-resistant iCleanTM fabrics and our power products, some of

which include dual mechanisms and articulating headrests. Our recent innovation, duo(cid:3), is a
revolutionary product line that features the look of stationary furniture with the power to recline
at the push of a button. We are committed to innovation throughout our business, and to support
these efforts we opened our new state-of-the-art Innovation Center in January 2019 at our Dayton,
Tennessee campus.

(cid:127) Our multi-faceted online strategy to participate in and leverage the growth of online furniture sales. In
July 2018 we purchased Joybird, a leading e-commerce retailer and manufacturer of upholstered
furniture, which positions us for growth in the ever-changing online selling environment and allows
us to better reach millennial and Gen X consumers and leverage our supply chain assets. In
addition, we continue to increase online sales of La-Z-Boy furniture through la-z-boy.com and
other digital players, such as Wayfair and Amazon.

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

(cid:127) Upholstery Segment. Our Upholstery reportable segment is our largest business segment and

consists primarily of two operating segments: La-Z-Boy, our largest operating segment, and the

operating segment for our England subsidiary. The Upholstery segment also includes our
international wholesale businesses. We aggregate these operating segments into one reportable
segment because they are economically similar and because they meet the other aggregation
criteria for determining reportable segments. Our Upholstery segment manufactures and imports
upholstered furniture such as recliners and motion furniture, sofas, loveseats, chairs, sectionals,
modulars, ottomans and sleeper sofas. The Upholstery segment sells directly to La-Z-Boy
Furniture Galleries(cid:3) stores, operators of La-Z-Boy Comfort Studio(cid:3) locations, England Custom
Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.

(cid:127) Casegoods Segment. Our Casegoods segment consists of one operating segment that sells furniture
under three brands: American Drew(cid:3), Hammary(cid:3), and Kincaid(cid:3). The Casegoods segment is an
importer, marketer, and distributor of casegoods (wood) furniture such as bedroom sets, dining
room sets, entertainment centers and occasional pieces, and also manufactures some custom
upholstered furniture. The Casegoods segment sells directly to major dealers, as well as La-Z-Boy
Furniture Galleries(cid:3) stores, and a wide cross-section of other independent retailers.

(cid:127) Retail Segment. Our Retail segment consists of one operating segment comprising our 156
company-owned La-Z-Boy Furniture Galleries(cid:3) stores. The Retail segment primarily sells
upholstered furniture, in addition to some casegoods and other accessories, to the end consumer
through these stores.

(cid:127) Corporate & Other. Corporate & Other includes the shared costs for corporate functions, including

human resources, information technology, finance and legal, in addition to revenue generated
through royalty agreements with companies licensed to use the La-Z-Boy(cid:3) brand name on various
products. We consider our corporate functions to be other business activities and have aggregated
them with our other insignificant operating segments including our global trading company in
Hong Kong and Joybird, an e-commerce retailer that manufactures and sells upholstered furniture
such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports and sells
casegoods (wood) furniture such as occasional tables and other accessories. Joybird sells to end
consumers almost exclusively online through its website, www.joybird.com. None of the operating
segments included in Corporate & Other meet the requirements of reportable segments at this
time.

Results of Operations

Fiscal Year 2019, Fiscal Year 2018, and Fiscal Year 2017

La-Z-Boy Incorporated

(Amounts in thousands, except percentages)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(FY19 vs FY18)
% Change

(52 weeks)
4/29/2017

(FY18 vs FY17)
% Change

Sales . . . . . . . . . . . . . . . . . . . . . . . $1,745,401 $1,583,947
Operating income . . . . . . . . . . . . . .
129,369
Operating margin . . . . . . . . . . . . . .

129,674

7.4%

8.2%

10.2% $1,520,060
133,342
0.2%

4.2%
(3.0)%

8.8%

Sales

Consolidated sales increased $161.5 million in fiscal 2019 compared with fiscal 2018, following an
increase of $63.9 million in fiscal 2018 compared with fiscal 2017.

(cid:127) The increase in sales in fiscal 2019 compared with fiscal 2018 was driven by growth in both our

core businesses and sales from our recent acquisitions. Sales in our Upholstery segment increased
due to higher selling prices, favorable changes in our product mix, and higher tariff surcharges on
Chinese imported parts. Sales in our Casegoods segment increased due to higher volume. In our
Retail segment, sales increased due to our acquired stores and delivered same-store sales increases.

Consolidated sales also benefitted from the acquisition of the Joybird ecommerce business
reflected in Corporate & Other.

(cid:127) The increase in sales in fiscal 2018 compared with fiscal 2017 was driven by sales growth in all
three of our operating segments. Our Upholstery segment benefited from the acquisition of the
La-Z-Boy wholesale business in the United Kingdom and Ireland and a favorable change in our
product mix. Our Casegoods segment grew sales volume by expanding floor space with existing
retailers. Our Retail segment sales increased due to the addition of new stores that were not open
in the prior-year period and from acquisitions we completed in fiscal 2018.

Operating Margin

Operating margin decreased 80 basis points in fiscal 2019 compared with the prior year, following a
decrease of 60 basis points in fiscal 2018 compared with the prior year.

(cid:127) Gross margin increased 90 basis points during fiscal 2019 compared with fiscal 2018.

(cid:127) Changes in our consolidated sales mix increased our gross margin 130 basis points in fiscal 2019
compared with the prior year. This benefit was driven by the growth of our Retail segment and
the acquisition of Joybird, which have a higher gross margin than our Upholstery and Casegoods
reportable segments.

(cid:127) This was partly offset by lower gross margin in our Upholstery segment, primarily due to higher
supply chain costs and changes in our product mix that were not fully offset by higher selling
prices.

(cid:127) Additionally, fiscal 2019 includes purchase accounting charges related to our acquisitions that

were 20 basis points higher in fiscal 2019 than in fiscal 2018.

(cid:127) Gross margin decreased 80 basis points in fiscal 2018 compared with fiscal 2017.

(cid:127) Our gross margin declined in fiscal 2018 compared with the prior year, mostly due to a decline
in our Upholstery segment’s gross margin resulting from increased prices for our three core raw
material components of steel, polyurethane foam and wood.

(cid:127) This was partly offset by a 20 basis point improvement in fiscal 2018 due to the growth of our

Retail segment compared with the prior year, which has a higher gross margin than our
wholesale segments.

(cid:127) Selling, general, and administrative (‘‘SG&A’’) expense as a percentage of sales increased 170 basis

points during fiscal 2019 compared with fiscal 2018.

(cid:127) SG&A expense was 200 basis points higher in fiscal 2019 due to changes in our consolidated

sales mix. This increase was driven by the growth of our Retail segment and the acquisition of
Joybird, which have a higher level of SG&A expense as a percentage of sales than our
Upholstery and Casegoods reportable segments.

(cid:127) Incentive compensation costs as a percentage of sales were 80 basis points higher during fiscal
2019 primarily due to our improved consolidated financial performance against our incentive-
based targets during fiscal 2019.

(cid:127) Fiscal 2019 includes purchase accounting charges related to our acquisitions that were 20 basis

points higher in fiscal 2019 than in fiscal 2018.

(cid:127) Partly offsetting these items was a benefit from favorable absorption of fixed SG&A costs on the

higher sales dollars in fiscal 2019.

(cid:127) During the third quarter of fiscal 2019 we enacted changes to our employee vacation policies

and reduced our salary vacation liability. This change provided a one-time 20 basis point benefit
to SG&A expense.

(cid:127) SG&A expense was lower by 30 basis points in fiscal year 2019, due to a charge for a legal

settlement in fiscal 2018.

(cid:127) Selling, general, and administrative (‘‘SG&A’’) expense as a percentage of sales decreased 20 basis

points during fiscal 2018 compared with fiscal 2017.

(cid:127) SG&A expense as a percentage of sales was 40 basis points lower in fiscal 2018, primarily due to

lower incentive compensation expense due to our consolidated financial performance being
lower when compared against our incentive-based targets in fiscal 2018 than the prior year.

(cid:127) We benefited from favorable absorption of fixed SG&A costs on the higher sales dollars and a

reduction in discretionary SG&A spending in fiscal 2018.

(cid:127) Partially offsetting these items was a charge for a legal settlement of a civil dispute, which

increased SG&A expense as a percentage of sales by 30 basis points in fiscal 2018 compared
with fiscal 2017. With the settlement, which resolved all of our past and future obligations at
issue in the litigation, we recognized an additional charge of $4.1 million in the third quarter of
fiscal 2018.

(cid:127) Additionally, SG&A expense as a percentage of sales increased 30 basis points in fiscal 2018,

compared with the prior year, due to the growth of our Retail segment, which has a higher level
of SG&A expense as a percentage of sales than our wholesale segments.

We explain these items further when we discuss each segment’s results later in this Management’s
Discussion and Analysis.

Upholstery Segment

(Amounts in thousands, except percentages)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(FY19 vs FY18)
% Change

(52 weeks)
4/29/2017

(FY18 vs FY17)
% Change

Sales . . . . . . . . . . . . . . . . . . . . . . . $1,268,242 $1,227,363
Operating income . . . . . . . . . . . . . .
130,349
Operating margin . . . . . . . . . . . . . .

127,906

10.1%

10.6%

3.3% $1,191,443
(1.9)% 148,996

3.0%
(12.5)%

12.5%

Sales

Our Upholstery segment’s sales increased $40.9 million in fiscal 2019 compared with fiscal 2018,
following an increase of $35.9 million in fiscal 2018 compared with fiscal 2017.

(cid:127) The fiscal 2019 sales increase was primarily due to the following:

(cid:127) Changes in our product mix drove a 1.9% increase in sales. Our product mix shifted to more
power units which have a higher average selling price than units without power, and primarily
resulted from increased sales of our duo(cid:3) product.

(cid:127) Price increases in response to inflationary pressure on raw materials resulted in a 1.3% increase

in sales, and higher tariff surcharges on Chinese imported parts increased sales by 1.2%.

(cid:127) These increases were somewhat offset by lower overall unit volume, which resulted in a 1.4%

decrease in sales. Volume was flat to the prior year for the first three quarters and only started
to decline around the beginning of our fourth quarter, which was in line with the rest of the
furniture industry which saw negative growth in the first calendar quarter of 2019 for the first
time since the 2008 recession.

(cid:127) The fiscal 2018 sales increase was primarily due to the following:

(cid:127) The acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland added

sales of $18.9 million.

(cid:127) Changes in our product mix resulted in a 2.0% increase in sales. Our product mix shifted from
non-powered fabric units to more leather units with power that have a higher average selling
price.

(cid:127) Higher selling prices resulted in a 0.7% increase in sales. We raised our selling price in response

to inflationary pressures on our raw materials.

(cid:127) These increases were somewhat offset by lower overall unit volume, which resulted in a 2.5%

decrease in sales.

Operating Margin

Our Upholstery segment’s operating margin decreased 50 basis points in fiscal 2019 compared with
fiscal 2018, following a decrease of 190 basis points in fiscal 2018 compared with the prior year.

(cid:127) Gross margin decreased 60 basis points during fiscal 2019 compared with fiscal 2018.

(cid:127) We experienced inflationary pressures in our supply chain which decreased the segment’s gross

margin by 90 basis points.

(cid:127) A shift in product mix resulted in a 70 basis point reduction in the segment’s gross margin. The
shift in our product mix to more units with power, especially our duo(cid:3) product, drives higher
gross profit dollars per unit but results in a lower gross margin as a percentage of sales than
units without power.

(cid:127) Partially offsetting these items were selling price increases, which provided a 90 basis point

benefit.

(cid:127) Raw material prices increased during the first half of the fiscal year, but then retracted in the
back half of the year. For the full fiscal year 2019, changes in raw material prices were flat
compared with the prior year.

(cid:127) Gross margin decreased 160 basis points during fiscal 2018 compared with fiscal 2017.

(cid:127) Increased prices, primarily for our three core raw material components of steel, polyurethane
foam and wood, decreased the segment’s gross margin by 80 basis points. The inflationary
pressure we experienced from these raw materials was higher than we expected, and during
fiscal 2018 we implemented sales price increases to offset the negative impact on our margins.

(cid:127) Lower absorption of fixed costs in our manufacturing facilities, driven primarily by a decline in

production volume, decreased the segment’s gross margin by 70 basis points.

(cid:127) The benefit of a legal settlement during fiscal 2017 negatively impacted the comparison of the

segment’s gross margin by 20 basis points.

(cid:127) SG&A expense as a percentage of sales was relatively flat during fiscal 2019 compared with fiscal

2018.

(cid:127) SG&A expense included a 30 basis point improvement due to a charge for a legal settlement

recorded in fiscal 2018.

(cid:127) We benefited from favorable absorption of fixed SG&A costs on the higher sales dollars in fiscal

2019.

(cid:127) This was offset by 60 basis points of higher incentive compensation expense in fiscal 2019 due to

the segment’s improved financial performance against incentive-based targets in fiscal 2019.

(cid:127) SG&A expense as a percentage of sales increased 30 basis points during fiscal 2018 compared with

fiscal 2017.

(cid:127) A charge for a legal settlement of a civil dispute increased SG&A expense as a percentage of

sales by 30 basis points. With the settlement, which resolved all of our past and future
obligations at issue in the litigation, we recognized an additional charge of $4.1 million in the
third quarter of fiscal 2018.

Casegoods Segment

(Amounts in thousands, except percentages)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(FY19 vs FY18)
% Change

(52 weeks)
4/29/2017

(FY18 vs FY17)
% Change

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

$114,473
12,589

$111,393
11,641

11.0%

10.5%

2.8% $100,228
8,623
8.1%

8.6%

11.1%
35.0%

Sales

Our Casegoods segment’s sales increased $3.1 million in fiscal 2019 compared with fiscal 2018,
following an increase of $11.2 million in fiscal 2018 compared with fiscal 2017.

(cid:127) The sales increases in fiscal 2019 and 2018 were primarily due to higher volume we achieved

through improved product styling, expanding our floor space with existing retailers, and a reliable
in-stock position.

Operating Margin

Our Casegoods segment’s operating margin increased 50 basis points in fiscal 2019 compared with the
prior year, following an increase of 190 basis points in fiscal 2018 compared with the prior year.

(cid:127) Gross margin increased 30 basis points during fiscal 2019 compared with fiscal 2018, following an

increase of 20 basis points during fiscal 2018 compared with fiscal 2017.

(cid:127) During fiscal 2019 and 2018, gross margin increased compared with each respective prior year
due to increased volume and a shift in our product mix to newer, higher-margin collections. In
fiscal 2018, this benefit was slightly offset by higher freight expense on imported product versus
the prior year.

(cid:127) SG&A expense as a percentage of sales decreased 20 basis points during fiscal 2019 compared with
fiscal 2018, following a decrease of 170 basis points during fiscal 2018 compared with fiscal 2017.

(cid:127) During fiscal 2019, the decreased SG&A expense was primarily due to changes to our employee

vacation policies, which provided a one-time benefit of 20 basis points.

(cid:127) During fiscal 2018, the decreased SG&A expense was due to improved absorption of fixed

SG&A costs on the higher sales volume, and a reduction in discretionary spending.

Retail Segment

(Amounts in thousands, except percentages)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(FY19 vs FY18)
% Change

(52 weeks)
4/29/2017

(FY18 vs FY17)
% Change

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

$570,201
37,922

$474,613
20,709

6.7%

4.4%

20.1% $443,238
83.1% 19,205

4.3%

7.1%
7.8%

Sales

Our Retail segment’s sales increased $95.6 million in fiscal 2019 compared with fiscal 2018, following
an increase of $31.4 million in fiscal 2018 compared with fiscal 2017.

(cid:127) The sales increase in fiscal 2019 included $67.0 million in sales from acquired stores. In fiscal 2019,
delivered same-store sales increased $26.0 million or 5.7%, primarily driven by improved execution
at the store level. The remainder of the change in sales during fiscal 2019 was due to the impact of
new and closed stores.

(cid:127) The sales increase in fiscal 2018 was a result of $20.4 million from acquired stores and

$14.7 million from new stores that were not open in the prior-year period. Partially offsetting these
items was $3.7 million lower delivered same-store sales, a decline of 1.0%. The decrease was
primarily driven by lower store traffic, the impact of which was somewhat offset by an increase in
average ticket that resulted from increased design services and custom orders.

Operating Margin

Our Retail segment’s operating margin increased 230 basis points in fiscal 2019 compared with the
prior year, following an increase of 10 basis points in fiscal 2018 compared with the prior year.

(cid:127) Gross margin increased 30 basis points during fiscal 2019 compared with fiscal 2018, following a

decrease of 20 basis points in fiscal 2018 compared with fiscal 2017.

(cid:127) During fiscal 2019, the improvement in gross margin was primarily due to increased design

services and custom sales. Additionally, gross margin improved due to the benefit of acquired
stores, which have gross margins that are slightly higher than our average store. These benefits
more than offset the impact of purchase accounting charges resulting from the acquisitions
during the year.

(cid:127) During fiscal 2018, gross margin decreased slightly due to higher promotional activity as we

executed a variety of strategies to drive traffic to our stores and convert that traffic into sales.

(cid:127) SG&A expense as a percentage of sales decreased 200 basis points during fiscal 2019 compared
with fiscal 2018, following a decrease of 30 basis points in fiscal 2018 compared with fiscal 2017.

(cid:127) During fiscal 2019, SG&A expenses as a percentage of sales decreased due to better leverage of
fixed costs (primarily occupancy and administrative costs) on increased same-store delivered
sales and the benefit of our acquired stores which operate with lower SG&A expense as a
percentage of sales compared with our existing stores.

(cid:127) During fiscal 2018, SG&A expenses as a percentage of sales was lower than the prior year due

to reducing our discretionary SG&A spending to better align with sales volume.

Corporate and Other

(Amounts in thousands, except percentages)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(FY19 vs FY18)
% Change

(52 weeks)
4/29/2017

(FY18 vs FY17)
% Change

Sales:

Corporate and Other . . . . . . . . . . . . $ 74,012 $ 12,739
(281,527) (242,161)
Eliminations . . . . . . . . . . . . . . . . . .

481.0% $
9,161
(16.3)% (224,010)

39.1%
(8.1)%

Operating loss:

Corporate and Other . . . . . . . . . . . .

(48,743)

(33,330)

(46.2)% (43,482)

23.3%

Sales

Sales increased in fiscal 2019 compared with fiscal 2018 primarily due to the acquisition of Joybird,
which contributed $59.1 million in sales. Sales in fiscal 2018 increased compared with the prior year
due to an increase in intercompany commission revenue charged to our reportable segments by our
global trading company in Hong Kong.

Eliminations increased in fiscal 2019 and fiscal 2018 compared with each respective prior year due to
higher sales from our Upholstery and Casegoods segments to our Retail segment, mainly because of
the increased sales in the Retail segment and the impact of acquired stores.

Operating Loss

Our Corporate and Other operating loss was $15.4 million higher in fiscal 2019 compared with fiscal
2018.

(cid:127) Incentive compensation costs were higher in fiscal 2019 compared with fiscal 2018, primarily due to

improved consolidated financial performance against incentive-based targets during fiscal 2019.

(cid:127) Fiscal 2019 includes the operating loss and purchase accounting adjustments related to the Joybird

acquisition.

(cid:127) Additionally, in fiscal 2018, we recognized a $1.8 million insurance gain related to a fire in our

England subsidiary’s corporate office building.

Our Corporate and Other operating loss was $10.2 million lower in fiscal 2018 compared with fiscal
2017.

(cid:127) The Corporate and Other operating loss was lower due to a decrease in incentive compensation
expense because our consolidated financial performance was lower when compared against our
incentive-based targets in fiscal 2018.

(cid:127) In addition, our global trading company in Hong Kong was more profitable, due to the increased

intercompany commission revenue we charge to our reportable segments.

(cid:127) Lastly, we recorded a $1.8 million insurance gain during fiscal 2018 following a fire in our England

subsidiary’s corporate office building. We recognized a gain because the insurance proceeds
exceeded the building’s net book value on the date of the fire.

Interest Expense

Interest expense was $1.0 million higher in fiscal 2019 compared with fiscal 2018, following a decrease
of $0.5 million in fiscal 2018 compared with fiscal 2017. The increase in interest expense in fiscal 2019
was primarily due to higher average short-term borrowings during the year. A short-term draw of
$35 million on our credit line was taken in the second quarter of fiscal 2019 and repaid by the end of
fiscal 2019, and was used to help fund our acquisitions during the year. Additionally, fiscal 2019
included $0.6 million for fair value adjustments of future guaranteed payments related to the Joybird
acquisition.

Pension Termination Charge

During the fourth quarter of fiscal 2019, we terminated our defined benefit pension plan for eligible
factory hourly employees in our La-Z-Boy operating unit. In connection with the plan termination, we
settled all future obligations under the plan through a combination of lump-sum payments to eligible
participants who elected to receive them, and transferred any remaining benefit obligations under the
plan to a highly rated insurance company. We recognized a non-cash pre-tax charge of $32.7 million in
our consolidated statement of income associated with the plan termination during the fourth quarter of
fiscal 2019.

Other Expense

Other expense was $0.6 million higher in fiscal 2019 compared with fiscal 2018 and $0.9 million lower
in fiscal 2018 compared with fiscal 2017, due to a $2.2 million gain on investments recorded in fiscal

2018 when our available-for-sale convertible debt security converted to preferred shares of a
privately-held company. Additionally, fiscal year 2018 had higher foreign currency exchange rate losses
when compared to both fiscal 2017 and fiscal 2019.

Income Taxes

Our effective tax rate was 26.4% for fiscal 2019, 36.7% for fiscal 2018, and 33.5% for fiscal 2017.

On December 22, 2017, the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) was enacted into law. Most of its
provisions are effective for tax years beginning on or after January 1, 2018. Because we are a fiscal year
U.S. taxpayer, the majority of the provisions, such as elimination of the domestic manufacturing
deduction, new taxes on certain foreign-sourced income, and new limitations on certain business
deductions began applying to us in fiscal 2019. As the Company is a fiscal year taxpayer, the lower
corporate income tax rate of 21% was phased in, resulting in a blended federal rate of 30.4% for fiscal
2018. The federal rate is 21% for fiscal 2019.

In December of 2017, the SEC staff issued guidance which provides that companies that have not
completed their accounting for the effects of the Tax Act but can determine a reasonable estimate of
those effects should include a provisional amount based on their reasonable estimate in their financial
statements. The guidance also allows companies to adjust the provisional amounts during a one-year
measurement period which is similar to the measurement period used when accounting for business
combinations. In fiscal 2019, the Company finalized the provisional estimates of $0.2 million recorded
in fiscal 2018, with no material change.

Impacting our effective tax rate for fiscal 2019 was a net tax expense of $1.2 million primarily from the
tax effect of the defined benefit pension plan termination of $2.6 million and a net tax benefit of
$1.4 million primarily from excess tax benefits from shared-based payments. Absent discrete
adjustments, the effective tax rate in fiscal 2019 would have been 25.1%.

Impacting our effective tax rate for fiscal 2018 was a charge of $5.5 million, reflecting the net effect of
the Tax Act. This included a $10.0 million charge for the provisional re-measurement of certain
deferred taxes and related amounts, $0.2 million of income tax expense for the effects of the transition
tax, and a benefit of $4.7 million primarily related to the lower blended federal tax rate. In addition to
the above items related to the Tax Act, was a net tax benefit primarily of $2.4 million from research
and development credits related to amended prior-year tax returns and the release of valuation
allowances relating to certain U.S. state deferred tax assets and state income tax credits. Absent
discrete adjustments, the effective tax rate in fiscal 2018 would have been 30.6%.

Impacting our effective tax rate for fiscal 2017 was a net tax benefit of $1.4 million primarily from the
release of valuation allowances relating to certain U.S. state deferred tax assets and state income tax
credits. Absent discrete adjustments, the effective tax rate in fiscal 2017 would have been 34.6%.

Liquidity and Capital Resources

Our sources of liquidity include cash and equivalents, short-term and long-term investments, cash from
operations, and amounts available under our credit facility. We believe these sources remain adequate
to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, and
fulfill other cash requirements for day-to-day operations, dividends to shareholders, and capital
expenditures. We had cash, cash equivalents and restricted cash of $131.8 million at April 27, 2019,
compared with $136.9 million at April 28, 2018. In addition, we had investments to enhance our returns
on cash of $31.5 million at April 27, 2019, compared with $34.4 million at April 28, 2018.

on December 19, 2017, extending its maturity date to December 19, 2022. The credit agreement
includes affirmative and negative covenants that apply under certain circumstances, including a fixed-
charge coverage ratio requirement that applies when excess availability under the credit line is less than
certain thresholds. At April 27, 2019, we were not subject to the fixed-charge coverage ratio
requirement, had no borrowings outstanding under the agreement, and had excess availability of
$148.1 million of the $150.0 million credit commitment.

Capital expenditures for fiscal 2019 were $48.4 million compared with $36.3 million for fiscal 2018.
Capital expenditures were higher in fiscal 2019, primarily due to construction of our new Innovation
Center, upgrades to our upholstery manufacturing plant in Dayton, Tennessee, expansion of our
England subsidiary plant, and construction of a new corporate office building for our England
subsidiary. We have no material contractual commitments outstanding for future capital expenditures.
We expect capital expenditures to be in the range of $50 to $60 million for fiscal 2020, reflecting plant
upgrades to our upholstery manufacturing facilities in Dayton, Tennessee and Neosho, Missouri, as well
as improvements to several of our retail stores.

Our board of directors has sole authority to determine if and when we will declare future dividends
and on what terms. We expect the board to continue declaring regular quarterly cash dividends for the
foreseeable future, but it may discontinue doing so at any time.

We believe our cash flows from operations, present cash, cash equivalents and restricted cash balance
of $131.8 million, short and long-term investments to enhance returns on cash of $31.5 million, and
current excess availability under our credit facility of $148.1 million, will be sufficient to fund our
business needs, including fiscal 2020 contractual obligations of $170.9 million as presented in our
contractual obligations table. Included in our cash, cash equivalents and restricted cash at April 27,
2019, is $44.3 million held by foreign subsidiaries for which we have determined the amounts to be
permanently reinvested.

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

(Amounts in thousands)

Cash Flows Provided By (Used For)
Net cash provided by operating activities . . .
Net cash used for investing activities . . . . . .
Net cash used for financing activities . . . . . .
Exchange rate changes . . . . . . . . . . . . . . . .

Change in cash, cash equivalents and

(52 weeks)
4/27/2019

Year Ended

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

150,745
(122,567)
(32,787)
(475)

115,750
(55,224)
(76,255)
1,741

147,990
(65,230)
(53,414)
178

restricted cash . . . . . . . . . . . . . . . . . . . .

(5,084) $

(13,988) $

29,524

Operating Activities

During fiscal 2019, net cash provided by operating activities was $150.7 million. Our cash provided by
operating activities was primarily attributable to net income generated during fiscal 2019 as well as a
$12.9 million increase in payroll and other compensation due to higher accrued incentive compensation
costs that will be paid in the first quarter of fiscal 2020.

During fiscal 2018, net cash provided by operating activities was $115.8 million. Our cash provided by
operating activities was primarily attributable to net income generated during fiscal 2018 and a
$6.6 million increase in accounts payable that is primarily due to standardizing payment terms with our
vendors, which resulted in many payment terms being extended.

During fiscal 2017, net cash provided by operating activities was $148.0 million. Our cash provided by
operating activities was primarily attributable to net income generated during fiscal 2017 and a
$12.5 million reduction in inventory. Our ability to improve our inventory efficiency and productivity
more than offset an increase in finished goods inventory during fiscal 2017.

Investing Activities

During fiscal 2019, net cash used for investing activities was $122.6 million, primarily due to
$76.5 million used for acquisitions and $48.4 million used for capital expenditures. Our cash used for
acquisitions during the period included the acquisition of the assets of two independent operators of
La-Z-Boy Furniture Galleries(cid:3) stores, one that operated nine stores and two warehouses in Arizona
and one that operated one store in Massachusetts, as well as the acquisition of Joybird, an e-commerce
retailer and manufacturer of upholstered furniture. Our capital expenditures during the year primarily
related to spending on manufacturing machinery and equipment, construction of our new Innovation
Center, upgrades to our Dayton, Tennessee Upholstery manufacturing facility, expansion of our
England subsidiary’s plant and construction of their new corporate office building, and relocation of
one of our regional distribution centers.

During fiscal 2018, net cash used for investing activities was $55.2 million, which included $15.9 million
to fund the acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland,
$36.3 million for capital expenditures, and $5.9 million for net investment increases. Capital
expenditures during the period primarily related to spending on the construction of our new Innovation
Center, manufacturing machinery and equipment, and our continued ERP system implementation.
Additionally, under the terms of the purchase agreement for the La-Z-Boy wholesale business in the
United Kingdom and Ireland, payment for the business was due 90 business days following the date of
acquisition, and accordingly, we made that payment during the first quarter of fiscal 2018.

During fiscal 2017, net cash used for investing activities was $65.2 million, which included $35.9 million
for acquisitions of retail stores, $20.3 million for capital expenditures, and $9.8 million for net
investment increases. Capital expenditures during the period primarily related to spending on
manufacturing machinery and equipment, our continued ERP system implementation, and construction
of our new Innovation Center.

Financing Activities

During fiscal 2019, net cash used for financing activities was $32.8 million, including $23.0 million used
to purchase our common stock pursuant to our share repurchase authorization and $23.5 million paid
to our shareholders in quarterly dividends. This was partly offset by $13.9 million in cash received upon
exercise of employee stock awards, net of shares withheld for taxes.

During fiscal 2018, net cash used for financing activities was $76.3 million, including $56.7 million used
to purchase our common stock and $22.0 million paid to our shareholders in quarterly dividends.

During fiscal 2017, net cash used for financing activities was $53.4 million, including $36.0 million used
to purchase our common stock and $20.7 million paid to our shareholders in quarterly dividends.

Our board of directors has authorized the purchase of company stock. As of April 27, 2019, 5.9 million
shares remained available for purchase pursuant to this authorization. The authorization has no
expiration date. We purchased 0.8 million shares during fiscal 2019 for a total of $23.0 million. We
expect to continue to be opportunistic in purchasing company stock with the cash flows we anticipate
generating in fiscal 2020.

Other

The following table summarizes our contractual obligations of the types specified as of April 27, 2019:

Payments Due by Period

(Amounts in thousands)

Capital lease obligations . . . . . . . .
Operating lease obligations . . . . . .
Purchase obligations* . . . . . . . . . .
Contingent consideration . . . . . . . .
Future guaranteed payments . . . . .
Legal liability . . . . . . . . . . . . . . . .

Total

199
392,220
87,341
7,900
26,300
2,333

Less than
1 Year

180
76,508
87,341
—
5,100
1,750

1 - 3
Years

19
130,307
—
3,300
11,200
583

4 - 5
Years

More than
5 Years

— $

82,623
—
4,600
10,000
—

—
102,782
—
—
—
—

Total contractual obligations . . . .

516,293

170,879

145,409

97,223

102,782

*We have purchase order commitments of $87.3 million related to open purchase orders, primarily with

foreign and domestic casegoods, leather and fabric suppliers, which are generally cancellable if
production has not begun.

Our consolidated balance sheet at the end of fiscal 2019 reflected a $1.0 million net liability for
uncertain income tax positions. We do not expect that the net liability for uncertain income tax
positions will significantly change within the next 12 months. We will either pay or release the liability
for uncertain income tax positions as tax audits are completed or settled, statutes of limitation expire or
other new information becomes available.

We do not expect our continuing compliance with existing federal, state and local statutes dealing with
protection of the environment to have a material effect on our capital expenditures, earnings,
competitive position or liquidity.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting
principles. In some cases, these principles require management to make difficult and subjective
judgments regarding uncertainties and, as a result, such estimates and assumptions may significantly
impact our financial results and disclosures. We base our estimates on currently known facts and
circumstances, prior experience and other assumptions we believe to be reasonable. We use our best
judgment in valuing these estimates and may, as warranted, use external advice. Actual results could
differ from these estimates, assumptions, and judgments and these differences could be significant. We
make frequent comparisons throughout the year of actual experience to our assumptions to reduce the
likelihood of significant adjustments. We record adjustments when differences are known. The following
critical accounting policies affect our consolidated financial statements.

Revenue Recognition and Related Allowances

Revenues are recognized when control of the promised goods or services is transferred to our
customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange
for those goods or services. We generate revenues primarily by manufacturing/importing and delivering
upholstery and casegoods (wood) furniture products to independent furniture retailers, independently-
owned La-Z-Boy Furniture Galleries(cid:3) stores or the end consumer. Each unit of furniture is a separate
performance obligation, and we satisfy our performance obligation when control of our product is
passed to our customer, which is the point in time that our customers are able to direct the use of and
obtain substantially all of the remaining economic benefit of the goods or services.

product shipments on third-party carriers at the point in time that our product is loaded onto the third-
party container or truck and that container or truck leaves our facility. For our imported products, we
recognize revenue at the point in time that legal ownership is transferred, which may not occur until
after the goods have passed through U.S. Customs. In all cases, this revenue includes amounts we bill
to customers for freight charges, because we have elected to treat shipping activities that occur after
the customer has obtained control of our product as a fulfillment cost rather than an additional
promised service. Because of this election, we recognize revenue for shipping when control of our
product passes to our customer, and the shipping costs are accrued when the freight revenue is
recognized. Revenue for product shipments on company-owned trucks is recognized for the product
and freight at the point in time that our product is delivered to our customer’s location.

We recognize revenue for retail sales and online sales to the end consumer through our company-
owned retail stores, www.la-z-boy.com or www.joybird.com once the end consumer has taken control of
the furniture, at which point legal title has passed to them. This takes place when the product is
delivered to the end consumer’s home. Home delivery is not a promised service to our customer, and is
not a separate performance obligation, because home delivery is a fulfillment activity as the costs are
incurred as part of transferring our product to the end consumer. At the time the end consumer places
an order through our company-owned retail stores or www.la-z-boy.com, we collect a deposit on a
portion of the total merchandise price. We record this as a customer deposit, which is included in our
accrued expenses and other current liabilities on our consolidated balance sheet. The balance of the
order is paid in full prior to delivery of the product. Once the order is taken through our company-
owned retail stores or www.la-z-boy.com we recognize a contract asset for the full order amount and a
corresponding deferred revenue liability for the difference between the total order and the deposit
collected. The contract asset is included in our other current assets on our consolidated balance sheet
and the deferred revenue is included in our accrued expenses and other current liabilities on our
consolidated balance sheet. At the time the end consumer places an order through www.joybird.com,
we collect the entire amount owed and record this as a customer deposit. Because the entire amount
owed is collected at the time of the order, there is no contract asset recorded for Joybird sales.

At the time we recognize revenue, we make provisions for estimated refunds, product returns, and
warranties, as well as other incentives that we may offer to customers. When estimating our incentives
we utilize either the expected value method or the most likely amount to determine the amount of
variable consideration. We use either method depending on which method will provide the best
estimate of the variable consideration, and we only include variable consideration when it is probable
that there will not be a significant reversal in the amount of cumulative revenue recognized when the
uncertainty associated with the variable consideration is subsequently resolved. Incentives offered to
customers include cash discounts, rebates, advertising agreements and other sales incentive programs.
Our sales incentives, including cash discounts and rebates, are recorded as a reduction to revenues.
Service allowances are for a distinct good or service received from our customer and are recorded as a
component of selling, general and administrative expense in our consolidated statement of income, and
are not recorded as a reduction of revenue and are not considered variable consideration. We use
substantial judgment based on the type of variable consideration or service allowance, historical
experience and expected sales volume when estimating these provisions. Sales, value added, and other
taxes we collect concurrent with revenue-producing activities are excluded from revenue. The expected
costs associated with our warranties and service allowances are recognized as expense when our
products are sold.

All orders are fulfilled within one year of order date, therefore we do not have any unfulfilled
performance obligations. Additionally, we elected the practical expedient to not adjust the promised
amount of consideration for the effects of a significant financing component because at contract
inception we expect the period between when we transfer our product to our customer and when the
customer pays for the product to be one year or less.

Trade accounts receivable arise from the sale of products on trade credit terms. On a quarterly basis,
we review 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,
we review orders from dealers that are significantly past due, and we ship product only when our ability
to collect payment from our customer for the new order is probable.

Our allowances for credit losses reflect our best estimate of probable losses inherent in the trade
accounts receivable balance. We determine the allowance based on known troubled accounts, historic
experience, and other currently available evidence.

Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that
we may not be able to recover the carrying amount of an asset or asset group. Using either quoted
market prices or an analysis of undiscounted projected future cash flows by asset groups, we determine
whether there is any indicator of impairment requiring us to further assess the fair value of our
long-lived assets. Our asset groups consist of our operating segments in our Upholstery reportable
segment, our Casegoods segment, each of our retail stores, our Joybird(cid:3) business and other corporate
assets.

Intangible Assets and Goodwill

We test intangibles and goodwill for impairment on an annual basis in the fourth quarter of each fiscal
year, and more frequently if events or changes in circumstances indicate that an asset might be
impaired. Indefinite-lived intangible assets include our American Drew trade name, and the reacquired
right to own and operate La-Z-Boy Furniture Galleries(cid:3) stores we have acquired. We have amortizable
intangible assets related to the acquisition of the La-Z-Boy wholesale business in the United Kingdom
and Ireland, which are primarily comprised of acquired customer relationships. We also have an
amortizable trade name related to the Joybird(cid:3) acquisition. We establish the fair value of our trade
names and reacquired rights based upon the relief from royalty method. We establish the fair value of
our other amortizable intangible assets based on the multi-period excess earnings method, a variant of
the income approach, and also using the relief from royalty method.
Our goodwill relates to the acquisition of La-Z-Boy Furniture Galleries(cid:3) stores and the La-Z-Boy
wholesale business in the United Kingdom and Ireland, and the acquisition of Joybird(cid:3), an e-commerce
retailer and manufacturer of upholstered furniture. The reporting unit for goodwill arising from retail
store acquisitions is our Retail operating segment. The reporting unit for goodwill arising from the
acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland and the acquisition
of Joybird is those respective businesses. We establish the fair value for the reporting unit based on the
discounted cash flows to determine if the fair value of our goodwill exceeds its carrying value.

Other Loss Reserves

We have various other loss exposures arising from the ordinary course of business, including inventory
obsolescence, health insurance, litigation, environmental claims, insured and self-insured workers’
compensation, restructuring charges, and product liabilities. Establishing loss reserves requires us to use
estimates and management’s judgment with respect to risk and ultimate liability. We use legal counsel
or other experts, including actuaries as appropriate, to assist us 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 health insurance, auto, product liability and workers’
compensation liabilities. Our deductibles generally do not exceed $1.5 million.

Income Taxes

We use the asset and liability method to account for income taxes. We recognize deferred tax assets
and liabilities based on 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 carryforwards. We measure deferred tax assets and liabilities using enacted
tax rates in effect for the year in which we expect to recover or settle those temporary differences.
When we record deferred tax assets, we are required to estimate, based on forecasts of taxable earnings
in the relevant tax jurisdiction, whether we are more likely than not to recover on them. In making
judgments about realizing the value of our deferred tax assets, we consider historic and projected
future operating results, the eligible carry-forward period, tax law changes and other relevant
considerations.

Product Warranties

We account for product warranties by accruing an estimated liability when we recognize revenue on the
sale of warranted product. We estimate future warranty claims based on claim experience and any
additional anticipated future costs on previously sold product. We incorporate repair costs in our
liability estimates, including materials, labor, and overhead amounts necessary to perform repairs, and
any costs associated with delivering repaired product to our customers and consumers. We use
considerable judgment in making our estimates. We record differences between our estimated and
actual costs when the differences are known.

Stock-Based Compensation

We measure stock-based compensation cost for equity-based awards on the grant date based on the
awards’ fair value, and recognize expense over the vesting period. We measure stock-based
compensation cost for liability-based awards on the grant date based on the awards’ fair value, and
recognize expense over the vesting period. We remeasure the liability for these awards and adjust their
fair value at the end of each reporting period until paid. We recognize compensation cost for stock-
based awards that vest based on performance conditions ratably over the vesting periods when the
vesting of such awards becomes probable. Determining the probability of award vesting requires
judgment, including assumptions about future operating performance. While the assumptions we use to
calculate and account for stock-based compensation awards represent management’s best estimates,
these estimates involve inherent uncertainties and the application of our management’s best judgment.
As a result, if we revise our assumptions and estimates, our stock-based compensation expense could be
materially different in the future.

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

We estimate the fair value of each performance award grant that vests based on a market condition
using a Monte Carlo valuation model. The Monte Carlo model incorporates more complex variables
than closed-form models such as the Black-Scholes option valuation model used for option grants. The
Monte Carlo valuation model simulates a distribution of stock prices to yield an expected distribution
of stock prices over the remaining performance period. The stock-paths are simulated using volatilities
calculated with historical information using data from a look-back period that is equal to the vesting
period. The model assumes a zero-coupon, risk-free interest rate with a term equal to the vesting
period. The simulations are repeated many times and the mean of the discounted values is calculated

as the grant date fair value for the award. The final payout of the award as calculated by the model is
then discounted back to the grant date using the risk-free interest rate.

Both the Monte Carlo and Black-Scholes methodologies are based, in part, on inputs for which there
are little or no observable market data, requiring us to develop our own assumptions. Inherent in both
of these models are assumptions related to expected stock-price volatility, expected life, risk-free
interest rate, and dividend yield.

Recent Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements included in this Form 10-K for a
discussion of recently adopted accounting standards and other new accounting standards.

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

While we had no variable rate borrowings at April 27, 2019, we could be exposed to market risk from
changes in interest rates if we incur variable rate debt in the future. Based on our current and expected
levels of exposed liabilities, management estimates that a one percentage point change in interest rates
would not have a material impact on our results of operations for fiscal 2020.

We are exposed to market risk from changes in the value of foreign currencies primarily related to our
plants in Mexico, our wholesale and retail businesses in Canada, our wholesale business in the United
Kingdom, and our majority-owned joint ventures in Thailand. In Mexico, we pay wages and other local
expenses in Mexican Pesos. In our Canada wholesale business we pay wages and other local expenses in
Canadian Dollars. We recognize sales and pay wages and other local expenses related to our wholesale
business in the United Kingdom in Great British Pounds, and our Canadian retail business in Canadian
Dollars. In Thailand, we pay wages and other local expenses in the Thai Baht. Nonetheless, gains and
losses resulting from market changes in the value of foreign currencies have not had and are not
currently expected to have a material effect on our consolidated results of operations. A decrease in
the value of foreign currencies in relation to the U.S. Dollar could impact the profitability of some of
our vendors and translate into higher prices from our suppliers, but we believe that, in that event, our
competitors would experience a similar impact.

We are exposed to market risk with respect to commodity and transportation costs, principally related
to commodities we use in producing our products, including steel, wood and polyurethane foam, in
addition to transportation costs for delivering our products. As commodity prices and transportation
costs rise, we determine whether a price increase to our customers to offset these costs is warranted. To
the extent that an increase in these costs would have a material impact on our results of operations, we
believe that our competitors would experience a similar impact.

We are exposed to market risk with respect to duties and tariffs assessed on raw materials, component
parts, and finished goods we import into countries where we operate. Additionally, we are exposed to
duties and tariffs on our finished goods that we export from our assembly plants to other countries. As
these tariffs and duties increase, we determine whether a price increase to our customers to offset
these costs is warranted. To the extent that an increase in these costs would have a material impact on
our results of operations, we believe that our competitors would experience a similar impact.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Management’s Report to Our Shareholders

Management’s Responsibility for Financial Information

Management is responsible for the consistency, integrity and preparation of the information contained
in this Annual Report on Form 10-K. The consolidated financial statements and other information
contained in this Annual Report on Form 10-K have been prepared in accordance with accounting
principles generally accepted in the United States of America and include necessary judgments and
estimates by management.

To fulfill our responsibility, we maintain comprehensive systems of internal control designed to provide
reasonable assurance that assets are safeguarded and transactions are executed in accordance with
established procedures. The concept of reasonable assurance is based upon recognition that the cost of
the controls should not exceed the benefit derived. We believe our systems of internal control provide
this reasonable assurance.

The board of directors exercised its oversight role with respect to our systems of internal control
primarily through its audit committee, which is comprised of independent directors. The committee
oversees our systems of internal control, accounting practices, financial reporting and audits to assess
whether their quality, integrity, and objectivity are sufficient to protect shareholders’ investments.

In addition, our consolidated financial statements have been audited by PricewaterhouseCoopers LLP,
an independent registered public accounting firm, whose report also appears in this Annual Report on
Form 10-K.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as that 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’’ set forth
by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on that
evaluation, our management concluded that our internal control over financial reporting was effective
as of April 27, 2019. SEC guidance permits companies to exclude certain acquisitions from the
assessment of internal control over financial reporting during the first year following the acquisition.
Accordingly, management has excluded Stitch Industries, Inc. (‘‘Joybird’’) and the business comprising
the assets acquired from EBCO, Inc., an independent operator of nine La-Z-Boy Furniture Galleries(cid:3)
stores in Arizona, from its assessment of internal control over financial reporting as of April 27, 2019,
because these businesses were acquired by the Company in purchase business combinations completed
during our fiscal second quarter ended October 27, 2018. The financial results of Joybird and the
business comprising the assets acquired from EBCO, Inc. constitute approximately 3% and 3% of
consolidated net sales, respectively, and approximately 2% and 1% of consolidated total assets,
respectively, as of and for the fiscal year ended April 27, 2019. PricewaterhouseCoopers LLP, an
independent registered public accounting firm, audited the effectiveness of the Company’s internal
control over financial reporting as of April 27, 2019, as stated in its report which appears herein.

Report of Independent Registered Public Accounting Firm

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

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of La-Z-Boy Incorporated and its
subsidiaries (the ‘‘Company’’) as of April 27, 2019 and April 28, 2018, and the related consolidated
statements of income, of comprehensive income, of changes in equity and of cash flows for each of the
three years in the period ended April 27, 2019, including the related notes and the financial statement
schedule listed in the index appearing under Item 15(a)(2) of this Form 10-K (collectively referred to
as the ‘‘consolidated financial statements’’). We also have audited the Company’s internal control over
financial reporting as of April 27, 2019, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of April 27, 2019 and April 28, 2018, and the results
of its operations and its cash flows for each of the three years in the period ended April 27, 2019 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 27, 2019, based on criteria established in Internal Control—Integrated Framework
(2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in
which it accounts for revenues from contracts with customers in fiscal 2019.

Basis for Opinions

The Company’s management is responsible for these consolidated 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 the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based
on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. 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 described in Management’s Report on Internal Control over Financial Reporting, management has
excluded Stitch Industries, Inc. (‘‘Joybird’’) and the business comprising the assets acquired from
EBCO, Inc. from its assessment of internal control over financial reporting as of April 27, 2019 because
they were acquired by the Company in purchase business combinations during the fiscal second quarter
ended October 27, 2018. We have also excluded Joybird and the business comprising the assets
acquired from EBCO, Inc. from our audit of internal control over financial reporting. Joybird and the
business comprising the assets acquired from EBCO, Inc. are wholly-owned subsidiaries whose total
assets and total net sales excluded from management’s assessment and our audit of internal control
over financial reporting represent approximately 2% and 1% of total assets, respectively and
approximately 3% and 3% of total net sales, respectively, of the related consolidated financial
statement amounts as of and for the year ended April 27, 2019.

Definition and Limitations of Internal Control over Financial Reporting

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.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Detroit, Michigan
June 18, 2019

We have served as the Company’s auditor since 1968.

LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF INCOME

(Amounts in thousands, except per share data)

Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

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

$ 1,745,401
1,042,831

$ 1,583,947
961,200

$ 1,520,060
910,757

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension termination charge . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . .

702,570
572,896

129,674
(1,542)
2,103
(32,671)
(2,237)

95,327
25,186

70,141
(1,567)

622,747
493,378

129,369
(538)
1,709
—
(1,650)

128,890
47,295

81,595
(729)

609,303
475,961

133,342
(1,073)
981
—
(2,510)

130,740
43,756

86,984
(1,062)

Net income attributable to La-Z-Boy Incorporated . . . . . . .

68,574

80,866

85,922

Basic weighted average common shares . . . . . . . . . . . . . . . . .
Basic net income attributable to La-Z-Boy Incorporated per

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted average common shares . . . . . . . . . . . . . . .
Diluted net income attributable to La-Z-Boy Incorporated per
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,828

47,621

48,963

1.46
47,333

1.69
48,135

1.75
49,470

1.44

1.67

1.73

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

LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Amounts in thousands)

Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

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

70,141 $

81,595 $

86,984

Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of cash flow hedges, net of tax . . . . . . . . . . .
Net unrealized gains (losses) on marketable securities, net of tax . .
Pension termination, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Net pension amortization and actuarial gain, net of tax . . . . . . . . .

Total other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . .

Total comprehensive income before noncontrolling interests . . . . .
Comprehensive income attributable to noncontrolling interests . . . . .

(2,472)
(67)
267
23,807
1,705

23,240

93,381
(1,433)

4,435
80
(376)
—
4,665

8,804

90,399
(1,849)

(428)
360
694
—
545

1,171

88,155
(1,116)

Comprehensive income attributable to La-Z-Boy Incorporated . . . . $

91,948 $

88,550 $

87,039

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

LA-Z-BOY INCORPORATED

CONSOLIDATED BALANCE SHEET

(Amounts in thousands, except par value)

4/27/2019

4/28/2018

Current assets

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net of allowance of $2,180 at 4/27/19 and $1,956 at 4/28/18 . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

129,819 $
1,968
143,288
196,899
69,144

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes—long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

541,118
200,523
185,867
29,907
20,670
81,705

134,515
2,356
154,055
184,841
42,451

518,218
180,882
75,254
18,190
21,265
79,158

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,059,790 $

892,967

Current liabilities

Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingencies and commitments
Shareholders’ equity

Preferred shares—5,000 authorized; none issued . . . . . . . . . . . . . . . . . . . .
Common shares, $1 par value—150,000 authorized; 46,955 outstanding at

4/27/19 and 46,788 outstanding at 4/28/18 . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total La-Z-Boy Incorporated shareholders’ equity . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

180 $

65,365
173,091

238,636
19
124,159

223
62,403
118,721

181,347
199
86,205

—

46,955
313,168
325,847
(3,462)

682,508
14,468

696,976

46,788
298,948
291,644
(25,199)

612,181
13,035

625,216

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,059,790 $

892,967

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

LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(Amounts in thousands)

Cash flows from operating activities

Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to cash provided by

70,141

81,595

86,984

operating activities

Gain on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on conversion of investment . . . . . . . . . . . . . . . . . . . .
Gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in provision for doubtful accounts . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . .
Pension termination charge . . . . . . . . . . . . . . . . . . . . . . . .
Pension plan contributions . . . . . . . . . . . . . . . . . . . . . . . . .
Change in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in accounts payable . . . . . . . . . . . . . . . . . . . . . . . .
Change in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . .

(325)
—
(656)
(1,668)
502
31,147
10,981
32,671
(7,000)
7,195
3,135
(7,737)
(2,388)
14,747

(2,108)
(2,204)
(770)
17,261
276
31,767
9,474
—
(2,000)
(2,801)
(8,009)
(3,245)
6,602
(10,088)

(224)
—
(471)
569
(291)
29,131
8,864
—
(2,300)
(7,850)
12,517
(1,211)
4,541
17,731

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

150,745

115,750

147,990

Cash flows from investing activities

Proceeds from disposals of assets . . . . . . . . . . . . . . . . . . . .
Proceeds from property insurance . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of investments . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . .

1,941
184
(48,433)
(20,698)
20,944
(76,505)

Net cash used for investing activities . . . . . . . . . . . . . .

(122,567)

Cash flows from financing activities

Payments on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for debt issuance costs . . . . . . . . . . . . . . . . . . . .
Stock issued for stock and employee benefit plans, net of

shares withheld for taxes . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit on stock option exercises . . . . . . . . . . . .
Purchases of common stock . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used for financing activities . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and equivalents . . . . .

Change in cash, cash equivalents and restricted cash . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of

(223)
—

13,901
—
(22,957)
(23,508)

(32,787)
(475)

(5,084)

1,440
2,087
(36,337)
(28,593)
22,674
(16,495)

(55,224)

(262)
(231)

2,977
—
(56,730)
(22,009)

(76,255)
1,741

(13,988)

761
—
(20,304)
(29,763)
19,954
(35,878)

(65,230)

(288)
—

1,749
1,737
(35,957)
(20,655)

(53,414)
178

29,524

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136,871

150,859

121,335

Cash, cash equivalents and restricted cash at end of period . . .

131,787

136,871

150,859

Supplemental disclosure of non-cash investing activities

Capital expenditures included in accounts payable . . . . . . . .

3,250

5,667

1,795

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

LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts in thousands)

Common
Shares

Capital in
Excess of
Par Value

Accumulated
Other

Non-

Retained
Earnings

Comprehensive Controlling
Income (Loss)

Interests

Total

At April 30, 2016 . . . . . . . . . . . . $

49,331 $

279,339 $

252,472 $
85,922

(34,000) $

1,117

10,070 $
1,062
54

557,212
86,984
1,171

Net income . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . .
Stock issued for stock and employee
benefit plans, net of cancellations
and withholding tax . . . . . . . . . . .

Purchases of 1,363 shares of common

504

2,992

(1,747)

stock . . . . . . . . . . . . . . . . . . . .

(1,363)

(3,300)

(31,294)

Stock option and restricted stock

expense . . . . . . . . . . . . . . . . . . .
Tax benefit from exercise of options . .
Dividends paid . . . . . . . . . . . . . . . .

At April 29, 2017 . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . .
Stock issued for stock and employee
benefit plans, net of cancellations
and withholding tax . . . . . . . . . . .

Purchases of 1,995 shares of common

8,864
1,737

48,472

289,632

(20,655)

284,698
80,866

311

4,046

(1,380)

stock . . . . . . . . . . . . . . . . . . . .

(1,995)

(4,204)

(50,531)

Stock option and restricted stock

expense . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . .

At April 28, 2018 . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . .
Stock issued for stock and employee
benefit plans, net of cancellations
and withholding tax . . . . . . . . . . .

Purchases of 752 shares of common

9,474

46,788

298,948

(22,009)

291,644
68,574

919

15,200

(2,218)

stock . . . . . . . . . . . . . . . . . . . .

(752)

(11,961)

(10,244)

(32,883)

7,684

11,186
729
1,120

(25,199)

23,374

13,035
1,567
(134)

Stock option and restricted stock

expense . . . . . . . . . . . . . . . . . . .

Cumulative effect adjustment for

investments, net of tax . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . .
Dividends declared not paid . . . . . . .

10,981

1,637
(23,508)
(38)

(1,637)

1,749

(35,957)

8,864
1,737
(20,655)

601,105
81,595
8,804

2,977

(56,730)

9,474
(22,009)

625,216
70,141
23,240

13,901

(22,957)

10,981

—
(23,508)
(38)

At April 27, 2019 . . . . . . . . . . . . $

46,955 $

313,168 $

325,847 $

(3,462) $

14,468 $

696,976

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of La-Z-Boy
Incorporated and its subsidiaries’ (individually and collectively, ‘‘we,’’ ‘‘our,’’ or the ‘‘Company’’)
consolidated financial statements. Our 2019, 2018 and 2017 fiscal years included 52 weeks.

Principles of Consolidation

The accompanying consolidated financial statements include the consolidated accounts of La-Z-Boy
Incorporated and our majority-owned subsidiaries. The portion of less than wholly-owned subsidiaries is
included as non-controlling interest. All intercompany transactions have been eliminated, including any
related profit on intercompany sales.

At April 27, 2019, we owned preferred shares of two privately-held companies, and a warrant to
purchase common shares of one of the companies, both of which are variable interest entities. We have
not consolidated their results in our financial statements because we do not have the power to direct
those activities that most significantly impact their economic performance and, therefore, are not the
primary beneficiary.

Use of Estimates

The consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America. These principles require management to make estimates and
assumptions that affect the reported amounts or disclosures of assets, liabilities (including contingent
liabilities), sales, and expenses at the date of the financial statements. Actual results could differ from
those estimates.

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.

Restricted Cash

We have cash on deposit with a bank as collateral for certain letters of credit.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out
(‘‘LIFO’’) basis for approximately 62% and 64% of our inventories at April 27, 2019, and April 28,
2018, respectively. Cost is determined for all other inventories on a first-in, first-out (‘‘FIFO’’) basis.
The LIFO method of accounting is used for our La-Z-Boy U.S. wholesale business inventory and the
imported finished goods inventory owned by our Casegoods segment, while the FIFO method is used
for the remainder of our inventory.

Property, Plant and Equipment

Items capitalized, including significant betterments to existing facilities, are recorded at cost.
Capitalized computer software costs include internal and external costs incurred during the software’s
development stage. Internal costs relate primarily to employee activities for coding and testing the
software under development. Computer software costs are depreciated over three to ten years. All

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)

maintenance and repair costs are expensed when incurred. Depreciation is computed principally using
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 a component of selling, general and
administrative expenses.

We review the carrying value of our long-lived assets for impairment annually or whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable. Our assessment
of recoverability is based on our best estimates using either quoted market prices or an analysis of the
undiscounted projected future cash flows by asset groups in order to determine if there is any indicator
of impairment requiring us to further assess the fair value of our long-lived assets. Our asset groups
consist of our operating segments in our Upholstery reportable segment, our Casegoods segment, each
of our retail stores, our Joybird operating segment, and other corporate assets.

Indefinite-Lived Intangible Assets and Goodwill

We test indefinite-lived intangibles and goodwill for impairment on an annual basis in the fourth
quarter of our fiscal year, or more frequently if events or changes in circumstances indicate that the
carrying value might be impaired. Indefinite-lived intangible assets include our American Drew trade
name and the reacquired right to own and operate La-Z-Boy Furniture Galleries(cid:3) stores we have
acquired. The reacquired right to own and operate La-Z-Boy Furniture Galleries(cid:3) stores are indefinite-
lived because our Retailer Agreements are perpetual agreements that have no specific expiration date
and no renewal options. A Retailer Agreement remains in effect as long as the independent retailer is
not in default under the terms of the agreement. We establish the fair value of our indefinite-lived
trade names and reacquired rights based upon the relief from royalty method.
Our goodwill relates to the acquisition of La-Z-Boy Furniture Galleries(cid:3) stores, the acquisition of the
La-Z-Boy wholesale business in the United Kingdom and Ireland, and the acquisition of Joybird(cid:3), an
e-commerce retailer and manufacturer of upholstered furniture. The reporting unit for goodwill arising
from retail store acquisitions is our Retail operating segment. We have four geographic regions which
are considered components of our Retail operating segment. These four geographic regions are
aggregated into one reporting unit for goodwill because they are economically similar, they operate in a
consistent manner across the regions, and each store supports and benefits from common research and
development projects. Additionally, the goodwill is recoverable from each of the geographic regions
working in concert because we can change the composition of the regions to strategically rebalance
management and distribution capacity as needed. The reporting unit for goodwill arising from the
acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland and the acquisition
of Joybird is each respective business. The estimated fair value of the reporting units is determined
based upon the income approach using discounted future cash flows. In situations where the fair value
is less than the carrying value, an impairment charge would be recorded for the shortfall.

Amortizable Intangible Assets

We test amortizable intangible assets for impairment on an annual basis in the fourth quarter of our
fiscal year, or more frequently if events or changes in circumstances indicate that the assets might be
impaired. We have amortizable intangible assets related to the acquisition of the La-Z-Boy wholesale

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)

business in the United Kingdom and Ireland, which primarily include acquired customer relationships.
These intangible assets will be amortized on a straight-line basis over their useful lives, which do not
exceed 15 years. We also have an amortizable intangible asset for the Joybird(cid:3) trade name, which will
be amortized on a straight-line basis over its useful life of eight years. All intangible amortization
expense is recorded as a component of selling, general, and administrative expense. We established the
fair value of these amortizable intangible assets based on the multi-period excess earnings method, a
variant of the income approach, and also using the relief from royalty method.

Investments

Available-for-sale debt 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/(loss).
Equity securities are recorded at fair value with unrealized gains and losses recorded in other expense,
net. Realized gains and losses for all investments and charges for other-than-temporary impairments of
debt securities are included in determining net income, with related purchase costs based on the
first-in, first-out method. We evaluate our available-for-sale debt investments for possible
other-than-temporary impairments by reviewing factors such as the extent to which, and length of time,
an investment’s fair value has been below our cost basis, the issuer’s financial condition, and our ability
and intent to hold the investment for sufficient time for its market value to recover. For impairments
that are other-than-temporary, an impairment loss is recognized in earnings equal to the 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 it is not adjusted for subsequent recoveries in fair value.

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 consolidated balance sheet and are used to fund our executive deferred compensation plan and
performance compensation retirement plan. The change in cash surrender or contract value is recorded
as income or expense during each period.

Customer Deposits

We collect a deposit on a portion of the total merchandise price at the time a customer order is placed
in one of our company-owned Retail stores, and through our website, www.la-z-boy.com. We record this
as a customer deposit, which is included in our accrued expenses and other current liabilities on our
consolidated balance sheet. The balance of the order is paid in full prior to delivery of the product. At
the time the end consumer places an order through www.joybird.com, we collect the entire amount
owed and record this as a customer deposit. Because the entire amount owed is collected at the time of
the order, there is no contract asset recorded for Joybird sales.

Revenue Recognition and Related Allowances

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)
owned La-Z-Boy Furniture Galleries(cid:3) stores or the end consumer. Each unit of furniture is a separate
performance obligation, and we satisfy our performance obligation when control of our product is
passed to our customer, which is the point in time that our customers are able to direct the use of and
obtain substantially all of the remaining economic benefit of the goods or services.

The majority of our wholesale shipping agreements are freight-on-board shipping point and risk of loss
transfers to our customer once the product is out of our control. Accordingly, revenue is recognized for
product shipments on third-party carriers at the point in time that our product is loaded onto the third-
party container or truck and that container or truck leaves our facility. For our imported products, we
recognize revenue at the point in time that legal ownership is transferred, which may not occur until
after the goods have passed through U.S. Customs. In all cases, this revenue includes amounts we bill
to customers for freight charges, because we have elected to treat shipping activities that occur after
the customer has obtained control of our product as a fulfillment cost rather than an additional
promised service. Because of this election, we recognize revenue for shipping when control of our
product passes to our customer, and the shipping costs are accrued when the freight revenue is
recognized. Revenue for product shipments on company-owned trucks is recognized for the product
and freight at the point in time that our product is delivered to our customer’s location.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)

substantial judgment based on the type of variable consideration or service allowance, historical
experience and expected sales volume when estimating these provisions. The expected costs associated
with our warranties and service allowances are recognized as expense when our products are sold. For
sales tax, we elected to exclude from the measurement of the transaction price all taxes imposed on
and concurrent with a specific revenue-producing transaction and collected by the entity from a
customer, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales
taxes). This allows us to present revenue net of these certain types of taxes.

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.

During fiscal 2017, we recorded a benefit related to legal settlements as part of cost of sales. Gross
margin benefited 20 basis points in fiscal 2017, as a result of legal settlements.

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 composed 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 as a component of SG&A. Other general and administrative expenses included in SG&A are
composed primarily of compensation and benefit costs for administration employees and other
administrative costs.

Pension Termination Charge

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)

plan to a highly rated insurance company. We recognized a non-cash pre-tax charge of $32.7 million in
our consolidated statement of income associated with the plan termination during the fourth quarter of
fiscal 2019.

Other Expense, Net

Other expense, net, is made up primarily of foreign currency exchange net gain/(loss), gain/(loss) on the
sale of investments, unrealized gain/(loss) on equity securities, and all components of pension costs
other than service costs and the charge to terminate our defined benefit pension plan for eligible
factory hourly employees in our La-Z-Boy operating unit in fiscal 2019.

Research and Development Costs

Research and development costs are charged to expense in the periods incurred. Expenditures for
research and development costs were $9.1 million, $7.9 million, and $8.0 million for the fiscal years
ended April 27, 2019, April 28, 2018, and April 29, 2017, respectively, and are included as a component
of SG&A.

Advertising Expenses

Production costs of commercials, programming and costs of other advertising, promotion and marketing
programs are charged to expense in the period in which the commercial or advertisement is first aired
or released. Gross advertising expenses were $106.4 million, $88.3 million, and $82.1 million for the
fiscal years ended April 27, 2019, April 28, 2018, and April 29, 2017, respectively.

A portion of our advertising program is a national advertising campaign. This campaign is a shared
advertising program with our dealers’ La-Z-Boy Furniture Galleries(cid:3) stores, which reimburse us for
about 30% of the cost of the program (excluding company-owned stores). Because of this shared cost
arrangement, the advertising expense is reported as a component of SG&A, while the dealers’
reimbursement portion is reported as a component of sales.

Operating Leases

We record rent expense related to operating leases 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. Our minimum lease payments may incorporate step rent provisions or rent escalations.
We also record rental income from subleases on a straight-line basis for minimum lease payments.

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 (i.e. a likelihood of more than 50%), based on, among other things, forecasts of
taxable earnings in the related tax jurisdiction. We consider historical and projected future operating

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)

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.

We recognize in our consolidated financial statements the benefit of a position taken or expected to be
taken in a tax return when it is more likely than not that the position would be sustained upon
examination by tax authorities. A recognized tax position is then measured at the largest amount of
benefit that is more likely than not to be realized upon settlement. Changes in judgment that result in
subsequent recognition, derecognition or change in a measurement date of a tax position taken in a
prior annual period (including any related interest and penalties) are recognized as a discrete item in
the interim period in which the change occurs.

Foreign Currency Translation

The functional currency of our wholesale Canadian and Mexico subsidiaries is the U.S. Dollar.
Transaction gains and losses associated with translating our wholesale Canadian and Mexico
subsidiaries’ assets and liabilities, which are non-U.S. Dollar denominated, are recorded in other
expense, net in our consolidated statement of income. The functional currency of each of our other
foreign subsidiaries is its 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, with the corresponding
translation effect included as a component of other comprehensive income.

Accounting for Stock-Based Compensation

We estimate the fair value of equity-based awards, including option awards and stock-based awards that
vest based on market conditions, on the date of grant using option-pricing models. The value of the
portion of the equity-based awards that are ultimately expected to vest is recognized as expense over
the requisite service periods in our consolidated statement of income using a straight-line single-option
method. We measure stock-based compensation cost for liability-based awards based on the fair value
of the award on the grant date, and recognize it as expense over the vesting period. The liability for
these awards is remeasured and adjusted to its fair value at the end of each reporting period until paid.
We record compensation cost for stock-based awards that vest based on performance conditions ratably
over the vesting periods when the vesting of such awards become probable.

Commitments and Contingencies

We establish an accrued liability for legal matters when those matters present loss contingencies that
are both probable and estimable. As a litigation matter develops and in conjunction with any outside
counsel handling the matter, we evaluate on an ongoing basis whether such matter presents a loss
contingency that is probable and estimable. When a loss contingency is not both probable and
estimable, we do not establish an accrued liability. If, at the time of evaluation, the loss contingency
related to a litigation matter is not both probable and estimable, the matter will continue to be
monitored for further developments that would make such loss contingency both probable and
estimable. Once the loss contingency related to a litigation matter is deemed to be both probable and
estimable, we will establish an accrued liability with respect to such loss contingency and record a
corresponding amount of litigation-related expense. We continue to monitor the matter for further
developments that could affect the amount of the accrued liability that has been previously established.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)

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 historic
claims experience, demographic factors, severity factors and other assumptions. Our workers’
compensation reserve is an undiscounted liability. We have various excess loss coverages for employee-
related health care benefits, vehicle liability, product liability, and workers’ compensation liabilities. Our
deductibles generally do not exceed $1.5 million.

Recent Accounting Pronouncements

Accounting pronouncements adopted in fiscal 2019

The accounting standards updates (‘‘ASUs’’) adopted below had a significant impact on our accounting
policies and/or our consolidated financial statements and related disclosures.

In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued ASU 2014-09 which requires
an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of
promised goods or services to customers. We adopted the new standard in the first quarter of fiscal
2019 with modified retrospective application. We reviewed substantially all of our contracts and other
revenue streams and determined that while the application of the new standard did not have a material
change in the amount of or timing for recognizing revenue, it did have a significant impact on our
financial statement disclosures related to disaggregated revenue, customer deposits, other receivables
and contract liabilities, as well as the presentation of other receivables and deferred revenues (contract
liabilities) on our consolidated balance sheet. For sales tax, we elected to apply the accounting policy
election permitted in ASC 606-10-32-2A, which allows an entity to exclude from the measurement of
the transaction price all taxes imposed on and concurrent with a specific revenue-producing transaction
and collected by the entity from a customer, including sales, use, excise, value-added, and franchise
taxes (collectively referred to as sales taxes). This allows us to present revenue net of these certain
types of taxes. See Note 16 for information on revenue disclosures.

In January 2016, the FASB issued ASU 2016-01 that requires equity investments to be measured at fair
value with the fair value changes to be recognized through net income. This standard does not apply to
investments that are accounted for using the equity method of accounting or that result in
consolidation of the invested entity. We adopted the new standard in the first quarter of fiscal 2019 and
consequently reclassified $2.1 million of net unrealized gains from accumulated other comprehensive
income to retained earnings as a cumulative-effect adjustment during the first quarter of fiscal 2019.
We also reclassified $0.5 million of tax expense related to these investments from accumulated other
comprehensive loss to retained earnings. We will recognize the tax impact for these investments in the
consolidated statement of income as the unrealized gains (losses) become realized. See Note 7 for
additional information on our current investments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1: Accounting Policies (Continued)

The following table summarizes additional ASUs which were adopted in fiscal 2019, but did not have a
material impact on our accounting policies or our consolidated financial statements and related
disclosures.

ASU

Description

Income Taxes: Intra-entity transfers of assets other than inventory

ASU 2016-16 . .
ASU 2017-01 . . Clarifying the definition of a business
ASU 2017-04 . .
ASU 2018-15 . .

Simplifying the test for goodwill impairment
Intangibles—Goodwill and other—Internal-use software: Customer’s accounting for
implementation costs incurred in a cloud computing arrangement that is a service
contract

Accounting pronouncements not yet adopted

The ASUs below are expected to have a significant impact on our accounting policies and/or our
consolidated financial statements and related disclosures upon adoption.

In February 2016, the FASB issued ASU 2016-02 requiring lessees to record all operating leases on
their balance sheet. Under this standard, the lessee is required to record an asset for the right to use
the underlying asset for the lease term and a corresponding liability for the contractual lease payments.
We have reviewed our inventory of leases and we are in the final stage of implementing a lease
accounting system and finalizing our control framework in preparation for the adoption of this standard
in the first quarter of fiscal 2020. We will adopt this standard using the modified retrospective
approach. The adoption will have a material impact on our consolidated balance sheet as we have a
significant number of operating leases. We estimate the gross up of our balance sheet to record a right
of use asset and lease liability to be in the range of approximately $300-$325 million.

The following table summarizes additional accounting pronouncements which we have not yet adopted,
but we believe will not have a material impact on our accounting policies or our consolidated financial
statements and related disclosures.

ASU

Description

ASU 2016-13 . . Financial instruments—Credit losses
ASU 2017-12 . . Targeted improvements to accounting for hedging activities
ASU 2018-02 . .

Income Statement—Reporting Comprehensive Income:
Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income

ASU 2018-13 . . Fair value measurement—Disclosure Framework—Changes to the

ASU 2018-14 . . Compensation—Retirement benefits—Defined benefit plans—

disclosure requirements for fair value measurements

Adoption Date

Fiscal 2021
Fiscal 2020

Fiscal 2020

Fiscal 2021

General—Changes to the disclosure requirements for defined benefit
plans

Fiscal 2022

Note 2: Acquisitions

Retail segment acquisitions

On August 15, 2018, and September 30, 2018, respectively, we acquired the assets of two independent
operators of La-Z-Boy Furniture Galleries(cid:3) stores: one that operated nine stores and two warehouses in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2: Acquisitions (Continued)

Arizona and one that operated one store in Massachusetts, for an aggregate $42.8 million, including
$38.9 million of cash, $2.6 million of forgiveness of accounts receivable, and $1.3 million of guaranteed
future payments. We will pay the guaranteed future payments as they are due, with the last payment
being completed in the second quarter of fiscal 2022. These acquisitions are an integral part of our
ongoing strategy to grow our company-owned retail business and leverage our integrated retail model
where we earn a combined profit on both the wholesale and retail sides of the business.

Prior to our retail acquisitions, we licensed the exclusive right to own and operate La-Z-Boy Furniture
Galleries(cid:3) stores (and to use the associated trademarks and trade name) in those markets to the
dealers whose assets we acquired, and we reacquired these rights when we purchased the dealers’ other
assets. The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual
agreements that have no specific expiration date and no renewal options. A Retailer Agreement
remains in effect as long as the independent retailer is not in default under the terms of the
agreement. The effective settlement of these arrangements resulted in no settlement gain or loss as the
contractual terms were at market. We recorded an indefinite-lived intangible asset of $6.6 million
related to these reacquired rights. We also recognized $32.0 million of goodwill in fiscal 2019 related
primarily to synergies we expect from the integration of the acquired stores and future benefits of these
synergies. For federal income tax purposes, we will amortize and appropriately deduct all of the
indefinite-lived intangible assets and goodwill assets over 15 years.

We based the purchase price allocations on fair values at the dates of acquisition, and summarize them
in the following table:

(Amounts in thousands)

Fair value of consideration:

Second quarter
fiscal 2019
Retail segment
acquisitions

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forgiveness of accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed future payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total fair value of consideration . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts recognized for identifiable assets acquired and liabilities

assumed:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indefinite-lived reacquired rights . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total identifiable net assets acquired . . . . . . . . . . . . . . . . . . . . . .

38,904
2,610
1,300

42,814

10,491
4,194
929
6,600
183
(6,515)
(5,055)

10,827

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31,987

During fiscal 2018, we acquired the assets of an independent operator of one La-Z-Boy Furniture
Galleries(cid:3) store in Grand Rapids, Michigan for $0.6 million of cash.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2: Acquisitions (Continued)

All acquired stores were included in our Retail segment results upon acquisition.

Corporate and Other acquisitions

On July 30, 2018, we completed our acquisition of Stitch Industries, Inc. (‘‘Joybird’’), an e-commerce
retailer and manufacturer of upholstered furniture, for guaranteed cash payments of $75 million, which
was subject to a working capital adjustment of $2.5 million which we received during the third quarter
of fiscal 2019 from amounts placed in escrow at the time of the closing of the transaction. We acquired
Joybird to better position ourselves for growth in the online selling environment and increase our
visibility with millennial and Gen X consumers, while simultaneously leveraging our supply chain assets.

The guaranteed payments include a closing date cash payment of $37.5 million in purchase price
consideration (net of the working capital adjustment), $7.5 million in prepaid compensation, and the
assumption of $5.0 million of liabilities that will be paid over the next two years. The remaining
$25 million will be paid in annual installments of $5 million over the next five years. The merger
agreement also includes two future earn-out opportunities based on Joybird’s financial performance in
fiscal 2021 and fiscal 2023.

The $7.5 million of prepaid compensation relates to the retention of the four Joybird founders, now
our employees, each of whom will forfeit proportional amounts if one or more of them resigns in the
two years following the acquisition. We are amortizing the $7.5 million to selling, general &
administrative expense over the two-year retention period on a straight-line basis. In addition to the
guaranteed cash payments of $75 million, we recorded a contingent consideration liability on the date
of acquisition of $7.5 million, which reflects the provisional fair value of the earn-out opportunities as
of the date of acquisition, and a finite-lived intangible asset of $6.4 million, which reflects the
provisional fair value of the acquired Joybird(cid:3) trade name, which we are amortizing to SG&A expense
on a straight-line basis over its useful life of eight years. The undiscounted range of the contingent
consideration is zero to $65 million and is based on sales and profitability of Joybird in fiscal 2021 and
fiscal 2023. Subsequent adjustments to the fair value of the contingent consideration will impact SG&A
expense in our consolidated statement of income.

We recorded $79.6 million of goodwill related to the Joybird acquisition, related primarily to synergies
we expect from the integration of the acquisition and the anticipated future benefits of these synergies.
The finite-lived intangible asset and goodwill asset for Joybird are not deductible for federal income tax
purposes.

When we acquired Joybird during the second quarter of fiscal 2019, we based the purchase price
allocations on provisional fair values at the date of acquisition. During the fourth quarter of fiscal 2019,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2: Acquisitions (Continued)

we obtained additional data and have revised certain of our estimates, resulting in the purchase price
allocations shown below:

(Amounts in thousands)

Fair value of consideration:

Second quarter
fiscal 2019
Corporate &
Other
acquisitions

Cash (paid at closing) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition earn-out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumption of liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total fair value of consideration . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts recognized for assets acquired and liabilities assumed:

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finite-lived tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total identifiable net liabilities acquired . . . . . . . . . . . . . . . . . . .

37,482
22,489
7,500
5,000
(2,486)

69,985

5,258
3,733
2,057
6,400
2,878
(8,222)
(13,904)
(7,681)
(150)

(9,631)

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79,616

We included the Joybird operating segment in our other business activities which we report as
Corporate and Other results upon acquisition.

None of the above acquisitions were material to our financial position or our results of operations, and,
therefore, pro-forma financial information is not presented. In accordance with Accounting Standard
Codification Topic 805-10-25-15, the acquirer has a period of time, referred to as the measurement
period, to finalize the accounting for a business combination. The measurement period provides
companies with a reasonable period of time to determine, among other things, the identifiable assets
acquired, liabilities assumed and consideration transferred for the acquisition, or other amounts used in
measuring goodwill. All of our provisional purchase accounting estimates shown above for both our
Retail acquisitions and our acquisition of Joybird are based on the information and data available to us
as of the time of the issuance of these financial statements, and are subject to change within the first
12 months of acquisition as we have access to additional data.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3: Restricted Cash

We have cash on deposit with a bank as collateral for certain letters of credit. All of our letters of
credit have maturity dates within the next 12 months, but we expect to renew some of these letters of
credit when they mature.

(Amounts in thousands)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total cash, cash equivalents and restricted cash . . . . . . .

Note 4: Inventories

(Amounts in thousands)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FIFO inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of FIFO over LIFO . . . . . . . . . . . . . . . . . . . . .

4/27/2019

4/28/2018

129,819
1,968

131,787

134,515
2,356

136,871

4/27/2019

4/28/2018

90,359
13,728
114,478

218,565
(21,666)

86,214
12,254
109,183

207,651
(22,810)

Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .

196,899

184,841

The increase in our FIFO inventories was primarily a result of our fiscal 2019 acquisitions.

Note 5: Property, Plant and Equipment

(Amounts in thousands)

Buildings and building fixtures . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Information systems and software . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . .

Estimated
Useful
Lives

3 - 40 years $
3 - 15 years
3 - 10 years
—
3 - 30 years
3 - 10 years
3 - 15 years

4/27/2019

4/28/2018

223,505 $
148,760
86,400
14,323
17,454
13,598
22,826
20,722

547,588
(347,065)

200,370
147,542
84,881
14,626
15,362
13,929
20,812
23,250

520,772
(339,890)

Net property, plant and equipment

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

200,523 $

180,882

Depreciation expense for the fiscal years ended April 27, 2019, April 28, 2018, and April 29, 2017, was
$27.5 million, $27.5 million, and $25.4 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6: Goodwill and Other Intangible Assets

We test goodwill annually for impairment. We have goodwill on our consolidated balance sheet as
follows:

Reportable Segment

Related Acquisition

Fiscal 2019 impairment
testing approach

Upholstery Segment . . . . . Acquisition of the wholesale business in the Qualitative
United Kingdom and Ireland

Retail Segment . . . . . . . . . Acquisitions of La-Z-Boy Furniture

Galleries(cid:3) stores

Corporate & Other . . . . . . Acquisition of Joybird

Quantitative

We used a qualitative approach for our Upholstery segment goodwill impairment test in fiscal 2019 due
to the relative fair value of our reporting unit significantly exceeding the carrying value of the goodwill,
as well as the operating performance of that respective reporting unit.

We used a quantitative simplified one-step approach for our Retail segment goodwill impairment test in
fiscal 2019, primarily due to the acquisitions of additional La-Z-Boy Furniture Galleries(cid:3) stores and the
resulting $32.0 million increase in goodwill recorded in that segment during the year. We applied the
income approach using discounted future cash flows to estimate the fair value of this reporting unit.
The key assumptions used in the quantitative assessment of our Retail segment goodwill at April 27,
2019, were a discount rate of 8.4%, a tax rate of 24.0% and a terminal growth rate of 2.0%. The
relative fair value of our Retail reporting unit significantly exceeded the carrying value of our goodwill
as of April 27, 2019.

We used a quantitative simplified one-step approach for our Corporate & Other goodwill impairment
test in fiscal 2019, primarily because the acquisition of Joybird occurred during the year. We applied
the income approach using discounted future cash flows to estimate the fair value of our Joybird
reporting unit. Estimating future cash flows requires management to make significant assumptions and
to apply judgment to project future sales based on estimated short and long-term growth rates and
estimates of future operating margins. Significant judgment is also involved in selecting the appropriate
discount rate to be applied to the projected future cash flows. The discount rate used in the
quantitative assessment of our Corporate & Other goodwill in fiscal 2019 was the calculated weighted-
average cost of capital for the Joybird reporting unit, which we estimated to be 25.0%. Changes in
these assumptions may affect our fair value estimates and the result of impairment tests in future
periods. Additional assumptions used in estimating the fair value were a tax rate of 24.9% and a
terminal growth rate of 2.0%. There was no significant difference between the relative fair value of our
Joybird reporting unit and the carrying value of our goodwill as of April 27, 2019, which is to be
expected given the short duration of time between the goodwill impairment testing date and the
Joybird acquisition date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6: Goodwill and Other Intangible Assets (Continued)

We did not have any goodwill impairment in fiscal 2019, fiscal 2018, or fiscal 2017. The following is a
roll-forward of goodwill for the fiscal years ended April 27, 2019, and April 28, 2018:

(Amounts in thousands)

Upholstery
Segment

Retail
Segment

Corporate
and Other

Total
Goodwill

Balance at April 29, 2017 . . . . . . . . . . . . . . . . . $
Translation adjustment . . . . . . . . . . . . . . . . .

12,181 $
786

62,064 $
223

— $
—

Balance at April 28, 2018 . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustment . . . . . . . . . . . . . . . . .

12,967
—
(819)

62,287
31,987
(171)

—
79,616
—

74,245
1,009

75,254
111,603
(990)

Balance at April 27, 2019 . . . . . . . . . . . . . . . . . $

12,148 $

94,103 $

79,616 $

185,867

We have intangible assets on our consolidated balance sheet as follows:

Reportable Segment

Intangible Asset

Useful Life

Upholstery segment . . . . . . Primarily acquired customer relationships Amortizable over useful
lives that do not exceed
from our acquisition of the wholesale
business in the United Kingdom and
15 years
Ireland

Casegoods segment . . . . . . . American Drew(cid:3) trade name
Retail segment . . . . . . . . . . Reacquired rights to own and operate
La-Z-Boy Furniture Galleries(cid:3) stores
Joybird(cid:3) trade name

Corporate & Other . . . . . . .

Indefinite-lived
Indefinite-lived

Amortizable over eight-year
useful life

The following is a roll-forward of our other intangible assets for the fiscal years ended April 27, 2019,
and April 28, 2018:

(Amounts in thousands)

Indefinite-
Lived
Trade
Names

Finite-
Lived
Trade
Names

Indefinite-
Lived
Reacquired
Rights

Amortizable
Reacquired
Rights

Other
Intangible
Assets

Total
Other
Intangible
Assets

Balance at April 29, 2017 . . . . . . . $
Acquisitions . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . ..
. . . . . . .
Translation adjustment

1,155 $
—
—
—

— $ 13,223 $
—
—
—

255
—
167

524 $
—
(542)
18

3,587 $ 18,489
255
(959)
405

—
(417)
220

Balance at April 28, 2018 . . . . . . .
Acquisitions . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . .
. . . . . . .
Translation adjustment

1,155
—
—
—

—
6,400
(599)
—

13,645
6,600
—
(128)

—
—
—
—

3,390
—
(346)
(210)

18,190
13,000
(945)
(338)

Balance at April 27, 2019 . . . . . . . $

1,155 $

5,801 $ 20,117 $

— $

2,834 $ 29,907

Note 7: Investments

We have current and long-term investments intended to enhance returns on our cash as well as to fund
future obligations of our non-qualified defined benefit retirement plan, our executive deferred
compensation plan, and our performance compensation retirement plan. We also hold other

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7: Investments (Continued)

investments consisting of cost-basis preferred shares of two privately-held companies. Our short-term
investments are included in other current assets and our long-term investments are included in other
long-term assets on our consolidated balance sheet.

The following summarizes our investments at April 27, 2019, and April 28, 2018:

(Amounts in thousands)

Short-term investments:

Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity investments . . . . . . . . . . . . . . . . . . . .

Total short-term investments . . . . . . . . . . . . . . . . . .

Long-term investments:

Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . .
Cost basis investments . . . . . . . . . . . . . . . . . . . . . . . . .

Total long-term investments . . . . . . . . . . . . . . . . . . .

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investments to enhance returns on cash . . . . . . . . . . . . . .
Investments to fund compensation/retirement plans . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$

4/27/2019

4/28/2018

18,016
3,341

21,357

24,085
11,979

36,064

57,421

31,470
13,972
11,979

$
$
$

12,926
3,340

16,266

32,134
10,954

43,088

59,354

34,359
14,041
10,954

The following is a summary of the unrealized gains, unrealized losses, and fair value by investment type
at April 27, 2019, and April 28, 2018:

Fiscal 2019

(Amounts in thousands)

Gross
Unrealized
Gains

Gross
Unrealized
Losses

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

1,841
75
258

— $

(111)
(13)

Fair Value

19,535
33,217
4,669

Total securities . . . . . . . . . . . . . . . . . . . .

2,174

(124) $

57,421

Fiscal 2018

(Amounts in thousands)

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

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

2,142
29
72

(39) $
(418)
—

18,765
36,312
4,277

Total securities . . . . . . . . . . . . . . . . . . . .

2,243

(457) $

59,354

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7: Investments (Continued)

The following table summarizes sales of marketable securities (for the fiscal years ended):

(Amounts in thousands)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

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

20,944
1,152
(496)

22,674
1,302
(532)

19,954
926
(455)

At April 27, 2019, the fair value of our fixed income marketable securities, classified as
available-for-sale securities, by contractual maturity was $18.1 million within one year, $12.7 million
within two to five years, $1.5 million within six to ten years and $0.9 million thereafter.

Note 8: Accrued Expenses and Other Current Liabilities

(Amounts in thousands)

4/27/2019

4/28/2018

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

53,374
13,892
42,787
17,038
46,000

40,467
12,687
31,282
—
34,285

Accrued expenses and other current liabilities . . . . . . .

173,091

118,721

The increase of $17.0 million in deferred revenue was due to the implementation of Accounting
Standard Update No. 2014-09, Revenue from Contracts with Customers, during fiscal 2019. This
standard did not require restatement of prior financial statements and so fiscal 2018 does not include a
similar liability. Additional information regarding this liability is included in Note 16. The remainder of
the increase was primarily a result of our fiscal 2019 acquisitions.

Note 9: Debt

(Amounts in thousands)

Capital leases

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . .

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4/27/2019

4/28/2018

199
(180)

422
(223)

199

We maintain a revolving credit facility secured primarily by all of our accounts receivable, inventory,
and cash deposit and securities accounts. Availability under the agreement fluctuates according to a
borrowing base calculated on eligible accounts receivable and inventory. We amended this agreement
on December 19, 2017, extending its maturity date to December 19, 2022. The credit agreement
includes affirmative and negative covenants that apply under certain circumstances, including a fixed-
charge coverage ratio requirement that applies when excess availability under the line is less than
certain thresholds. At April 27, 2019, and at April 28, 2018, we were not subject to the fixed-charge
coverage ratio requirement, had no borrowings outstanding under the agreement, and had excess
availability of $148.1 million of the $150.0 million credit commitment.

Capital leases consist primarily of long-term commitments for the purchase of information technology
equipment and have maturities ranging from fiscal 2020 to fiscal 2021. Maturities of long-term capital

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9: Debt (Continued)

leases, subsequent to April 27, 2019, are $0.2 million in fiscal 2020 and di minimis in fiscal 2021.
Interest rates on our capital leases range from 2.6% to 2.7%.

Cash paid for interest during fiscal years 2019, 2018 and 2017 was $1.0 million, $0.4 million, and
$0.5 million, respectively.

Note 10: Operating Leases

We have operating leases for numerous retail facilities, two manufacturing facilities in Mexico and one
in Thailand, executive and sales offices, warehouses and showrooms, as well as for transportation
equipment, information technology, and other equipment. The operating leases expire at various dates
through fiscal 2033. We have certain retail facilities which we sublease to outside parties. The total rent
liability included in other long-term liabilities as of April 27, 2019, and April 28, 2018, was
$14.6 million and $13.2 million, respectively.

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)

Future
Minimum
Rentals

Future
Minimum
Income

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76,508
71,544
58,763
46,541
36,082
102,782

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

392,220

3,220
2,571
888
461
461
465

8,066

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

(Amounts in thousands)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

Rental expense . . . . . . . . . . . . . . . . . . . . .
Rental income . . . . . . . . . . . . . . . . . . . . . .

77,168
2,642

71,022
3,039

68,452
3,604

Both our rental expense and rental income are included in selling, general, and administrative expense
in our consolidated statement of income.

Note 11: Employee Benefits

Employee Retirement and Welfare Plans

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. On January 1,
2019, we increased our matching contributions for eligible employees which resulted in an additional
expense of $1.7 million in fiscal 2019. During fiscal 2019 and prior periods presented below, we made
supplemental contributions to this plan for eligible employees based on achievement of operating
performance targets. The supplemental contribution will be discontinued for fiscal 2020 as a result of
increasing the matching contributions mentioned above.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11: Employee Benefits (Continued)

A performance compensation retirement plan (‘‘PCRP’’) is maintained for eligible highly compensated
employees. The company contributions to plan are based on achievement of performance targets.
Employees vest in these contributions if they achieve certain age and years of service with the
Company, and can elect to receive benefit payments over a period ranging between five to twenty years
after they leave the Company. As of April 27, 2019, and April 28, 2018, we had $0.5 million and
$0.2 million, respectively, of obligations for this plan included in other current liabilities and
$12.0 million and $9.5 million, respectively, included in other long-term liabilities.

We also maintain an executive deferred compensation plan for eligible highly compensated employees.
An element of this plan allows contributions for eligible highly compensated employees. As of April 27,
2019, and April 28, 2018, we had $23.9 million and $23.2 million, respectively, of obligations for this
plan included in other long-term liabilities. We had life insurance contracts related to this plan and the
PCRP at April 27, 2019, and at April 28, 2018, with cash surrender values of $34.3 million and
$31.6 million, respectively, which are included in other long-term assets. Mutual funds related to this
plan are considered trading securities and are included in other current assets. This plan had
$0.2 million in mutual funds at April 27, 2019, and $0.1 million in mutual funds at April 28, 2018.

We maintain a non-qualified defined benefit retirement plan for certain former salaried employees.
Included in other long-term liabilities were plan obligations of $15.5 million for both fiscal 2019 and
2018, which represented the unfunded projected benefit obligation of this plan. The total cost
recognized for this plan was $0.8 million in fiscal 2019 and fiscal 2018 which primarily related to
interest cost. The actuarial loss recognized in accumulated other comprehensive loss was $0.2 million
and the benefit payments during the year were $1.1 million for both fiscal 2019 and fiscal 2018. Benefit
payments are scheduled to be approximately $1.1 million annually for the next ten years. The discount
rate used to determine the obligations under this plan as of the end of fiscal 2019 and fiscal 2018 was
3.9% and 4.1%, respectively. 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
this plan in a Rabbi trust (see Notes 7 and 20 for additional information on these investments). We are
not required to fund the non-qualified defined benefit retirement plan in fiscal 2020; however, we have
the discretion to make contributions to the Rabbi trust.

During the fourth quarter of fiscal 2019, we terminated our defined benefit pension plan for eligible
factory hourly employees in our La-Z-Boy operating unit. In connection with the plan termination, we
settled all future obligations under the plan through a combination of lump-sum payments to eligible
participants who elected to receive them, and transferred any remaining benefit obligations under the
plan to a highly rated insurance company. We recognized a non-cash pre-tax pension termination
charge of $32.7 million in our consolidated statement of income associated with the plan termination
during the fourth quarter of fiscal 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11: Employee Benefits (Continued)

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

(Amounts in thousands)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . .
Net amortization and deferral . . . . . . . . . . . . . . .
Pension termination charge . . . . . . . . . . . . . . . . .

Net periodic pension cost (hourly plan) . . . . . .
401(k)(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PCRP(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total retirement costs (excluding non-qualified

851 $

4,464
(4,544)
2,556
32,671

35,998
9,128
3,084
284

1,316 $
4,587
(4,818)
3,120
—

4,205
7,093
1,347
360

1,278
4,681
(4,978)
3,058
—

4,039
7,124
1,488
51

defined benefit retirement plan) . . . . . . . . . . $

48,494 $

13,005 $

12,702

(1) Not determined by an actuary

Employee Vacation Policy Changes

We enacted changes to our employee vacation policies that became effective on January 1, 2019. Our
new vacation policies enhanced the amount of vacation time earned by our employees. Additionally,
under these vacation policies, our salary and office hourly employees now accrue vacation in the
current calendar year for use in the current calendar year, and any vacation time earned but not used
will be forfeited at the end of each calendar year. These changes reduced our salary and office hourly
vacation liability and resulted in a one-time non-cash gain of $5.1 million in our consolidated statement
of income during fiscal 2019. Of the total $5.1 million gain recorded, $1.3 million was recorded in cost
of sales with the remainder recorded in selling, general, and administrative expense. Our factory hourly
vacation policies were only changed to enhance the amount of vacation time earned by our employees,
with no change to accrual methodologies, and resulted in $1.1 million incremental expense in fiscal
2019, recorded in cost of sales.

Note 12: Product Warranties

We accrue an estimated liability for product warranties when we recognize revenue on the sale of
warranted products. We estimate future warranty claims on new sales based on our historical claims
experience and any additional anticipated future costs on previously sold products. We incorporate
repair costs into our liability estimates, including materials, labor and overhead amounts necessary to
perform repairs, and any costs associated with delivering repaired product to our customers. Over 90%
of our warranty liability relates to our Upholstery reportable segment as we generally warrant our
products against defects for one year on fabric and leather, from one to ten years on cushions and
padding, and provide a limited lifetime warranty on certain mechanisms and frames. Our Upholstery
segment warranties cover labor costs relating to our parts for one year. We provide a limited lifetime
warranty against defects on a majority of the Joybird products, which are a part of our Corporate and
Other results. For all our manufacturer warranties, the warranty period begins when the consumer

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12: Product Warranties (Continued)

receives our product. We use considerable judgment in making our estimates, and we record differences
between our actual and estimated costs when the differences are known.

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

(Amounts in thousands)

4/27/2019

4/28/2018

Balance as of the beginning of the year . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals during the year . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements during the year . . . . . . . . . . . . . . . . . . . . . .

21,205
1,000
22,831
(22,300)

21,870
—
19,120
(19,785)

Balance as of the end of the year . . . . . . . . . . . . . . . .

22,736

21,205

As of April 27, 2019, and April 28, 2018, we included $13.9 million and $12.7 million, respectively, of
our product warranty liability in accrued expenses and other current liabilities on our consolidated
balance sheet, and included the remainder in other long-term liabilities. We recorded accruals during
the periods presented in the table above, primarily to reflect charges that relate to warranties issued
during the respective periods. The acquired warranty liability reflects our provisional estimate of the
acquired warranty liabilities of Joybird on the acquisition date. See Note 2 for further information on
our acquisition of Joybird.

Note 13: 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, the effect of which are not
considered significant. 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 matters, and we currently do not believe it is probable that we will
have any additional loss for legal or environmental matters that would be material to our consolidated
financial statements.

In view of the inherent difficulty of predicting the outcome of litigation, particularly where the
claimants seek very large or indeterminate damages or where the matters present novel legal theories,
we generally cannot predict the eventual outcome, timing, or related loss, if any, of pending matters.

Note 14: Stock-Based Compensation

In fiscal 2018, our shareholders approved the La-Z-Boy Incorporated 2017 Omnibus Incentive Plan
which provides for the grant of stock options, stock appreciation rights, restricted stock, stock units
(including deferred stock units), unrestricted stock, dividend equivalent rights, and short-term cash
incentive awards. Under this plan, as amended, the aggregate number of common shares that may be
issued through awards of any form is 5.9 million shares.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14: Stock-Based Compensation (Continued)

The table below summarizes the total stock-based compensation expense recognized for all outstanding
grants in our consolidated statement of income (for the fiscal years ended):

(Amounts in thousands)

Equity-based awards expense . . . . . . . . . . . . . . . . . . . . . . . . .
Liability-based awards expense . . . . . . . . . . . . . . . . . . . . . . .

Total stock-based compensation expense . . . . . . . . . . . . . . .

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

10,981
339

11,320

9,474
405

9,879

8,864
1,687

10,551

Stock Options. The La-Z-Boy Incorporated 2017 Omnibus Incentive Plan authorized grants to certain
employees and directors 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. We granted 423,273 stock options
to employees during the first quarter of fiscal 2019, and we also have stock options outstanding from
previous grants. We recognize compensation expense for stock options over the vesting period equal to
the fair value on the date our compensation committee approved the awards. The vesting period for
our stock options ranges from one to four years, with accelerated vesting upon retirement. The vesting
date for retirement-eligible employees is the later of the date they meet the criteria for retirement or
the end of the fiscal year in which the grant was made. We accelerate the expense for options granted
to retirement eligible employees over the vesting period, with expense recognized from the grant date
through their retirement eligibility date or over the ten months following the grant date, whichever
period is longer. Granted options outstanding under the former long-term equity award plan remain in
effect and have a term of ten years.

Stock option expense recognized in selling, general and administrative expense for fiscal 2019, fiscal
2018, and fiscal 2017 was $3.5 million, $4.2 million, and $3.4 million, respectively. We received
$16.2 million, $4.4 million, and $3.6 million in cash during fiscal 2019, fiscal 2018, and fiscal 2017,
respectively, for exercises of stock options.

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

Number of
Shares
(In Thousands)

Weighted
Average
Exercise
Price

Outstanding at April 28, 2018 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . .

Outstanding at April 27, 2019 . . . . . . . . .

Exercisable at April 27, 2019 . . . . . . . . .

1,837
423
(58)
(761)

1,441

516

24.18
33.15
30.44
21.28

28.09

25.78

Weighted
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value
(In Thousands)

7.4

9,407

7.7

6.8

9,933

6,557

3,450

The aggregate intrinsic value of options exercised was $2.2 million and $4.9 million in fiscal 2018 and
fiscal 2017, respectively. As of April 27, 2019, our total unrecognized compensation cost related to
non-vested stock option awards was $2.0 million, which we expect to recognize over a weighted-average
remaining vesting term of all unvested awards of 1.7 years. During the year ended April 27, 2019,
0.5 million shares vested.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14: Stock-Based Compensation (Continued)

We estimate the fair value of the employee stock options at the date of grant using the Black-Scholes
option-pricing model, which requires management to make certain assumptions. We estimate expected
volatility based on the historical volatility of our common shares. We base the average expected life on
the contractual term of the stock option and expected employee exercise trends. We base the risk-free
rate on U.S. Treasury issues with a term equal to the expected life assumed at the date of the grant.
We estimate forfeiture rates based on our employees’ forfeiture history and believe they will
approximate future results. The fair value of stock options granted during fiscal 2019, fiscal 2018, and
fiscal 2017 were calculated using the following assumptions:

Fiscal 2019
Grant

Fiscal 2018
Grant

Fiscal 2017
Grant

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

2.82%
1.45%
5.0
33.07%
9.65

1.84%
1.61%
5.0
32.12%
7.16

1.30%
1.54%
5.0
38.87%
7.99

Stock Appreciation Rights. We have not granted any SARs to employees since fiscal 2014, but we have
SARs outstanding from the fiscal 2013 and fiscal 2014 grants. All outstanding SARs are fully vested
and have a term of ten years. SARs will be paid in cash upon exercise and, accordingly, we account for
SARs as liability-based awards that we re-measure to fair value at the end of each reporting period. We
recognized compensation expense of $0.1 million, $0.3 million, and $0.7 million related to SARs in
selling, general and administrative expense for the years ended April 27, 2019, April 28, 2018, and
April 29, 2017, respectively. We have no remaining unrecognized compensation cost at April 27, 2019,
relating to SAR awards as they are all fully vested, but we will continue to re-measure these awards to
reflect the fair value at the end of each reporting period until all awards are exercised or forfeited.

In fiscal 2013 and 2014, we granted SARs as described in our Annual Report on Form 10-K for the
fiscal years ended April 27, 2013 and April 26, 2014, respectively. These awards have exceeded their
expected life and are re-measured to fair value based on their intrinsic value, which is the market value
of our common stock on the last day of the reporting period less the exercise price, until the earlier of
the exercise date or the contractual term date. At April 27, 2019, the intrinsic value per share of the
fiscal 2013 and 2014 awards were $20.48 and $13.39, respectively.

Restricted Stock. We awarded 112,926 shares of restricted stock to employees during fiscal 2019. We
issue restricted stock at no cost to the employees, and the shares are held in an escrow account until
the vesting period ends. If a recipient’s employment ends during the escrow period (other than through
death or disability), the shares are returned at no cost to the company. We account for restricted stock
awards as equity-based awards because when they vest, they will be settled in common shares. The
weighted average fair value of the restricted stock that was awarded in fiscal 2019 was $32.78 per share,
the market value of our common shares on the date of grant. We estimate forfeiture rates based on
our employees’ forfeiture history and believe they will approximate future results. We recognize
compensation expense for restricted stock over the vesting period equal to the fair value on the date
our compensation committee approved the awards. Restricted stock awards vest at 25% per year,
beginning one year from the grant date for a term of four years. We recorded expense related to the
restricted stock in selling, general and administrative expense of $2.5 million, $2.2 million, and
$1.7 million during fiscal 2019, fiscal 2018, and fiscal 2017, respectively. Our unrecognized

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14: Stock-Based Compensation (Continued)

compensation cost at April 27, 2019, related to restricted shares was $5.2 million and is expected to be
recognized over a weighted-average remaining contractual term of all unvested awards of 1.8 years.

The following table summarizes information about non-vested share awards as of and for the year
ended April 27, 2019:

Shares
(In Thousands)

Weighted
Average
Grant Date
Fair Value

Non-vested shares at April 28, 2018 . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

233
113
(89)
(10)

Non-vested shares at April 27, 2019 . . . . . . . . . . . . . .

247

26.56
32.78
26.03
27.92

29.55

Restricted Stock Units. Restricted stock units granted to our non-employee directors are offered at no
cost to the directors and vest when a director leaves the board. During fiscal 2019, fiscal 2018, and
fiscal 2017 we granted less than 0.1 million of restricted stock each year to our non-employee directors.
We account for these restricted stock units as equity-based awards because when they vest, they will be
settled in shares of our common stock. We measure and recognize compensation expense for these
awards based on the market price of our common shares on the date of grant, which was $33.15,
$23.85, and $27.10 for the awards granted in fiscal 2019, fiscal 2018, and fiscal 2017, respectively.
Expense relating to the restricted stock units which we recorded in selling, general and administrative
expense was $0.7 million, $0.7 million and $0.6 million in fiscal 2019, fiscal 2018 and fiscal 2017,
respectively.

Performance Awards. Under the La-Z-Boy Incorporated 2017 Omnibus Incentive Plan, the
Compensation Committee of the board of directors was authorized to award common shares to certain
employees based on the attainment of certain financial goals over a given performance period. The
awards 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.

Payout of these grants depends on our financial performance (80%) and a market-based condition
based on the total return our shareholders receive on their investment in our stock relative to returns
earned through investments in other public companies (20%). The performance award opportunity
ranges from 50% of the employee’s target award if minimum performance requirements are met to a
maximum of 200% of the target award based on the attainment of certain financial and shareholder-
return goals over a specific performance period, which is generally three fiscal years.

The number of awards that will vest, as well as unearned and canceled awards, depend on the
achievement of certain financial and shareholder-return goals over the three-year performance periods,
and will be settled in shares if service conditions are met, requiring employees to remain employed with
the company through the end of the three-year performance periods. The following table summarizes

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14: Stock-Based Compensation (Continued)

the performance-based shares outstanding at the maximum award amounts based upon the respective
performance share agreements:

Shares
(In Thousands)

Weighted
Average
Grant Date
Fair Value

Outstanding shares at April 28, 2018 . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned or cancelled . . . . . . . . . . . . . . . . . . . . . .

541
292
(139)
(171)

Outstanding shares at April 27, 2019 . . . . . . . . . . . . .

523

25.52
31.71
25.73
27.05

28.43

We account for performance-based shares as equity-based awards because when they vest, they will be
settled in common shares. We estimate forfeiture rates based on our employees’ forfeiture history and
believe they will approximate future results. For shares that vest based on our results relative to the
performance goals, we expense as compensation cost the fair value of the shares as of the day we
granted the awards recognized over the performance period, taking into account the probability that we
will satisfy the performance goals. The fair value of each share of the awards we granted in fiscal 2019,
fiscal 2018, and fiscal 2017 that vest based on attaining performance goals was $31.71, $25.93, and
$24.79, respectively, the market value of our common shares on the date we granted the awards less
the dividends we expect to pay before the shares vest. For shares that vest based on market conditions,
we use a Monte Carlo valuation model to estimate each share’s fair value as of the date of grant. The
Monte Carlo valuation model uses multiple simulations to evaluate our probability of achieving various
stock price levels to determine our expected performance ranking relative to our peer group. Similar to
the way in which we expense the awards of stock options, we expense compensation cost, net of
estimated forfeitures, over the vesting period regardless of whether the market condition is ultimately
satisfied. Based on the Monte Carlo model, the fair value as of the grant date of the fiscal 2019, fiscal
2018, and fiscal 2017 grants of shares that vest based on market conditions was $46.39, $36.24, and
$33.32, respectively. Our unrecognized compensation cost at April 27, 2019, related to performance-
based shares was $5.3 million based on the current estimates of the number of awards that will vest,
and is expected to be recognized over a weighted-average remaining contractual term of all unvested
awards of 1.4 years.

Equity-based compensation expenses related to performance-based shares recognized in our
consolidated statement of income were as follows (for the fiscal years ended):

(Amounts in thousands)

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

Fiscal 2015 grant . . . . . . . . . . . . . . . . . . . .
Fiscal 2016 grant . . . . . . . . . . . . . . . . . . . .
Fiscal 2017 grant . . . . . . . . . . . . . . . . . . . .
Fiscal 2018 grant . . . . . . . . . . . . . . . . . . . .
Fiscal 2019 grant . . . . . . . . . . . . . . . . . . . .

— $
—
1,044
1,402
1,774

— $

1,052
455
887
—

Total expense . . . . . . . . . . . . . . . . . . . . .

4,220

2,394

675
1,284
1,109
—
—

3,068

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14: Stock-Based Compensation (Continued)

Previously Granted Deferred Stock Units. We account for awards under our deferred stock unit plan for
non-employee directors as liability-based awards because upon exercise these awards will be paid in
cash. We measure and recognize compensation expense based on the market price of our common
stock on the grant date. We remeasure and adjust the liability based on the market value (intrinsic
value) of our common shares on the last day of the reporting period until paid with a corresponding
adjustment to reflect the cumulative amount of compensation expense. For purposes of dividends and
for measuring the liability, each deferred stock unit is the equivalent of one common share. As of
April 27, 2019, we had 0.1 million deferred stock units outstanding. We recorded expense relating to
deferred stock units in selling, general and administrative of $0.2 million, $0.1 million, and $0.2 million
during fiscal 2019, fiscal 2018, and fiscal 2017, respectively. Our liability related to these awards was
$2.2 million and $2.0 million at April 27, 2019, and April 28, 2018, respectively, and is included as a
component of other long-term liabilities on our consolidated balance sheet.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15: Accumulated Other Comprehensive Loss

The activity in accumulated other comprehensive loss for the fiscal years ended April 27, 2019,
April 28, 2018, and April 29, 2017, were as follows:

(Amounts in thousands)

Change in
Fair Value

Unrealized
Gain on

Translation
Adjustment

of Cash Flow Marketable
Securities

Hedge

Net Pension
Amortization
and Net
Actuarial
Gain (Loss)

Accumulated
Other
Comprehensive
Loss

Balance at April 30, 2016 . . . . . . . . . . . . $
Changes before reclassifications . . . . . .
Amounts reclassified to net income . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . .

(445) $
(482)
—
—

(286) $

(1,478)
2,060
(222)

1,058 $
1,592
(471)
(427)

(34,327) $
(2,410)
3,290
(335)

(34,000)
(2,778)
4,879
(984)

Other comprehensive income (loss)

attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . . . .

Balance at April 29, 2017 . . . . . . . . . . . .
Changes before reclassifications . . . . . .
Amounts reclassified to net income . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . .

Other comprehensive income (loss)

attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . . . .

Balance at April 28, 2018 . . . . . . . . . . . .
Changes before reclassifications . . . . . .
Cumulative effect adjustment for

investments(1) . . . . . . . . . . . . . . . . . .
Amounts reclassified to net income(2)
. .
Tax effect . . . . . . . . . . . . . . . . . . . . . .

Other comprehensive income (loss)

attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . . . .

(482)

(927)
3,315
—
—

3,315

2,388
(2,338)

—
—
—

360

74
164
(208)
124

154
(369)

—
280
22

694

1,752
844
(1,420)
200

(376)

1,376
330

(1,637)
25
(88)

545

(33,782)
3,257
3,341
(1,933)

4,665

(29,117)
(479)

—
26,553
(562)

(2,338)

(67)

(1,370)

25,512

Balance at April 27, 2019 . . . . . . . . . . . . $

50 $

87 $

6 $

(3,605) $

1,117

(32,883)
7,580
1,713
(1,609)

7,684

(25,199)
(2,856)

(1,637)
26,858
(628)

21,737

(3,462)

(1) The cumulative effect adjustment for investments is composed of $2.1 million of unrealized gains on
equity investments offset by $0.5 million of tax expense. We reclassified the net $1.6 million of
cumulative effect adjustment from accumulated other comprehensive loss to retained earnings as a
result of adopting Accounting Standards Update 2016-01 (see Note 1 for further information).

(2)

Included in the amount reclassified from accumulated other comprehensive income is a net
$23.8 million charge related to the pension termination that occurred in the fourth quarter of fiscal 2019
(see Note 11 for additional information). Of this amount, $28.2 million of expense was recorded as
pension termination charge and $4.4 million of income was recorded in income tax expense in our
consolidated statement of income.

We reclassified the unrealized gain/(loss) on marketable securities from accumulated other
comprehensive loss to net income through other expense, net in our consolidated statement of income,
reclassified the change in fair value of cash flow hedges to net income through cost of sales, and
reclassified the net pension amortization to net income through other expense, net.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15: Accumulated Other Comprehensive Loss (Continued)

The components of non-controlling interest at April 27, 2019, April 28, 2018, and April 29, 2017, were
as follows:

(Amounts in thousands)

4/27/2019

4/28/2018

4/29/2017

Balance as of the beginning of the year . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . .

13,035
1,567
(134)

11,186
729
1,120

10,070
1,062
54

Balance as of the end of the year . . . . . . . .

14,468

13,035

11,186

Note 16: Revenue Recognition

The following table disaggregates our revenue by product category by segment for the fiscal year ended
April 27, 2019:

(Amounts in thousands)

Upholstery

Casegoods

Retail

Corporate
and Other

Total

Motion Upholstery Furniture . . . . .
Stationary Upholstery Furniture . . .
Bedroom Furniture . . . . . . . . . . . .
Dining Room Furniture . . . . . . . . .
Occasional Furniture . . . . . . . . . . .
Other(1)
. . . . . . . . . . . . . . . . . . . .

804,691
367,386
—
—
1,616
94,549

— $

16,631
31,465
23,073
49,173
(5,869)

350,520
108,590
5,327
9,918
20,354
75,492

— $ 1,155,211
570,356
42,116
34,952
72,275
152,018

77,749
5,324
1,961
1,132
(12,154)

Total . . . . . . . . . . . . . . . . . . . . .

$ 1,268,242

114,473

570,201
Eliminations

74,012

Consolidated Net Sales

2,026,928
(281,527)

$ 1,745,401

(1) Primarily includes revenue for delivery, advertising, royalties, parts, accessories, after-treatment

products, tariff surcharges, discounts & allowances, rebates and other sales incentives

Motion Upholstery Furniture—Includes gross revenue for upholstered furniture, such as recliners,
sofas, loveseats, chairs, sectionals and modulars that have a mechanism that allows the back of the
product to recline or the product’s footrest to extend. This gross revenue includes sales to La-Z-Boy
Furniture Galleries(cid:3) stores (including company-owned stores), operators of La-Z-Boy Comfort Studio(cid:3)
locations, England Custom Comfort Center locations, other major dealers, independent retailers, and
the end consumer.

Stationary Upholstery Furniture—Includes gross revenue for upholstered furniture, such as sofas,
loveseats, chairs, sectionals, modulars, and ottomans that do not have a mechanism. This gross revenue
includes sales to La-Z-Boy Furniture Galleries(cid:3) stores (including company-owned stores), operators of
La-Z-Boy Comfort Studio(cid:3) locations, England Custom Comfort Center locations, other major dealers,
independent retailers, and the end consumer.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16: Revenue Recognition (Continued)

Bedroom Furniture—Includes gross revenue for casegoods furniture typically found in a bedroom, such
as beds, chests, dressers, nightstands and benches. This gross revenue includes sales to La-Z-Boy
Furniture Galleries(cid:3) stores (including company-owned stores), independent retailers, and the end
consumer.

Dining Room Furniture—Includes gross revenue for casegoods furniture typically found in a dining
room, such as dining tables, dining chairs, storage units and stools. This gross revenue includes sales to
La-Z-Boy Furniture Galleries(cid:3) stores (including company-owned stores), independent retailers, and the
end consumer.

Occasional Furniture—Includes gross revenue for casegoods furniture found throughout the home,
such as cocktail tables, chairsides, sofa tables, end tables, and entertainment centers. This gross revenue
includes sales to La-Z-Boy Furniture Galleries(cid:3) stores (including company-owned stores), independent
retailers, and the end consumer.

Our consolidated balance sheet includes current assets of $17.0 million that we reported as other
receivables. These other receivables represent the remaining consideration to which we are entitled
prior to fulfilling our performance obligation. At the beginning of fiscal 2019, we had $12.1 million of
other receivables.

We receive deposits from end consumers before we recognize revenue, resulting in customer deposits,
and in some cases we have the unconditional right to collect the remaining portion of the order price
before we fulfill our performance obligation, resulting in deferred revenue (collectively, the ‘‘contract
liabilities’’). At the beginning of fiscal 2019, we had $31.3 million of customer deposits and
$12.1 million of deferred revenues. At April 27, 2019, we included $42.8 million of customer deposits
and $17.0 million of deferred revenues in accrued expenses and other current liabilities on our
consolidated balance sheet. During the fiscal year ended April 27, 2019, we recognized $41.5 million of
revenue that was recorded as a contract liability at the beginning of fiscal 2019.

We have elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to
recognize the promised amount of consideration without adjusting for the effects of a significant
financing component if the contract has a duration of one year or less. As our contracts typically are
less than one year in length and do not have significant financing components, we have not adjusted
consideration.

Note 17: Segment Information

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17: Segment Information (Continued)
Comfort Studio(cid:3) locations, England Custom Comfort Center locations, major dealers, and a wide cross-
section of other independent retailers.

Casegoods Segment. Our Casegoods segment consists of one operating segment that sells furniture
under three brands: American Drew(cid:3), Hammary(cid:3), and Kincaid(cid:3). The Casegoods segment is an
importer, marketer, and distributor of casegoods (wood) furniture such as bedroom sets, dining room
sets, entertainment centers and occasional pieces, and also manufactures some coordinated upholstered
furniture. The Casegoods segment sells directly to major dealers, as well as La-Z-Boy Furniture
Galleries(cid:3) stores, and a wide cross-section of other independent retailers.

Retail Segment. Our Retail segment consists of one operating segment comprising our 156 company-
owned La-Z-Boy Furniture Galleries(cid:3) stores. The Retail segment sells primarily upholstered furniture,
in addition to some casegoods and other accessories, to end consumers through these stores.

Corporate & Other. Corporate & Other includes the shared costs for corporate functions, including
human resources, information technology, finance and legal, in addition to revenue generated through
royalty agreements with companies licensed to use the La-Z-Boy(cid:3) brand name on various products. We
consider our corporate functions to be other business activities and have aggregated them with our
other insignificant operating segments including our global trading company in Hong Kong and Joybird,
an e-commerce retailer that manufactures and sells upholstered furniture such as sofas, loveseats,
chairs, ottomans, sleeper sofas and beds, and also imports and sells casegoods (wood) furniture such as
occasional tables and other accessories. Joybird sells to the end consumer almost exclusively online
through its website, www.joybird.com. None of the operating segments included in Corporate & Other
meet the requirements of reportable segments.

The accounting policies of the operating segments are the same as those described in Note 1. We
account for intersegment revenue transactions between our segments consistent with independent third-
party transactions, that is, at current market prices. As a result, the manufacturing profit related to
sales to our Retail segment is included within the appropriate Upholstery or Casegoods segment.
Operating income realized on intersegment revenue transactions is therefore generally consistent with
the operating income realized on our revenue from independent third-party transactions. Segment
operating income is based on profit or loss from operations before interest expense, interest income,
other income (expense) and income taxes. Identifiable assets are cash and equivalents, notes and
accounts receivable, net inventories, net property, plant and equipment, goodwill and other intangible
assets. Our unallocated assets include deferred income taxes, corporate assets (including a portion of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17: Segment Information (Continued)

cash and equivalents), and various other assets. Sales are attributed to countries on the basis of the
customer’s location.

(Amounts in thousands)

Sales

Upholstery segment:

Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

Sales to external customers . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,016,957
251,285

$ 1,010,097
217,266

986,917
204,526

Upholstery segment sales . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,268,242

1,227,363

1,191,443

Casegoods segment:

Sales to external customers . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Casegoods segment sales . . . . . . . . . . . . . . . . . . . . . . . . . . .

95,677
18,796

114,473

95,919
15,474

111,393

87,181
13,047

100,228

Retail segment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

570,201

474,613

443,238

Corporate and Other:

Sales to external customers . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate and Other sales . . . . . . . . . . . . . . . . . . . . . . . . . .

62,566
11,446

74,012

3,318
9,421

12,739

2,724
6,437

9,161

Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(281,527)

(242,161)

(224,010)

Consolidated sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,745,401

$ 1,583,947

$ 1,520,060

Operating Income (Loss)

Upholstery segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated operating income . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension termination charge . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

127,906
12,589
37,922
(48,743)

129,674
(1,542)
2,103
(32,671)
(2,237)

130,349
11,641
20,709
(33,330)

129,369
(538)
1,709
—
(1,650)

148,996
8,623
19,205
(43,482)

133,342
(1,073)
981
—
(2,510)

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . .

95,327

128,890

130,740

Depreciation and Amortization

16,122
1,143
4,007
9,875

15,823
993
3,758
11,193

Consolidated depreciation and amortization . . . . . . . . . . . .

31,147

31,767

14,692
863
3,131
10,445

29,131

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17: Segment Information (Continued)

(Amounts in thousands)

Capital Expenditures

Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

37,114
1,949
4,604
4,766

30,049
711
3,377
2,200

Consolidated capital expenditures . . . . . . . . . . . . . . . . . . .

48,433

36,337

13,193
786
2,831
3,494

20,304

Assets

Upholstery segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

398,469
55,295
210,863
395,163

363,864
57,312
177,853
293,938

357,889
53,064
172,601
305,301

Consolidated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,059,790

892,967

888,855

Long-Lived Assets by Geographic Location

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated long-lived assets . . . . . . . . . . . . . . . . . . . . . .

389,892
27,529

417,421

251,778
23,671

275,449

239,198
23,791

262,989

Sales by Country

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

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

89%
6%
5%

100%

87%
7%
6%

100%

88%
7%
5%

100%

Note 18: Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) was enacted into law. Most of its
provisions are effective for tax years beginning on or after January 1, 2018. Because we are a fiscal year
U.S. taxpayer, the majority of the provisions, such as elimination of the domestic manufacturing
deduction, new taxes on certain foreign-sourced income, and new limitations on certain business
deductions, began applying to us in fiscal 2019. Additionally, as a Company fiscal year taxpayer, the
lower corporate income tax rate of 21% was phased in, resulting in a blended federal rate of 30.4% for
fiscal 2018. The federal tax rate is 21% for fiscal 2019.

In December of 2017, the SEC staff issued guidance which provides that companies that have not
completed their accounting for the effects of the Tax Act, but can determine a reasonable estimate of
those effects, should include a provisional amount based on their reasonable estimate in their financial
statements. The guidance also allows companies to adjust the provisional amounts during a one year
measurement period which is similar to the measurement period used when accounting for business
combinations. In fiscal 2019, we finalized the provisional estimates of $0.2 million recorded in fiscal
2018, with no material change.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18: Income Taxes (Continued)

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

(Amounts in thousands)

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

Total

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

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

73,058
22,269

95,327

111,516
17,374

128,890

122,196
8,544

130,740

Income tax expense (benefit) consists of the following components (for the fiscal years ended):

(Amounts in thousands)

Federal:

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

—current . . . . . . . . . . . . . . . . . . . . . . . .
—deferred . . . . . . . . . . . . . . . . . . . . . . .

17,629
(2,649)

21,206
16,401

35,606
2,349

State:

—current . . . . . . . . . . . . . . . . . . . . . . . .
—deferred . . . . . . . . . . . . . . . . . . . . . . .

Foreign:

—current . . . . . . . . . . . . . . . . . . . . . . . .
—deferred . . . . . . . . . . . . . . . . . . . . . . .

6,199
(933)

4,919
21

4,886
1,075

3,820
(93)

5,194
(1,703)

2,388
(78)

Total income tax expense . . . . . . . . . . . .

25,186

47,295

43,756

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

(% of income before income taxes)

4/27/2019

4/28/2018

4/29/2017

Fiscal Year Ended

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

from:
Re-measurement of deferred taxes for

changes in statutory U.S. tax rate . . . . . . .
. .

State income taxes, net of federal benefit
Tax effect of defined benefit pension plan

termination . . . . . . . . . . . . . . . . . . . . . .
U.S. manufacturing benefit . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . .
U.S. research tax credits . . . . . . . . . . . . . . .
Miscellaneous items . . . . . . . . . . . . . . . . . .

21.0%

30.4%

35.0%

(0.2)
4.1

2.7
—
0.6
(0.8)
(1.0)

7.8
3.3

—
(1.5)
(0.3)
(1.9)
(1.1)

—
2.7

—
(2.4)
(1.0)
—
(0.8)

Effective tax rate . . . . . . . . . . . . . . . . . . . . . .

26.4%

36.7%

33.5%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18: Income Taxes (Continued)

For our foreign operating units, we permanently reinvest the earnings and consequently do not record a
deferred tax liability relative to the undistributed earnings. We have reinvested approximately
$55.6 million of the earnings. After enactment of the Tax Act, the potential deferred tax attributable to
these earnings would be approximately $3.1 million, primarily related to foreign withholding taxes and
state income taxes.

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

(Amounts in thousands)

4/27/2019

4/28/2018

Assets
Deferred and other compensation . . . . . . . . . . . . . . . . . . . $
State income tax—net operating losses, credits and other . .
Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal net operating losses, credits . . . . . . . . . . . . . . . . . .
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,603 $
5,346
5,707
2,714
2,525
1,479
2,032
91
2,250
(2,312)

Total deferred tax assets

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

39,435

Liabilities
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . .
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,523)
(1,615)
(6,627)
—
—

18,326
5,050
5,348
2,971
2,714
2,343
—
—
—
(1,224)

35,528

(7,684)
(1,531)
(3,575)
(1,230)
(243)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . $

20,670 $

21,265

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

(Amounts in thousands)

Federal net operating losses . . . . . . . . . . . . . . . . .
Various U.S. state net operating losses (excluding

federal tax effect) . . . . . . . . . . . . . . . . . . . . . . .
Foreign capital losses . . . . . . . . . . . . . . . . . . . . . .

$
$

Amount

Expiration

2,032

Fiscal 2034 - 2038

5,012
17

Fiscal 2019 - 2038
Indefinite

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.

The evaluation of the amount of net deferred tax assets expected to be realized necessarily involves
forecasting the amount of taxable income that will be generated in future years. We have forecasted
future results using estimates management believes to be reasonable. We based these estimates on
objective evidence such as expected trends resulting from certain leading economic indicators. Based

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18: Income Taxes (Continued)

upon our net deferred tax asset position at April 27, 2019, we estimate that about $69 million of future
taxable income would need to be generated to fully recover our net deferred tax assets. The realization
of deferred income tax assets is dependent on future events. Actual results inevitably will vary from
management’s forecasts. Such variances could result in adjustments to the valuation allowance on
deferred tax assets in future periods, and such adjustments could be material to the financial
statements.

During fiscal 2019, we recorded a $1.1 million increase in our valuation allowance for deferred tax
assets that are now considered more likely than not to be realized. This determination was primarily
due to state net operating losses and the limitations on the realization of deferred tax assets related to
executive compensation. A summary of the valuation allowance by jurisdiction is as follows:

Jurisdiction (Amounts in thousands)

4/28/2018
Valuation
Allowance

Change

4/27/2019
Valuation
Allowance

U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . .
U.S. State . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $

1,207
17

586
502
—

Total

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

1,224

1,088

586
1,709
17

2,312

The remaining valuation allowance of $2.3 million primarily related to certain U.S. federal, state and
foreign deferred tax assets. The U.S. federal deferred taxes are primarily due to limitations on the
realization of deferred taxes related to executive compensation. The U.S. state deferred taxes are
primarily related to state net operating losses.

As of April 27, 2019, we had a gross unrecognized tax benefit of $1.1 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:

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

Reductions:

Positions taken during the prior year . . . .
Decreases related to settlements with

taxing authorities . . . . . . . . . . . . . . . . .
Reductions resulting from the lapse of the
statute of limitations . . . . . . . . . . . . . .

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

1,014

620

1,821

187
—

(36)

—

(96)

464
25

—

148
—

(4)

(27)

(95)

(1,318)

Balance at the end of the period . . . . . . . . .

1,069

1,014

620

We recognize interest and penalties associated with uncertain tax positions in income tax expense. We
had approximately $0.3 million accrued for interest and penalties as of both April 27, 2019, and
April 28, 2018.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18: Income Taxes (Continued)

If recognized, $0.9 million of the total $1.0 million of unrecognized tax benefits would decrease our
effective tax rate. We do not expect that the net liability for uncertain income tax positions will
significantly change within the next 12 months. The remaining balance will be settled or released as tax
audits are effectively settled, statutes of limitation expire or other new information becomes available.

Our U.S. federal income tax returns for fiscal years 2016 and subsequent are still subject to audit. Our
U.S. federal income tax return for fiscal year 2016 is currently under audit. In addition, we conduct
business in various states. The major states in which we conduct business are subject to audit for fiscal
years 2015 and subsequent. Our foreign operations are subject to audit for fiscal years 2009 and
subsequent.

Cash paid for taxes (net of refunds received) during the fiscal years ended April 27, 2019, April 28,
2018, and April 29, 2017, were $23.8 million, $37.1 million, and $33.7 million, respectively.

Note 19: Earnings per Share

Certain share-based compensation awards that entitle their holders to receive non-forfeitable dividends
prior to vesting are considered participating securities. Prior to fiscal 2019, we granted restricted stock
awards that contained non-forfeitable rights to dividends on unvested shares, and we are required to
include these participating securities in calculating our basic earnings per common share, using the
two-class method. The restricted stock awards we granted in fiscal 2019 do not have non-forfeitable
rights to dividends and therefore are not considered participating securities. The dividends on the
restricted stock awards granted in fiscal 2019 are, and will continue to be, held in escrow until the stock
awards vest at which time we will pay any accumulated dividends.

The following is a reconciliation of the numerators and denominators we used in our computations of
basic and diluted earnings per share:

(Amounts in thousands)

Numerator (basic and diluted):

Net income attributable to La-Z-Boy

Fiscal Year Ended

(52 weeks)
4/27/2019

(52 weeks)
4/28/2018

(52 weeks)
4/29/2017

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

68,574

80,866

85,922

Income allocated to participating

securities . . . . . . . . . . . . . . . . . . . . . .

(225)

(407)

(422)

Net income available to common

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

68,349

80,459

85,500

Denominator:

Basic weighted average common shares

outstanding . . . . . . . . . . . . . . . . . . . . .

46,828

47,621

48,963

Add:

Contingent common shares . . . . . . . . . . .
Stock option dilution . . . . . . . . . . . . . . .

242
263

211
303

194
313

Diluted weighted average common

shares outstanding . . . . . . . . . . . . . .

47,333

48,135

49,470

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19: Earnings per Share (Continued)

The values for contingent common shares set forth above reflect the dilutive effect of common shares
that we would have issued to employees under the terms of performance-based share awards if the
relevant performance period for the award had been the reporting period.

We had outstanding options to purchase 0.4 million shares for the year ended April 27, 2019, with a
weighted average exercise price of $33.15. We excluded the effect of these options from our diluted
share calculation since the weighted average exercise price of the options was higher than the average
market price, and including the options’ effect would have been anti-dilutive. We did not exclude any
outstanding options from the diluted share calculation for the fiscal years ended April 28, 2018, and
April 29, 2017.

Note 20: Fair Value Measurements

Accounting standards require that we put financial assets and liabilities into one of three categories
based on the inputs we use to value them:

(cid:127) Level 1—Financial assets and liabilities the values of which are based on unadjusted quoted market

prices for identical assets and liabilities in an active market that we have the ability to access.

(cid:127) Level 2—Financial assets and liabilities the values of which are based on quoted prices in markets

that are not active or on model inputs that are observable for substantially the full term of the asset
or liability.

(cid:127) Level 3—Financial assets and liabilities the values of which are based on prices or valuation

techniques that require inputs that are both unobservable and significant to the overall fair value
measurement.

Accounting standards require that in making fair value measurements, we use observable market data
when available. When inputs used to measure fair value fall within different levels of the hierarchy, we
categorize the fair value measurement as being in the lowest level that is significant to the
measurement. We recognize transfers between levels of the fair value hierarchy at the end of the
reporting period in which they occur.

In addition to assets and liabilities that we record at fair value on a recurring basis, we are required to
record assets and liabilities at fair value on a non-recurring basis. We measure non-financial assets such
as other intangible assets, goodwill, and other long-lived assets at fair value when there is an indicator
of impairment, and we record them at fair value only when we recognize an impairment loss.

The following table presents the fair value hierarchy for those assets we measured at fair value on a
recurring basis at April 27, 2019, and April 28, 2018. There were no transfers into or out of Level 1,
Level 2, or Level 3 for any of the periods presented.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 20: Fair Value Measurements (Continued)

Fiscal 2019

(Amounts in thousands)

Assets

Fair Value Measurements

Level 1

Level 2

Level 3

Marketable securities . . . . . . . . . . . . . . .
Held-to-maturity investments . . . . . . . . . .
Cost basis investment . . . . . . . . . . . . . . .

5
3,341
—

34,390
—
—

—
—
11,979

Total assets . . . . . . . . . . . . . . . . . . . . .

3,346

34,390

11,979

Liabilities

Contingent consideration liability . . . . . . .

— $

7,900

Fiscal 2018

(Amounts in thousands)

Assets

Fair Value Measurements

Level 1

Level 2

Level 3

Marketable securities . . . . . . . . . . . . . . .
Held-to-maturity investments . . . . . . . . . .
Cost basis investment . . . . . . . . . . . . . . .

1,141
3,340
—

37,173
—
—

—
—
10,954

Total assets . . . . . . . . . . . . . . . . . . . . .

4,481

37,173

10,954

Liabilities

Contingent consideration liability . . . . . . .

— $

344

At April 27, 2019, and April 28, 2018, we held marketable securities intended to enhance returns on
our cash and to fund future obligations of our non-qualified defined benefit retirement plan, as well as
marketable securities to fund future obligations of our executive deferred compensation plan and our
performance compensation retirement plan. We also held other fixed income and cost basis
investments.

The fair value measurements for our Level 1 and Level 2 securities are based on 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. At April 27, 2019, our Level 3 investments
included preferred shares of two privately-held companies, and a warrant to purchase common shares
of one of these privately-held companies. The fair value for our Level 3 investments is not readily
available so we estimate the fair value as costs minus impairment, if any, plus or minus adjustments
resulting from observable price changes in orderly transactions for identical or similar investments with
the same issuer. Our Level 3 liability includes our contingent consideration liabilities on recent
acquisitions. We estimated the fair value of the contingent consideration liability for Joybird to be
$7.9 million at April 27, 2019, an increase of $0.4 million over the acquisition-date fair value of this
liability. The fair value of contingent consideration is based on future revenues and earnings in fiscal
2021 and fiscal 2023. The fair value was determined using a variation of the income approach, known
as the real options method, whereby revenue and earnings were simulated over the earn-out periods in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 20: Fair Value Measurements (Continued)

a risk-neutral framework using Geometric Brownian Motion. For each simulation path, the potential
earn-out payments were calculated based on management’s probability estimates for achievement of the
revenue and earnings milestones and then were discounted to the valuation date. As of April 27, 2019,
we used a discount rate of 4.2% for the fiscal 2021 milestone and 4.7% for the fiscal 2023 milestone.
The increase in the Joybird contingent consideration liability between the acquisition date and the end
of fiscal 2019 was primarily due to the shorter time horizon between the payout dates and the valuation
date, and the change in valuation was recorded as a component of selling, general & administrative
expense in our consolidated statement of income during fiscal 2019.

The following table is a reconciliation of our Level 3 assets and liabilities recorded at fair value using
significant unobservable inputs:

(Amounts in thousands)

Assets

Balance at April 28, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities

Balance at April 28, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-up, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at April 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 3

10,954
1,025

11,979

344
7,500
74
(18)

7,900

Our asset leveling presented above does not include certain marketable securities investments that are
measured at fair value using net asset value per share under the practical expedient methodology.
These investments are still included in the total fair value column of the table in our investment
footnote (see Note 7). The fair value of the investments measured using net asset value at April 27,
2019, and April 28, 2018, was $7.7 million and $6.7 million, respectively.

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 that occurred during the fourth quarter of fiscal 2019 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
During our fiscal second quarter ended October 27, 2018, we acquired Stitch Industries, Inc.
(‘‘Joybird’’) and the business comprising the assets acquired from EBCO, Inc., an independent operator
of nine La-Z-Boy Furniture Galleries(cid:3) stores in Arizona. We are currently integrating Joybird and the
business comprising the assets acquired from EBCO, Inc. into our operations, compliance programs,
and internal control processes. As permitted by SEC guidance, management excluded Joybird and the
business comprising the assets acquired from EBCO, Inc. from its assessment of internal controls over
financial reporting as of April 27, 2019.

ITEM 9B. OTHER INFORMATION.

None.

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 www.la-z-boy.com. We will disclose any
amendments to, or waivers from, the code applicable to an executive officer or director at our website
www.la-z-boy.com.

We provide some information about our executive officers in Part I of this report, under the heading
‘‘Information About Our Executive Officers.’’ All other information required to be reported under this
item will be included in our proxy statement for our 2019 Annual Meeting of Shareholders, 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
2019 Annual Meeting of Shareholders, 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 pursuant to this Item 12 will be included in our proxy
statement for our 2019 Annual Meeting of Shareholders, and is incorporated into this item by
reference.

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 27, 2019

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

Weighted-
average exercise
price 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

1,441,640(1) $

28.09

5,460,094(2)

(1) Beginning April 29, 2018, all equity awards were issued under our 2017 Omnibus Incentive Plan.
The total above reflects 389,906 of options issued under our 2017 Omnibus Incentive Plan in
addition to 1,051,734 of options outstanding that were issued from our 2010 Omnibus Incentive
Plan, which could no longer issue shares as of April 28, 2018.

(2) This amount is the aggregate number of shares that is available for future issuance under our 2017

Omnibus Incentive Plan, which 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 and non-employee directors. We have performance
awards outstanding under the plan that would reduce the number of shares remaining available for

future issuance under the plan by 376,800 shares, assuming the maximum performance targets were
achieved.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are filed as part of this report:

(1) Financial Statements:

Management’s Report to Our Shareholders
Report of Independent Registered Public Accounting Firm
Consolidated Statement of Income for each of the three fiscal years ended April 27,

2019, April 28, 2018, and April 29, 2017

Consolidated Statement of Comprehensive Income for each of the three fiscal years

ended April 27, 2019, April 28, 2018, and April 29, 2017

Consolidated Balance Sheet at April 27, 2019, and April 28, 2018
Consolidated Statement of Cash Flows for the fiscal years ended April 27, 2019,

April 28, 2018, and April 29, 2017

Consolidated Statement of Changes in Equity for the fiscal years ended April 27,

2019, April 28, 2018, and April 29, 2017
Notes to Consolidated Financial Statements

(2) Financial Statement Schedule:

Schedule II—Valuation and Qualifying Accounts for the fiscal years ended April 27,

2019, April 28, 2018, and April 29, 2017

Schedule II immediately follows Item 16.

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.

(3) Exhibits:

The following exhibits are filed or furnished as part of this report:

Exhibit
Number

Description

(3.1)

(3.2)

(3.3)

(3.4)

(3.5)

(4.1)

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)

La-Z-Boy Incorporated Amendment to Restated Articles of Incorporation effective
August 21, 1998 (Incorporated by reference to an exhibit to Form 10-Q for the quarter
ended October 27, 2012)

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 27, 2012)

La-Z-Boy Incorporated Amendment to Restated Articles of Incorporation effective
August 24, 2012 (Incorporated by reference to an exhibit to Form 10-Q for the quarter
ended October 27, 2012)

La-Z-Boy Incorporated Amended and Restated Bylaws (as of May 3, 2011)
(Incorporated by reference to an exhibit to Form 8-K filed May 6, 2011)

Second Amended and Restated Credit Agreement dated as of December 19, 2017,
among La-Z-Boy Incorporated, certain of its subsidiaries, the lenders named therein, and
Wells Fargo Capital Finance, LLC, as administrative agent for the lenders (Incorporated
by reference to an exhibit to Form 8-K filed December 21, 2017)

Exhibit
Number

(4.2) Description of Securities

Description

(10.1)* 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)

(10.2)* 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)

(10.3)* Form of Change in Control Agreement in effect for: Kurt L. Darrow. Similar agreements
are in effect for Melinda D. Whittington, Otis Sawyer, J. Douglas Collier, and Darrell D.
Edwards, except the severance period in those agreements is 12 months rather than
24 months (Incorporated by reference to an exhibit to Form 10-K for the fiscal year
ended April 25, 2015)

(10.4)* Form of Indemnification Agreement (covering all directors, including employee-directors)

(Incorporated by reference to an exhibit to Form 8-K, filed January 22, 2009)

(10.5)* 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)

(10.6)* Amended and Restated La-Z-Boy Incorporated 2010 Omnibus Incentive Plan

(Incorporated by reference to Annex A to definitive proxy statement for annual meeting
of shareholders held August 21, 2013)

(10.7)* La-Z-Boy Incorporated 2010 Omnibus Incentive Plan Sample Award Agreement

(Incorporated by reference to an exhibit to Form 10-Q for the quarter ended
October 23, 2010)

(10.8)* La-Z-Boy Incorporated 2010 Omnibus Incentive Plan Revised Sample Award Agreement

effective July 9, 2012 (Incorporated by reference to an exhibit to Form 8-K filed July 9,
2012)

(10.9)* La-Z-Boy Incorporated Severance Plan for Named Executive Officers (Incorporated by
reference to an exhibit to Form 10-K for the fiscal year ended April 24, 2010)

(10.10)* La-Z-Boy Incorporated Performance Compensation Retirement Plan effective April 27,

2013 (Incorporated by reference to an exhibit to Form 10-K for the fiscal year ended
April 27, 2013)

(10.11)* 2014 Amendment to La-Z-Boy Incorporated Performance Compensation Retirement
Plan (Incorporated by reference to an exhibit to Form 10-K for the fiscal year ended
April 26, 2014)

(10.12)* First 2014 Amendment to La-Z-Boy Incorporated Severance Plan for Named Executive
Officers (Incorporated by reference to an exhibit to Form 10-K for the fiscal year ended
April 25, 2015)

(10.13)* La-Z-Boy Incorporated 2017 Omnibus Incentive Plan (Incorporated by reference to

Annex A within the Company’s Definitive Proxy Statement on Schedule 14A filed
July 18, 2017)

(10.14)* La-Z-Boy Incorporated 2017 Omnibus Incentive Plan Sample Award Agreement

Exhibit
Number

Description

(10.15)* Offer of Employment Letter between Melinda Whittington and La-Z-Boy Incorporated,
dated May 17, 2018 (Incorporated by reference to an exhibit to Form 10-K for the fiscal
year ended April 28, 2018)

(10.16)* Relocation Agreement between Melinda Whittington and La-Z-Boy Incorporated, dated

May 17, 2018 (Incorporated by reference to an exhibit to Form 10-K for the fiscal year
ended April 28, 2018)

(21)

List of subsidiaries of La-Z-Boy Incorporated

(23) Consent of PricewaterhouseCoopers LLP (EDGAR filing only)

(31.1) Certifications of Chief Executive Officer pursuant to Rule 13a-14(a)

(31.2) Certifications of Chief Financial Officer pursuant to Rule 13a-14(a)

(32) Certifications pursuant to 18 U.S.C. Section 1350

(101.INS) XBRL Instance Document

(101.SCH) XBRL Taxonomy Extension Schema Document

(101.CAL) XBRL Taxonomy Extension Calculation Linkbase Document

(101.LAB) XBRL Taxonomy Extension Label Linkbase Document

(101.PRE) XBRL Taxonomy Extension Presentation Linkbase Document

(101.DEF) XBRL Taxonomy Extension Definition Linkbase Document

Indicates a management contract or compensatory plan or arrangement under which a director or
executive officer may receive benefits.

ITEM 16. FORM 10-K SUMMARY.

None.

LA-Z-BOY INCORPORATED
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)

Balance at
Beginning
of Year

Acquisitions

Additions

Charged/
(Credited)
to
Costs and
Expenses

Charged/
(Credited)
to
Other
Accounts

Deductions

Balance at
End of
Year

1,956
2,563
3,145

1,224
1,786
3,625

600
—
—

367 (1)
261 (1)
(278)(1)

— $
—
—

740
—
—

—
—
—

506 (3)
(299)(3)
(562)(3)

(743)(2) $
(868)(2)
(304)(2)

2,180
1,956
2,563

(158)(4) $
(263)(4)
(1,277)(4)

2,312
1,224
1,786

Description

Allowance for

doubtful accounts,
deducted from
accounts
receivable:
April 27, 2019 . . .
April 28, 2018 . . .
April 29, 2017 . . .

Allowance for

deferred tax assets:
April 27, 2019 . . .
April 28, 2018 . . .
April 29, 2017 . . .

(1) Additions charged (credited) to costs and expenses includes the impact of foreign currency

exchange gains (losses).

(2) Deductions represented uncollectible accounts written off less recoveries of accounts receivable

written off in prior years.

(3) Represents impact of adjusting gross deferred tax assets and the impact of the statutory U.S. tax

rate change.

(4) Valuation allowance release.

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 18, 2019

LA-Z-BOY INCORPORATED

BY /s/ KURT L. DARROW

Kurt L. Darrow
Chairman, 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 18, 2019, by the following persons on behalf of the Registrant and in the capacities
indicated.

/s/ K.L. DARROW

/s/ L.A. BARNES

K.L. Darrow
Chairman, President and Chief Executive Officer

L.A. Barnes
Vice President, Corporate Controller and Chief
Accounting Officer

/s/ S.M. GALLAGHER

S.M. Gallagher
Director

/s/ J.E. KERR

J.E. Kerr
Director

/s/ H.G. LEVY

H.G. Levy
Director

/s/ L.B. PETERS

L.B. Peters
Director

/s/ M.D. WHITTINGTON

M.D. Whittington
Senior Vice President and Chief Financial Officer

/s/ E.J. HOLMAN

E.J. Holman
Director

/s/ M.T. LAWTON

M.T. Lawton
Director

/s/ W.A. MCCOLLOUGH

W.A. McCollough
Director

/s/ N.R. QUBEIN

N.R. Qubein
Director

La-Z-Boy Incorporated
Reconciliation of GAAP to Non-GAAP Financial
Measures

(Unaudited, $ amounts in thousands)

Fiscal 2014

% of
sales

Fiscal 2015

% of
sales

Fiscal 2016*

% of
sales

Fiscal 2017

% of
sales

Fiscal 2018

% of
sales

Fiscal 2019

% of
sales

GAAP Operating Income

$90,707 6.7%

$105,816 7.4%

$125,331 8.2%

$133,342 8.8%

$129,369 8.2%

$129,674 7.4%

Restructuring Expense
(Income)

4,839

Purchase Accounting Charges

456

(371)

329

579

544

441

1,766

923

6,917

Non-GAAP Operating Income

$96,002 7.1%

$105,774 7.4%

$126,454 8.3%

$135,549 8.9%

$130,292 8.2%

$136,591 7.8%

* Fiscal 2016 includes 53 weeks. All other years presented include 52 weeks.

In addition to the financial measures prepared in accordance with accounting principles generally accepted in the
United States ("GAAP"), this letter to shareholders also includes Non-GAAP financial measures. Management uses
these Non-GAAP financial measures when assessing our ongoing performance. The Non-GAAP measures include
references to Non-GAAP operating income and Non-GAAP operating margin, each of which excludes purchase
accounting and restructuring charges. These Non-GAAP financial measures are not meant to be considered a
substitute for La-Z-Boy Incorporated’s results prepared in accordance with GAAP, and may not be comparable to
similarly titled measures reported by other companies. Reconciliations of such Non-GAAP financial measures to the
most directly comparable GAAP financial measures are set forth above.

Management believes that presenting certain Non-GAAP financial measures excluding purchase accounting and
restructuring charges will help investors understand the long-term profitability trends of our business and compare
our profitability to prior and future periods. Management uses these Non-GAAP measures to assess the company’s
operating and financial performance, and excludes purchase accounting and restructuring charges because the
amount and timing of such charges are significantly impacted by the timing, size, number and nature of the
acquisitions and restructuring actions consummated.

Junction Pyramid Bar by Hammary

Briar Sectional by Joybird

Five-Year Sales and Operating Margin

8.3%

8.2%

8.9%

8.8%

8.2%

7.8%

7.4%

$1,425

$1,525

$1,520

$1,584

$1,745

2015

2016*

2017

2018

2019

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

$1,800

$1,700

$1,600

$1,500

$1,400

$1,300
FY

Sales (in Millions)

GAAP Operating Margin

Non-GAAP Operating Margin**

*Fiscal 2016 includes 53 weeks. All other years presented include 52 weeks.
** See Reconciliation of GAAP to Non-GAAP Financial Measures at the end of this Annual Report on page 98.

Kurt L. Darrow
(Chairman)
Chairman, President and
Chief Executive Officer,
La-Z-Boy Incorporated

W. Alan McCollough
(Lead Director)
Former Chairman and
Chief Executive Officer,
Circuit City Stores, Inc.

BOARD OF DIRECTORS

Sarah M. Gallagher
Executive Advisor,
FitForCommerce, LLC

Edwin J. Holman
Former Chairman,
RGIS International

Janet E. Kerr
Vice Chancellor,
Pepperdine University

Michael T. Lawton
Former Executive Vice President
and Chief Financial Officer,
Domino’s Pizza, Inc.

H. George Levy, MD
Otorhinolaryngologist

Lauren B. Peters
Executive Vice President
and Chief Financial Officer,
Foot Locker, Inc.

Dr. Nido R. Qubein
President,
High Point University

CORPORATE AND OTHER EXECUTIVES

Kurt L. Darrow
Chairman, President and
Chief Executive Officer

Melinda D. Whittington
Senior Vice President and
Chief Financial Officer

Darrell D. Edwards
Senior Vice President and
Chief Operating Officer

Otis S. Sawyer
Senior Vice President and President
La-Z-Boy Portfolio Brands

Lindsay A. Barnes
Vice President, Corporate Controller
and Chief Accounting Officer

David B. Behen
Vice President and
Chief Information Officer

Greg A. Brinks
Vice President and Treasurer

Aaron T. Brown
Vice President Strategy
and Analytics

Terrence J. Linz
President La-Z-Boy Retail Division

Stephen K. Krull
Vice President, General Counsel
and Secretary

Dale E. Ulman
Vice President Tax

Katherine E. Vanderjagt
Vice President and Chief Human
Resources Officer

INVESTOR INFORMATION

American Stock Transfer
& Trust Company, LLC

6201 15th Avenue
Brooklyn, NY 11219
877-573-3955
www.astfinancial.com

Stock Exchange
La-Z-Boy Incorporated common
shares are traded on the New
York Stock Exchange under
the symbol LZB.

World Headquarters
La-Z-Boy Incorporated
One La-Z-Boy Drive
Monroe, MI 48162
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.
Analysts, shareholders and investors
may request information from:

Investor Relations
La-Z-Boy Incorporated

One La-Z-Boy Drive
Monroe, MI 48162
investorrelations@la-z-boy.com
734-241-2438

©2019 La-Z-Boy Incorporated
Except as noted, all designated trademarks and service marks utilized in this
report are owned by La-Z-Boy Incorporated or its subsidiary companies.

359774_LZB_AnnualReportCover_FINAL_R1.indd 2

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SUCCESS2019

A N N U A L R E P O R T

One La-Z-Boy Drive

Monroe, Michigan 48162

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