La-Z-Boy(US:LZB)2022-06-20 16:00Company Overview - La-Z-Boy is the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the U.S.[16] - The company operates 348 La-Z-Boy Furniture Galleries stores and 531 La-Z-Boy Comfort Studio locations, totaling approximately 12.5 million square feet of proprietary floor space worldwide[20]. - La-Z-Boy's wholesale segment sells directly to its own stores and independent retailers, while the retail segment primarily sells to end consumers[22]. - The company holds a significant wholesale market share, being the second largest manufacturer/distributor of residential furniture in the U.S. by annual sales volume[48]. Financial Performance - Sales for the fiscal year ended April 30, 2022, were $2,356,811, an increase of 36% compared to $1,734,244 for the previous year[210]. - Gross profit for the same period was $915,969, representing a gross margin of approximately 38.8%, up from $740,260 in the prior year[210]. - Net income attributable to La-Z-Boy Incorporated increased to $150,017, a 41% rise from $106,461 in the previous year[210]. - Basic net income per share rose to $3.41, compared to $2.31 for the prior year, reflecting a 47.4% increase[210]. - Total assets as of April 30, 2022, were $1,932,089, up from $1,786,322 the previous year, indicating a growth of 8.2%[216]. - Total current liabilities increased to $675,689 from $611,670, representing an increase of 10.5%[216]. - Cash flows from operating activities were $79,004, a significant decrease from $309,917 in the previous year[218]. - The company reported a total comprehensive income of $145,741 for the fiscal year, compared to $111,892 in the prior year, marking a 30.3% increase[213]. Inventory and Backlog - The company anticipates that typical seasonal trends in sales may not resume until the second half of fiscal 2023 due to record backlog[35]. - Inventory increased by $77.1 million as of year-end fiscal 2022 compared to fiscal 2021 to support increased sales demand and manufacturing capacity[41]. - Wholesale backlog reached $697.2 million as of April 30, 2022, up from $616.7 million a year earlier, attributed to pricing actions and increased production capacity[47]. - The company maintains higher levels of finished goods inventory for casegoods products due to long lead times from Asian vendors[39]. Employee and Community Engagement - The company employed approximately 12,800 full-time equivalent employees as of April 30, 2022, an increase from approximately 11,500 employees at the end of fiscal 2021[57]. - The company provided vaccine access to over 12,000 community members through its clinic in Mexico during fiscal 2022[71]. - The company has implemented initiatives to enhance diversity, inclusion, and belonging within its corporate strategy[70]. - La-Z-Boy has been recognized for its philanthropic efforts, including being the official furniture provider for Ronald McDonald House Charities[70]. Acquisitions and Strategic Initiatives - Acquisitions completed in fiscal 2022 were not significant to the consolidated financial statements, and pro-forma financial information is not presented[269]. - The acquisition of Alabama and Chattanooga, Tennessee businesses was completed for $8.3 million, with $8.0 million paid in cash, reflecting a strategic priority to grow company-owned retail business[270]. - The acquisition of Furnico Furniture Ltd in the U.K. was completed for approximately $13.3 million, with total cash payments of $13.9 million, aimed at realizing production synergies and cost savings[271]. - The Long Island, New York acquisition was completed for $4.5 million, with $4.4 million paid in cash, also aimed at expanding the company-owned retail business[273]. Market Risks and Economic Factors - The company is exposed to market risks from changes in foreign currencies, particularly in Mexico, Canada, the UK, and Thailand, but these changes are not expected to materially affect consolidated results[185]. - The company is also exposed to market risks related to commodity and transportation costs, including steel, wood, and polyurethane foam[186]. - Management estimates that a one percentage point change in interest rates would not have a material impact on the results of operations for fiscal 2022[184]. Internal Controls and Compliance - La-Z-Boy's internal control over financial reporting was deemed effective as of April 30, 2022, based on an evaluation conducted by management[193]. - PricewaterhouseCoopers LLP audited the effectiveness of La-Z-Boy's internal control over financial reporting as of April 30, 2022[196]. - The company has maintained comprehensive systems of internal control to safeguard assets and ensure transactions are executed according to established procedures[190]. Capital Expenditures and Shareholder Returns - La-Z-Boy's capital expenditures for the year were $76,580, up from $37,960 in the previous year, indicating a focus on investment in growth[218]. - The company repurchased $90,645 worth of common stock during the fiscal year, compared to $44,202 in the previous year, reflecting a strategy to return value to shareholders[218]. - The company declared dividends of $0.63 per share, totaling $28.977 million, compared to $0.54 per share in the previous year, indicating a 16.7% increase in dividend payout[224]. Research and Development - Research and development costs for fiscal year 2022 were $9.0 million, compared to $7.6 million in fiscal year 2021 and $10.8 million in fiscal year 2020[255]. - Gross advertising expenses increased to $126.8 million in fiscal year 2022 from $94.6 million in fiscal year 2021 and $108.3 million in fiscal year 2020[256]. Revenue Recognition and Customer Deposits - The company recognizes revenue for retail and online sales once the end consumer takes control of the furniture, which occurs upon delivery[245]. - The company collects customer deposits at the time of order placement, which are recorded as liabilities until the product is delivered[243]. - Customer deposits increased to $183.233 million as of April 30, 2022, compared to $180.766 million the previous year[297].