Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Oct. 27, 2018	Nov. 21, 2018
Document and Entity Information
Entity Registrant Name	LA-Z-BOY INC
Entity Central Index Key	0000057131
Current Fiscal Year End Date	--04-27
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		46,833,470
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 27, 2018

CONSOLIDATED STATEMENT OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 27, 2018	Oct. 28, 2017	Oct. 27, 2018	Oct. 28, 2017
CONSOLIDATED STATEMENT OF INCOME
Sales	$ 439,333	$ 393,205	$ 824,028	$ 750,284
Cost of sales	264,928	238,253	501,101	456,229
Gross profit	174,405	154,952	322,927	294,055
Selling, general and administrative expense	145,905	120,683	271,267	243,488
Operating income	28,500	34,269	51,660	50,567
Interest expense	(501)	(160)	(605)	(317)
Interest income	392	376	994	719
Other income (expense), net	(1,997)	(926)	(1,105)	823
Income before income taxes	26,394	33,559	50,944	51,792
Income tax expense	6,045	10,353	11,644	16,842
Net income	20,349	23,206	39,300	34,950
Net income attributable to noncontrolling interests	(337)	(310)	(985)	(403)
Net income attributable to La-Z-Boy Incorporated	$ 20,012	$ 22,896	$ 38,315	$ 34,547
Basic weighted average common shares (in shares)	46,888	47,964	46,802	48,160
Basic net income attributable to La-Z-Boy Incorporated per share (in dollars per share)	$ 0.43	$ 0.47	$ 0.82	$ 0.71
Diluted weighted average common shares (in shares)	47,259	48,297	47,219	48,537
Diluted net income attributable to La-Z-Boy Incorporated per share (in dollars per share)	$ 0.42	$ 0.47	$ 0.81	$ 0.71
Dividends declared per share (in dollars per share)	$ 0.12	$ 0.11	$ 0.24	$ 0.22

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 27, 2018	Oct. 28, 2017	Oct. 27, 2018	Oct. 28, 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Net income	$ 20,349	$ 23,206	$ 39,300	$ 34,950
Other comprehensive income (loss)
Currency translation adjustment	1,168	(147)	(3,021)	2,169
Change in fair value of cash flow hedges, net of tax	155	(741)	(178)	(263)
Net unrealized gain (loss) on marketable securities, net of tax	23	208	64	(63)
Net pension amortization, net of tax	517	517	1,033	1,034
Total other comprehensive income (loss)	1,863	(163)	(2,102)	2,877
Total comprehensive income before allocation to noncontrolling interests	22,212	23,043	37,198	37,827
Comprehensive income attributable to noncontrolling interests	(956)	(410)	(376)	(908)
Comprehensive income attributable to La-Z-Boy Incorporated	$ 21,256	$ 22,633	$ 36,822	$ 36,919

CONSOLIDATED BALANCE SHEET - USD ($) $ in Thousands	Oct. 27, 2018	Apr. 28, 2018
Current assets
Cash and equivalents	$ 93,867	$ 134,515
Restricted cash	2,001	2,356
Receivables, net of allowance of $2,647 at 10/27/18 and $1,956 at 4/28/18	150,507	154,055
Inventories, net	214,948	184,841
Other current assets	76,093	42,451
Total current assets	537,416	518,218
Property, plant and equipment, net	195,327	180,882
Goodwill	182,116	75,254
Other intangible assets, net	30,500	18,190
Deferred income taxes - long-term	23,227	21,265
Other long-term assets, net	83,549	79,158
Total assets	1,052,135	892,967
Current liabilities
Short-term borrowings	35,000
Current portion of long-term debt	217	223
Accounts payable	75,090	62,403
Accrued expenses and other current liabilities	176,075	118,721
Total current liabilities	286,382	181,347
Long-term debt	89	199
Other long-term liabilities	116,433	86,205
Contingencies and commitments
Shareholders' equity
Preferred shares - 5,000 authorized; none issued
Common shares, $1 par value - 150,000 authorized; 46,905 outstanding at 10/27/18 and 46,788 outstanding at 4/28/18	46,905	46,788
Capital in excess of par value	307,701	298,948
Retained earnings	309,543	291,644
Accumulated other comprehensive loss	(28,329)	(25,199)
Total La-Z-Boy Incorporated shareholders' equity	635,820	612,181
Noncontrolling interests	13,411	13,035
Total equity	649,231	625,216
Total liabilities and equity	$ 1,052,135	$ 892,967

CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Oct. 27, 2018	Apr. 28, 2018
Current assets
Receivables, allowance (in dollars)	$ 2,647	$ 1,956
Shareholders' equity
Preferred shares, authorized (in shares)	5,000	5,000
Preferred shares, issued (in shares)	0	0
Common shares, par value (in dollars per share)	$ 1	$ 1
Common shares, authorized (in shares)	150,000	150,000
Common shares, outstanding (in shares)	46,905	46,788

CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Oct. 27, 2018	Oct. 28, 2017
Cash flows from operating activities
Net income	$ 39,300	$ 34,950
Adjustments to reconcile net income to cash provided by (used for) operating activities
Gain on disposal of assets	(72)	(1,884)
Gain on conversion of investment		(2,204)
Change in deferred taxes	1,572	(403)
Provision for doubtful accounts	315	74
Depreciation and amortization	15,541	15,869
Equity-based compensation expense	5,679	6,410
Pension plan contributions	(7,000)	(2,000)
Change in receivables	122	6,165
Change in inventories	(15,037)	(4,096)
Change in other assets	(15,781)	(7,935)
Change in payables	6,034	2,136
Change in other liabilities	15,411	4,142
Net cash provided by operating activities	46,084	51,224
Cash flows from investing activities
Proceeds from disposals of assets	256	608
Proceeds from property insurance	114	1,485
Capital expenditures	(26,926)	(16,372)
Purchases of investments	(5,193)	(18,507)
Proceeds from sales of investments	7,754	11,529
Acquisitions, net of cash acquired	(78,145)	(15,879)
Net cash used for investing activities	(102,140)	(37,136)
Cash flows from financing activities
Net proceeds from credit facility	35,000
Payments on debt	(116)	(131)
Stock issued for stock and employee benefit plans, net of shares withheld for taxes	4,039	356
Purchases of common stock	(11,610)	(30,692)
Dividends paid	(11,278)	(10,648)
Net cash provided by (used for) financing activities	16,035	(41,115)
Effect of exchange rate changes on cash and equivalents	(982)	865
Change in cash, cash equivalents and restricted cash	(41,003)	(26,162)
Cash, cash equivalents and restricted cash at beginning of period	136,871	150,859
Cash, cash equivalents and restricted cash at end of period	95,868	124,697
Supplemental disclosure of non-cash investing activities
Capital expenditures included in payables	$ 4,442	$ 1,631

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - USD ($) $ in Thousands	Common Shares	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Non-Controlling Interests	Total
Balance at Apr. 29, 2017	$ 48,472	$ 289,632	$ 284,698	$ (32,883)	$ 11,186	$ 601,105
Increase (Decrease) in Stockholders' Equity
Net income			80,866		729	81,595
Other comprehensive income (loss)				7,684	1,120	8,804
Stock issued for stock and employee benefit plans, net of cancellations and withholding tax	311	4,046	(1,380)			2,977
Purchase of 1,995 shares and 378 shares of common stock for the year-ended April 28, 2018 and six months ended Oct 27, 2018 respectively.	(1,995)	(4,204)	(50,531)			(56,730)
Stock option and restricted stock expense		9,474				9,474
Dividends paid			(22,009)			(22,009)
Balance at Apr. 28, 2018	46,788	298,948	291,644	(25,199)	13,035	625,216
Increase (Decrease) in Stockholders' Equity
Net income			38,315		985	39,300
Other comprehensive income (loss)				(1,493)	(609)	(2,102)
Stock issued for stock and employee benefit plans, net of cancellations and withholding tax	495	5,706	(2,162)			4,039
Purchase of 1,995 shares and 378 shares of common stock for the year-ended April 28, 2018 and six months ended Oct 27, 2018 respectively.	(378)	(2,632)	(8,600)			(11,610)
Stock option and restricted stock expense		5,679				5,679
Cumulative effect adjustment for investments, net of tax \| ASU 2016-01 - Investments			1,637	(1,637)
Dividends paid			(11,278)			(11,278)
Dividends declared not paid			(13)			(13)
Balance at Oct. 27, 2018	$ 46,905	$ 307,701	$ 309,543	$ (28,329)	$ 13,411	$ 649,231

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Parenthetical) - shares	6 Months Ended	12 Months Ended
	Oct. 27, 2018	Apr. 28, 2018
Common Shares
Shares purchased	378	1,995

Basis of Presentation	6 Months Ended
Basis of Presentation	Oct. 27, 2018
Basis of Presentation
Basis of Presentation	Note 1: Basis of Presentation The accompanying consolidated financial statements include the consolidated accounts of La-Z-Boy Incorporated and our majority-owned subsidiaries. We derived the April 28, 2018, balance sheet from our audited financial statements. We prepared the interim financial information in conformity with generally accepted accounting principles, which we applied on a basis consistent with those reflected in our fiscal 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission, but the information does not include all of the disclosures required by generally accepted accounting principles. In management’s opinion, the interim financial information includes all adjustments and accruals, consisting only of normal recurring adjustments (except as otherwise disclosed), that are necessary for a fair statement of results for the respective interim periods. The interim results reflected in the accompanying financial statements are not necessarily indicative of the results of operations that will occur for the full fiscal year ending April 27, 2019. At October 27, 2018, we owned preferred shares of two privately-held companies, both of which are variable interest entities. We also hold a warrant to purchase common shares of one of these companies. We have not consolidated the results of either of these companies in our financial statements because we do not have the power to direct those activities that most significantly impact the economic performance of either of these companies and, therefore, are not the primary beneficiary. Accounting pronouncements adopted in fiscal 2019 In May 2014, the Financial Accounting Standards Board ("FASB") issued a new accounting standard that 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. The new standard supersedes virtually all existing authoritative accounting guidance on revenue recognition and requires additional disclosures and greater use of estimates and judgments. During July 2015, the FASB deferred the effective date of the revenue recognition standard by one year, thus making the new accounting standard effective beginning with our fiscal 2019. 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. See Note 11 for information on these disclosures. In January 2016, the FASB issued a new accounting standard 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. As of April 28, 2018, we held equity investments and recognized changes in fair value through other comprehensive income (loss) as unrealized gains (losses). 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 6 for additional information on our current investments. In October 2016, the FASB issued a new accounting standard that requires entities to recognize the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. We adopted this standard in the first quarter of fiscal 2019. Adoption of this standard did not impact our current practices because intra-entity transfers, as the standard defines them, did not occur in the first six months of fiscal 2019. In January 2017, the FASB issued a new accounting standard clarifying the definition of a business with the objective of adding guidance to entities evaluating whether a transaction should be accounted for as an acquisition. We adopted this standard in the first quarter of fiscal 2019. Adoption of this standard did not change the accounting treatment of acquisitions completed during fiscal 2019. In January 2017, the FASB issued a new accounting standard simplifying the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity should now perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. We are required to adopt this standard by our fiscal 2021, but the standard permits us to adopt it early. We have elected to adopt this standard in fiscal 2019, and we will perform our goodwill impairment test in the fourth quarter of fiscal 2019. We do not believe that adoption of this standard will have a material impact on our consolidated financial statements or disclosures. In August 2018, the FASB issued a new accounting standard that aligns the accounting for implementation costs in hosting arrangements that are service contracts with accounting for implementation costs on internal-use software. The standard allows certain implementation costs in specified phases of the project to be capitalized and expensed over the term of the hosting arrangement. We are required to adopt this standard by our fiscal 2021, but the standard permits early adoption in any interim period. We have elected to adopt this standard beginning with our second quarter of fiscal 2019. We have not capitalized any costs to date related to the implementation of hosting arrangements, but we anticipate capitalizing costs in the future. We do not expect the capitalization of these costs to have a material impact on our consolidated financial statements and related disclosures. Accounting pronouncements not yet adopted In February 2016, the FASB issued a new accounting standard 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. This standard will be effective beginning with our fiscal 2020. We are currently reviewing our leases and gathering the necessary information to adopt this standard when it becomes effective. We anticipate that adopting this standard will have a material impact on our consolidated balance sheet as we have a significant number of operating leases. In June 2016, the FASB issued a new accounting standard that amends current guidance on other-than-temporary impairments of available-for-sale debt securities. This new standard requires the use of an allowance to record estimated credit losses on these assets when the fair value is below the amortized cost of the asset. This standard also removes the evaluation of the length of time that a security has been in a loss position to avoid recording a credit loss. We are required to adopt this standard for our fiscal 2021 and apply it through a cumulative-effect adjustment to retained earnings. We are still assessing the impact this standard will have on our consolidated financial statements and related disclosures. In August 2017, the FASB issued a new accounting standard designed to improve and simplify the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This standard is intended to better align the recognition and presentation of the effects of hedging instruments with the hedged item in the financial statements, and requires additional disclosures on hedging instruments. This standard will be effective for our fiscal 2020. As of October 27, 2018, we do not have any outstanding hedging relationships or instruments that would be affected by this standard. The Tax Cut and Jobs Act of 2017 (the “Tax Act”) required corporations to adjust deferred taxes to reflect the reduction of the corporate income tax rate, leaving items within accumulated other comprehensive income stranded at the historical tax rate. In February 2018, the FASB issued a new accounting standard that allows corporations in their consolidated financial statements to reclassify these stranded income tax effects from accumulated other comprehensive income to retained earnings. This standard will be effective for our fiscal 2020, and companies are permitted to adopt it in any interim period. Companies are to apply the standard either in the period they adopt or retrospectively to each period that was affected by the Tax Act’s change in the federal corporate tax rate. We are still assessing the impact this standard will have on our consolidated financial statements and related disclosures. In August 2018, the FASB issued a new accounting standard that modifies the disclosure requirements for fair value measurements. The standard removes certain disclosures for transfers between levels in the fair value hierarchy and the valuation processes for Level 3 measurements. The standard adds disclosure requirements for unrealized gains/losses included in other comprehensive income related to Level 3 fair value measurements, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This standard will be effective for our fiscal 2021, with early adoption permitted. We do not believe these changes will have a significant impact on our financial statement disclosures. In August 2018, the FASB issued a new accounting standard that modifies the disclosure requirements for defined benefit pension or other postretirement obligations. The standard removes certain disclosures that are no longer considered cost beneficial, clarifies the requirements of certain other disclosures, and adds new disclosure requirements. This standard will be effective for our fiscal 2022, with early adoption permitted. We do not believe these changes will have a significant impact on our financial statement disclosures.

Acquisitions

6 Months Ended

Oct. 27, 2018

Acquisitions

Acquisitions

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® stores: one that operated nine stores and two warehouses in 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 over the next 34 months. These acquisitions are a core part of our 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® 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:


	Second quarter
	fiscal 2019
(Unaudited, amounts in thousands)	acquisitions
Fair value of consideration:
Cash	$	38,904
Forgiveness of accounts receivable		2,610
Guaranteed future payments		1,300
Total fair value of consideration		42,814

Amounts recognized for identifiable assets acquired and liabilities assumed:
Inventory		10,491
Other current assets		4,194
Property, plant and equipment		929
Indefinite-lived reacquired rights		6,600
Other long-term assets		183
Customer deposits		(6,515)
Other current liabilities		(5,055)
Total identifiable net assets acquired		10,827

Goodwill	$	31,987

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, subject to working capital adjustments. We acquired Joybird as they are a leading e-commerce retailer and manufacturer of upholstered furniture, which positions us for growth in the online selling environment and allows us to better reach millennial and Gen X consumers, while leveraging our supply chain assets.

The guaranteed payments include a closing date cash payment of $37.5 million in purchase price consideration, $7.5 million in prepaid compensation, and the assumption of $5.0 million of liabilities that will be paid over the next two years, with the remaining $25 million to be paid annually in $5 million installments 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 merger agreement also included a working capital adjustment, and as of October 27, 2018, we have recorded a receivable for approximately $2.5 million for working capital adjustments. We received this $2.5 million during the third quarter of fiscal 2019 from amounts placed in escrow at the time of the closing of the transaction.

The $7.5 million of prepaid compensation relates to the retention of the four Joybird founders, now our employees, who will forfeit proportional amounts if one or more of them resign 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 of $3.3 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® trade name, which we are amortizing to selling, general & administrative expense over its useful life of eight years on a straight-line basis. The undiscounted range of the contingent consideration is zero to $65 million 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 selling, general & administrative expense in our consolidated statement of income.

We recorded $75.8 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.

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


	Second quarter
	fiscal 2019
(Unaudited, amounts in thousands)	acquisitions
Fair value of consideration:
Cash	$	37,482
Guaranteed payment		22,489
Acquisition earn-out		3,300
Assumption of liability		5,000
Working capital adjustment		(2,486)
Total fair value of consideration		65,785

Amounts recognized for assets acquired and liabilities assumed:
Inventory		5,258
Other current assets		3,258
Property, plant and equipment		2,057
Finite-lived tradename		6,400
Other long-term assets		4,010
Accounts payable		(8,399)
Customer deposits		(9,619)
Other current liabilities		(12,876)
Other long-term liabilities		(150)
Total identifiable net liabilities acquired		(10,061)

Goodwill	$	75,846

We included the Joybird acquisition 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 amount 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.

Restricted Cash

6 Months Ended

Oct. 27, 2018

Restricted Cash

Restricted Cash

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 twelve months, but we expect to renew some of these letters of credit when they mature.


(Unaudited, amounts in thousands)	10/27/18		10/28/17
Cash and cash equivalents	$	93,867	$	122,345
Restricted cash		2,001		2,352
Total cash, cash equivalents and restricted cash	$	95,868	$	124,697

Inventories

6 Months Ended

Oct. 27, 2018

Inventories

Inventories

Note 4: Inventories

A summary of inventories is as follows:


(Unaudited, amounts in thousands)	10/27/18		4/28/18
Raw materials	$	95,485	$	86,214
Work in process		13,816		12,254
Finished goods		128,457		109,183
FIFO inventories		237,758		207,651
Excess of FIFO over LIFO		(22,810)		(22,810)
Total inventories	$	214,948	$	184,841

Goodwill and Other Intangible Assets

6 Months Ended

Oct. 27, 2018

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Note 5: Goodwill and Other Intangible Assets

We have goodwill in our Retail Segment related to our acquisitions of La-Z-Boy Furniture Galleries® stores. In our Corporate and Other results, we have goodwill related to our acquisition of Joybird. The remainder of our goodwill is related to our acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland, which we recorded in our Upholstery reportable segment. The following is a roll-forward of goodwill for the six months ended October 27, 2018:


	Upholstery		Retail		Corporate		Total
(Unaudited, amounts in thousands)	Segment		Segment		and Other		Goodwill
Balance at April 28, 2018	$	12,967	$	62,287	$	—	$	75,254
Acquisitions		—		31,987		75,846		107,833
Translation adjustment		(894)		(77)		—		(971)
Balance at October 27, 2018	$	12,073	$	94,197	$	75,846	$	182,116

Our intangible assets include the indefinite-lived trade name for American Drew®, a brand in our Casegoods segment, and the finite-lived trade name for Joybird®, a brand within Corporate and Other. Indefinite-lived reacquired rights relate to our acquisition of La-Z-Boy Furniture Galleries® stores, and are recorded in our Retail segment. Other intangible assets are primarily acquired customer relationships from our acquisition of the La-Z-Boy wholesale business in the United Kingdom and Ireland, and are recorded in our Upholstery reportable segment. The following is a roll-forward of our intangible assets for the six months ended October 27, 2018:


	Indefinite-Lived		Finite-Lived		Indefinite-Lived		Other		Total Other
	Trade		Trade		Reacquired		Intangible		Intangible
(Unaudited, amounts in thousands)	Names		Names		Rights		Assets		Assets
Balance at April 28, 2018	$	1,155	$	—	$	13,645	$	3,390	$	18,190
Acquisitions		—		6,400		6,600		—		13,000
Amortization		—		(200)		—		(204)		(404)
Translation adjustment		—		—		(57)		(229)		(286)
Balance at October 27, 2018	$	1,155	$	6,200	$	20,188	$	2,957	$	30,500

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Investments

6 Months Ended

Oct. 27, 2018

Investments

Investments

Note 6: 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 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 October 27, 2018, and April 28, 2018:


(Unaudited, amounts in thousands)	10/27/18		4/28/18
Short-term investments:
Marketable securities	$	13,052	$	12,926
Held-to-maturity investments		3,218		3,340
Total short-term investments		16,270		16,266

Long-term investments:
Marketable securities		27,061		32,134
Cost basis investments		10,954		10,954
Total long-term investments		38,015		43,088

Total investments	$	54,285	$	59,354

Investments to enhance returns on cash	$	29,795	$	34,359
Investments to fund compensation/retirement plans	$	13,536	$	14,041
Other investments	$	10,954	$	10,954

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


At October 27, 2018
	Gross		Gross
(Unaudited, amounts in thousands)	Unrealized Gains		Unrealized Losses		Fair Value
Equity securities	$	1,889	$	(99)	$	18,525
Fixed income		27		(333)		31,339
Other		221		(11)		4,421
Total securities	$	2,137	$	(443)	$	54,285


At April 28, 2018
	Gross		Gross
(Unaudited, amounts in thousands)	Unrealized Gains		Unrealized Losses		Fair Value
Equity securities	$	2,142	$	(39)	$	18,765
Fixed income		29		(418)		36,312
Other		72		—		4,277
Total securities	$	2,243	$	(457)	$	59,354

The following table summarizes sales of marketable securities:


	Quarter Ended				Six Months Ended
(Unaudited, amounts in thousands)	10/27/18		10/28/17		10/27/18		10/28/17
Proceeds from sales	$	2,992	$	5,672	$	7,754	$	11,529
Gross realized gains		10		16		85		418
Gross realized losses		(11)		(7)		(66)		(228)

At October 27, 2018, the fair value of fixed income marketable securities, which are classified as available-for-sale securities, by contractual maturity was $13.0 million within one year, $16.3 million within two to five years, $1.2 million within six to ten years, and $0.8 million thereafter.

Pension Plans

6 Months Ended

Oct. 27, 2018

Pension Plans

Pension Plans

Note 7: Pension Plans

Net periodic pension costs were as follows:


	Quarter Ended				Six Months Ended
(Unaudited, amounts in thousands)	10/27/18		10/28/17		10/27/18		10/28/17
Service cost	$	323	$	329	$	646	$	658
Interest cost		1,116		1,147		2,232		2,294
Expected return on plan assets		(1,136)		(1,204)		(2,272)		(2,408)
Net amortization		639		780		1,278		1,560
Net periodic pension cost	$	942	$	1,052	$	1,884	$	2,104

The components of net periodic pension cost other than the service cost are included in other income (expense), net in our consolidated statement of income. Service cost is recorded in cost of sales in our consolidated statement of income.

Product Warranties

6 Months Ended

Oct. 27, 2018

Product Warranties

Product Warranties

Note 8: 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 based on our 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 80% 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 products sold by Joybird, part of our Corporate and Other results. For all our manufacturer warranties, the warranty period begins when the consumer 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:


	Quarter Ended				Six Months Ended
(Unaudited, amounts in thousands)	10/27/18		10/28/17		10/27/18		10/28/17
Balance as of the beginning of the period	$	21,093	$	21,882	$	21,205	$	21,870
Acquisitions		4,100		—		4,100		—
Accruals during the period		5,489		4,648		10,610		9,501
Settlements during the period		(5,485)		(4,924)		(10,718)		(9,765)
Balance as of the end of the period	$	25,197	$	21,606	$	25,197	$	21,606

As of October 27, 2018, and April 28, 2018, we included $16.6 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.

Stock-Based Compensation

6 Months Ended

Oct. 27, 2018

Stock-Based Compensation

Stock-Based Compensation

Note 9: Stock-Based Compensation

The table below summarizes the total stock-based compensation expense we recognized for all outstanding grants in our consolidated statement of income:


	Quarter Ended				Six Months Ended
(Unaudited, amounts in thousands)	10/27/18		10/28/17		10/27/18		10/28/17
Equity-based awards expense	$	3,639	$	2,852	$	5,679	$	6,410
Liability-based awards (income) expense		(300)		(588)		(134)		308
Total stock-based compensation expense	$	3,339	$	2,264	$	5,545	$	6,718

Stock Options. We granted 423,273 stock options to employees during the first quarter of fiscal 2019, and we have stock options outstanding from previous grants. We account for stock options as equity-based awards because when they are exercised, they will be settled in common shares. 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. We estimate forfeiture rates based on our employees’ forfeiture history and believe they will approximate future results. 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 calculated the fair value of stock options granted during the first quarter of fiscal 2019 using the following assumptions:


	Fiscal 2019
(Unaudited)	grant
Risk-free interest rate		2.82	%
Dividend rate		1.45	%
Expected life in years		5.00
Stock price volatility		33.07	%
Fair value per share	$	9.65

Stock Appreciation Rights (“SARs”). We did not grant any SARs to employees during the first six months of fiscal 2019, but we have SARs outstanding from previous 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.

In fiscal 2013 and fiscal 2014, we granted SARs as described in our Annual Report on Form 10-K for the fiscal year ended April 27, 2013, and April 26, 2014, respectively. As of October 27, 2018, we had 7,149 and 17,918 SARs outstanding for the fiscal 2013 and fiscal 2014 awards, respectively. These awards have exceeded their expected life and are being 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 October 27, 2018, the intrinsic value per share of the fiscal 2013 and fiscal 2014 awards were $15.54 and $8.45, respectively.

Restricted Stock. We granted 100,426 shares of restricted stock to employees during the first six months of fiscal 2019. We also have shares of restricted stock outstanding from previous grants. 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 awarded in the first six months of fiscal 2019 was $33.11 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 grant date of the award. Restricted stock awards vest at 25% per year, beginning one year from the grant date over a term of four years.

Restricted Stock Units. During the second quarter of fiscal 2019, we granted 21,240 restricted stock units to our non-employee directors. These restricted stock units vest when the director leaves the board. 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.

Performance Shares. During the first quarter of fiscal 2019, we granted 146,107 performance-based shares. We also have performance-based share awards outstanding from previous grants. 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 share 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.

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 that vest based on attaining performance goals was $31.71, 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, and, similar to the way in which we expense awards of stock options, we expense compensation cost over the vesting period regardless of the value that award recipients ultimately receive. Based on the Monte Carlo model, the fair value as of the grant date of the fiscal 2019 grant of shares that vest based on market conditions was $46.39.

Accumulated Other Comprehensive Loss

6 Months Ended

Oct. 27, 2018

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Note 10: Accumulated Other Comprehensive Loss

The activity in accumulated other comprehensive loss for the quarter ended October 27, 2018, and October 28, 2017, is as follows:


							Net pension
			Change in		Unrealized		amortization		Accumulated
			fair value		gain on		and net		other
	Translation		of cash		marketable		actuarial		comprehensive
(Unaudited, amounts in thousands)	adjustment		flow hedge		securities		loss		loss
Balance at July 28, 2018	$	(573)	$	(179)	$	(220)	$	(28,601)	$	(29,573)
Changes before reclassifications		549		140		30		—		719
Amounts reclassified to net income		—		65		—		686		751
Tax effect		—		(50)		(7)		(169)		(226)
Other comprehensive income attributable to La-Z- Boy Incorporated		549		155		23		517		1,244
Balance at October 27, 2018	$	(24)	$	(24)	$	(197)	$	(28,084)	$	(28,329)

Net pension

Change in

Unrealized

amortization

Accumulated

fair value

gain on

and net

other