SEC Filing | La-Z-Boy Incorporated

Quarter Ended

(Unaudited, amounts in thousands)

7/27/19

7/28/18

Balance as of the beginning of the period

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549-1004

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 27, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

COMMISSION FILE NUMBER 1-9656

LA-Z-BOY INCORPORATED

(Exact name of registrant as specified in its charter)

MICHIGAN	38-0751137
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One La-Z-Boy Drive, Monroe, Michigan	48162-5138
(Address of principal executive offices)	(Zip Code)

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

None

(Former name, former address and former fiscal year, if changed since last report.)

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

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

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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	⌧	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class		Outstanding at August 13, 2019
Common Stock, $1.00 Par Value		46,632,617

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LA-Z-BOY INCORPORATED

FORM 10-Q FIRST QUARTER OF FISCAL 2020

TABLE OF CONTENTS

		Page Number(s)
PART I Financial Information (Unaudited)		3
Item 1.	Financial Statements	3
	Consolidated Statement of Income	3
	Consolidated Statement of Comprehensive Income	4
	Consolidated Balance Sheet	5
	Consolidated Statement of Cash Flows	6
	Consolidated Statement of Changes in Equity	7
	Notes to Consolidated Financial Statements	8
	Note 1. Basis of Presentation	8
	Note 2. Acquisitions	9
	Note 3. Restricted Cash	11
	Note 4. Inventories	11
	Note 5. Leases	11
	Note 6. Goodwill and Other Intangible Assets	13
	Note 7. Investments	14
	Note 8. Employee Benefits	15
	Note 9. Product Warranties	16
	Note 10. Stock-Based Compensation	17
	Note 11. Accumulated Other Comprehensive Loss	19
	Note 12. Revenue Recognition	20
	Note 13. Segment Information	22
	Note 14. Income Taxes	23
	Note 15. Earnings per Share	23
	Note 16. Fair Value Measurements	24

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Cautionary Statement Concerning Forward-Looking Statements	27
	Introduction	28
	Results of Operations	30
	Liquidity and Capital Resources	34
	Critical Accounting Policies	36
	Recent Accounting Pronouncements	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

PART II Other Information		37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6.	Exhibits	38

Signature Page		39

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PART I - FINANCIAL INFORMATION (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF INCOME


	Quarter Ended
(Unaudited, amounts in thousands, except per share data)	7/27/19		7/28/18
Sales	$	413,633	$	384,695
Cost of sales		245,921		236,173
Gross profit		167,712		148,522
Selling, general and administrative expense		144,290		125,362
Operating income		23,422		23,160
Interest expense		(318)		(104)
Interest income		727		602
Other income (expense), net		(760)		892
Income before income taxes		23,071		24,550
Income tax expense		5,083		5,599
Net income		17,988		18,951
Net (income) loss attributable to noncontrolling interests		81		(648)
Net income attributable to La-Z-Boy Incorporated	$	18,069	$	18,303

Basic weighted average common shares		46,820		46,716
Basic net income attributable to La-Z-Boy Incorporated per share	$	0.39	$	0.39

Diluted weighted average common shares		47,125		47,161
Diluted net income attributable to La-Z-Boy Incorporated per share	$	0.38	$	0.39

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

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LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


	Quarter Ended
(Unaudited, amounts in thousands)	7/27/19		7/28/18
Net income	$	17,988	$	18,951
Other comprehensive income (loss)
Currency translation adjustment		614		(4,189)
Change in fair value of cash flow hedges, net of tax		4		(333)
Net unrealized gain on marketable securities, net of tax		108		41
Net pension amortization, net of tax		41		516
Total other comprehensive income (loss)		767		(3,965)
Total comprehensive income before allocation to noncontrolling interests		18,755		14,986
Comprehensive (income) loss attributable to noncontrolling interests		(405)		580
Comprehensive income attributable to La-Z-Boy Incorporated	$	18,350	$	15,566

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

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LA-Z-BOY INCORPORATED

CONSOLIDATED BALANCE SHEET


(Unaudited, amounts in thousands, except par value)	7/27/19		4/27/19
Current assets
Cash and equivalents	$	111,622	$	129,819
Restricted cash		1,970		1,968
Receivables, net of allowance of $2,177 at 7/27/19 and $2,180 at 4/27/19		134,379		143,288
Inventories, net		197,701		196,899
Other current assets		85,631		69,144
Total current assets		531,303		541,118
Property, plant and equipment, net		204,789		200,523
Goodwill		184,675		185,867
Other intangible assets, net		29,595		29,907
Deferred income taxes – long-term		21,906		20,670
Right of use lease asset		312,433		—
Other long-term assets, net		77,449		81,705
Total assets	$	1,362,150	$	1,059,790

Current liabilities
Current portion of long-term debt	$	—	$	180
Accounts payable		62,935		65,365
Lease liability, short-term		64,158		—
Accrued expenses and other current liabilities		168,757		173,091
Total current liabilities		295,850		238,636
Long-term debt		—		19
Lease liability, long-term		262,264		—
Other long-term liabilities		105,898		124,159
Shareholders' equity
Preferred shares – 5,000 authorized; none issued		—		—
Common shares, $1 par value – 150,000 authorized; 46,690 outstanding at 7/27/19 and 46,955 outstanding at 4/27/19		46,690		46,955
Capital in excess of par value		311,207		313,168
Retained earnings		329,096		325,847
Accumulated other comprehensive loss		(3,728)		(3,462)
Total La-Z-Boy Incorporated shareholders' equity		683,265		682,508
Noncontrolling interests		14,873		14,468
Total equity		698,138		696,976
Total liabilities and equity	$	1,362,150	$	1,059,790

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

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LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS


	Quarter Ended
(Unaudited, amounts in thousands)	7/27/19		7/28/18
Cash flows from operating activities
Net income	$	17,988	$	18,951
Adjustments to reconcile net income to cash provided by (used for) operating activities
Gain on disposal of assets		(536)		—
Change in deferred taxes		(677)		(183)
Provision for doubtful accounts		116		279
Depreciation and amortization		7,298		7,541
Equity-based compensation expense		1,675		2,040
Change in receivables		8,535		14,236
Change in inventories		(527)		(11,092)
Change in other assets		7,305		463
Change in payables		(1,391)		2,491
Change in other liabilities		(20,446)		(2,572)
Net cash provided by operating activities		19,340		32,154

Cash flows from investing activities
Proceeds from disposals of assets		22		61
Proceeds from insurance		642		58
Capital expenditures		(12,299)		(15,873)
Purchases of investments		(5,288)		(4,190)
Proceeds from sales of investments		4,060		4,762
Acquisitions		(5,438)		—
Net cash used for investing activities		(18,301)		(15,182)

Cash flows from financing activities
Payments on debt and finance lease liabilities		(47)		(59)
Stock issued for stock and employee benefit plans, net of shares withheld for taxes		(1,417)		(2,009)
Purchases of common stock		(12,313)		(7,944)
Dividends paid		(6,112)		(5,625)
Net cash used for financing activities		(19,889)		(15,637)

Effect of exchange rate changes on cash and equivalents		655		(1,601)
Change in cash, cash equivalents and restricted cash		(18,195)		(266)
Cash, cash equivalents and restricted cash at beginning of period		131,787		136,871
Cash, cash equivalents and restricted cash at end of period	$	113,592	$	136,605

Supplemental disclosure of non-cash investing activities
Capital expenditures included in payables	$	2,416	$	4,122

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

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LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


							Accumulated
							Other
			Capital in				Comprehensive		Non-
	Common		Excess of		Retained		Income		Controlling
(Unaudited, amounts in thousands)	Shares		Par Value		Earnings		(Loss)		Interests		Total
At April 28, 2018	$	46,788	$	298,948	$	291,644	$	(25,199)	$	13,035	$	625,216
Net income						18,303				648		18,951
Other comprehensive loss								(2,737)		(1,228)		(3,965)
Stock issued for stock and employee benefit plans, net of cancellations and withholding tax		160		(42)		(2,127)						(2,009)
Purchases of 257 shares of common stock		(257)		(176)		(7,511)						(7,944)
Stock option and restricted stock expense				2,040								2,040
Cumulative effect adjustment for investments, net of tax						1,637		(1,637)				—
Dividends declared and paid ($0.12/share)						(5,625)						(5,625)
At July 28, 2018	$	46,691	$	300,770	$	296,321	$	(29,573)	$	12,455	$	626,664

							Accumulated
							Other
			Capital in				Comprehensive		Non-
	Common		Excess of		Retained		Income		Controlling
(Unaudited, amounts in thousands)	Shares		Par Value		Earnings		(Loss)		Interests		Total
At April 27, 2019	$	46,955	$	313,168	$	325,847	$	(3,462)	$	14,468	$	696,976
Net income (loss)						18,069				(81)		17,988
Other comprehensive income								281		486		767
Stock issued for stock and employee benefit plans, net of cancellations and withholding tax		126		126		(1,669)						(1,417)
Purchases of 391 shares of common stock		(391)		(3,762)		(8,160)						(12,313)
Stock option and restricted stock expense				1,675								1,675
Cumulative effect adjustment for leases, net of tax (1)						574						574
Reclassification of certain income tax effects (2)						547		(547)				—
Dividends declared and paid ($0.13/share)						(6,112)						(6,112)
At July 27, 2019	$	46,690	$	311,207	$	329,096	$	(3,728)	$	14,873	$	698,138

(1)

Cumulative effect adjustment of deferred gains on prior sale/leaseback transactions as a result of adopting ASU 2016-02.

(2)

Income tax effects of the Tax Cuts and Jobs Act are reclassified from AOCI to retained earnings due to the adoption of ASU 2018-02.

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

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LA-Z-BOY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 27, 2019, 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 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), 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 25, 2020.

To further strengthen our supply chain footprint, on August 8, 2019, we announced our plan to close our Redlands, California upholstered furniture manufacturing facility and move production to available capacity at our other North American facilities. In addition, we will transition the leather cut-and-sew operation from the Newton, Mississippi upholstered furniture manufacturing plant to another North American-based cut-and-sew facility. The company’s Redlands upholstered furniture plant currently employs about 350 people, accounts for approximately 10% of the La-Z-Boy branded business total upholstery production and manufactures recliners, motion sofas and classics (high-leg recliners). We plan to cease production at the Redlands plant in October 2019. The move of the Newton leather cut-and-sew operation is expected to fully transition by the end of calendar 2019 and will impact about 105 of the 525 employees at that location. The Redlands facility, which is approximately 200,000 square feet, will be idled after operations cease and marketed for sale.

As a part of our supply chain optimization initiative, we may incur expenses that qualify as exit and disposal costs under ASC 420, Exit or Disposal Cost Obligations. Other expenses that are an integral component of, and directly attributable to, restructuring activities do not qualify as exit and disposal costs, such as accelerated depreciation, asset impairments and other incremental costs. In the first quarter of fiscal 2020, we recognized a severance liability of $1.5 million within cost of sales that was probable and estimable at the end of the reporting period. These costs do not qualify as exit and disposal costs under ASC 420.

At July 27, 2019, 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 2020

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

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 adopted this standard in the first quarter of fiscal 2020 using the modified retrospective approach.

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The following table summarizes additional ASUs which were adopted in fiscal 2020, but did not have a material impact on our accounting policies or our consolidated financial statements and related disclosures.


ASU		Description
ASU 2017-06		Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force)
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 2018-07		Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
ASU 2018-16		Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

Accounting pronouncements not yet adopted

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	Adoption Date
ASU 2016-13	Financial Instruments – Credit losses	Fiscal 2021
ASU 2018-13	Fair Value Measurement – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements	Fiscal 2021
ASU 2018-14	Compensation – Retirement benefits – Defined Benefit Plans – General – Changes to the Disclosure Requirements for Defined Benefit Plans	Fiscal 2022

Note 2: Acquisitions

We did not complete any acquisitions during the quarter ended July 27, 2019. Information regarding our fiscal 2019 acquisition below reflects revised estimates based on updated information obtained during the first quarter of fiscal 2020.

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. We received the working capital adjustment 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 within two years following the acquisition.The remaining $25 million will

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be paid in five annual installments of $5 million on the anniversary date of the acquisition, the first of which was paid in the first quarter of fiscal 2020. 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. We also recorded a finite-lived intangible asset of $6.4 million reflecting the provisional fair value of the acquired Joybird^® trade name, which we are amortizing to selling, general, and administrative (“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 $78.8 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.

When we acquired Joybird, we based the purchase price allocations on provisional fair values at the date of acquisition. During the first quarter of fiscal 2020, we obtained additional data and have revised certain of our estimates, resulting in the purchase price allocations shown below:


	Second quarter
	fiscal 2019
	Corporate and
	Other
(Amounts in thousands)	acquisitions
Fair value of consideration:
Cash (paid at closing)	$	37,482
Guaranteed payment		22,489
Acquisition earn-out		7,500
Assumption of liability		5,000
Working capital adjustment		(2,486)
Total fair value of consideration		69,985

Amounts recognized for assets acquired and liabilities assumed:
Inventory		5,258
Other current assets		3,733
Property, plant and equipment		2,057
Finite-lived tradename		6,400
Other long-term assets		3,647
Accounts payable		(8,222)
Customer deposits		(13,904)
Other current liabilities		(7,681)
Other long-term liabilities		(150)
Total identifiable net liabilities acquired		(8,862)

Goodwill	$	78,847

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

The above acquisition was not 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. As we are beyond the provisional period, all of the purchase accounting shown above is final.

Note 3: Restricted Cash

We have restricted 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)	7/27/19		7/28/18
Cash and cash equivalents	$	111,622	$	134,247
Restricted cash		1,970		2,358
Total cash, cash equivalents and restricted cash	$	113,592	$	136,605

Note 4: Inventories

A summary of inventories is as follows:


(Unaudited, amounts in thousands)	7/27/19		4/27/19
Raw materials	$	94,384	$	90,359
Work in process		13,514		13,728
Finished goods		111,469		114,478
FIFO inventories		219,367		218,565
Excess of FIFO over LIFO		(21,666)		(21,666)
Total inventories	$	197,701	$	196,899

Note 5: Leases

During the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and all related amendments. The guidance requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a lease liability.

The Company leases real estate for retail stores, distribution centers, warehouses, plants, showrooms and office space. We also have equipment leases for tractors/trailers, IT and office equipment and vehicles. We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all of the economic benefits from the use of that identified asset. Most of our real estate leases include options to renew or terminate early. We assess these options to determine if we are reasonably certain of exercising these options based on all relevant economic and financial factors. Any options that meet this criteria are included in the lease term at lease commencement.

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Most of our leases do not have an interest rate implicit in the lease. As a result, for purposes of measuring our ROU asset and lease liability, we determine our incremental borrowing rate by applying a spread above the U.S. Treasury borrowing rates. In the case an interest rate is implicit in a lease we will use that rate as the discount rate for that lease. Some of our leases contain variable rent payments based on a Consumer Price Index or percentage of sales. Due to the variable nature of these costs, they are not included in the measurement of the ROU asset and lease liability.

The Company has elected to apply the practical expedients permitted under transition guidance to forgo the restatement of comparative periods and to not reassess leases entered into prior to adoption. In addition, we have elected the practical expedient to not separate lease and non-lease components when determining the ROU asset and lease liability. We have also made an accounting policy election to not recognize an ROU asset and lease liability on the balance sheet for those leases with an initial term of one year or less and instead such liabilities will be expensed on a straight-line basis over the lease term.

Supplemental balance sheet information (in thousands) related to leases as of July 27, 2019:


Operating leases
ROU assets	$	312,312
Lease liabilities, short-term		64,031
Lease liabilities, long-term		262,264

Finance leases
ROU assets	$	121
Lease liabilities, short-term		127
Lease liabilities, long-term		—

The ROU assets by segment are as follows (in thousands) as of July 27, 2019:


Upholstery	$	55,057
Casegoods		2,205
Retail		248,338
Corporate & Other		6,833
Total ROU assets	$	312,433

The components of lease cost are as follows (in thousands) for the quarter ended July 27, 2019:


Operating lease cost	$	19,018
Financing lease cost		49
Short-term lease cost		25
Variable lease cost		40
Less: Sublease income		(628)
Total lease cost	$	18,504

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The following table presents supplemental lease disclosures for the quarter ended July 27, 2019:


(Dollars in thousands)	Operating			Financing
Cash paid for amounts included in the measurement of lease liabilities	$	19,303		$	49
Lease liabilities arising from new ROU assets		14,353			—

Weighted-average remaining lease term (years)		6.6			0.8
Weighted-average discount rate		3.9	%		3.9	%

The following table presents our undiscounted cash flows as of July 27, 2019 and our minimum contractual obligations on our leases as of April 27, 2019:


	7/27/19				4/27/19
(Amounts in thousands)	Operating Leases		Financing Leases		Operating Leases		Financing Leases
Within one year	$	75,357	$	129	$	76,508	$	180
After one year and within two years		68,610		—		71,544		19
After two years and within three years		55,219		—		58,763		—
After three years and within four years		43,029		—		46,541		—
After four years and within five years		34,193		—		36,082		—
After five years		93,658		—		102,782		—
Total lease payments		370,066		129	$	392,220	$	199
Less: Interest		43,771		2
Total lease obligations	$	326,295	$	127

Note 6: Goodwill and Other Intangible Assets

We have goodwill on our consolidated balance sheet as follows:


Reportable Segment/Unit		Related Acquisition
Upholstery segment		Acquisition of the wholesale business in the United Kingdom and Ireland
Retail segment		Acquisitions of La-Z-Boy Furniture Galleries^® stores
Corporate & Other		Acquisition of Joybird

The following is a roll-forward of goodwill for the quarter ended July 27, 2019:


	Upholstery		Retail		Corporate		Total
(Unaudited, amounts in thousands)	Segment		Segment		and Other		Goodwill
Balance at April 27, 2019	$	12,148	$	94,103	$	79,616	$	185,867
Acquisition adjustment		—		—		(769)		(769)
Translation adjustment		(500)		77		—		(423)
Balance at July 27, 2019	$	11,648	$	94,180	$	78,847	$	184,675

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


Reportable Segment/Unit	Intangible Asset	Useful Life
Upholstery segment	Primarily acquired customer relationships from our acquisition of the wholesale business in the United Kingdom and Ireland	Amortizable over useful lives that do not exceed 15 years
Casegoods segment	American Drew^®trade name	Indefinite-lived
Retail segment	Reacquired rights to own and operate La-Z-Boy Furniture Galleries^® stores	Indefinite-lived
Corporate & Other	Joybird^® trade name	Amortizable over eight-year useful life

The following is a roll-forward of our other intangible assets for the quarter ended July 27, 2019:


	Indefinite-		Finite-		Indefinite-				Total
	Lived		Lived		Lived		Other		Other
	Trade		Trade		Reacquired		Intangible		Intangible
(Amounts in thousands)	Names		Names		Rights		Assets		Assets
Balance at April 27, 2019	$	1,155	$	5,801	$	20,117	$	2,834	$	29,907
Amortization		—		(200)		—		(55)		(255)
Translation adjustment		—		—		58		(115)		(57)
Balance at July 27, 2019	$	1,155	$	5,601	$	20,175	$	2,664	$	29,595

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 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 July 27, 2019, and April 27, 2019:


(Unaudited, amounts in thousands)	7/27/19		4/27/19
Short-term investments:
Marketable securities	$	26,002	$	18,016
Held-to-maturity investments		3,454		3,341
Total short-term investments		29,456		21,357

Long-term investments:
Marketable securities		21,023		24,085
Cost basis investments		11,979		11,979
Total long-term investments		33,002		36,064

Total investments	$	62,458	$	57,421

Investments to enhance returns on cash	$	32,884	$	31,470
Investments to fund compensation/retirement plans	$	17,595	$	13,972
Other investments	$	11,979	$	11,979

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


At July 27, 2019
	Gross		Gross
(Unaudited, amounts in thousands)	Unrealized Gains		Unrealized Losses		Fair Value
Equity securities	$	2,066	$	—	$	23,268
Fixed income		155		(47)		34,382
Other		324		(16)		4,808
Total securities	$	2,545	$	(63)	$	62,458


At April 27, 2019
	Gross		Gross
(Unaudited, amounts in thousands)	Unrealized Gains		Unrealized Losses		Fair Value
Equity securities	$	1,841	$	—	$	19,535
Fixed income		75		(111)		33,217
Other		258		(13)		4,669
Total securities	$	2,174	$	(124)	$	57,421

The following table summarizes sales of marketable securities:


	Quarter Ended
(Unaudited, amounts in thousands)	7/27/19		7/28/18
Proceeds from sales	$	4,060	$	4,762
Gross realized gains		6		75
Gross realized losses		(2)		(55)

At July 27, 2019, the fair value of fixed income marketable securities, classified as available-for-sale securities, by contractual maturity was $22.6 million within one year, $9.4 million within two to five years, $1.6 million within six to ten years, and $0.8 million thereafter.

Note 8: Employee Benefits

Pension

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.

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There were no net periodic pension costs associated with the terminated pension plan in the quarter ended July 27, 2019. For the quarter ended July 28, 2018, net periodic pension costs were as follows:


	Quarter Ended
(Unaudited, amounts in thousands)	7/28/18
Service cost	$	323
Interest cost		1,116
Expected return on plan assets		(1,136)
Net amortization		639
Net periodic pension cost	$	942

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.

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.

Note 9: 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 also provide for 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 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, which is 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: