SEC Filing | La-Z-Boy Incorporated

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lzb-20201024

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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 October 24, 2020

☐ 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 November 10, 2020
Common Stock, $1.00 Par Value						46,144,183

Table of Contents

LA-Z-BOY INCORPORATED

FORM 10-Q SECOND QUARTER OF FISCAL 2021

TABLE OF CONTENTS


		Page Number
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	9
	Note 4. Inventories	10
	Note 5. Goodwill and Other Intangible Assets	10
	Note 6. Investments	11
	Note 7 . Accrued Expenses	12
	Note 8 . Product Warranties	12
	Note 9 . Stock-Based Compensation	13
	Note 10 . Accumulated Other Comprehensive Loss	14
	Note 1 1 . Revenue Recognition	15
	Note 1 2 . Segment Information	17
	Note 1 3 . Income Taxes	18
	Note 1 4 . Earnings per Share	18
	Note 1 5 . Fair Value Measurements	19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Cautionary Note Regarding Forward-Looking Statements	21
	Introduction	21
	Results of Operations	23
	Liquidity and Capital Resources	28
	Critical Accounting Policies	30
	Recent Accounting Pronouncements	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II Other Information		31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 6.	Exhibits	31

Signature Page		32

Table of Contents

PART I - FINANCIAL INFORMATION (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

LA-Z-BOY INCORPORATED

CONSOLIDATED STATEMENT OF INCOME


	Quarter Ended				Six Months Ended
(Unaudited, amounts in thousands, except per share data)	10/24/20		10/26/19		10/24/20		10/26/19
Sales	$	459,120	$	447,212	$	744,578	$	860,845
Cost of sales	258,565		264,823		427,660		510,744
Gross profit	200,555		182,389		316,918		350,101
Selling, general and administrative expense	152,616		152,788		264,654		297,078
Operating income	47,939		29,601		52,264		53,023
Interest expense	(346)		(308)		(805)		(626)
Interest income	123		522		617		1,249


Other income (expense), net	(11)		1,368		1,463		608
Income before income taxes	47,705		31,183		53,539		54,254
Income tax expense	12,401		8,279		13,556		13,362
Net income	35,304		22,904		39,983		40,892
Net income attributable to noncontrolling interests	(369)		(311)		(250)		(230)
Net income attributable to La-Z-Boy Incorporated	$	34,935	$	22,593	$	39,733	$	40,662

Basic weighted average common shares	46,023		46,551		45,966		46,686
Basic net income attributable to La-Z-Boy Incorporated per share	$	0.76	$	0.48	$	0.86	$	0.87

Diluted weighted average common shares	46,323		46,879		46,167		47,010
Diluted net income attributable to La-Z-Boy Incorporated per share	$	0.75	$	0.48	$	0.86	$	0.86

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				Six Months Ended
(Unaudited, amounts in thousands)	10/24/20		10/26/19		10/24/20		10/26/19
Net income	$	35,304	$	22,904	$	39,983	$	40,892
Other comprehensive income (loss)
Currency translation adjustment	1,354		1,526		3,465		2,140
Change in fair value of cash flow hedges, net of tax	—		6		—		10
Net unrealized gain (loss) on marketable securities, net of tax	(65)		46		(23)		154
Net pension amortization, net of tax	65		41		130		82
Total other comprehensive income	1,354		1,619		3,572		2,386
Total comprehensive income before allocation to noncontrolling interests	36,658		24,523		43,555		43,278
Comprehensive income attributable to noncontrolling interests	(448)		(671)		(827)		(1,076)
Comprehensive income attributable to La-Z-Boy Incorporated	$	36,210	$	23,852	$	42,728	$	42,202

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)	10/24/20		4/25/20
Current assets
Cash and equivalents	$	350,949	$	261,553
Restricted cash	2,478		1,975
Receivables, net of allowance of $5,890 at 10/24/20 and $7,541 at 4/25/20	128,324		99,351
Inventories, net	188,652		181,643
Other current assets	125,999		81,804
Total current assets	796,402		626,326
Property, plant and equipment, net	211,688		214,767
Goodwill	174,834		161,017
Other intangible assets, net	30,647		28,653
Deferred income taxes – long-term	18,990		20,839
Right of use lease assets	341,765		318,647
Other long-term assets, net	76,017		64,640
Total assets	$	1,650,343	$	1,434,889

Current liabilities
Accounts payable	$	89,260	$	55,511
Short-term borrowings	—		75,000

Lease liabilities, current	65,758		64,376
Accrued expenses and other current liabilities	335,294		155,282
Total current liabilities	490,312		350,169

Lease liabilities, long-term	294,601		270,162
Other long-term liabilities	110,781		98,252
Shareholders' equity
Preferred shares – 5,000 authorized; none issued	—		—
Common shares, $1.00 par value – 150,000 authorized; 46,113 outstanding at 10/24/20 and 45,857 outstanding at 4/25/20	46,113		45,857
Capital in excess of par value	326,182		318,215
Retained earnings	378,438		343,633
Accumulated other comprehensive loss	(3,957)		(6,952)
Total La-Z-Boy Incorporated shareholders' equity	746,776		700,753
Noncontrolling interests	7,873		15,553
Total equity	754,649		716,306
Total liabilities and equity	$	1,650,343	$	1,434,889

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


	Six Months Ended
(Unaudited, amounts in thousands)	10/24/20		10/26/19
Cash flows from operating activities
Net income	$	39,983	$	40,892
Adjustments to reconcile net income to cash provided by (used for) operating activities
(Gain)/loss on disposal of assets	140		(283)
Gain on sale of investments	(284)		(99)
Change in deferred taxes	1,849		273
Provision for doubtful accounts	(1,568)		350
Depreciation and amortization	16,351		14,936
Equity-based compensation expense	6,167		4,707


Change in receivables	(28,949)		(12,722)
Change in inventories	(3,511)		(7,645)
Change in right-of-use lease assets	35,137		32,323
Change in other assets	(1,926)		(4,088)
Change in payables	33,236		3,854
Change in lease liabilities	(32,422)		(32,665)
Change in other liabilities	131,507		13,869
Net cash provided by operating activities	195,710		53,702

Cash flows from investing activities
Proceeds from disposals of assets	21		88
Proceeds from insurance	—		1,018
Capital expenditures	(15,442)		(22,949)
Purchases of investments	(17,649)		(17,798)
Proceeds from sales of investments	19,470		13,171
Acquisitions	(7,783)		(5,875)
Net cash used for investing activities	(21,383)		(32,345)

Cash flows from financing activities

Payments on debt and finance lease liabilities	(75,013)		(95)
Stock issued for stock and employee benefit plans, net of shares withheld for taxes	364		571
Purchases of common stock	—		(23,167)
Dividends paid to shareholders	(3,216)		(12,151)
Dividends paid to minority interest joint venture partners (1)	(8,507)		—
Net cash used for financing activities	(86,372)		(34,842)

Effect of exchange rate changes on cash and equivalents	1,944		1,239
Change in cash, cash equivalents and restricted cash	89,899		(12,246)
Cash, cash equivalents and restricted cash at beginning of period	263,528		131,787
Cash, cash equivalents and restricted cash at end of period	$	353,427	$	119,541

Supplemental disclosure of non-cash investing activities
Capital expenditures included in payables	$	3,769	$	5,805

(1)Includes dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.

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


(Unaudited, amounts in thousands)	Common Shares		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interests		Total
At April 25, 2020	$	45,857	$	318,215	$	343,633	$	(6,952)	$	15,553	$	716,306
Net income (loss)	—		—		4,798		—		(119)		4,679
Other comprehensive income	—		—		—		1,720		498		2,218
Stock issued for stock and employee benefit plans, net of cancellations and withholding tax	132		(195)		(1,686)		—		—		(1,749)

Stock option and restricted stock expense	—		2,047		—		—		—		2,047
Dividends declared and paid (1)	—		—		5		—		(8,507)		(8,502)

At July 25, 2020	$	45,989	$	320,067	$	346,750	$	(5,232)	$	7,425	$	714,999
Net income	—		—		34,935		—		369		35,304
Other comprehensive income	—		—		—		1,275		79		1,354
Stock issued for stock and employee benefit plans, net of cancellations and withholding tax	124		1,995		(6)		—		—		2,113

Stock option and restricted stock expense	—		4,120		—		—		—		4,120


Dividends declared and paid ($0.07/share)	—		—		(3,221)		—		—		(3,221)
Dividends declared not paid ($0.07/share)	—		—		(20)		—		—		(20)
At October 24, 2020	$	46,113	$	326,182	$	378,438	$	(3,957)	$	7,873	$	754,649

(1)No dividends to shareholders were declared or paid during the first quarter of fiscal 2021; amount includes dividends forfeited from restricted stock awards previously granted. Non-controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested.


(Unaudited, amounts in thousands)	Common Shares		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-Controlling 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)
Repurchases 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
Net income	—		—		22,593		—		311		22,904
Other comprehensive income	—		—		—		1,260		359		1,619
Stock issued for stock and employee benefit plans, net of cancellations and withholding tax	84		1,908		(4)		—		—		1,988
Purchases of 335 shares of common stock	(335)		(1,908)		(8,611)		—		—		(10,854)
Stock option and restricted stock expense	—		3,032		—		—		—		3,032

Dividends declared and paid ($0.13/share)	—		—		(6,039)		—		—		(6,039)
Dividends declared not paid ($0.13/share)	—		—		(46)		—		—		(46)
At October 26, 2019	$	46,439	$	314,239	$	336,989	$	(2,468)	$	15,543	$	710,742

(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 Accumulated Other Comprehensive Income ("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 (collectively, the "Company"). We derived the April 25, 2020, 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 2020 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 24, 2021.

At October 24, 2020, we owned preferred shares and warrants to purchase common shares of two privately held 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.

COVID-19

As part of our continued response to the impact of COVID-19, on June 4, 2020, we announced our business realignment plan, which included the reduction of the Company's global workforce by approximately 10% across our manufacturing, retail and corporate locations, including the closure of our Newton, Mississippi upholstery manufacturing facility. In the first six months of fiscal 2021, we incurred expenses of $3.9 million associated with our business realignment plan, primarily due to severance costs and an impairment of the carrying value of the Newton manufacturing facility. In the first six months of fiscal 2021, as consumers continued to allocate more discretionary spending to home furnishings, the demand for our products has outpaced our production capacity. In response, we have added manufacturing cells at our Mexico Cut-and-Sew Center, temporarily re-activated a portion of our Newton, Mississippi upholstery manufacturing facility, and will open a leased upholstery plant, in San Luis Rio Colorado, Mexico early in the third quarter of fiscal 2021.

During the fourth quarter of fiscal 2020, in response to economic conditions resulting from COVID-19, to strengthen our financial position and maintain liquidity, we proactively borrowed $75.0 million from our revolving credit facility. Given the positive trends in cash flows during the first six months of fiscal 2021, we repaid all of the $75.0 million borrowed under our line of credit in the first and second quarters of fiscal 2021. We continue to actively manage the impact of the COVID-19 crisis and there is uncertainty regarding the impact COVID-19 will have on our financial operations in the near and long term.

Accounting pronouncements adopted in fiscal 2021

The following table summarizes Accounting Standards Updates ("ASUs") which were adopted in fiscal 2021, but did 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 (Topic 326): Measurement of Credit Losses on Financial Instruments
ASU 2020-04						Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

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Accounting pronouncements not yet adopted

The following table summarizes 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 2018-14

Compensation – Retirement benefits – Defined Benefit Plans – General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans

Fiscal 2022

ASU 2019-12

Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

Fiscal 2022

ASU 2020-01

Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815

Fiscal 2022

Note 2: Acquisitions

On September 14, 2020, we completed our asset acquisition of the Seattle, Washington business that operated six independently owned La-Z-Boy Furniture Galleries® stores and one warehouse for $13.5 million, subject to customary adjustments. In the second quarter of fiscal 2021, a $2.0 million cash payment was made for the purchase with future guaranteed payments of $9.4 million to be paid over the next 36 months. This acquisition is 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 sales.

Prior to this acquisition, we licensed to the counterparty the exclusive right to own and operate La-Z-Boy Furniture Galleries® stores (and to use the associated trademarks and trade name) in the Seattle, Washington market, and we reacquired these rights when we consummated the transaction. The reacquired rights are indefinite-lived because our Retailer Agreements are perpetual agreements that have no specific expiration date and no renewal options. 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 $2.2 million related to these reacquired rights. We also recognized $12.9 million of goodwill in our Retail segment 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.

The acquisition of the Seattle, Washington business was not significant to our consolidated financial statements, and, therefore, pro-forma financial information is not presented. All of our provisional purchase accounting estimates for this acquisition are based on the information and data available to us as of the time of the issuance of these financial statements, and in accordance with Accounting Standard Codification Topic 805-10-25-15, are subject to change within the first 12 months of acquisition as we have access to additional data.

Note 3: Restricted Cash

We have restricted cash on deposit with a bank as collateral for certain letters of credit. All 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)	10/24/20		10/26/19
Cash and cash equivalents	$	350,949	$	117,569
Restricted cash	2,478		1,972
Total cash, cash equivalents and restricted cash	$	353,427	$	119,541

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Note 4: Inventories

A summary of inventories is as follows:


(Unaudited, amounts in thousands)	10/24/20		4/25/20
Raw materials	$	91,742	$	92,174
Work in process	17,759		14,064
Finished goods	100,596		96,850
FIFO inventories	210,097		203,088
Excess of FIFO over LIFO	(21,445)		(21,445)
Total inventories	$	188,652	$	181,643

Note 5: Goodwill and Other Intangible Assets

We have goodwill on our consolidated balance sheet as follows:

Reportable Segment/Unit

Reporting Unit

Related Acquisition

Wholesale Segment

La-Z-Boy United Kingdom

Wholesale business in the United Kingdom and Ireland

Retail Segment

Retail

La-Z-Boy Furniture Galleries® stores

Corporate & Other

Joybird

The following is a roll-forward of goodwill for the six months ended October 24, 2020:


(Unaudited, amounts in thousands)	Wholesale Segment		Retail Segment		Corporate and Other		Total Goodwill
Balance at April 25, 2020	$	11,630	$	93,941	$	55,446	$	161,017
Acquisitions	—		12,931		—		12,931
Translation adjustment	636		250		—		886
Balance at October 24, 2020	$	12,266	$	107,122	$	55,446	$	174,834

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

Reportable Segment/Unit

Intangible Asset

Useful Life

Wholesale 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

Wholesale 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 six months ended October 24, 2020:


(Unaudited, amounts in thousands)	Indefinite- Lived Trade Names		Finite- Lived Trade Name		Indefinite- Lived Reacquired Rights		Other Intangible Assets		Total Other Intangible Assets
Balance at April 25, 2020	$	1,155	$	5,003	$	19,996	$	2,499	$	28,653
Acquisitions	—		—		2,182		—		2,182
Amortization	—		(399)		—		(110)		(509)
Translation adjustment	—		—		187		134		321
Balance at October 24, 2020	$	1,155	$	4,604	$	22,365	$	2,523	$	30,647

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We test indefinite-lived 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. We test amortizable intangible assets for impairment if events or changes in circumstances indicate that the assets might be impaired.

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 start-up 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:


(Unaudited, amounts in thousands)	10/24/20		4/25/20
Short-term investments:
Marketable securities	$	15,905	$	18,634
Held-to-maturity investments	2,531		3,337
Total short-term investments	18,436		21,971
Long-term investments:
Marketable securities	24,373		19,572
Cost basis investments	7,579		6,479
Total long-term investments	31,952		26,051
Total investments	$	50,388	$	48,022

Investments to enhance returns on cash	$	27,224	$	28,622
Investments to fund compensation/retirement plans	15,585		12,921
Other investments	7,579		6,479
Total investments	$	50,388	$	48,022

The following is a summary of the unrealized gains, unrealized losses, and fair value by investment type:


	10/24/20						4/25/20
(Unaudited, amounts in thousands)	Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Equity securities	$	1,873	$	—	$	16,224	$	1,011	$	(6,390)	$	12,692
Fixed income	206		(25)		29,735		268		(56)		30,213
Other	452		—		4,429		372		—		5,117
Total securities	$	2,531	$	(25)	$	50,388	$	1,651	$	(6,446)	$	48,022

The following table summarizes sales of marketable securities:


	Quarter Ended				Six Months Ended
(Unaudited, amounts in thousands)	10/24/20		10/26/19		10/24/20		10/26/19
Proceeds from sales	$	3,292	$	8,310	$	17,017	$	12,370
Gross realized gains	184		181		310		187
Gross realized losses	(8)		(86)		(26)		(88)

Table of Contents

The following is a summary of the fair value of fixed income marketable securities, classified as available-for-sale securities, by contractual maturity:


(Unaudited, amounts in thousands)	10/24/20
Within one year	$	14,425
Within two to five years	12,340
Within six to ten years	1,149
Thereafter	1,821
Total	$	29,735

Note 7: Accrued Expenses and Other Current Liabilities


(Unaudited, amounts in thousands)	10/24/20		4/25/20
Payroll and other compensation	$	45,135	$	34,980
Accrued product warranty, current portion	14,174		14,264
Customer deposits	140,707		40,721
Deferred revenue	67,882		17,086
Other current liabilities	67,396		48,231
Accrued expenses and other current liabilities	$	335,294	$	155,282

The increase in customer deposits and deferred revenue was primarily driven by higher Retail segment and Joybird written sales in the first six months of fiscal 2021. Higher written sales also led to an increase in contract assets, which are included in other current assets on the consolidated balance sheet, consistent with the increase in deferred revenue. Refer to Note 11, Revenue Recognition, for additional details regarding our contract assets and contract liabilities.

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 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 Wholesale 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 Wholesale segment warranties cover labor costs relating to our parts for one year. We provide a limited lifetime warranty against defects on a majority of Joybird products, which are a 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)	10/24/20		10/26/19		10/24/20		10/26/19
Balance as of the beginning of the period	$	23,123	$	22,836	$	23,255	$	22,736

Accruals during the period	5,306		5,768		9,134		11,425
Settlements during the period	(5,491)		(5,523)		(