LA-Z-BOY INC

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, 2026 balance sheet from our audited financial statements. We prepared the interim financial information in conformity with generally accepted accounting principles ("US GAAP"), which we applied on a basis consistent with those reflected in our fiscal 2026 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 US GAAP. 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, 2027.

Accounting Pronouncements Adopted in Fiscal 2027

The following table summarizes Accounting Standards Updates ("ASUs"), which were adopted in fiscal 2027, but did not have a material impact on our accounting policies or our consolidated financial statements and related disclosures.

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.

Supply Chain Optimization

During the first quarter of fiscal 2027, we announced the planned closure of our leased upholstery assembly plant in San Luis Rio Colorado ("SLRC"), Mexico with operations ceased at the end of the first quarter of fiscal 2027. As a result of this action, during the first quarter of fiscal 2027, we recorded charges within the Wholesale segment of $9.3 million in SG&A expense for the impairment of various long-lived assets and $3.0 million in cost of sales primarily related to severance expense.

Additionally, during the first quarter of fiscal 2027, we announced the planned closure of our leased Joybird manufacturing plant in Tijuana, Mexico, with all manufacturing operations expected to transfer to our U.S. plants by the end of fiscal 2027. As a result of this action, we recorded charges of $5.0 million in cost of sales within Corporate and Other for severance expense, accelerated depreciation, and accelerated lease expense.

Note 2: Acquisitions

The below acquisition 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 the acquisition completed in fiscal 2027 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 following the acquisition as we gain additional data.

The following Retail acquisition reflects a core component of our strategic priorities, which is 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) in suitable geographic markets, alongside the existing La-Z-Boy Store network.

Prior to the Retail acquisition described below, we licensed to the counterparty the exclusive right to own and operate La-Z-Boy Stores (and to use the associated trademarks and trade name) in their respective markets, and we reacquired these rights when we consummated the transaction. These 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 date of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. For federal income tax purposes, we amortize and deduct these indefinite-lived intangible assets and goodwill, if any, over 15 years.

Gulf Coast Region Acquisition

On June 22, 2026, we completed our acquisition of the Pensacola, Florida and Mobile and Spanish Fort, Alabama businesses that operated three independently owned La-Z-Boy Stores for $17.2 million, inclusive of and subject to further customary adjustments. We paid total cash of $15.7 million during the first quarter of fiscal 2027 and the remaining consideration included forgiveness of accounts receivable and payments based on working capital adjustments. As part of the acquisition, we recorded an indefinite-lived intangible asset of $4.8 million related to the reacquired rights described above.

Prior Year Acquisitions

We did not complete any acquisitions during the first quarter of fiscal 2026.

Note 3: Inventories

A summary of inventories is as follows:

Note 4: Assets Held for Sale

Assets and liabilities are classified as held for sale when management commits to a plan to sell a disposal group and concludes that it meets all other relevant criteria in accordance with U.S. GAAP. Assets held for sale are measured at the lower of their carrying value or fair value less costs to sell and are no longer depreciated or amortized. Any loss resulting from the measurement is recognized in the period the held for sale criteria are met while gains are not recognized until the date of sale.

As of July 25, 2026, we had no assets that met the criteria to be classified as held for sale. As of April 25, 2026, the following assets and liabilities met the criteria to be classified as held for sale in connection with our plan to divest a portion of our Casegoods wholesale business:

(1)Included in accounts payable and accrued expenses and other current liabilities on our consolidated balance sheet.

On May 29, 2026, we completed the sale of the remaining assets and liabilities held for sale in the Casegoods disposal group through a combination of cash and a promissory note, resulting in an immaterial impact to the consolidated financial statements. The Casegoods disposal group does not meet the requirements to be classified as discontinued operations as the disposition of a portion of this business does not represent a strategic shift that will have a material effect on the Company's operations and financial results.

Note 5: Goodwill and Other Intangible Assets

We have goodwill on our consolidated balance sheet as follows:

The following table summarizes changes in the carrying amount of our goodwill by reportable segment:

(1)Includes $46.9 million and $20.6 million of accumulated impairment losses in Corporate and Other and the Wholesale segment, respectively.

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

(1)Fully amortized as of July 25, 2026.

The following summarizes changes in our intangible assets:

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. When we perform the quantitative test for goodwill, we establish the fair value for the reporting unit based on the income approach, in which we utilize a discounted cash flow model, the market approach, in which we utilize market multiples of comparable companies, or a combination of both approaches. The income approach requires the use of significant estimates and assumptions including forecasted sales growth, operating income projections, and discount rates and changes in these assumptions may materially impact our fair value assessment.

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 primarily intended to enhance returns on our cash. 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:

(1)Balance as of July 25, 2026 reflects sale of investments to fund lump-sum payments to participants to terminate our non-qualified legacy acquired retirement plan.

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

The following table summarizes sales of marketable securities:

(1)Quarter ended July 25, 2026 includes sale of investments to fund lump-sum payments to participants to terminate our non-qualified legacy acquired retirement plan.

Note 7: Product Warranties

We account for product warranties by accruing an estimated liability when we recognize revenue on the sale of warrantied product. We estimate future warranty claims on product sales based on sales volume and claim experience and periodically make adjustments to reflect changes in actual experience. 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 and consumers. Approximately 90% of our warranty liability relates to our Wholesale reportable segment, as we generally warrant our products against defects forone tothree years on fabric and leather, fromone tofive years on cushions and padding, and provide a limited lifetime warranty on certain mechanisms and frames, unless otherwise noted in the warranty. Additionally, our Wholesale segment warranties cover labor costs relating to our parts forone year. We provide a limited lifetime warranty against defects on a majority of the Joybird products, which are a part of our Corporate and Other results. For all our manufacturer warranties, the warranty period begins when the consumer receives our product. We use considerable judgment in making our estimates and 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:

(1)$16.7 million and $17.0 million is recorded in accrued expenses and other current liabilities as of July 25, 2026, and April 25, 2026, respectively, while the remainder is included 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.

Note 8: 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:

(1)Includes deferred stock units issued to directors, restricted stock units, and performance-based units. Compensation expense for these awards is based on the market price of our common stock on the grant date and is remeasured each reporting period based on the market value of our common shares on the last day of the reported period.

Restricted Stock Units. During the first quarter of fiscal 2027, we granted 239,234 shares of restricted stock units to employees and we also have restricted stock unit awards outstanding from previous grants. We issue restricted stock units at no cost to the employees and account for restricted stock unit awards as equity-based awards because when they vest, they will be settled in common shares. We recognize compensation expense for restricted stock over the vesting period equal to the fair value on the date our Compensation and Talent Oversight Committee of our board of directors approved the awards. Restricted stock unit awards vest at 25% per year, beginningone year from the grant date for a term offour years, with continued vesting upon retirement. We accelerate the expense for restricted stock units granted to retirement-eligible employees over the vesting period, with expense recognized from the grant date through their retirement eligibility date or over theten months following the grant date, whichever period is longer. We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur. The weighted average fair value of the restricted stock that was awarded in the first quarter of fiscal 2027 was $39.99 per share, the market value of our common shares on the date of grant.

Performance-Based Units. During the first quarter of fiscal 2027, we granted 168,139 performance-based units, and we also have performance-based unit awards outstanding from previous grants. Payouts of these grants depend on our financial performance (50%) 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 (50%). 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 units as equity-based awards because when they vest, they will be settled in common shares. In the event of an employee's termination during the vesting period, the potential right to earn shares under this program is generally forfeited and we have elected to recognize forfeitures as an adjustment to compensation expense in the same period in which the forfeitures occur. For units that vest based on our results relative to the performance goals, we expense as compensation cost the fair value of the units 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 unit of the awards we granted in fiscal 2027 that vest based on attaining performance goals was $37.09, 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 units that vest based on market conditions, we use a Monte Carlo valuation model to estimate each share’s fair value as of the date of grant. The Monte Carlo valuation model uses multiple simulations to evaluate our probability of achieving various stock price levels to determine our expected performance ranking relative to our peer group. For units that vest based on market conditions, we expense compensation cost over the vesting period regardless of whether the market condition is ultimately satisfied. Based on the Monte Carlo valuation model, the fair value as of the grant date of the fiscal 2027 grant of units that vest based on market conditions was $56.47.

Stock Options. We did not grant stock options to employees during the first quarter of fiscal 2027, but we have stock options outstanding from prior year grants with the last occurring in fiscal 2023. Granted options outstanding under the former long-term equity award plans remain in effect and have a term of 10 years.

Note 9: Accumulated Other Comprehensive Loss

Activity in accumulated other comprehensive income (loss) for the quarters ended July 25, 2026, and July 26, 2025, is as follows:

(1)Fiscal 2027 includes a $2.3 million charge related to the termination and settlement of our non-qualified legacy acquired retirement plan, of which $2.2 million of expense was recorded in other income (expense), net and $0.1 million of expense was recorded in income tax expense in our consolidated statement of income. Fiscal 2027 also includes $0.4 million of realized gains on the sale of marketable securities, of which $0.1 million of income was recorded in other income (expense), net and $0.3 million of income was recorded in income tax expense in our consolidated statement of income.

(2)We reclassified both the unrealized gain (loss) on marketable securities and the net pension amortization in fiscal 2026 from accumulated other comprehensive loss to net income through other income (expense), net.

The components of noncontrolling interest were as follows:

Note 10: Revenue Recognition

Our revenue is primarily derived from product sales. We report product sales net of discounts and recognize them when control (rights and obligations associated with the product) passes to the customer. For sales to furniture retailers or distributors, control typically transfers when we ship the product. In cases where we sell directly to the end consumer, control of the product is generally transferred upon delivery.

For shipping and handling activities, we have elected to apply the accounting policy election permitted in ASC 606-10-25-18B, which allows an entity to account for shipping and handling activities as fulfillment activities (rather than as a promised good or service) when the activities are performed even if those activities are performed after the control of the good has been transferred. We expense shipping and handling costs at the time we recognize revenue in accordance with this election.

For sales tax, we have elected to apply the accounting policy election permitted in ASC 606-10-32-2A, which allows an entity to exclude from the measurement of the transaction price all taxes imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales taxes). This allows us to present revenue net of these certain types of taxes.

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

The following table presents our revenue disaggregated by product category and by segment or unit:

(1)Primarily includes after-treatment product, royalties, parts, surcharges, rebates and other sales incentives.

Upholstered Furniture - Includes revenue for upholstered furniture, such as recliners, sofas, loveseats, chairs, sectionals, modulars, and ottomans. This revenue includes sales to La-Z-Boy Stores (including company-owned stores), operators of La-Z-Boy Comfort Studio® and branded space locations, England Custom Comfort Center locations, other major dealers, independent retailers, and the end consumer. Fiscal 2026 includes the upholstery portion of our Casegoods business that was divested on January 30, 2026.

Casegoods/Accessories - Includes revenue for occasional tables typically found in a living room, dining and bedroom furniture, and other accessories such as lamps, rugs, and other decor found throughout the home. This revenue includes sales to La-Z-Boy Stores (including company-owned stores), independent retailers, and the end consumer. Includes the Casegoods wholesale business that was divested on May 29, 2026.

Contract Assets and Liabilities. We receive customer deposits from end consumers before we recognize revenue and in some cases we have the unconditional right to collect the remaining portion of the order price before we fulfill our performance obligation, resulting in a contract asset and a corresponding deferred revenue liability. In our consolidated balance sheet, customer deposits and deferred revenue (collectively, the "contract liabilities") are reported in accrued expenses and other current liabilities while contract assets are reported as other current assets.

The following table presents our contract assets and liabilities:

(1)During the quarter ended July 25, 2026, we recognized revenue of $100.6 million related to our contract liability balance at April 25, 2026.

Note 11: Segment Information

We report segment information consistent with the way our chief operating decision maker, (the "CODM"), our Board Chair, President and Chief Executive Officer, evaluates the operating results and performance of the Company. Our reportable operating segments include the Wholesale segment and the Retail segment.

Wholesale Segment. Our Wholesale segment consists primarily ofthree operating segments: La-Z-Boy, our largest operating segment, our England subsidiary, and our international operating segment, which includes our international La-Z-Boy wholesale and manufacturing businesses. We aggregate these operating segments intoone reportable segment because they are economically similar and meet the other aggregation criteria for determining reportable segments. Our Wholesale segment manufactures and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas and imports casegoods (wood) furniture such as bedroom sets, dining room sets, entertainment centers and occasional pieces. The Wholesale segment sells directly to La-Z-Boy Stores, operators of La-Z-Boy Comfort Studio® and branded space locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.

Retail Segment. Our Retail segment consists ofone operating segment comprised of our 234 company-owned La-Z-Boy Stores. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other home furnishings accessories, to end consumers through these stores.

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

We use operating income to evaluate segment performance and to allocate resources. Segment operating income is based on profit or loss from operations before interest expense, interest income, other income (expense), net and income taxes. The CODM assesses performance by regularly reviewing each segment's significant expense categories which include cost of sales, selling, general and administrative ("SG&A") expenses, and goodwill impairment, if applicable.

The accounting policies of the operating segments are the same as those described in our Annual Report on Form 10-K for the fiscal year ended April 25, 2026. We account for intersegment revenue transactions between our segments consistent with independent third-party transactions, that is, at current market prices. As a result, the manufacturing profit related to sales to our Retail segment is included within the Wholesale segment. Operating income realized on intersegment revenue transactions is therefore generally consistent with the operating income realized on our revenue from independent third-party transactions.

Identifiable assets are cash and equivalents, accounts receivable, net inventories, net property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets. Our unallocated assets include deferred income taxes, corporate assets (including a portion of cash and equivalents), and various other assets. Asset information is regularly reviewed by the CODM at the consolidated level and segment-level asset information is not used for purposes of making decisions, assessing financial performance, or allocating resources.

The following table presents sales and operating income (loss) by segment:

(1)Sales are attributed to countries on the basis of the customer's location.

Note 12: Income Taxes

Our effective tax rate was 45.8% benefit for the quarter ended July 25, 2026 compared with 25.0% expense for the quarter ended July 26, 2025. Due to the immaterial net loss position for the quarter ended July 25, 2026, the change in the effective tax rate was disproportionately impacted by one-time impacts of certain non-deductible supply chain optimization charges along with the tax benefits from the vesting of stock awards and state refunds.

Note 13: Earnings per Share

The following is a reconciliation of the numerators and denominators we used in our computations of basic and diluted earnings per share:

(1)Diluted earnings per share was computed using the treasury stock method.

The values for contingent common shares set forth above reflect the dilutive effect of common shares that we would have issued to employees under the terms of performance-based share awards if the relevant performance period for the award had been the reporting period.

For the quarter ended July 25, 2026, basic and diluted loss per common share are equivalent due to the net loss position for the period. We exclude the effect of options from our diluted share calculation when the weighted average exercise price of the options is higher than the average market price, since including the options' effect would be anti-dilutive. For the quarter ended July 26, 2025, we didnot exclude any outstanding options from the diluted share calculation.

Note 14: Fair Value Measurements

Accounting standards require that we put financial assets and liabilities into one of three categories based on the inputs we use to value them:

•Level 1 — Financial assets and liabilities, the values of which are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.

•Level 2 — Financial assets and liabilities, the values of which are based on quoted prices in markets that are not active or on model inputs that are observable for substantially the full term of the asset or liability.

•Level 3 — Financial assets and liabilities, the values of which are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Accounting standards require that in making fair value measurements, we use observable market data when available. When inputs used to measure fair value fall within different levels of the hierarchy, we categorize the fair value measurement as being in the lowest level that is significant to the measurement. We recognize transfers between levels of the fair value hierarchy at the end of the reporting period in which they occur.

In addition to assets and liabilities that we record at fair value on a recurring basis, we are required to record assets and liabilities at fair value on a non-recurring basis. We measure non-financial assets such as other intangible assets, goodwill, and other long-lived assets at fair value when there is an indicator of impairment, and we record them at fair value only when we recognize an impairment loss.

The following table presents the fair value hierarchy for those assets and liabilities we measured at fair value on a recurring basis at July 25, 2026 and April 25, 2026. There were no transfers into or out of Level 1, Level 2, or Level 3 for any of the periods presented.

(1)Certain marketable securities investments are measured at fair value using net asset value per share under the practical expedient methodology.

As of April 25, 2026, we held marketable securities to fund future obligations under a non-qualified legacy acquired retirement plan. In the first quarter of fiscal 2027, the vast majority of our marketable securities were sold to fund lump-sum payments to participants to terminate the plan.

The fair value measurements for our Level 1 and Level 2 securities are based on quoted prices in active markets, as well as through broker quotes and independent valuation providers, multiplied by the number of shares owned exclusive of any transaction costs.