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ITEM 1A. RISK FACTORS.
The Company has developed an information security program to address risks from cybersecurity threats. The program includes policies and procedures that identify how security measures and controls are developed, implemented, and maintained. A risk assessment is conducted annually. The risk assessment along with risk-based analysis and judgment are used to select security controls to address risks. During this process, the following factors, among others, are considered: likelihood and severity of risk, impact on the Company and others if a risk materializes, feasibility and cost of controls, and impact of controls on the Company's operations and others. Specific controls that are used to some extent by the Company include endpoint threat detection and response (EDR), identity and access management (IAM), privileged access management (PAM), logging and monitoring involving the use of security information and event management (SIEM), multi-factor authentication (MFA), firewalls and intrusion detection and prevention, and vulnerability and patch management.
We incorporate third-party expertise in various aspects of our cybersecurity program. One or more third-party security firms are used by the Company in different capacities to provide or operate some of these controls and technology systems. Third parties are also used to conduct assessments, such as vulnerability scans and penetration testing of the Company and its systems. The Company uses a variety of processes to address cybersecurity threats related to the use of third-party technology and services.
The Company is not aware of any cybersecurity threat or any material cybersecurity incident to date, including as a result of any previous cybersecurity incidents, that has materially affected or is reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Additionally, in Item 1A Risk Factors under the heading of "Operational Risk Factors," forward-looking cybersecurity threats that could have a material impact on the Company are discussed. Those sections of Item 1A should be read in conjunction with this Item 1C.
The Chief Information Officer (“CIO”) has management oversight responsibility for the Company’s information security program and cybersecurity strategy. The Company has appointed a Chief Information Security Officer (“CISO”), who reports directly to the CIO and is responsible for the development, operation, and maintenance of the Company’s information security program, including implementation of security policies, incident response coordination, risk management activities, and ongoing monitoring of the Company’s information technology environment. Pursuant to the Company’s written Incident Response Plan (“IRP”), both the CIO and CISO are members of the executive incident response team, and severity classifications in the IRP are used to escalate matters to the executive incident response team. Pursuant to the Company’s written IRP, the CIO is a member of the executive incident response team and severity classifications in the IRP are used to escalate matters to the executive incident response team. The CIO has more than 20 years
Our business is subject to a variety of risks. Any of the following risks could materially and adversely affect our business, financial condition, results of operations, liquidity, or future prospects. Any of the following risks could materially and adversely affect our business, results of operations, financial condition, or future prospects. The risks discussed below should be carefully considered, together with the other information provided in this Annual Report on Form 10-K, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 1C. Cybersecurity, and our financial statements, including the related notes. These risk factors do not identify all risks that we face. There may be additional risks
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that are presently unknown to us or that we currently believe to be immaterial that could affect us. Investors should carefully consider all risks, including those disclosed, before making an investment decision.
Macroeconomic and Market Risk Factors
Declines in certain economic and market conditions that impact consumer confidence and consumer spending, or cause further disruption in our business, could negatively impact our sales, results of operations and liquidity.
The furniture industry and our business are particularly sensitive to cyclical variations in the general economy and to uncertainty regarding future economic conditions because our principal products are consumer goods that may be considered postponable discretionary purchases. Economic downturns and prolonged negative economic conditions have affected, and could continue to affect, general consumer spending, resulting in a decrease in the overall demand for such discretionary items, including residential furniture and furnishings. Economic downturns and prolonged negative economic conditions have affected, and could continue to affect general consumer spending, resulting in a decrease in the overall demand for such discretionary items, including home furnishings. Factors influencing consumer spending include, among others, general economic conditions, consumer disposable income, recession and fears of recession, United States government default or shutdown or the risk of such default or shutdown, inflation, unemployment, war and fears of war, changes in global trade policies, availability of consumer credit, consumer debt levels, consumer confidence, conditions in the housing market, fuel prices, interest rates, sales tax rates, civil disturbances and terrorist activities, natural disasters, adverse weather, and health epidemics or pandemics. We are unable to identify and predict to what extent such factors may further impact consumer spending on our products in the short and long term.
Loss of market share and other financial or operational difficulties due to competition would likely result in a decrease in our sales, earnings, and liquidity.
The residential furniture industry is highly competitive and fragmented. We currently compete with many other manufacturers and retailers, including online retailers. Some of these competitors offer widely advertised products or are large retail furniture dealers offering their own store-branded products. Competition in the residential furniture industry is based on, among other factors, quality, style of products, perceived value, price, promotional activities, customer service and experience, omni-channel presence, and advertising. Changes in pricing and promotional activities of competitors may adversely affect our performance. In addition, due to the large number of competitors and their wide range of product offerings, we may not be able to effectively differentiate for consumers our products (in comfort, styling, finish, and other aspects of construction) from those of our competitors. In addition, due to the large number of competitors and their wide range of product offerings, we may not be able to 11 Table of Contentsdifferentiate our products (through styling, finish, and other construction techniques) from those of our competitors. The highly competitive nature of the industry means we are constantly subject to the risk of losing market share, which would likely decrease our future sales, earnings, and liquidity.
A majority of our sales are to distribution channels that rely on physical stores to merchandise and sell our products and a significant shift in consumer preference toward purchasing products online could have a material adverse effect on our sales and operating margin. Over the past several years, the furniture industry in general has experienced a shift to more online purchasing. We are attempting to meet consumers where they prefer to shop by expanding our digital and omni-channel capabilities and improving the user experience at www. We are attempting to meet consumers where they prefer to shop by expanding our online capabilities and improving the user experience at www. la-z-boy.com to drive more traffic to both our online site and our physical stores. We also own Joybird, a leading omni-channel, direct to consumer retailer and manufacturer of upholstered furniture. We also own Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture. Joybird sells a large portion of their product online, where there is significant competition for customer attention among online and direct-to-consumer brands. Joybird sells product primarily online, where there is significant competition for customer attention among online and direct-to-consumer brands.
These and other competitive pressures could cause us to lose market share, revenue and customers, increase expenditures or reduce prices, any of which could have a material adverse effect on our results of operations and liquidity.
Operational Risk Factors
Our business and our reputation could be adversely affected by cybersecurity incidents and the failure to protect sensitive information relating to customers, consumers, employees, contractors, suppliers, vendors and other third parties or confidential business information.
We receive, process, store, and share sensitive information relating to our customers, consumers, employees, contractors, suppliers, vendors and other third parties, including payment information, personally identifiable information, confidential business information, and proprietary data.We receive, process, store, use and share data about our customers, consumers, employees, contractors, suppliers, vendors and others, including payment information and personally identifiable information, as well as other personal, confidential and proprietary information. We also rely on third-party service providers and cloud-based technology platforms to support certain business operations and maintain certain information technology systems and infrastructure.
Cybersecurity threats and incidents, including phishing, ransomware, malware, social engineering, denial-of-service attacks, and other attempts to gain unauthorized access to systems or data, continue to increase in frequency and sophistication. In
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addition, evolving technologies, including artificial intelligence (“AI”), may increase the effectiveness, speed and scale of cyber-attacks. During fiscal 2026, we experienced attempts to breach our networks and systems, and we expect such attempts to continue.
Despite the cybersecurity measures and controls that we maintain, our systems and those of our third-party service providers may be vulnerable to cybersecurity incidents, unauthorized access, data loss, theft, misuse, or other security breaches. Because techniques used to obtain unauthorized access to systems and data are constantly evolving, our security measures may not detect or prevent all incidents on a timely basis or at all.
A significant cybersecurity incident or data breach could disrupt our operations, compromise sensitive information, damage our reputation, result in lost sales or customers, expose us to litigation or regulatory investigations, and result in remediation costs, fines, penalties, or other liabilities. Although we maintain insurance coverage intended to mitigate certain losses, our coverage may not be adequate to cover all costs or liabilities associated with a cybersecurity incident.
Disruptions to our information technology systems could adversely affect our business and results of operations.
We rely extensively on information technology systems to process transactions, manage our operations, support certain independent dealers, maintain financial and operational records, and communicate throughout our supply chain. We also depend on systems and services provided by third-party technology vendors.
Our information technology systems, including back-up systems, may be damaged, interrupted, or fail to operate properly as a result of power outages, telecommunications failures, hardware or software failures, employee error, cyber incidents, natural disasters, adverse weather, or other events beyond our control. In addition, disruptions or failures affecting critical systems or infrastructure maintained by third-party service providers could adversely affect our operations. Any significant disruption, outage or failure involving our information technology systems or those of our third-party providers could result in operational delays, production disruptions, supply chain interruptions, lost sales, customer dissatisfaction, increased costs, and reputational harm, which could adversely affect our business and results of operations. If critical systems become unavailable or damaged, we may be required to make substantial investments to repair, replace, or restore such systems and implement alternative processes or remediation measures. Although we maintain business continuity and disaster recovery plans, such plans may not be effective in all circumstances. While we carry insurance that would mitigate losses from certain damage, interruption, or breach of our information technology systems, insurance may be insufficient to compensate us fully for potential significant losses.
Inability to maintain and enhance our brand image and reputation and respond to changes in our current and potential consumers' tastes, trends and shopping behavior in a timely manner could adversely affect our business, results of operations and financial condition.
The success of our business depends in large part on our ability to maintain, enhance, and protect our brand image and reputation to increase our business by retaining consumers and attracting new ones.The success of our business depends on our ability to maintain and enhance our brands to increase our business by retaining consumers and attracting new ones. Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including use of social media and online advertising campaigns, and more recently the growing use of AI and generative AI, as well as changes to consumer behavior based on these new technologies. Furniture products are fashion-oriented so changes in consumers' tastes and trends and the resultant change in our product mix, as well as failure to offer our consumers multiple channels for purchasing our products, could adversely affect our business and results of operations. Furniture product is fashion-oriented so changes in consumers' tastes and trends and the resultant change in our product mix, as well as failure to offer our consumers multiple avenues for purchasing our products, could adversely affect our business and results of operations. As mentioned above, there is significant competition for customer attention among online and direct-to-consumer brands. Our objective is to maintain strong advertising and marketing campaigns promoting our brands and to update our current product designs, styles, quality, prices, and options to purchase our products in-store or online. If these efforts are unsuccessful or require us to incur substantial costs, our business, results of operations and financial condition could be adversely affected.
Significant disruptions in our supply chain could negatively affect our business and results of operations.
From time to time, like many businesses, we have experienced significant disruption in our supply chain as a result of external factors, resulting in unprecedented increases in material, freight and transportation costs, as well as significant unavailability or delay of raw materials, parts or finished goods.From time to time, like many businesses, we have experienced significant disruption in our supply chain as a result of external factors, such as the COVID-19 pandemic, resulting in unprecedented increases in material, freight and transportation costs, as well as significant unavailability or delay of parts or finished goods. Future significant disruptions of this nature in our supply chain, in the furniture industry, within our independent dealer network or among our third-party wholesalers, or other unusual developments could cause significant disruption to our business and negatively affect our results of operations.
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Fluctuations in the price, availability and quality of raw materials could cause delays that could result in our inability to timely provide goods to our customers. Such fluctuations have increased, and could continue to increase, our cost and therefore decrease our earnings.
In manufacturing furniture, we use various types of wood, fabrics, leather, upholstered filling material, including polyurethane foam, steel, other raw materials, and metal components.In manufacturing furniture, we use various types of wood, fabrics, leathers, upholstered filling material, including polyurethane foam, steel, other raw materials, and metal components. Additionally, our manufacturing processes and plant operations use various electrical equipment and components and tooling. Because we are dependent on outside suppliers for these items, fluctuations in their price, availability, and quality have had, and could continue to have, a negative effect on our cost of sales and our ability to meet our customers' demands. We have a higher concentration in upholstery sales, including motion furniture, than many of our competitors, and the effects of price and wage inflation related to steel, polyurethane foam, wood, electrical components for power units, leather and fabric or quantity shortages of such materials or parts have had, and could continue to have, a significant negative impact on our business. Competitive and marketing pressures may prevent us from passing along price increases to our customers, and the inability to meet our customers' demands could cause us to lose sales.
Further, most of our polyurethane foam comes from three suppliers. These suppliers have several facilities across the United States, but adverse weather, natural or man-made disasters, or public health crises (such as pandemics or epidemics) could result in delays or restrictions in shipments of polyurethane foam to our plants. Similarly, adverse weather (including increased risk of catastrophic events as a result of climate change), natural or man-made disasters, public health crises (such as pandemics or epidemics), labor disputes, possible acts of terrorism, port and canal blockages and congestion, and availability of shipping containers have resulted, and could in the future result, in delays in shipments or an inability to obtain required raw materials or components from any of our suppliers.
A change in the financial condition of our domestic and foreign fabric and leather suppliers could impede their ability to provide products to us in a timely manner.A change in the financial condition of our domestic and foreign fabric suppliers could impede their ability to provide products to us in a timely manner. Upholstered furniture is fashion oriented, and if we are unable to acquire sufficient fabric variety, or to predict or respond to changes in fashion trends, we might lose sales and have to sell excess inventory at reduced prices. Doing so would have a negative effect on our sales and earnings.
Changes in the availability and cost of foreign sourcing and economic and political uncertainty in countries outside of the United States in which we operate or from which we purchase product, could adversely affect our business and results of operations.
We have operations in countries outside the United States, some of which are located in emerging markets. Long-term economic and political uncertainty in some of the countries in which we operate, such as Mexico and Thailand, could result in the disruption of markets and negatively affect our business. Long-term economic and political uncertainty in some of the countries in which we operate, such as the United Kingdom, Mexico, and Thailand, could result in the disruption of markets and negatively affect our business. Our Wholesale segment purchases cut-and-sewn fabric and leather sets, electronic component parts, and some finished goods from Chinese and other foreign vendors. Our cut-and-sewn leather and fabric sets are primarily purchased from suppliers that operate in Vietnam and China and the majority of our raw fabric, including the fabric that is used by our Vietnam fabric set suppliers, is purchased from suppliers that primarily operate in China. While we continue to diversify our vendor sources, as a result of factors outside of our control, at times our sourcing partners have not been able to, and in the future may not be able to, produce or deliver goods in a timely fashion or in the required quantities or the quality of their product may lead us to reject it, causing disruptions in our business operations and delays in shipments to our customers.
Financial and Strategic Risk Factors
Our current retail markets and other markets that we may enter in the future may not achieve the growth and profitability we anticipate. We have incurred, and may incur in the future, charges for the impairment of long-lived assets, goodwill, or other intangible assets if we fail to meet our earnings expectations for these markets.
From time to time we may acquire independent La-Z-Boy Stores or other direct to consumer businesses, such as Joybird.From time to time we may acquire independent La-Z-Boy Furniture Galleries® stores or other retail businesses, such as Joybird. We also remodel and relocate existing stores and experiment with new store formats and may close underperforming stores. We also plan to remodel and relocate existing stores and experiment with new store formats and may close underperforming stores. Our assets include goodwill and other intangible assets acquired in connection with these acquisitions. Profitability of acquired, remodeled, relocated, and new format stores will depend on lease rates (for stores we lease) and retail sales and profitability justifying the costs of such acquisition, remodeling, and relocation. If we do not meet our sales or earnings expectations for these stores or businesses, we have in the past incurred, and may in the future incur, charges for the impairment of long-lived assets, the impairment of right-of-use lease assets, the impairment of goodwill, or the impairment of other intangible assets. If we do not meet our sales or earnings expectations for these stores or businesses, we have in the past incurred and may in the future incur charges for the impairment of long-lived assets, the impairment of right-of-use lease assets, the impairment of goodwill, or the impairment of other intangible assets.
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We may require funding from external sources, which may not be available at the levels we require or may cost more than we expect, and as a result, our expenses and results of operations could be negatively affected.
We regularly review and evaluate our liquidity and capital needs. We believe that our cash and cash equivalents, short-term investments, cash from operations, and amounts available under our credit facility will be sufficient to finance our operations and expected capital requirements for at least the next 12 months.
In the event that we draw on our credit facility, outstanding amounts may become immediately due and payable upon certain events of default, including a failure to comply with the financial covenants in the credit agreement—a consolidated net lease adjusted leverage ratio requirement and a consolidated fixed-charge coverage ratio requirement—or with certain other affirmative and negative covenants in the credit agreement.In the event that we draw on our credit facility, outstanding amounts may become immediately due and payable upon certain events of default, including a failure to comply with the financial covenants in the credit agreement—a consolidated net lease 14 Table of Contentsadjusted leverage ratio requirement and a consolidated fixed-charge coverage ratio requirement—or with certain other affirmative and negative covenants in the credit agreement. If we are unable to access additional credit at the levels we require, or the cost of credit is greater than expected, it could adversely affect our results of operations or financial condition.
Due to the nature of our business and our payment terms, we may not be able to collect amounts owed to us by customers or other third-parties, which may adversely affect our sales, earnings, financial condition, and liquidity.Due to the nature of our business and our payment terms, we may not be able to collect amounts owed to us by customers, which may adversely affect our sales, earnings, financial condition, and liquidity.
We grant payment terms to most wholesale customers ranging from 15 to 60 days. Some of our customers have experienced, and may in the future experience, cash flow and credit-related issues. If a major event with negative economic effects were to occur, and such effects have occurred in the past, we may not be able to collect amounts owed to us or such payment may only occur after significant delay. While we perform credit evaluations of our customers and other third-parties, those evaluations may not prevent uncollectible trade accounts receivable or debt. While we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable. Credit evaluations involve significant management diligence and judgment, especially in the current environment. Should more customers than we anticipate experience liquidity issues, if payment is not received on a timely basis, or if a customer or other third-party declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers or other third parties, which could adversely affect our sales, earnings, financial condition and liquidity. Should more customers than we anticipate experience liquidity issues, if payment is not received on a timely basis, or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition and liquidity.
We may be unsuccessful in identifying attractive acquisition opportunities or, to the extent that we pursue attractive acquisition opportunities, we may be unsuccessful in completing or realizing the expected benefits of such acquisitions.
From time to time, we may acquire independent La-Z-Boy Stores or other retail businesses or pursue other growth opportunities through strategic acquisitions.From time to time, we may acquire independent La-Z-Boy Furniture Galleries® stores or other retail businesses or pursue other growth opportunities through strategic acquisitions. We have completed several such acquisitions in recent years. If we choose to acquire businesses in the future, there can be no assurance that we will be able to find suitable businesses to purchase, acquire such businesses on acceptable terms, or realize the benefits of any acquisition we pursue. The success of any completed acquisition will depend on our ability to effectively integrate and manage the business after the acquisition. The identification of suitable acquisition or strategic investment candidates, as well as the management and integration of any acquired businesses, can be costly and time-consuming and can distract our leadership team from our current operations.
Legal, Tax and Regulatory Risk Factors
Changes in the domestic or international regulatory environment could adversely affect our business and results of operations.
We are subject to numerous laws and regulations, including those relating to labor and employment, customs, sanctions, truth-in-advertising, consumer protection, e-commerce, privacy, health and safety, real estate, environmental and zoning and occupancy, intellectual property and other laws and regulations that regulate retailers, manufacturers or otherwise govern our business. Changes in laws and regulations in the United States or internationally may require us to modify our current business practices or otherwise increase our costs of compliance, which could adversely affect our results of operations.
We are subject to risks from changes to the trade policies, including tariff and import/export regulations, by the United States or other foreign governments.
Changes in trade policy, including trade restrictions, new or increased tariffs or quotas, embargoes, sanctions and countersanctions, safeguards or customs restrictions by the U.S. and/or other foreign governments could have a material adverse impact on our business. The imposition of new tariffs or increases in existing tariffs on products imported from countries where we or our suppliers operate could result in increased costs for raw materials and finished goods. These cost increases may reduce our margins, require us to raise prices, or make our products less competitive in the marketplace. In addition, other countries may change their business and trade policies in anticipation of or in response to increased import tariffs and other changes in trade policy and regulations already enacted or that may be enacted in the future. If we are unable to
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mitigate these risks through supply chain adjustments, pricing strategies, or other measures, our financial performance and growth prospects could be negatively affected.
We manufacture components and finished goods in the United States and Mexico; source raw materials domestically and from foreign countries; purchase components and finished goods manufactured in foreign countries, including Vietnam and China; participate in consolidated joint ventures in Thailand; and operate a wholesale and retail business in Canada.We manufacture components and finished goods in the United States, Mexico and the United Kingdom; source raw materials domestically and from foreign countries; purchase components and finished goods manufactured in foreign countries, including China and Vietnam; participate in consolidated joint ventures in Thailand; and operate a wholesale and retail business in Canada. As a result, we are subject to risks relating to changes in the domestic or international regulatory environment or trade policies, including new or increased duties, tariffs, retaliatory tariffs, trade limitations, and termination or renegotiation of bilateral and multilateral trade agreements impacting our business.
The United States has enacted certain tariffs on many items sourced from China and other countries, including certain furniture, accessories, furniture parts, and raw materials that are imported into the United States and that we use in our domestic operations.15 Table of ContentsThe United States has enacted certain tariffs on many items sourced from China, including certain furniture, accessories, furniture parts, and raw materials that are imported into the United States and that we use in our domestic operations. We may not be able to fully or substantially mitigate the impact of these tariffs, pass price increases on to our customers, or secure adequate alternative sources of products or materials. The tariffs, along with any additional tariffs or retaliatory trade restrictions implemented by the United States or other countries, could negatively impact customer sales, including potential delays in product received from our vendors, our cost of goods sold and results of operations. Conversely, if certain tariffs are eliminated or reduced, we may face additional competition from foreign manufacturers entering the United States market and from domestic retailers who rely on imported goods, putting pressure on our prices and margins, which could adversely affect our results of operations. Finally, our business, including our sales and margins, could be adversely affected by the imposition in Canada, China, Mexico, Thailand, Vietnam, the United Kingdom or other foreign countries of import bans, quotas, and increases in tariffs. Finally, our business, including our sales and margins, could be adversely affected by the imposition in Canada, Mexico, the United Kingdom or other foreign countries of import bans, quotas, and increases in tariffs.
Our business and our reputation could be adversely affected by the failure to comply with, or the costs of compliance with, evolving regulations relating to our obligation to protect sensitive information relating to customers, consumers, employees, suppliers, and vendors or confidential business information.Our business and our reputation could be adversely affected by the failure to comply with or the cost of compliance with evolving regulations relating to our obligation to protect sensitive employee, customer, consumer, vendor or Company data.
We receive, process, store, and share sensitive information about our customers, consumers, employees, contractors, suppliers, vendors and other third parties, including payment information and personally identifiable information, as well as other confidential business information.We receive, process, store, use and share data about our customers, consumers, employees, contractors, suppliers, vendors and others, including payment information and personally identifiable information, as well as other personal, confidential and proprietary information. There are numerous federal, state, local and foreign laws and regulations regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. Regulatory focus on data privacy and security concerns continues to increase globally, and laws and regulations concerning the collection, use, and disclosure of personal information are expanding and becoming more complex, while being subject to uncertain and differing interpretations that may be inconsistent among countries or conflict with other rules. For example, the European General Data Protection Regulation (“GDPR”) applies to us and creates a range of requirements and compliance obligations regarding the treatment of personal data, including the public disclosure of significant data breaches, and imposes significant penalties for non-compliance. Several state laws include additional requirements with respect to disclosure and deletion of personal information of residents, as well as civil penalties for violations and a private right of action for data breaches. These privacy and data protection laws may increase our costs of compliance and risks of non-compliance, which could result in substantial penalties, negative publicity and harm to our brand. These risks may be heightened by our online marketing and customer engagement activities. It is possible that these laws may be interpreted or applied in a manner that is adverse to us, unforeseen, or otherwise inconsistent from one jurisdiction to another or with our practices, or that we may not adequately adapt our internal policies and/or procedures to evolving regulations, any of which could result in litigation, regulatory investigations, enforcement actions, fines, penalties and potential legal liability, require us to change our practices in a manner adverse to our business or limit access to our products and services in certain countries. As a result, our reputation and brand, which are critical to our business operations, may be harmed, we could incur substantial costs, including costs related to litigation, or we could lose both customers and revenue.
Changes in regulation of our international operations, including anti-corruption laws and regulations, could adversely affect our business and results of operations.
Our operations outside of the United States and sale of product in various countries subject us to U.S. and foreign laws and regulations, including but not limited to the UK Bribery Act 2010, the U.S. Foreign Corrupt Practices Act, the U.S. Export Administration Act, and other anti-bribery and anti-corruption statutes. These laws and regulations include prohibitions on improper payments to government officials, restrictions on where we can do business, what products we can supply to certain countries, and what information we can provide to certain governments. Violations of these laws, which are complex, frequently changing, and are often subject to varying interpretation and enforcement, may result in civil or criminal penalties or sanctions that could have a significant adverse effect on our business and results of operations. It is possible that our employees, contractors, or agents could violate our policies and procedures or otherwise fail to comply with these laws and regulations.
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We may be subject to product liability and other claims or undertake to recall one or more products, which could adversely affect our reputation, business, results of operations and financial condition.
Millions of our products, sold over many years, are currently used by consumers. We have voluntarily recalled products in the past, and while none of those recalls has resulted in a material expense or other significant adverse effect, a significant product recall or other product-related litigation could result in future additional expense, penalties, and injury to our brands and reputation, and adversely affect our business and results of operations. In addition, we are involved in lawsuits, claims and proceedings incident to the ordinary course of our business. Litigation is inherently unpredictable. Any claims against us, whether meritorious or not, could result in costly litigation that could adversely affect our business and results of operations.
Although we maintain liability insurance in amounts that we believe are reasonable, in most cases, we are responsible for large, self-insured retentions and legal defense costs.16 Table of ContentsAlthough we maintain liability insurance in amounts that we believe are reasonable, in most cases, we are responsible for large, self-insured retentions and defense costs. We may not be able to maintain such insurance on acceptable terms, if at all, in the future, or product liability or other claims may exceed the amount of our insurance coverage, or all such matters may not be covered by our insurance. We may not be able to maintain such insurance on acceptable terms, if at all in the future, or that product liability or other claims will not exceed the amount of insurance coverage, or that all such matters would be covered by our insurance. As a result, product liability and other claims could have a material adverse effect on our reputation, business, results of operations and financial condition. As a result, product liability and other claims could have a material adverse effect on our business, results of operations and financial condition.
Changes in tax policies could adversely affect our business and results of operations.
Changes in United States or international income tax laws and regulations may have an adverse effect on our business in the future. We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective income tax rate in the future could be adversely affected by a number of factors, including changes in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, the outcome of income tax audits in various jurisdictions, and any repatriation of non-U.S. earnings for which the Company has not previously provided for U.S. taxes. We regularly assess these matters to determine the adequacy of our tax provision, which is subject to significant judgment.
General Risk Factors
Our operations are subject to risks of unsettled political conditions, natural or man-made disasters, adverse weather, climate change, acts of war, terrorism, organized crime, pandemics and other public health concerns, any one of which could adversely affect our business and results of operations.
Our operations are subject to risks of unsettled political conditions, natural or man-made disasters, adverse weather, climate change, acts of war, terrorism, organized crime, pandemics and other public health concerns. If any of these events cause disruptions or damage in our manufacturing plants, distribution facilities, company-owned La-Z-Boy Stores or corporate headquarters, or the facilities of our vendors, or if such events impact the availability of raw materials or cause disruption in our supply chain, that could make servicing our customers more difficult or result in the potential loss of sales and customers. If any of these events cause disruptions or damage in our manufacturing plants, distribution facilities, company-owned La-Z-Boy Furniture Galleries® stores or corporate headquarters, or the facilities of our vendors, or if such events impact the availability of raw materials or cause disruption in our supply chain, that could make servicing our customers more difficult or result in the potential loss of sales and customers. In addition, we may incur costs in repairing any damage beyond our applicable insurance coverage. Any of these outcomes could have an adverse affect on our business and results of operations.
We make certain assumptions, judgments and estimates that impact the amounts reported in our consolidated financial statements, which, if not accurate, may impact our financial results.
Certain assumptions, judgments and estimates impact amounts reported in our consolidated financial statements, including but not limited to, inventories, goodwill, intangible assets, product warranty liabilities, insurance and legal-related liabilities, and income taxes. To derive our assumptions, judgments and estimates, we use historical experience and various other factors that we believe are reasonable as of the date we prepare our consolidated financial statements. Our goodwill, resulting from certain acquisitions, is based on the expected future performance of the operations acquired and at least annually, we reassess the goodwill for impairment. Changes in business conditions or other events could materially change the projection of future cash flows or the discount rate we used in the fair value calculation for goodwill impairment tests. Actual results could differ materially from our estimates, and such differences may impact our financial results.
We may not be able to recruit and retain key employees and skilled workers in a competitive labor market or we could experience continued increases in labor costs, which could adversely affect our business and results of operations.
If we cannot successfully recruit and retain key employees and skilled workers or we experience the unexpected loss of those employees, our operations may be negatively impacted. A shortage of qualified personnel along with continued labor cost inflation may require us to further enhance our compensation in order to compete effectively in the hiring and retention of qualified employees.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C.ITEM 1A. CYBERSECURITY.
Risk Management and Strategy
The Company has a written incident response plan ("IRP") and conducts annual tabletop exercises to enhance incident response preparedness. Business continuity and disaster recovery plans are used to prepare for the potential for a disruption in the technology we rely on. The Company is a member of an industry cybersecurity intelligence and risk sharing organization. Certain employees, including those with access to Company-provided e-mail accounts, undergo security awareness training when hired and at least annually thereafter.
The Company has an enterprise risk management committee comprised of key business and functional leaders to address enterprise risks, and cybersecurity is a risk category addressed by that group. In addition to assessing major risks, management identifies and monitors such risks. At least annually, the Company’s executive leadership reviews with the Board of Directors the major risks identified in the enterprise risk management process, as well as the steps identified to mitigate such risks. Each of the business and functional leaders responsible for the management of these identified risks also regularly discusses with the Board changes in assessment of these risks and mitigation plans.
The Company (or third parties it relies on) may not be able to fully, continuously, and effectively implement security controls as intended. As described above, we utilize a risk-based approach and judgment to determine the security controls to implement and it is possible we may not implement appropriate controls if we do not recognize or underestimate a particular risk. In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate risks. And events, when detected by security tools or third parties, may not always be immediately understood or acted upon.
Governance
18
of comprehensive IT experience across a breadth of technologies, and the CISO brings significant experience in cybersecurity operations, risk management, and information security practices.
The CIO is also a member of the Company’s executive leadership team and meets regularly with the CEO, CFO, and other members of executive management regarding cybersecurity risks, strategy, and incidents. The CIO reports directly to the Board , at least twice a year, on cybersecurity risks and strategy and attends Board meetings to be available to discuss cybersecurity matters with the Board. The CISO also supports these reporting and governance activities, as appropriate. Oversight of the information security program at the Board level sits with the Audit Committee. The CIO and CISO report to the Audit Committee on risks and internal controls related to cybersecurity and information technology and systems at least annually and attends quarterly Committee meetings to be available to discuss such matters with the Audit Committee. The CIO reports to the Audit Committee on risks and internal controls related to cybersecurity and information technology and systems at least annually and attends quarterly Committee meetings to be available to discuss such matters with the Audit Committee.
Recently Filed
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| Ticker * | File Date |
|---|---|
| LZB | an hour ago |
| SNOA | an hour ago |
| NKLR | 23 hours ago |
| CRDO | 1 day ago |
| VTGN | 1 day, 1 hour ago |
| AIOT | 1 day, 1 hour ago |
| QUMS | 1 day, 4 hours ago |
| CGC | 1 day, 11 hours ago |
| GWAV | 3 days, 22 hours ago |
| BF-A | 4 days, 1 hour ago |
| RVSB | 4 days, 1 hour ago |
| BKYI | 4 days, 3 hours ago |
| IEHC | 4 days, 5 hours ago |
| ONAR | 5 days ago |
| FRD | 5 days, 1 hour ago |
| SENEB | 5 days, 1 hour ago |
| MH | 5 days, 10 hours ago |
| AEMD | 6 days ago |
| BARK | 6 days, 1 hour ago |
| SJM | 1 week ago |
| ESSI | 1 week ago |
| NTCS | 1 week ago |
| NATH | 1 week ago |
| CETY | 1 week, 4 days ago |
| WRLD | 1 week, 5 days ago |
| OESX | 1 week, 5 days ago |
| LRHC | 1 week, 5 days ago |
| PYYX | 1 week, 5 days ago |
| ANVI | 1 week, 6 days ago |
| MLAB | 1 week, 6 days ago |
| PETS | 2 weeks ago |
| UPYY | 2 weeks ago |
| SKFG | 2 weeks ago |
| HIVE | 2 weeks ago |
| IVF | 2 weeks ago |
| BRLS | 2 weeks ago |
| PRPH | 2 weeks, 1 day ago |
| GLSI | 2 weeks, 1 day ago |
| FRHC | 2 weeks, 1 day ago |
| UVV | 2 weeks, 1 day ago |
| ACQC | 2 weeks, 4 days ago |
| PKE | 2 weeks, 4 days ago |
| STEK | 2 weeks, 4 days ago |
| FNGR | 2 weeks, 4 days ago |
| FSHP | 2 weeks, 4 days ago |
| KSEZ | 2 weeks, 4 days ago |
| RMCF | 2 weeks, 4 days ago |
| VSAT | 2 weeks, 4 days ago |
| STE | 2 weeks, 4 days ago |
| NTRP | 2 weeks, 4 days ago |
