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Stock-Based Compensation | 12 Months Ended
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Apr. 29, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation In fiscal 2023, our shareholders approved the La-Z-Boy Incorporated 2022 Omnibus Incentive Plan which provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units, unrestricted stock, performance awards, dividend equivalent rights, and short-term cash incentive awards. Under this plan, the aggregate number of common shares that may be issued through awards of any form is 2.8 million shares, reduced by the number of shares subject to awards granted under the La-Z-Boy Incorporated 2017 Omnibus Incentive Plan after April 30, 2022 and prior to the Annual Meeting of Shareholders of La-Z-Boy Incorporated held on August 30, 2022. Awards granted in fiscal 2023 were made under our La-Z-Boy Incorporated 2017 Omnibus Incentive Plan. As of the end of fiscal 2023, no grants may be issued under this plan or any of our previous plans. The table below summarizes the total stock-based compensation expense we recognized for all outstanding grants. Stock-based compensation expense is recorded in SG&A in the consolidated statement of income:
|  | Fiscal Year Ended
|  | (52 weeks) |  | (53 weeks) |  | (52 weeks)
(Amounts in thousands) |  | 4/29/2023 |  | 4/30/2022 |  | 4/24/2021
Equity-based awards expense |  |  |  |  |  |
Stock options |  | $ | 2,076 |  |  | $ | 1,973 |  |  | $ | 2,959 |
Restricted stock |  | 5,069 |  |  | 3,720 |  |  | 3,367 |
Restricted stock units issued to Directors |  | 1,020 |  |  | 1,194 |  |  | 840 |
Performance-based shares |  | 4,293 |  |  | 4,971 |  |  | 5,505 |
Total equity-based awards expense |  | 12,458 |  |  | 11,858 |  |  | 12,671 |
Liability-based awards expense (1) |  | 162 |  |  | (1,131) |  |  | 1,878 |
Total stock-based compensation expense |  | $ | 12,620 |  |  | $ | 10,727 |  |  | $ | 14,549 |
(1)Includes stock appreciation rights, 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. Stock Options. The La-Z-Boy Incorporated 2017 Omnibus Incentive Plan authorized grants to certain employees and directors to purchase common shares at a specified price, which may not be less than 100% of the current market price of the stock at the date of grant. We granted 318,411 stock options to employees during the first quarter of fiscal 2023, and we also have stock options outstanding from previous grants. We account for stock options as equity-based awards because when they are exercised, they will be settled in common shares. We recognize compensation expense for stock options over the vesting period equal to the fair value on the date our Compensation and Talent Oversight Committee of our board of directors approved the awards. The vesting period for our stock options ranges from one to four years, with accelerated vesting upon retirement. The vesting date for retirement-eligible employees is the later of the date they meet the criteria for retirement or ten months after the grant date. We accelerate the expense for options granted to retirement eligible employees over the vesting period, with expense recognized from the grant date through their retirement eligibility date or over the ten months following the grant date, whichever period is longer. We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur. Granted options outstanding under the former long-term equity award plan remain in effect and have a term of 10 years. We estimate the fair value of the employee stock options at the grant date using the Black-Scholes option-pricing model, which requires management to make certain assumptions. The fair value of stock options granted during fiscal years 2023, 2022, and 2021 were calculated using the following assumptions:
| Grant Year |  |
| Fiscal 2023 |  | Fiscal 2022 |  | Fiscal 2021 |  | Assumption
Risk-free interest rate | 2.87% |  | 0.82% |  | 0.34% |  | U.S. Treasury issues with term equal to expected life at grant date
Dividend rate | 2.70% |  | 1.58% |  | —% |  | Estimated future dividend rate and common share price at grant date
Expected life | 5.0 years |  | 5.0 years |  | 5.0 years |  | Contractual term of stock option and expected employee exercise trends
Stock price volatility | 42.78% |  | 42.16% |  | 41.79% |  | Historical volatility of our common shares
Fair value per option | $ | 7.90 |  |  | $ | 12.29 |  |  | $ | 10.06 |  |  |
Plan activity for stock options under the above plans was as follows:
| Number of Shares (In Thousands) |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value (In Thousands)
Outstanding at April 30, 2022 | 1,516 |  |  | $ | 30.51 |  |  | 6.6 |  | $ | 24 |
Granted | 318 |  |  | 24.41 |  |  | N/A |  | N/A
Canceled | (37) |  |  | 30.46 |  |  | N/A |  | N/A
Exercised | (176) |  |  | 26.64 |  |  | N/A |  | 1,047 |
Outstanding at April 29, 2023 | 1,621 |  |  | 29.73 |  |  | 6.7 |  | 2,175 |
Exercisable at April 29, 2023 | 1,076 |  |  | $ | 30.15 |  |  | 5.7 |  | $ | 776 |
The aggregate intrinsic value of options exercised was $0.3 million and $5.1 million in fiscal 2022 and fiscal 2021, respectively. As of April 29, 2023, our total unrecognized compensation cost related to non-vested stock option awards was $2.7 million, which we expect to recognize over a weighted-average remaining vesting term of all unvested awards of 1.6 years. During the year ended April 29, 2023, stock options with respect to 0.3 million shares vested. We received $4.7 million, $1.1 million, and $10.8 million in cash during fiscal 2023, 2022, and 2021, respectively, for exercises of stock options. Restricted Stock. We granted 256,128 shares of restricted stock units to employees during fiscal 2023. We issue restricted stock at no cost to the employees and account for restricted stock 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 awards vest at 25% per year, beginning one year from the grant date for a term of four years, with continued vesting upon retirement with respect to the fiscal 2023 grants. We accelerate the expense for restricted stock granted to retirement-eligible employees over the vesting period, with expense recognized from the grant date through their retirement eligibility date or over the ten months following the grant date, whichever period is longer. We 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 fiscal 2023 was $24.58 per share, the market value of our common shares on the date of grant. The following table summarizes information about non-vested awards as of and for the year ended April 29, 2023:
|  | Shares or Units (In Thousands) |  | Weighted Average Grant Date Fair Value
Non-vested awards at April 30, 2022 |  | 287 |  |  | $ | 33.45 |
Granted |  | 256 |  |  | 24.58 |
Vested |  | (107) |  |  | 32.81 |
Canceled |  | (43) |  |  | 31.15 |
Non-vested awards at April 29, 2023 |  | 393 |  |  | 28.10 |
Unrecognized compensation cost related to non-vested restricted shares was $6.7 million and is expected to be recognized over a weighted-average remaining contractual term of all unvested awards of 1.5 years. Restricted Stock Units Issued to Directors. Restricted stock units granted to our non-employee directors are offered at no cost to the directors and vest the earlier of the date a director ceases to be a member of the board (for any reason other than the termination of service for cause) or the one-year anniversary of the grant date. During fiscal 2023, fiscal 2022, and fiscal 2021 we granted less than 0.1 million restricted stock units each year to our non-employee directors. We account for these restricted stock units as equity-based awards because when they vest, they will be settled in shares of our common stock. We measure and recognize compensation expense for these awards based on the market price of our common shares on the date of grant. The weighted-average fair value of the restricted stock units that were granted during fiscal 2023, fiscal 2022, and fiscal 2021 was $26.49, $35.34, and $32.08, respectively. Performance Shares. Under the La-Z-Boy Incorporated 2017 Omnibus Incentive Plan, the Compensation and Talent Oversight Committee of our board of directors is authorized to award common shares to certain employees based on the attainment of certain financial goals over a given performance period. The awards are offered at no cost to the employees. In the event of an employee's termination during the vesting period, the potential right to earn shares under this program is generally forfeited. During the first quarter of fiscal 2023, we granted 240,833 performance-based shares, and we also have performance-based share awards outstanding from grants in fiscal 2022 and fiscal 2021. Payout 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. The number of awards that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring employees to remain employed with the Company through the end of the three-year performance periods. The following table summarizes the performance-based shares outstanding at the maximum award amounts based upon the respective performance share agreements:
|  | Shares (In Thousands) |  | Weighted Average Grant Date Fair Value
Outstanding shares at April 30, 2022 |  | 621 |  |  | $ | 32.28 |
Granted |  | 482 |  |  | 24.41 |
Vested |  | (122) |  |  | 28.68 |
Unearned or canceled |  | (218) |  |  | 30.21 |
Outstanding shares at April 29, 2023 |  | 763 |  |  | 28.47 |
We account for performance-based shares 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 shares that vest based on our results relative to the performance goals, we expense as compensation cost the fair value of the shares as of the day we granted the awards recognized over the performance period, taking into account the probability that we will satisfy the performance goals. The fair value of each share of the awards we granted in fiscal 2023, fiscal 2022, and fiscal 2021 that vest based on attaining performance goals was $22.43, $36.13, and $30.75, respectively, the market value of our common shares on the date we granted the awards less the dividends we expect to pay before the shares vest. For shares that vest based on market conditions, we use a Monte Carlo valuation model to estimate each share's fair value as of the date of grant. 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. Similar to the way in which we expense the awards of stock options, we expense compensation cost over the vesting period regardless of whether the market condition is ultimately satisfied. Based on the Monte Carlo model, the fair value as of the grant date of the fiscal 2023, fiscal 2022, and fiscal 2021 grants of shares that vest based on market conditions was $36.63, $51.85, and $38.14, respectively. Our unrecognized compensation cost at April 29, 2023, related to performance-based shares was $6.7 million based on the current estimates of the number of awards that will vest, and is expected to be recognized over a weighted-average remaining contractual term of all unvested awards of 1.4 years. Equity-based compensation expenses related to performance-based shares recognized in our consolidated statement of income were as follows (for the fiscal years ended):
|  | Fiscal Year Ended
|  | (52 weeks) |  | (53 weeks) |  | (52 weeks)
(Amounts in thousands) |  | 4/29/2023 |  | 4/30/2022 |  | 4/24/2021
Fiscal 2019 grant |  | $ | — |  |  | $ | — |  |  | $ | 1,545 |
Fiscal 2020 grant |  | — |  |  | 1,066 |  |  | 2,051 |
Fiscal 2021 grant |  | 548 |  |  | 2,195 |  |  | 1,909 |
Fiscal 2022 grant |  | 1,649 |  |  | 1,710 |  |  | — |
Fiscal 2023 grant |  | 2,096 |  |  | — |  |  | — |
Total expense |  | $ | 4,293 |  |  | $ | 4,971 |  |  | $ | 5,505 |

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