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Aug. 4, 2021, 6:00 a.m. EDT

LL Flooring Reports Second Quarter 2021 Financial Results

RICHMOND, Va., (BUSINESS WIRE) -- Lumber Liquidators (“LL Flooring” or “Company”) /zigman2/quotes/202539569/composite LL -6.49% , a leading specialty retailer of hard-surface flooring in North America, today announced financial results for the second quarter ended June 30, 2021.

“Thanks to the hard work and dedication of our associates, we delivered strong second quarter financial results as measured on both a one- and two-year basis,” said President and Chief Executive Officer Charles Tyson. “We delivered comparable sales growth of 31.3% and operating margin expansion of 290 basis points versus the second quarter of 2020. We also delivered comparable sales growth of 10.0% on a two-year stack basis and grew our operating margin by 600 basis points versus the second quarter of 2019. Our strong sales and profitability results were driven by increasing traction on our transformation initiatives as well as continued strong demand for home improvement projects and consumers’ growing comfort allowing contractors into their homes as the economy recovers from the COVID-19 pandemic.”

“As we look ahead, we are encouraged by the increasing traction we are gaining on our transformation that will position us well for sustainable long-term growth,” Tyson continued. “In the near term, we are cautious about the potential impact of continued supply chain disruptions as well as related higher transportation and materials costs. To minimize the impact of these headwinds, we are keenly focused on rebuilding inventory to drive sales, executing our pricing and promotion strategies to optimize gross margin, and maintaining disciplined expense management as we continue to invest in our growth strategies.”

Second Quarter Financial Highlights

  • Net sales of $301.4 million increased 30.9% compared to the same period last year and 4.4% compared to the second quarter of 2019, driven primarily by strong pro customer and services sales.

  • Total comparable store sales increased 31.3% versus the same period last year, and increased 10.0% on a two-year stack basis (which does not reflect the impact of store closures and openings between periods).

  • Gross margin of 37.4% decreased 90 basis points as a percent of sales compared to the same period last year and increased 190 basis points compared to the second quarter of 2019; Adjusted gross margin [1] of 37.4% decreased 90 basis points as a percent of sales compared to the same period last year, primarily reflecting higher tariffs, materials and inbound transportation costs that were partially offset by pricing, promotion and sourcing strategies; and increased 220 basis points compared to the second quarter of 2019, primarily reflecting the Company’s pricing, promotion and sourcing strategies that more than mitigated higher tariffs.

  • SG&A as a percent of sales of 31.9% leveraged 380 basis points compared to the second quarter of last year and 410 basis points compared to the second quarter of 2019; Adjusted SG&A [1] as a percent of sales of 31.8% leveraged 370 basis points compared to the second quarter of last year on higher net sales, and leveraged 220 basis points compared to the second quarter of 2019 on more efficient marketing spend and disciplined expense management.

  • Operating margin of 5.5% increased 290 basis points compared to the second quarter of last year and 600 basis points compared to the second quarter of 2019; Adjusted operating margin [1 ] of [] 5.6% increased 280 basis points compared to the second quarter of last year, and 440 basis points compared to the second quarter of 2019.

  • Diluted EPS of $0.41 increased $0.32 compared to the second quarter of last year and increased $0.51 compared to the second quarter of 2019; Adjusted Earnings Per Diluted Share [1] of $0.41 increased $0.31 compared to the second quarter of last year and increased $0.38 compared to the second quarter of 2019.

  • During the second quarter, the Company repaid all $101.0 million of outstanding debt.

  • During the second quarter, the Company opened four new stores , bringing total stores to 416 as of June 30, 2021.

1Pleaserefer to the GAAP to non-GAAP reconciliation tables below for more information.

Cash Flow & Liquidity

As of June 30, 2021, the Company had liquidity of $241.0 million, consisting of excess availability under its Credit Agreement of $128.6 million, and cash and cash equivalents of $112.4 million. This represents an increase in liquidity of $55.0 million from June 30, 2020.

During the first six months of 2021, the Company generated $53.3 million of cash flows from operating activities, primarily due to positive changes in working capital, reflecting continued inventory supply constraints, as well as $22.6 million of net income.

2021 Outlook

For the foreseeable future, there remains uncertainty in the macro environment related to consumer spending as well as global supply chain disruptions, and the potential impact of the COVID-19 Delta variant. As a result, while we are pleased with the traction we are gaining on our transformation initiatives, we are not providing financial guidance at this time. However, we believe it is prudent to plan for slowing comparable sales on a two-year stack basis for the second half of 2021 compared to the 10% two-year stack comparable sales we delivered in the second quarter.

Learn More about LL Flooring

Conference Call and Webcast Information

The Company plans to host a conference call and audio webcast on August 4, 2021, at 8:00 a.m. Eastern Time. The conference may be accessed by dialing (844) 200-6205 or (646) 904-5544. A replay will be available approximately two hours after the call ends through August 11, 2021 and may be accessed by dialing (929) 458-6194 and entering pin number 472642. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company's website, https://investors.llflooring.com/ .

About Lumber Liquidators

LL Flooring is one of North America’s leading specialty retailers of hard-surface flooring with 416 stores as of June 30, 2021. The Company seeks to offer the best customer experience online and in stores, with more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs. LL Flooring’s online tools also help empower customers to find the right solution for the space they’ve envisioned. LL Flooring’s extensive selection includes vinyl plank, solid and engineered hardwood, laminate, bamboo, porcelain tile, and cork, with a wide range of flooring enhancements and accessories to complement. Our stores are staffed with flooring experts who provide advice, pro partnership services and installation options for all of LL Flooring’s products, the majority of which is in stock and ready for delivery.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release includes statements of the Company’s expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by words such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “thinks,” “estimates,” “seeks,” “predicts,” “could,” “projects,” “potential” and other similar terms and phrases, are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, the Company’s management as of the date of such statements. These statements are subject to risks and uncertainties, all of which are difficult to predict and many of which are beyond the Company’s control.

The Company specifically disclaims any obligation to update these statements, which speak only as of the dates on which such statements are made, except as may be required under the federal securities laws. For a discussion of the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see the “Risk Factors” section of the Company’s annual report on Form 10-K for the year ended December 31, 2020, and the Company’s other filings with the Securities and Exchange Commission (“SEC”). Such filings are available on the SEC’s website at www.sec.gov and the Company’s Investor Relations website at https://investors.llflooring.com/ .

Non-GAAP and Other Information

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses the following non-GAAP financial measures: (i) Adjusted Gross Profit; (ii) Adjusted Gross Margin; (iii) Adjusted SG&A; (iv) Adjusted SG&A as a percentage of net sales; (v) Adjusted Operating Income; (vi) Adjusted Operating Margin; (vii) Adjusted Other (Income) Expense; (viii) Adjusted Earnings; and (ix) Adjusted Earnings per Diluted Share. These non-GAAP financial measures should be viewed in addition to, and not in lieu of, financial measures calculated in accordance with GAAP. These supplemental measures may vary from, and may not be comparable to, similarly titled measures by other companies.

The non-GAAP financial measures are presented because management uses these non-GAAP financial measures to evaluate the Company’s operating performance and, in certain cases, to determine incentive compensation. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors. The presented non-GAAP financial measures exclude items that management does not believe reflect the Company’s core operating performance, which include regulatory and legal settlements and associated legal and operating costs, changes in antidumping and countervailing duties, as such items are outside the control of the Company or are due to their inherent unusual, non-operating, unpredictable, non-recurring or non-cash nature.

(Tables Follow)

 
LL Flooring
     
  June 30,   December 31,
  2021   2020
Assets    
Current Assets:    
Cash and Cash Equivalents $ 112,395   $ 169,941  
Merchandise Inventories   223,907     244,409  
Prepaid Expenses   9,602     9,370  
Tariff Recovery Receivable   429     4,078  
Other Current Assets   10,594     10,354  
Total Current Assets   356,927     438,152  
Property and Equipment, net   95,055     97,557  
Operating Lease Right-of-Use   115,792     109,475  
Goodwill   9,693     9,693  
Deferred Tax Asset   11,583     11,611  
Other Assets   8,858     7,860  
Total Assets $ 597,908   $ 674,348  
     
Liabilities and Stockholders’ Equity    
Current Liabilities:    
Accounts Payable $ 69,367   $ 70,543  
Customer Deposits and Store Credits   67,731     61,389  
Accrued Compensation   10,714     15,347  
Sales and Income Tax Liabilities   4,513     5,793  
Accrual for Legal Matters and Settlements   35,750     30,398  
Operating Lease Liabilities - Current   32,640     33,024  
Other Current Liabilities   24,689     25,761  
Total Current Liabilities   245,404     242,255  
Other Long-Term Liabilities   6,793     13,293  
Operating Lease Liabilities - Long-Term   94,646     90,194  
Credit Agreement       101,000  
Total Liabilities   346,843     446,742  
     
Stockholders’ Equity:    
Common Stock ($0.001 par value; 35,000 shares authorized; 30,455 and 30,229 shares issued and 29,063 and 28,911 shares outstanding, respectively)   30     30  
Treasury Stock, at cost (1,392 and 1,318 shares, respectively)   (144,788 )   (142,977 )
Additional Capital   225,287     222,628  
Retained Earnings   170,536     147,925  
Total Stockholders’ Equity   251,065     227,606  
Total Liabilities and Stockholders’ Equity $ 597,908   $ 674,348  
 
LL Flooring
         
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2021   2020   2021   2020
         
Net Sales        
Net Merchandise Sales $ 259,542 $ 210,055 $ 509,585   $ 448,837  
Net Services Sales   41,842   20,229   75,249     48,821  
Total Net Sales   301,384   230,284   584,834     497,658  
Cost of Sales        
Cost of Merchandise Sold   156,597   125,953   298,607     266,699  
Cost of Services Sold   32,057   16,039   57,905     37,696  
Total Cost of Sales   188,654   141,992   356,512     304,395  
Gross Profit   112,730   88,292   228,322     193,263  
Selling, General and Administrative Expenses   96,116   82,288   198,602     178,495  
Operating Income   16,614   6,004   29,720     14,768  
Other Expense (Income)   498   1,142   (270 )   2,024  
Income Before Income Taxes   16,116   4,862   29,990     12,744  
Income Tax Expense (Benefit)   4,127   2,223   7,379     (2,130 )
Net Income $ 11,989 $ 2,639 $ 22,611   $ 14,874  
Net Income per Common Share—Basic $ 0.41 $ 0.09 $ 0.78   $ 0.52  
Net Income per Common Share—Diluted $ 0.41 $ 0.09 $ 0.77   $ 0.51  
Weighted Average Common Shares Outstanding:        
Basic   29,042   28,831   28,993     28,776  
Diluted   29,488   28,892   29,543     28,889  
 
LL Flooring
     
  Six Months Ended June 30,
  2021   2020
     
Cash Flows from Operating Activities:    
Net Income $ 22,611   $ 14,874  
Adjustments to Reconcile Net Income:    
Depreciation and Amortization   9,282     8,934  
Deferred Income Taxes Provision   28     495  
Income on Vouchers Redeemed for Legal Settlements   (821 )    
Stock-Based Compensation Expense   2,596     966  
Provision for Inventory Obsolescence Reserves   1,420     1,574  
(Gain) Loss on Disposal of Fixed Assets   18     (827 )
Changes in Operating Assets and Liabilities:    
Merchandise Inventories   17,583     35,897  
Accounts Payable   (596 )   9,150  
Customer Deposits and Store Credits   6,342     13,921  
Accrued Compensation   (4,633 )   (236 )
Tariff Recovery Receivable   3,649     8,740  
Operating Lease Right-of-Use   (6,317 )   252  
Prepaid Expenses and Other Current Assets   293     1,590  
Accrual for Legal Matters and Settlements   7,733     148  
Payments for Legal Matters and Settlements   (62 )   (4,833 )
Deferred Rent Payments   (2,015 )   5,813  
Other Assets and Liabilities   (3,777 )   9,209  
Net Cash Provided by Operating Activities   53,334     105,667  
     
Cash Flows from Investing Activities:    
Purchases of Property and Equipment   (7,435 )   (7,212 )
Other Investing Activities   57     949  
Net Cash Used in Investing Activities   (7,378 )   (6,263 )
     
Cash Flows from Financing Activities:    
Borrowings on Credit Agreement   -     45,000  
Payments on Credit Agreement   (101,000 )   (26,000 )
Common Stock Repurchased   (1,811 )   (438 )
Other Financing Activities   (691 )   (199 )
Net Cash Provided by Financing Activities   (103,502 )   18,363  
Effect of Exchange Rates on Cash and Cash Equivalents   -     (23 )
Net Increase in Cash and Cash Equivalents   (57,546 )   117,744  
Cash and Cash Equivalents, Beginning of Period   169,941     8,993  
Cash and Cash Equivalents, End of Period $ 112,395   $ 126,737  
     
Supplemental disclosure of non-cash operating activities:    
Relief of Inventory for Vouchers Redeemed for Legal Settlements $ 1,498   $  
     
Supplemental disclosure of non-cash operating and financing activities:    
Tenant Improvement Allowance for Leases $ (765 ) $ (611 )
 
LL Flooring
Due to the significant fluctuations that occurred during 2020 as a result of the COVID-19 pandemic, to better illustrate comparable two-year growth from our ongoing business for the current year we are also providing comparisons to 2019.
 
Items impacting gross margin with comparisons to the prior-year periods include:
                         
  Three Months Ended June 30,   Six Months Ended June 30,
  2021   2020   2019   2021   2020   2019
  $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales
  (dollars in thousands) 2 (dollars in thousands) 2
Gross Profit, as reported (GAAP) $ 112,730 37.4 % $ 88,292 38.3 % $ 102,487   35.5 % $ 228,322   39.0 % $ 193,263 38.8 % $ 196,098   35.3 %
                         
HTS Classification Adjustments [3]   %   %   (779 ) (0.3 )%     %   %   (779 ) (0.1 )%
Antidumping Adjustments [4]   %   %     %   (6,566 ) (1.1 )%   %     %
Sub-Total Items above   %   %   (779 ) (0.3 )%   (6,566 ) (1.1 )%   %   (779 ) (0.1 )%
                         
Adjusted Gross Profit (non-GAAP measures) $ 112,730 37.4 % $ 88,292 38.3 % $ 101,708   35.2 % $ 221,756   37.9 % $ 193,263 38.8 % $ 195,319   35.2 %
____________________
[2]   Amounts may not sum due to rounding.
[3]   Represents classification adjustments related to the HTS duty categorization in prior periods during the three and six months ended June 30, 2019.
[4]   Represents antidumping income associated with applicable prior-year shipments of engineered hardwood from China.
Items impacting SG&A with comparisons to the prior-year periods include:
                         
  Three Months Ended June 30,   Six Months Ended June 30,
  2021   2020   2019   2021   2020   2019
  $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales
  (dollars in thousands) 5 (dollars in thousands) 5
SG&A, as reported (GAAP) $ 96,116 31.9 % $ 82,288   35.7 % $ 103,864 36.0 % $ 198,602 34.0 % $ 178,495   35.9 % $ 200,896 36.2 %
                         
Accrual (Recovery) for Legal Matters and Settlements [6]   %   (500 ) (0.2 )%   4,750 1.6 %   7,675 1.3 %   (500 ) (0.1 )%   4,575 0.8 %
Legal and Professional Fees [ 7]   279 0.1 %   995   0.4 %   1,017 0.4 %   427 0.1 %   1,788   0.4 %   2,995 0.5 %
Sub-Total Items above   279 0.1 %   495   0.2 %   5,767 2.0 %   8,102 1.4 %   1,288   0.3 %   7,570 1.3 %
                         
Adjusted SG&A (a non-GAAP measure) $ 95,837 31.8 % $ 81,793   35.5 % $ 98,097 34.0 % $ 190,500 32.6 % $ 177,207   35.6 % $ 193,326 34.9 %
____________________
[5]   Amounts may not sum due to rounding.
[6]   This amount represents the charge to earnings for the Mason and Savidis matters, which are described more fully in Item 1, Note 7 to the condensed consolidated financial statements filed in the June 30, 2021 10-Q.
[7]   This amount represents charges to earnings related to our defense of certain significant legal actions during the period. This does not include all legal costs incurred by the Company.
LL Flooring
 
Items impacting operating income and operating margin with comparisons to the prior-year periods include:
                         
  Three Months Ended June 30,   Six Months Ended June 30,
  2021   2020   2019   2021   2020   2019
  $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales
  (dollars in thousands) 2 (dollars in thousands) 2
Operating Income (Loss), as reported (GAAP) $ 16,614 5.5 % $ 6,004   2.6 % $ (1,377 ) (0.5 )% $ 29,720   5.1 % $ 14,768   3.0 % $ (4,798 ) (0.9 )%
                         
Gross Margin Items:                        
HTS Classification Adjustments [3]   %     %   (779 ) (0.3 )%     %     %   (779 ) (0.1 )%
Antidumping Adjustments [4]   %     %     %   (6,566 ) (1.1 )%     %     %
Gross Margin Subtotal   %     %   (779 ) (0.3 )%   (6,566 ) (1.1 )%     %   (779 ) (0.1 )%
                         
SG&A Items:                        
Accrual (Recovery) for Legal Matters and Settlements [6]   %   (500 ) (0.2 )%   4,750   1.6 %   7,675   1.3 %   (500 ) (0.1 )%   4,575   0.8 %
Legal and Professional Fees [ 7]   279 0.1 %   995   0.4 %   1,017   0.4 %   427   0.1 %   1,788   0.3 %   2,995   0.5 %
SG&A Subtotal   279 0.1 %   495   0.2 %   5,767   2.0 %   8,102   1.4 %   1,288   0.2 %   7,570   1.3 %
                         
Adjusted Operating Income (a non-GAAP measure) $ 16,893 5.6 % $ 6,499   2.8 % $ 3,611   1.2 % $ 31,256   5.3 % $ 16,056   3.2 % $ 1,993   0.3 %
____________________
[2,3,4,5,6,7] See the Gross Profit and SG&A sections above for more detailed explanations of these individual items.
 
Items impacting other expense (income) with comparisons to the prior year periods include:
                                       
    Three Months Ended June 30,   Six Months Ended June 30
    2021   2020   2019   2021   2020   2019
    $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales   $   % of Sales
    (dollars in thousands) 8 (dollars in thousands) 8
Other Expense (Income), as reported (GAAP)   $ 498   0.2 % $ 1,142   0.5 % $ 1,068   0.4 % $ (270 )   (0.0 )% $ 2,024   0.4 % $ 2,358   0.4 %
                                       
Interest impact related to antidumping adjustment [ 9]       %     %     %   (1,841 )   (0.3 )%     %     %
Sub-Total Items above       %     %     %   (1,841 )   (0.3 )%     %     %
                                       
Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure)   $ 498   0.2 % $ 1,142   0.5 % $ 1,068   0.4 % $ 1,571     0.3 % $ 2,024   0.4 % $ 2,358   0.4 %
____________________
[8] Amounts may not sum due to rounding.
[9] Represents antidumping interest income associated with applicable prior-year shipments of engineered hardwood from China.
 
LL Flooring
 
Items impacting earnings per diluted share with comparisons to the prior-year periods include:
  Three Months Ended June 30,   Six Months Ended June 30,
  2021   2020   2019   2021   2020   2019
  (dollars in thousands, except per share amounts)   (dollars in thousands, except per share amounts)
Net Income (Loss), as reported (GAAP) $ 11,989   $ 2,639     $ (2,856 )   $ 22,611     $ 14,874     $ (7,780 )
Net Income (Loss) per Diluted Share (GAAP) $ 0.41   $ 0.09     $ (0.10 )   $ 0.77     $ 0.51     $ (0.27 )
                       
Gross Margin Items:                      
HTS Classification Adjustments [3]             (576 )                 (576 )
Antidumping Adjustments [4]                   (4,852 )            
Gross Margin Subtotal             (576 )     (4,852 )           (576 )
                       
SG&A Items:                      
Accrual (Recovery) for Legal Matters and Settlements [6]       (369 )     3,510       5,672       (369 )     3,381  
Legal and Professional Fees [ 7]   206     735       742       316       1,321       2,213  
SG&A Subtotal   206     366       4,252       5,988       952       5,594  
                       
Other Expense Items:                      
Antidumping Adjustments Interest [ 9]                   (1,360 )            
Other (Income) Expense Subtotal                   (1,360 )            
                       
Adjusted Earnings (Loss) $ 12,195   $ 3,005     $ 820     $ 22,387     $ 15,826     $ (2,762 )
Adjusted Earnings (Loss) per Diluted Share (a non-GAAP measure) $ 0.41   $ 0.10     $ 0.03     $ 0.76     $ 0.55     $ (0.10 )
 
____________________
[3,4,5,6,7,8,9] See the Gross Profit, SG&A and Other (Income) Expense sections above for more detailed explanations of these individual items. These items have been tax affected at the Company’s federal incremental rate of 26.1%.
The following chart provides a timeline and tariff levels for the key events related to Section 301 tariffs (unaudited):
         
    Section 301 tariff   Corresponding approximate
Event Timing level on imports Tariff level on percentage of Company's
    from China Subset Products merchandise subject to tariff
Imposition of Tariffs September 2018 10% 10% then 0% [10] 48%
Increase in Tariffs June 2019 25% 25% then 0% [10] 44%
Retroactive Exemption on Subset Products [10] November 2019 25% 0% 10%
Exemption Not Renewed and Tariffs Re-imposed on Subset Products August 2020 25% 25% 32%
  June 30, 2021 25% 25% 22%
 
____________________
[10 ] On November 7, 2019, the U.S. Trade Representative granted a retroactive exclusion to September 2018 on Subset Products as defined in the Section 301 Tariffs section above bringing the rate to 0%.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804005120/en/

SOURCE: Lumber Liquidators

Julie MacMedan
Head of Investor Relations
804-420-9801
ir@lumberliquidators.com

COMTEX_390914766/2456/2021-08-04T06:00:11

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/zigman2/quotes/202539569/composite
US : U.S.: NYSE
$ 15.86
-1.10 -6.49%
Volume: 522,768
Nov. 29, 2021 4:00p
P/E Ratio
7.49
Dividend Yield
N/A
Market Cap
$493.34 million
Rev. per Employee
$492,243
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