RICHMOND, Va., March 2, 2021 /PRNewswire/ -- Lumber Liquidators
("LL Flooring" or "Company") (NYSE: LL), a leading specialty
retailer of hard-surface flooring in North America, today announced financial
results for the fourth quarter and full year ended December 31, 2020.
"We closed 2020 strong with fourth quarter comparable sales up
10.5%, reflecting continued execution on our transformation plan
that positioned us to capitalize on robust consumer demand for home
improvement projects," said President and Chief Executive Officer
Charles Tyson. "I am pleased with
the progress our team is making on our four strategic pillars:
people and culture, improving the customer experience, driving
traffic and transactions, and improving profitability. For
the full year 2020, we delivered $1.1
billion of net sales, demonstrating resilience as we
navigated the COVID-19 shut down in the spring to grow comparable
sales 10.8% in the second half. Our profitability initiatives
drove a $40 million increase in
operating income and a 360 basis points increase in operating
margin on similar net sales versus 2019. I want to thank our
team members for serving our customers every day to deliver these
impressive results.
"So far in 2021, our industry continues to benefit from consumer
investment in home improvement. That said, there remains a good
deal of uncertainty due to COVID-19, potential changes in consumer
spending priorities and supply chain volatility. We are well
positioned with a strong balance sheet and the financial
flexibility to continue to execute our transformation, allowing us
to adjust quickly to the environment, if needed. We strive to
become the customers' first choice in hard-surface flooring by
providing the best experience from start to finish, and plan to
differentiate ourselves by offering the high-quality selection,
expertise and high-touch service of a local store combined with the
scale, omni-channel convenience and value of a national
brand. We see substantial opportunity ahead to continue to
evolve our Company and increase shareholder value over the long
term."
Fourth Quarter Results
Net sales in the fourth quarter of 2020 increased $30.4 million, or 11.1%, to $304.2 million from the fourth quarter of
2019. Comparable store sales for the fourth quarter of 2020
increased 10.5% primarily as a result of continued execution
against the Company's transformation plan and healthy consumer
demand for home improvement projects. Net merchandise sales
increased 11.2% while net services sales (install and freight)
increased 10.2% over the prior year. As previously announced, the
Company closed 14 stores and opened one new store in the fourth
quarter of 2020 bringing total store count to 410 as of
December 31, 2020.
Gross profit increased 5.4% in the fourth quarter of 2020 to
$117.9 million from $111.9 million in the comparable period in 2019
and gross margin decreased 210 basis points to 38.8% in the fourth
quarter of 2020 from 40.9% in the fourth quarter of 2019. For
the fourth quarter of 2020, the Company reported a net positive
$1.8 million impact from anti-dumping
and countervailing duty rate changes compared to 2019.
Additionally, the fourth quarter of 2020 included costs
related to Canadian and US store closures. Excluding these items as
shown on the table that follows, Adjusted Gross Profit (a non-GAAP
measure) increased by $3.5 million
and Adjusted Gross Margin (a non-GAAP measure) decreased by 290
basis points. The decrease in adjusted gross margin was due
to last year's approximately $13
million benefit from the retroactive exclusion of tariffs on
certain flooring products imported from China (discussed in the "Section 301 Tariffs"
section that follows) partially offset by merchandising sourcing
and cost-out efforts, and, to a lesser extent, selective retail
price increases.
SG&A expense increased 7.5% to $99.6
million, or 32.7% of sales, down 110 basis points in the
fourth quarter of 2020 from the comparable period in 2019. SG&A
in both quarters included certain costs related to legal matters.
Additionally, the fourth quarter of 2020 included $1.2 million of costs related to Canadian and US
store closures. Excluding these items as shown in the table
that follows, Adjusted SG&A (a non-GAAP measure) increased 4.4%
to $97.0 million. The increase
in adjusted SG&A was primarily driven by higher bonuses and
commissions consistent with the Company's strong financial
performance. As a percent of sales, adjusted SG&A
leveraged 200 basis points, to 31.9% of sales, compared to 33.9%
for the same period in the prior year.
Operating income was $18.4 million
for the fourth quarter of 2020 compared to $19.3 million for the fourth quarter of
2019. Adjusted Operating Income (a non-GAAP measure) was
$18.8 million for the fourth quarter
of 2020, a year-over-year decrease of $0.6
million compared to adjusted operating income of
$19.4 million for the fourth quarter
of 2019. The year-over-year decrease was more than fully due
to the approximately $11 million
benefit to adjusted operating income in the fourth quarter of 2019
as a result of the retroactive exclusion of tariffs (discussed in
the "Section 301 Tariffs" section that follows), which did not
repeat in the fourth quarter of 2020, mostly offset by higher net
sales, merchandising sourcing and cost-out efforts, and selective
retail price increases, and SG&A leverage in 2020.
The Company had other income of $68
thousand for the three months ended December 31, 2020 compared to other expense of
$0.5 million for the three months
ended December 31, 2019. Both years
reflected interest on borrowings on our Credit Agreement. The
interest expense on borrowings in 2020 was offset by a favorable
adjustment of $1.2 million for the
reversal of interest expense associated with anti-dumping and
countervailing duty rate changes.
In the fourth quarter of 2020, the Company determined that it
was no longer in a consolidated three-year cumulative loss position
and released the valuation allowance recorded against most of its
U.S. deferred tax assets. As a result, for the three months
ended December 31, 2020, the Company
recognized an income tax benefit of $12.6
million, driven by the partial release of the valuation
allowance of $19.6 million, and the
deferred tax impact of the CARES Act and other items to true up
discrete provisions recorded in 2020. Absent these items, the rate
would have approximated the statutory rate. For the three
months ended December 31, 2019, the
Company recognized income tax expense of $2.4 million.
Net income for the fourth quarter of 2020 increased $14.7 million to $31.1
million compared to $16.4
million for the fourth quarter of 2019, while Adjusted
Earnings (a non-GAAP measure) for the fourth quarter of 2020 were
$31.4 million, a year-over-year
increase of $15.0 million compared to
adjusted earnings of $16.4 million
for the fourth quarter of 2019.
Earnings per diluted share was $1.05 for the fourth quarter 2020 versus
$0.57 in the year ago quarter, and
fourth quarter 2020 Adjusted Earnings Per Diluted Share (a non-GAAP
measure) was $1.06 compared to
$0.57 for the fourth quarter of 2019.
Adjusted earnings per diluted share for the fourth quarter of
2020 included the partial release of the valuation allowance of
$19.6 million.
Full-year Results
Net sales increased $5.1 million,
or 0.5%, to $1,098 million in 2020
from $1,093 million in 2019, which
includes a $10.4 million increase in
non-comparable store net sales partially offset by a decrease of
$5.3 million, or 0.5%, in comparable
store net sales. Following a 20% decrease in net sales in the
second quarter due to the impact of COVID-19, the Company recovered
to deliver a strong second-half performance. Net
merchandise sales increased 2.0% while net services sales (install
and freight) decreased 10.0% over the prior year. The Company
closed nine net stores in 2020, and as of December 31, 2020, operated 410 stores.
Gross profit of $427.7 million in
2020 increased $24.0 million from
2019 and, as a percent of sales, gross margin in 2020 increased to
39.0% from 36.9% in 2019. When excluding items in the table
that follows, adjusted gross profit of $426.3 million in 2020 increased $22.3 million versus 2019 and adjusted gross
margin in 2020 increased to 38.8% from 37.0% in 2019. This
180-basis point improvement in adjusted gross margin was due
primarily to merchandising sourcing and, to a lesser extent,
cost-out efforts and selective retail price increases.
SG&A expenses of $371.4
million in 2020 decreased $15.5
million from 2019, and as a percentage of net sales,
SG&A decreased to 33.8% in 2020, compared to 35.4% in
2019. When excluding items in the table that follows,
adjusted SG&A of $362.7 million
in 2020 decreased $16.6 million from
2019 and, as a percentage of net sales, was 33.0% in 2020, a
decrease of 170 basis points from 34.7% in 2019. The decrease
in adjusted SG&A was primarily due to lower advertising expense
as the Company reduced its promotional cadence in response to
COVID-19 and then optimized its marketing efforts, pivoting towards
more efficient digital channels, as well as $2.5 million from the final settlement in 2020 of
the business interruption insurance claim related to the
August 2019 network security incident
and lower travel and entertainment expense. These savings
were partially offset by higher bonus and commission reflecting the
Company's strong financial performance, and higher benefits
expense.
Operating income was $56.3 million
in 2020, compared to operating income of $16.7 million in 2019. When excluding items in
the table that follows, adjusted operating income was $63.6 million and adjusted operating margin was
5.8% in 2020, compared to $24.7
million, or 2.3%, in 2019. The primary driver of the
increase was the Company's execution on its profitability
initiatives, which increased adjusted gross margin and reduced
advertising expense.
The Company had other expense of $2.6
million and $3.8 million for
the years ended December 31, 2020 and
2019, respectively. The expense in both years primarily reflected
interest on borrowings on our Credit Agreement. The expense
related to borrowings in 2020 was partially offset by a favorable
adjustment of $1.2 million reported
in the fourth quarter of 2020 for the reversal of interest expense
associated with anti-dumping and countervailing duty rate
changes.
Income tax benefit was $7.8
million in 2020 compared to income tax expense of
$3.3 million in 2019. Excluding
the partial release of the valuation allowance and CARES Act
impact, income tax expense for 2020 would have been $13.6 million, which represented an effective tax
rate of 25.3%.
Net income was $61.4 million, or
$2.10 per diluted share, in 2020
compared to net income of $9.7
million, or $0.34 per diluted
share, in 2019. Adjusted earnings per diluted share for 2020
was $2.28 compared to $0.54 for 2019. Adjusted earnings per
diluted share for 2020 included the partial release of the tax
valuation allowance of $19.6
million.
Cash Flow & Liquidity
As of December 31, 2020, the
Company had liquidity of $213.9
million, consisting of excess availability under its Credit
Agreement of $44.0 million, and cash
and cash equivalents of $169.9
million. This represents an increase in liquidity of
$102.9 million from December 31, 2019. In addition, the
Company's debt balance as of December 31,
2020 was $101.0 million,
unchanged since amending the Credit Agreement on April 17, 2020, and up $19.0 million from December 31, 2019.
The increase in liquidity at December 31,
2020 from the year earlier was driven by improved operating
performance along with disciplined working capital management,
which led the Company to report Cash Flow from Operations of
$157.0 million compared to
$0.3 million in 2019. The
working capital benefit included a 15% reduction in inventory due
to strong sales and supply chain disruptions, collection of tariff
receivables, further growth in customer deposits, and higher
accounts payable. The accounts payable balance was higher at
the end of 2020 due to the increased in-transit inventory and
extended payment terms with vendors and other service
providers.
Canadian and U.S. Store Closure Costs
During the third quarter of 2020, the Company conducted a
comprehensive review of its real estate portfolio. Following the
conclusion of this review, the Company made the decision to close
its Canadian operations, including all eight stores in Canada, and six underperforming U.S. locations
by the end of 2020. The Company will continue to monitor store
performance on an ongoing basis. The Company incurred expense
of $3.8 million to close these stores
in the second half of 2020, $1.2
million of which was recorded in the fourth quarter of 2020.
All 14 stores were closed by year end although certain clean-up
activities will not be fully completed until early in 2021.
Section 301 Tariffs
The Company's financial statements have been impacted by Section
301 tariffs on certain products imported from China in recent years. A subset of these
imports for certain click vinyl and other engineered products (the
"Subset Products") received an exemption that was made retroactive
to the beginning of the Section 301 Tariffs for a period of
time. The Company has deployed strategies to mitigate
tariffs and improve gross margin, including alternative country
sourcing, partnering with current vendors to lower costs and
introduce new products, and adjusting its pricing. Please
refer to the table on page 11 of this release for a detailed
timeline and tariff levels for the key events related to Section
301 Tariffs.
The Company recorded a benefit of approximately $13 million of gross profit and $11 million of operating income in the fourth
quarter of 2019 as a result of the retroactive exclusion of these
tariffs, which did not repeat in the fourth quarter of 2020.
During the fourth quarter of 2020, the August reinstatement of
tariffs began to flow through the income statement as these
products were sold. This impact was partially offset by the
Company's mitigation strategies.
The future impact of the reinstatement of tariffs is dependent
on several factors including: 1) ongoing Company mitigation efforts
for which the outcome is uncertain, 2) inventory turnover rates
which were affected by COVID-19 in 2020, and 3) behavior of
consumers and competitors as prices for products adjust based on
supply/demand and as consumer preferences shift among product
categories impacting both product sourcing and inventory
turnover. It is still too early to predict the outcome of
such measures adopted by the Company.
2021 Outlook
The uncertainty surrounding the duration and extent of the
impact of COVID-19 makes it uniquely challenging to accurately
forecast future financial performance, and as such, the Company is
not providing financial guidance.
Conference Call and Webcast Information
The Company plans to host a conference call and audio webcast on
March 2, 2021, at 8:00 a.m. Eastern Time. The conference may be
accessed by dialing (877) 407-9039 or (201) 689-8470. A replay will
be available approximately two hours after the call ends through
March 9, 2021 and may be accessed by
dialing (844) 512-2921 or (412) 317-6671 and entering pin number
13716450. The live conference call and replay can also be accessed
via audio webcast at the Investor Relations section of the
Company's website, www.LLFlooring.com.
About LL Flooring
LL Flooring is one of North
America's leading specialty retailers of hard-surface
flooring with 410 stores as of December 31,
2020. The Company seeks to offer the best customer
experience online and in stores, with more than 400 varieties of
hard-surface floors featuring a range of quality styles and
on-trend designs. LL'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.
Learn More about LL Flooring
- Our commitment to quality, compliance, the communities we serve
and corporate giving: https://www.LLFlooring.com/quality
- Follow us on social media: Facebook, Instagram and
Twitter.
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
www.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
Earnings; and (viii) 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.
For further information contact:
LL Flooring Investor
Relations
ir@lumberliquidators.com
Tel: 804-420-9801
(Tables Follow)
LL
Flooring Consolidated Balance Sheets (in
thousands)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$
|
169,941
|
|
$
|
8,993
|
Merchandise
Inventories
|
|
|
244,409
|
|
|
286,369
|
Prepaid
Expenses
|
|
|
9,370
|
|
|
8,288
|
Deposit for Legal
Settlement
|
|
|
—
|
|
|
21,500
|
Tariff Recovery
Receivable
|
|
|
4,078
|
|
|
27,025
|
Other Current
Assets
|
|
|
10,354
|
|
|
6,938
|
Total Current
Assets
|
|
|
438,152
|
|
|
359,113
|
Property and
Equipment, net
|
|
|
97,557
|
|
|
98,733
|
Operating Lease
Right-of-Use Assets
|
|
|
109,475
|
|
|
121,796
|
Goodwill
|
|
|
9,693
|
|
|
9,693
|
Deferred Tax
Asset
|
|
|
11,611
|
|
|
—
|
Other
Assets
|
|
|
7,860
|
|
|
6,674
|
Total
Assets
|
|
$
|
674,348
|
|
$
|
596,009
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
70,543
|
|
$
|
59,827
|
Customer Deposits and
Store Credits
|
|
|
61,389
|
|
|
41,571
|
Accrued
Compensation
|
|
|
15,347
|
|
|
11,742
|
Sales and Income Tax
Liabilities
|
|
|
5,793
|
|
|
7,225
|
Accrual for Legal
Matters and Settlements - Current
|
|
|
30,398
|
|
|
67,471
|
Operating Lease
Liabilities - Current
|
|
|
33,024
|
|
|
31,333
|
Other Current
Liabilities
|
|
|
25,761
|
|
|
18,937
|
Total Current
Liabilities
|
|
|
242,255
|
|
|
238,106
|
Other Long-Term
Liabilities
|
|
|
13,293
|
|
|
13,757
|
Operating Lease
Liabilities - Long-Term
|
|
|
90,194
|
|
|
100,470
|
Deferred Tax
Liability
|
|
|
—
|
|
|
426
|
Credit
Agreement
|
|
|
101,000
|
|
|
82,000
|
Total
Liabilities
|
|
|
446,742
|
|
|
434,759
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Common Stock ($0.001
par value; 35,000 shares authorized; 30,229 and 29,959 shares
issued
and 28,911 and 28,714 shares outstanding at December 31, 2020 and
2019, respectively
|
|
|
30
|
|
|
30
|
Treasury Stock, at cost
(1,318 and 1,245 shares, respectively)
|
|
|
(142,977)
|
|
|
(142,314)
|
Additional
Capital
|
|
|
222,628
|
|
|
218,616
|
Retained
Earnings
|
|
|
147,925
|
|
|
86,498
|
Accumulated Other
Comprehensive Loss
|
|
|
—
|
|
|
(1,580)
|
Total Stockholders'
Equity
|
|
|
227,606
|
|
|
161,250
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
674,348
|
|
$
|
596,009
|
LL
Flooring Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
|
December 31,
(unaudited)
|
|
December 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Merchandise
Sales
|
|
|
264,983
|
|
|
238,242
|
|
|
974,829
|
|
|
956,041
|
|
Net Services
Sales
|
|
|
39,228
|
|
|
35,612
|
|
|
122,873
|
|
|
136,561
|
|
Total Net
Sales
|
|
$
|
304,211
|
|
$
|
273,854
|
|
$
|
1,097,702
|
|
$
|
1,092,602
|
|
Cost of
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Merchandise
Sold
|
|
|
155,715
|
|
|
135,287
|
|
|
574,944
|
|
|
586,918
|
|
Cost of Services
Sold
|
|
|
30,574
|
|
|
26,653
|
|
|
95,046
|
|
|
101,998
|
|
Total Cost of
Sales
|
|
|
186,289
|
|
|
161,940
|
|
|
669,990
|
|
|
688,916
|
|
Gross
Profit
|
|
|
117,922
|
|
|
111,914
|
|
|
427,712
|
|
|
403,686
|
|
Selling, General and
Administrative Expenses
|
|
|
99,561
|
|
|
92,578
|
|
|
371,430
|
|
|
386,970
|
|
Operating
Income
|
|
|
18,361
|
|
|
19,336
|
|
|
56,282
|
|
|
16,716
|
|
Other (Income)
Expense
|
|
|
(68)
|
|
|
499
|
|
|
2,642
|
|
|
3,764
|
|
Income Before Income
Taxes
|
|
|
18,429
|
|
|
18,837
|
|
|
53,640
|
|
|
12,952
|
|
Income Tax (Benefit)
Expense
|
|
|
(12,621)
|
|
|
2,439
|
|
|
(7,787)
|
|
|
3,289
|
|
Net
Income
|
|
$
|
31,050
|
|
$
|
16,398
|
|
$
|
61,427
|
|
$
|
9,663
|
|
Net Income per
Common Share—Basic
|
|
$
|
1.07
|
|
$
|
0.57
|
|
$
|
2.13
|
|
$
|
0.34
|
|
Net Income per
Common Share—Diluted
|
|
$
|
1.05
|
|
$
|
0.57
|
|
$
|
2.10
|
|
$
|
0.34
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,890
|
|
|
28,712
|
|
|
28,830
|
|
|
28,689
|
|
Diluted
|
|
|
29,498
|
|
|
28,833
|
|
|
29,247
|
|
|
28,793
|
|
LL
Flooring Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
61,427
|
|
$
|
9,663
|
|
$
|
(54,379)
|
Adjustments to
Reconcile Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
17,645
|
|
|
17,465
|
|
|
18,425
|
Deferred Income Taxes
(Benefit) Provision
|
|
|
(12,037)
|
|
|
(366)
|
|
|
240
|
Stock-Based
Compensation Expense
|
|
|
3,333
|
|
|
4,848
|
|
|
4,091
|
Provision for
Inventory Obsolescence Reserves
|
|
|
3,036
|
|
|
1,888
|
|
|
3,108
|
Impairment of
Operating Lease Right-Of-Use
|
|
|
935
|
|
|
—
|
|
|
—
|
Reclassification of
Foreign Currency Translation to Earnings
|
|
|
757
|
|
|
—
|
|
|
—
|
(Gain) Loss on
Disposal of Fixed Assets
|
|
|
(211)
|
|
|
(221)
|
|
|
1,818
|
Changes in Operating
Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
Merchandise
Inventories
|
|
|
38,617
|
|
|
28,941
|
|
|
(59,179)
|
Accounts
Payable
|
|
|
9,910
|
|
|
(13,640)
|
|
|
4,852
|
Customer Deposits and
Store Credits
|
|
|
19,818
|
|
|
1,353
|
|
|
1,685
|
Tariff Recovery
Receivable
|
|
|
22,947
|
|
|
(27,025)
|
|
|
—
|
Prepaid Expenses and
Other Current Assets
|
|
|
(4,094)
|
|
|
(88)
|
|
|
2,902
|
Deposit for Legal
Settlement
|
|
|
—
|
|
|
—
|
|
|
(21,500)
|
Accrual for Legal
Matters and Settlements
|
|
|
2,507
|
|
|
4,575
|
|
|
63,951
|
Payments for Legal
Matters and Settlements
|
|
|
(18,080)
|
|
|
(34,729)
|
|
|
(2,904)
|
Deferred Payroll
Taxes
|
|
|
5,131
|
|
|
—
|
|
|
—
|
Other Assets and
Liabilities
|
|
|
5,405
|
|
|
7,665
|
|
|
(6,096)
|
Net Cash Provided
by (Used in) Operating Activities
|
|
|
157,046
|
|
|
329
|
|
|
(42,986)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of Property
and Equipment
|
|
|
(15,828)
|
|
|
(19,906)
|
|
|
(14,332)
|
Other Investing
Activities
|
|
|
966
|
|
|
422
|
|
|
871
|
Net Cash Used in
Investing Activities
|
|
|
(14,862)
|
|
|
(19,484)
|
|
|
(13,461)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Borrowings on Credit
Agreement
|
|
|
45,000
|
|
|
104,500
|
|
|
74,000
|
Payments on Credit
Agreement
|
|
|
(26,000)
|
|
|
(87,500)
|
|
|
(24,000)
|
Proceeds from the
Exercise of Stock Options
|
|
|
679
|
|
|
—
|
|
|
770
|
Payments on Financed
Insurance Obligations
|
|
|
—
|
|
|
—
|
|
|
(612)
|
Other Financing
Activities
|
|
|
(901)
|
|
|
(1,119)
|
|
|
(953)
|
Net Cash Provided
by Financing Activities
|
|
|
18,778
|
|
|
15,881
|
|
|
49,205
|
Effect of Exchange
Rates on Cash and Cash Equivalents
|
|
|
(14)
|
|
|
702
|
|
|
(1,131)
|
Net Increase
(Decrease) in Cash and Cash Equivalents
|
|
|
160,948
|
|
|
(2,572)
|
|
|
(8,373)
|
Cash and Cash
Equivalents, Beginning of Year
|
|
|
8,993
|
|
|
11,565
|
|
|
19,938
|
Cash and Cash
Equivalents, End of Year
|
|
$
|
169,941
|
|
$
|
8,993
|
|
$
|
11,565
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash operating and financing
activities:
|
|
|
|
|
|
|
|
|
|
Release of Deposit for
Legal Settlement and Liability
|
|
$
|
21,500
|
|
$
|
—
|
|
$
|
—
|
Tenant Improvement
Allowance for Leases
|
|
|
(726)
|
|
|
(2,962)
|
|
|
—
|
LL
Flooring GAAP to Non-GAAP Reconciliation
(in thousands, except
percentages)1
|
|
Items impacting gross
margin with comparisons to the prior-year period
include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, (unaudited)
|
|
|
Year Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
|
$
|
|
% of Sales
|
|
$
|
|
% of Sales
|
|
|
$
|
|
% of Sales
|
|
$
|
|
% of Sales
|
|
|
|
(dollars in thousands)
|
|
|
(dollars in thousands)
|
|
Gross Profit/Margin,
as reported (GAAP)
|
|
$
|
117,922
|
|
38.8
|
%
|
$
|
111,914
|
|
40.9
|
%
|
|
$
|
427,712
|
|
39.0
|
%
|
$
|
403,686
|
|
36.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidumping
Adjustments 2
|
|
|
(2,208)
|
|
(0.7)
|
%
|
|
364
|
|
0.1
|
%
|
|
|
(2,208)
|
|
(0.2)
|
%
|
|
1,143
|
|
0.1
|
%
|
HTS Classification
Adjustments 3
|
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
|
—
|
|
—
|
%
|
|
(779)
|
|
—
|
%
|
Store Closure Costs
4
|
|
|
61
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
|
822
|
|
—
|
%
|
|
—
|
|
—
|
%
|
Sub-Total Items
above
|
|
|
(2,147)
|
|
(0.7)
|
%
|
|
364
|
|
0.1
|
%
|
|
|
(1,386)
|
|
(0.2)
|
%
|
|
364
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Gross
Profit/Margin (non-GAAP measures)
|
|
$
|
115,775
|
|
38.1
|
%
|
$
|
112,278
|
|
41.0
|
%
|
|
$
|
426,326
|
|
38.8
|
%
|
$
|
404,050
|
|
37.0
|
%
|
________________
|
1
|
Amounts may not sum
due to rounding.
|
2
|
Represents
countervailing and antidumping expense associated with applicable
prior-year shipments of engineered hardwood
from China.
|
3
|
Represent
classification adjustments related to the HTS duty categorization
in prior periods during the three months and full
year ended December 31, 2019.
|
4
|
Represents the
inventory write-offs related to the Canadian and US store closures
described more fully in Note 11 to the
consolidated financial statements filed in the December 31, 2020
10-K.
|
Items impacting
SG&A with comparisons to the prior-year period
include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, (unaudited)
|
|
|
Year Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
|
$
|
|
% of Sales
|
|
$
|
|
% of Sales
|
|
|
$
|
|
% of Sales
|
|
$
|
|
% of Sales
|
|
|
|
(dollars in
thousands)
|
|
|
(dollars in thousands)
|
|
SG&A, as reported
(GAAP)
|
|
$
|
99,561
|
|
32.7
|
%
|
$
|
92,578
|
|
33.8
|
%
|
|
$
|
371,430
|
|
33.8
|
%
|
$
|
386,970
|
|
35.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for Legal
Matters and Settlements 5
|
|
|
—
|
|
—
|
%
|
|
(1,100)
|
|
(0.4)
|
%
|
|
|
1,500
|
|
0.2
|
%
|
|
3,475
|
|
0.3
|
%
|
Legal and
Professional Fees 6
|
|
|
1,433
|
|
0.5
|
%
|
|
766
|
|
0.3
|
%
|
|
|
4,220
|
|
0.4
|
%
|
|
4,169
|
|
0.4
|
%
|
Store Closure Costs
7
|
|
|
1,159
|
|
0.4
|
%
|
|
—
|
|
—
|
%
|
|
|
2,962
|
|
0.3
|
%
|
|
—
|
|
—
|
%
|
Sub-Total Items
above
|
|
|
2,592
|
|
0.9
|
%
|
|
(334)
|
|
(0.1)
|
%
|
|
|
8,682
|
|
0.9
|
%
|
|
7,644
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted SG&A (a
non-GAAP measure)
|
|
$
|
96,969
|
|
31.9
|
%
|
$
|
92,912
|
|
33.9
|
%
|
|
$
|
362,748
|
|
33.0
|
%
|
$
|
379,326
|
|
34.7
|
%
|
_______________
|
5
|
This amount
represents expense of $2 million related to the Gold matter in the
third quarter of 2020 partially offset by a $0.5
million insurance recovery in the second quarter of 2020 of legal
fees related to certain significant legal action. 2019 reflects
a $4.75 million expense for the Kramer employment case and $0.3M
for certain Related Laminate Matters partially offset by
a $1.1 million insurance recovery of legal fees related to certain
significant legal action. These matters are described more
fully in Note 10 to the consolidated financial statements filed in
the December 31, 2020 10-K.
|
6
|
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.
|
7
|
Represents store
lease impairments, write down on fixed assets and employee
termination benefits related to the Canadian
and US store closures described more fully in Note 11 to the
condensed consolidated financial statements filed in the
December 31, 2020 10-K.
|
Items impacting
operating income and operating margin with comparisons to the
prior-year period include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, (unaudited)
|
|
|
Year Ended
December 31,
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
$
|
|
% of Sales
|
|
$
|
|
|
% of Sales
|
|
|
$
|
|
% of Sales
|
|
$
|
|
% of Sales
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
Operating Income, as
reported (GAAP)
|
|
$
|
18,361
|
|
$
|
6.0
|
%
|
$
|
19,336
|
|
|
7.1
|
%
|
|
$
|
56,282
|
|
5.1
|
%
|
$
|
16,716
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidumping
Adjustments 2
|
|
|
(2,208)
|
|
|
(0.7)
|
%
|
|
364
|
|
|
0.1
|
%
|
|
|
(2,208)
|
|
(0.2)
|
%
|
|
1,143
|
|
0.1
|
%
|
HTS Classification
Adjustments 3
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
|
—
|
|
—
|
%
|
|
(779)
|
|
—
|
%
|
Store Closure Costs
4
|
|
|
61
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
|
822
|
|
—
|
%
|
|
—
|
|
—
|
%
|
Gross Margin
Subtotal
|
|
|
(2,147)
|
|
|
(0.7)
|
%
|
|
364
|
|
|
0.1
|
%
|
|
|
(1,386)
|
|
(0.2)
|
%
|
|
364
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for Legal
Matters and Settlements 5
|
|
|
—
|
|
|
—
|
%
|
|
(1,100)
|
|
|
(0.4)
|
%
|
|
|
1,500
|
|
0.2
|
%
|
|
3,475
|
|
0.3
|
%
|
Legal and
Professional Fees 6
|
|
|
1,433
|
|
|
0.5
|
%
|
|
766
|
|
|
0.3
|
%
|
|
|
4,220
|
|
0.4
|
%
|
|
4,169
|
|
0.4
|
%
|
Store Closure Costs
7
|
|
|
1,159
|
|
|
0.4
|
%
|
|
—
|
|
|
—
|
%
|
|
|
2,962
|
|
0.3
|
%
|
|
—
|
|
—
|
%
|
SG&A
Subtotal
|
|
|
2,592
|
|
|
0.9
|
%
|
|
(334)
|
|
|
(0.1)
|
%
|
|
|
8,682
|
|
0.9
|
%
|
|
7,644
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income/Margin (a non-GAAP measure)
|
|
$
|
18,806
|
|
$
|
6.2
|
%
|
$
|
19,366
|
|
$
|
7.1
|
%
|
|
$
|
63,578
|
|
5.8
|
%
|
$
|
24,724
|
|
2.3
|
%
|
___________________________
|
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
earnings per diluted share with comparisons to the prior-year
periods include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, (unaudited)
|
|
|
Year Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
Net Income, as
reported (GAAP)
|
|
|
$
|
31,050
|
|
$
|
16,398
|
|
|
$
|
61,427
|
|
$
|
9,663
|
Net Income per
Diluted Share (GAAP)
|
|
|
$
|
1.05
|
|
$
|
0.57
|
|
|
$
|
2.10
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidumping
Adjustments 2
|
|
|
|
(1,632)
|
|
|
269
|
|
|
|
(1,632)
|
|
|
845
|
HTS Classification
Adjustments 3
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(576)
|
Store Closure Costs
4
|
|
|
|
45
|
|
|
—
|
|
|
|
607
|
|
|
—
|
Gross Margin
Subtotal
|
|
|
|
(1,587)
|
|
|
269
|
|
|
|
(1,025)
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for Legal
Matters and Settlements 5
|
|
|
|
—
|
|
|
(813)
|
|
|
|
1,109
|
|
|
2,568
|
Legal and
Professional Fees 6
|
|
|
|
1,059
|
|
|
567
|
|
|
|
3,119
|
|
|
3,081
|
Store Closure Costs
7
|
|
|
|
857
|
|
|
—
|
|
|
|
2,189
|
|
|
—
|
SG&A
Subtotal
|
|
|
|
1,916
|
|
|
(246)
|
|
|
|
6,417
|
|
|
5,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Earnings
|
|
|
$
|
31,379
|
|
$
|
16,421
|
|
|
$
|
66,819
|
|
$
|
15,581
|
Adjusted Earnings per
Diluted Share (a non-GAAP measure)
|
|
|
$
|
1.06
|
|
$
|
0.57
|
|
|
$
|
2.28
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________________________
|
2,3,4,5,6,7
|
See the Gross Profit
and SG&A 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:
|
|
|
|
|
|
|
|
Section
301
|
|
Corresponding
approximate
|
Event
|
Timing
|
tariff level
on
|
Tariff level
on
|
percentage of
Company's
|
|
|
imports from
China
|
Subset
Products
|
merchandise
subject to tariff
|
Imposition of
Tariffs
|
September
2018
|
10%
|
10% then
0%1
|
48%
|
Increase in
Tariff's
|
June 2019
|
25%
|
25% then
0%1
|
44%
|
Retroactive Exemption
on Subset
Products1
|
November
2019
|
25%
|
0%
|
10%
|
Exemption Not Renewed
and Tariffs
Re-imposed on Subset Products
|
August
2020
|
25%
|
25%
|
32%
|
|
December 31,
2020
|
25%
|
25%
|
34%
|
_________________________
|
1
|
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 original content to download
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SOURCE Lumber Liquidators