RICHMOND, Va., Nov. 2, 2020 /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 third quarter ended September 30, 2020.
"We are very pleased with our strong third quarter results,
underscored by our continued execution against our transformation
plan and industry strength as we saw customers display a healthy
appetite for home improvement projects," said President and Chief
Executive Officer Charles Tyson.
"Our team has executed well against our four strategic pillars:
people and culture, improving customer experience, driving
traffic and transactions, and improving profitability, which drove
a robust comp of 10.9%, a $16 million
increase in Net Income, and a $25
million increase in Adjusted Operating Income compared to
the prior year. We would like to thank our associates for their
agility and dedication throughout the quarter to deliver these
impressive results."
"Our sales trends strengthened as we saw sequential improvement
in our Pro and Install customers from the second to the third
quarter, driven by increased willingness from customers to allow
contractors into their homes for home improvement and installation
projects. Our focus on liquidity over the past several months has
allowed us to build a strong liquidity position to navigate the
current COVID-19 environment. We are purposefully executing our
transformation plan and believe all of our actions are
repositioning the Company for long-term success. There remains a
good deal of uncertainty in this operating environment, but we are
confident in our strategy."
Third Quarter Results
Net sales in the third quarter of 2020 increased $32 million, or 12.1%, to $296 million from the third quarter of
2019. Comparable store sales for the third quarter of 2020
increased 10.9% primarily as a result of continued execution
against the Company's transformation and healthy consumer demand
for home improvement projects. The third quarter of 2019 was
unfavorably affected by a network security incident in late August,
which the Company believes negatively impacted total revenue by
approximately $6 million to
$8 million with an accompanying
reduction in gross profit. The Company opened one net new
store in the third quarter of 2020 bringing total store count to
423 as of September 30,
2020.
Gross profit increased 22% in the third quarter of 2020 to
$117 million from $96 million in the comparable period in
2019. Gross Margin increased 320 basis points to 39.4% in the
third quarter of 2020 from 36.2% in the third quarter of 2019 due
to lower year-over-year Section 301 tariffs (discussed in the
"Section 301 Tariffs" section that follows), supply chain
efficiency, along with pricing initiatives and a larger mix of
higher-margin manufactured products. These items were
partially offset by higher customer delivery costs associated with
promotions.
SG&A expense decreased 0.1% to $93
million, or 31.6% of sales, down 380 basis points in the
third quarter of 2020 from the comparable period in 2019. SG&A
in both quarters included certain costs related to investigations
and lawsuits. Additionally, the third quarter included costs
related to Canadian and US store closures in 2020. Excluding
these items as shown in the table that follows, Adjusted SG&A
(a non-GAAP measure) decreased 4.9% to $89
million, or 29.9% of sales, down 530 basis points compared
to the same period in the prior year. The reduction in
Adjusted SG&A was primarily driven by the optimization of our
marketing efforts, as we pivoted towards more efficient channels
like digital, and $2.5 million from
the final settlement of the business interruption insurance claim
related to the August 2019 network
security incident; partially offset by an increase in credit card
fees due to the year-over-year increase in revenue.
Operating income was $23 million
for the third quarter of 2020 compared to $2.2 million for the third quarter of 2019.
Adjusted Operating Income (a non-GAAP measure) was $29 million for the third quarter of 2020, a
year-over-year increase of more than $25
million compared to Adjusted Operating Income of
$3.4 million for the third quarter of
2019. The year-over-year increase was primarily driven
by strong sales growth, enhanced gross margin, and strong expense
management.
For the three months ended September 30,
2020, the Company recognized income tax expense of
$7 million, which represented an
effective tax rate of 31.0%. For the three months ended
September 30, 2019, the Company
recognized income tax expense of $0.2
million, which represented an effective tax rate of 17.7%.
The variability of the Company's third-quarter tax rate reflects
the timing of deductions as the Company calculated a discrete
provision in 2020 because of COVID-19 uncertainty as compared to
using an effective tax rate in 2019.
Net income for the third quarter of 2020 increased $14.5 million to $15.5
million compared to $1 million
for the third quarter of 2019, while Adjusted Earnings (a non-GAAP
measure) for the third quarter of 2020 was $20 million, a year-over-year increase of
$18 million compared to Adjusted
Earnings of $1.9 million for the
third quarter of 2019.
Earnings per diluted share was $0.53 for the third quarter 2020 versus
$0.04 in the year ago quarter.
On an adjusted basis, third quarter earnings per diluted share
increased $0.60 to $0.67 compared to an Adjusted Earnings per
Diluted Share (a non-GAAP measure) of $0.07 for the third quarter of 2019.
Net cash provided by operating activities was $181 million
for the year to date, inclusive of $75 million in the third
quarter, an increase of $198 million
over the equivalent period of the prior year. The
increase in the year to date was primarily due to operating
performance along with disciplined working capital management. The
working capital benefit included a reduction in inventory due to
strong sales, higher accounts payable, further growth in
customer deposits, and collection of tariff receivables. The
Company has a significant amount of inventory in transit as of
September 30, 2020 and expects
inventory to build in the fourth quarter to more historic
levels. The accounts payable balance was higher at the end of
the quarter due to the increased in-transit inventory and extended
payment terms with vendors and other service providers.
Liquidity Update
As of September 30, 2020, the
Company had liquidity of approximately $230
million, consisting of excess availability under its Credit
Agreement of $31 million, and cash
and cash equivalents of $199
million. This represents an increase in liquidity of
$44 million from June 30, 2020. In addition, the Company's
debt balance as of September 30, 2020
was $101 million, unchanged since
amending the Credit Agreement on April 17,
2020.
Canadian and US 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 US locations
by the end of 2020. The Company will continue to monitor store
performance on an ongoing basis. The Company expects to incur
expense of between $4 and
$5 million to close these stores in
the second half of 2020, $2.6 million
of which was recorded in the third quarter of 2020. The Company
expects all fourteen stores to be closed by year end although
certain transfers of inventory and clean-up activities will not be
fully completed until early in 2021.
Section 301 Tariffs
Beginning in September 2018, goods
coming from China were subject to
a 10% tariff under Section 301, which was increased to 25% in
June 2019. On November 7, 2019, the U.S. Trade Representative
("USTR") granted a retroactive exclusion on certain Click Vinyl and
engineered products imported from China. Subsequently, on August 6, 2020, the USTR announced its intention
not to extend the exclusion pertaining to those certain flooring
products imported from China, and
the exclusion expired as of August 7,
2020, which again subjects those products to the 25% Section
301 tariffs.
At that time, approximately 43% of the Company's merchandise
receipts originated from China.
Approximately 10% of the Company's merchandise receipts remained
subject to the Section 301 tariffs even during the exclusion
period; the remaining 33% are once again subject to the Section 301
tariffs. As the Company continues to execute its alternative
sourcing strategy, its goal is to reduce the percentage of goods
that we purchase from China to the
mid-thirties by the end of 2020 and to continue those efforts in
the coming year.
The Company had a benefit of $11
million of operating income in the fourth quarter of 2019 as
a result of the retroactive exclusion of these tariffs, which will
not be repeated in 2020.
Following the tariffs being reinstated in August 2020, cash flow was reduced as the Company
began to pay the tariffs on the product affected by the Section 301
tariff reinstatement. As this product is sold beginning in the
fourth quarter, the increased cost of the tariffs will flow through
the income statement.
In addition to alternative country sourcing, the Company has
other approaches to mitigate the impact of the tariffs, including
partnering with current vendors to lower costs and adjusting its
pricing. The Company continues to monitor market pricing and
promotional strategies to inform and guide its decisions.
2020 Outlook
As previously announced on April 20,
2020, the Company withdrew its annual financial guidance
that was initially provided on February
25, 2020. 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
November 2, 2020, 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
November 9, 2020 and may be accessed
by dialing (844) 512-2921 or (412) 317-6671 and entering pin number
13711148. 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 423 stores as of September 30,
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
waterproof vinyl plank, solid and engineered hardwood, laminate,
bamboo, porcelain tile, and cork, with a wide range of flooring
enhancements and accessories to complement. With over 25
years of experience, 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, 2019, "Risk
Factors" in the Company's quarterly reports on Form 10-Q for the
quarters ended March 31, 2020,
June 30, 2020 and September 30, 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
(Unaudited, in
thousands)
|
|
|
September
30,
|
|
December 31,
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash and Cash
Equivalents
|
$
|
199,347
|
|
$
|
8,993
|
Merchandise
Inventories
|
|
237,440
|
|
|
286,369
|
Prepaid
Expenses
|
|
7,940
|
|
|
8,288
|
Deposit for Legal
Settlement
|
|
21,500
|
|
|
21,500
|
Tariff Recovery
Receivable
|
|
7,516
|
|
|
27,025
|
Other Current
Assets
|
|
6,950
|
|
|
6,938
|
Total Current
Assets
|
|
480,693
|
|
|
359,113
|
Property and
Equipment, net
|
|
94,202
|
|
|
98,733
|
Operating Lease
Right-of-Use
|
|
114,552
|
|
|
121,796
|
Goodwill
|
|
9,693
|
|
|
9,693
|
Other
Assets
|
|
7,887
|
|
|
6,674
|
Total
Assets
|
$
|
707,027
|
|
$
|
596,009
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts
Payable
|
$
|
90,194
|
|
$
|
59,827
|
Customer Deposits and
Store Credits
|
|
63,736
|
|
|
41,571
|
Accrued
Compensation
|
|
14,272
|
|
|
11,742
|
Sales and Income Tax
Liabilities
|
|
5,997
|
|
|
7,225
|
Accrual for Legal
Matters and Settlements Current
|
|
64,751
|
|
|
67,471
|
Operating Lease
Liabilities - Current
|
|
35,341
|
|
|
31,333
|
Other Current
Liabilities
|
|
24,305
|
|
|
18,937
|
Total Current
Liabilities
|
|
298,596
|
|
|
238,106
|
Other Long-Term
Liabilities
|
|
17,426
|
|
|
13,757
|
Operating Lease
Liabilities - Long-Term
|
|
95,046
|
|
|
100,470
|
Deferred Tax
Liability
|
|
973
|
|
|
426
|
Credit
Agreement
|
|
101,000
|
|
|
82,000
|
Total
Liabilities
|
|
513,041
|
|
|
434,759
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Common Stock ($0.001
par value; 35,000 shares authorized; 30,184 and 29,959 shares
issued and 28,871 and 28,714 shares outstanding,
respectively)
|
|
30
|
|
|
30
|
Treasury Stock, at
cost (1,313 and 1,245 shares, respectively)
|
|
(142,827)
|
|
|
(142,314)
|
Additional
Capital
|
|
220,969
|
|
|
218,616
|
Retained
Earnings
|
|
116,875
|
|
|
86,498
|
Accumulated Other
Comprehensive Loss
|
|
(1,061)
|
|
|
(1,580)
|
Total
Stockholders' Equity
|
|
193,986
|
|
|
161,250
|
Total Liabilities
and Stockholders' Equity
|
$
|
707,027
|
|
$
|
596,009
|
LL
Flooring
Consolidated
Statements of Operations
(Unaudited, in
thousands, except per share amounts)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Net Merchandise
Sales
|
$
|
261,009
|
|
$
|
229,241
|
|
$
|
709,845
|
|
$
|
717,799
|
Net Services
Sales
|
|
34,824
|
|
|
34,719
|
|
|
83,646
|
|
|
100,949
|
Total Net
Sales
|
|
295,833
|
|
|
263,960
|
|
|
793,491
|
|
|
818,748
|
Cost of
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Merchandise
Sold
|
|
152,530
|
|
|
142,404
|
|
|
419,230
|
|
|
451,631
|
Cost of Services
Sold
|
|
26,777
|
|
|
25,882
|
|
|
64,472
|
|
|
75,345
|
Total Cost of
Sales
|
|
179,307
|
|
|
168,286
|
|
|
483,702
|
|
|
526,976
|
Gross
Profit
|
|
116,526
|
|
|
95,674
|
|
|
309,789
|
|
|
291,772
|
Selling, General and
Administrative Expenses
|
|
93,374
|
|
|
93,495
|
|
|
271,869
|
|
|
294,392
|
Operating Income
(Loss)
|
|
23,152
|
|
|
2,179
|
|
|
37,920
|
|
|
(2,620)
|
Other
Expense
|
|
685
|
|
|
909
|
|
|
2,709
|
|
|
3,265
|
Income (Loss) Before
Income Taxes
|
|
22,467
|
|
|
1,270
|
|
|
35,211
|
|
|
(5,885)
|
Income Tax
Expense
|
|
6,964
|
|
|
225
|
|
|
4,834
|
|
|
850
|
Net Income
(Loss)
|
$
|
15,503
|
|
$
|
1,045
|
|
$
|
30,377
|
|
$
|
(6,735)
|
Net Income (Loss)
per Common Share—Basic
|
$
|
0.54
|
|
$
|
0.04
|
|
$
|
1.05
|
|
$
|
(0.23)
|
Net Income (Loss)
per Common Share—Diluted
|
$
|
0.53
|
|
$
|
0.04
|
|
$
|
1.04
|
|
$
|
(0.23)
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
28,859
|
|
|
28,706
|
|
|
28,801
|
|
|
28,681
|
Diluted
|
|
29,334
|
|
|
28,786
|
|
|
29,075
|
|
|
28,681
|
LL
Flooring
Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
30,377
|
|
$
|
(6,735)
|
|
Adjustments to
Reconcile Net Income (Loss):
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
13,327
|
|
|
12,903
|
|
Deferred Income Taxes
Provision
|
|
|
547
|
|
|
106
|
|
Stock-Based
Compensation Expense
|
|
|
2,112
|
|
|
3,621
|
|
Provision for
Inventory Obsolescence Reserves
|
|
|
2,564
|
|
|
724
|
|
Impairment of
Operating Lease Right-Of-Use Asset
|
|
|
935
|
|
|
—
|
|
Gain on Disposal of
Fixed Assets
|
|
|
(401)
|
|
|
(284)
|
|
Changes in Operating
Assets and Liabilities:
|
|
|
|
|
|
|
|
Merchandise
Inventories
|
|
|
46,057
|
|
|
9,546
|
|
Accounts
Payable
|
|
|
31,308
|
|
|
(14,186)
|
|
Customer Deposits and
Store Credits
|
|
|
22,165
|
|
|
4,810
|
|
Tariff Recovery
Receivable
|
|
|
19,509
|
|
|
—
|
|
Prepaid Expenses and
Other Current Assets
|
|
|
821
|
|
|
(3,665)
|
|
Accrual for Legal
Matters and Settlements
|
|
|
2,183
|
|
|
4,575
|
|
Payments for Legal
Matters and Settlements
|
|
|
(4,903)
|
|
|
(33,725)
|
|
Deferred Rent
Payments
|
|
|
4,709
|
|
|
—
|
|
Other Assets and
Liabilities
|
|
|
9,452
|
|
|
5,235
|
|
Net Cash Provided
by (Used in) Operating Activities
|
|
|
180,762
|
|
|
(17,075)
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
Purchases of Property
and Equipment
|
|
|
(9,822)
|
|
|
(13,523)
|
|
Other Investing
Activities
|
|
|
949
|
|
|
419
|
|
Net Cash Used in
Investing Activities
|
|
|
(8,873)
|
|
|
(13,104)
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
Borrowings on Credit
Agreement
|
|
|
45,000
|
|
|
85,500
|
|
Payments on Credit
Agreement
|
|
|
(26,000)
|
|
|
(61,000)
|
|
Other Financing
Activities
|
|
|
(506)
|
|
|
(1,104)
|
|
Net Cash Provided
by Financing Activities
|
|
|
18,494
|
|
|
23,396
|
|
Effect of Exchange
Rates on Cash and Cash Equivalents
|
|
|
(29)
|
|
|
823
|
|
Net Increase in
Cash and Cash Equivalents
|
|
|
190,354
|
|
|
(5,960)
|
|
Cash and Cash
Equivalents, Beginning of Period
|
|
|
8,993
|
|
|
11,565
|
|
Cash and Cash
Equivalents, End of Period
|
|
$
|
199,347
|
|
$
|
5,605
|
|
Supplemental
disclosure of non-cash operating and financing
activities:
|
|
|
|
|
|
|
|
Tenant Improvement
Allowance for Leases
|
|
$
|
(676)
|
|
$
|
(310)
|
|
LL
Flooring
GAAP to Non-GAAP
Reconciliation
(in thousands,
except percentages)
|
|
Items impacting gross
margin with comparisons to the prior-year period
include:
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
|
|
(dollars in thousands)
|
|
(dollars in thousands)
|
|
Gross Profit, as
reported (GAAP)
|
|
$
|
116,526
|
|
39.4
|
%
|
$
|
95,674
|
|
36.2
|
%
|
$
|
309,789
|
|
39.0
|
%
|
$
|
291,772
|
|
35.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidumping
Adjustments 1
|
|
|
—
|
|
—
|
%
|
|
780
|
|
0.3
|
%
|
|
—
|
|
—
|
%
|
|
780
|
|
0.1
|
%
|
HTS Classification
Adjustments 2
|
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
(779)
|
|
(0.1)
|
%
|
Store Closure Costs
3
|
|
|
761
|
|
0.3
|
%
|
|
—
|
|
—
|
%
|
|
761
|
|
0.1
|
%
|
|
—
|
|
—
|
%
|
Sub-Total Items
above
|
|
|
761
|
|
0.3
|
%
|
|
780
|
|
0.3
|
%
|
|
761
|
|
0.1
|
%
|
|
1
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Gross Profit
(non-GAAP measures)
|
|
$
|
117,287
|
|
39.7
|
%
|
$
|
96,454
|
|
36.5
|
%
|
$
|
310,550
|
|
39.1
|
%
|
$
|
291,773
|
|
35.6
|
%
|
|
|
1
|
Represents
countervailing and antidumping expense associated with applicable
prior-year shipments of engineered hardwood from China.
|
2
|
Represents
classification adjustments related to the HTS duty categorization
in prior periods during the three and nine months ended September
30, 2019.
|
3
|
Represents the
inventory write-offs related to the Canadian and US store closures
described more fully in Note 8 to the condensed consolidated
financial statements filed in the September 30, 2020
10-Q.
|
Items impacting
SG&A with comparisons to the prior-year period
include:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
|
(dollars in thousands)
|
|
(dollars in thousands)
|
|
SG&A, as reported
(GAAP)
|
$
|
93,374
|
|
31.6
|
%
|
$
|
93,495
|
|
35.4
|
%
|
$
|
271,869
|
|
34.3
|
%
|
$
|
294,392
|
|
36.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for Legal
Matters and Settlements 4
|
|
2,000
|
|
0.7
|
%
|
|
—
|
|
—
|
%
|
|
1,500
|
|
0.2
|
%
|
|
4,575
|
|
0.6
|
%
|
Legal and
Professional Fees5
|
|
999
|
|
0.3
|
%
|
|
408
|
|
0.2
|
%
|
|
2,787
|
|
0.4
|
%
|
|
3,403
|
|
0.4
|
%
|
Store Closure
Costs6
|
|
1,803
|
|
0.6
|
%
|
|
—
|
|
—
|
%
|
|
1,803
|
|
0.2
|
%
|
|
—
|
|
—
|
%
|
Sub-Total Items
above
|
|
4,802
|
|
1.6
|
%
|
|
408
|
|
0.2
|
%
|
|
6,090
|
|
0.8
|
%
|
|
7,978
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted SG&A (a
non-GAAP measure)
|
$
|
88,572
|
|
29.9
|
%
|
$
|
93,087
|
|
35.2
|
%
|
$
|
265,779
|
|
33.5
|
%
|
$
|
286,414
|
|
35.0
|
%
|
|
|
4
|
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 certain Related Laminate
Matters. These matters are described more fully in Note 7 to the
condensed consolidated financial statements filed in the September
30, 2020 10-Q.
|
5
|
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.
|
6
|
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 8 to the condensed consolidated
financial statements filed in the September 30, 2020
10-Q.
|
Items impacting
operating income (loss) and operating margin with comparisons to
the prior-year period include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
$
|
|
% of
Sales
|
|
|
(dollars in thousands)
|
|
(dollars in thousands)
|
|
Operating Income
(Loss), as reported (GAAP)
|
$
|
23,152
|
|
7.8
|
%
|
$
|
2,179
|
|
0.8
|
%
|
$
|
37,920
|
|
4.8
|
%
|
$
|
(2,620)
|
|
(0.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidumping
Adjustments 1
|
|
—
|
|
—
|
%
|
|
780
|
|
0.3
|
%
|
|
—
|
|
—
|
%
|
|
780
|
|
0.1
|
%
|
HTS Classification
Adjustments 2
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
(779)
|
|
(0.1)
|
%
|
Store Closure Costs
3
|
|
761
|
|
0.3
|
%
|
|
—
|
|
—
|
%
|
|
761
|
|
0.1
|
%
|
|
—
|
|
—
|
%
|
Gross Margin
Subtotal
|
|
761
|
|
0.3
|
%
|
|
780
|
|
0.3
|
%
|
|
761
|
|
0.1
|
%
|
|
1
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for Legal
Matters and Settlements4
|
|
2,000
|
|
0.7
|
%
|
|
—
|
|
—
|
%
|
|
1,500
|
|
0.2
|
%
|
|
4,575
|
|
0.6
|
%
|
Legal and
Professional Fees5
|
|
999
|
|
0.3
|
%
|
|
408
|
|
0.2
|
%
|
|
2,787
|
|
0.4
|
%
|
|
3,403
|
|
0.4
|
%
|
Store Closure
Costs6
|
|
1,803
|
|
0.6
|
%
|
|
—
|
|
—
|
%
|
|
1,803
|
|
0.2
|
%
|
|
—
|
|
—
|
%
|
SG&A
Subtotal
|
|
4,802
|
|
1.6
|
%
|
|
408
|
|
0.2
|
%
|
|
6,090
|
|
0.8
|
%
|
|
7,978
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income (a non-GAAP measure)
|
$
|
28,715
|
|
9.7
|
%
|
$
|
3,367
|
|
1.3
|
%
|
$
|
44,771
|
|
5.6
|
%
|
$
|
5,359
|
|
1.0
|
%
|
|
1,2,3,4,5,6 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
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2020
|
|
2019
|
|
2020
|
2019
|
|
(dollars
in thousands, except per share
amounts)
|
|
(dollars
in thousands, except per share
amounts)
|
Net Income (Loss), as
reported (GAAP)
|
$
|
15,503
|
|
$
|
1,045
|
|
$
|
30,377
|
|
$
|
(6,735)
|
Net Income (Loss) per
Diluted Share (GAAP)
|
$
|
0.53
|
|
$
|
0.04
|
|
$
|
1.04
|
|
$
|
(0.23)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
Items:
|
|
|
|
|
|
|
|
|
|
|
|
Antidumping
Adjustments 1
|
|
—
|
|
|
576
|
|
|
—
|
|
|
576
|
HTS Classification
Adjustments 2
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(575)
|
Store Closure Costs
3
|
|
561
|
|
|
—
|
|
|
561
|
|
|
—
|
Gross Margin
Subtotal
|
|
561
|
|
|
576
|
|
|
561
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
Items:
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for Legal
Matters and Settlements 4
|
|
1,476
|
|
|
—
|
|
|
1,107
|
|
|
3,376
|
Legal and
Professional Fees5
|
|
737
|
|
|
301
|
|
|
2,057
|
|
|
2,511
|
Store Closure
Costs6
|
|
1,331
|
|
|
—
|
|
|
1,331
|
|
|
—
|
SG&A
Subtotal
|
|
3,544
|
|
|
301
|
|
|
4,495
|
|
|
5,888
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings
(Loss)
|
$
|
19,608
|
|
$
|
1,922
|
|
$
|
35,433
|
|
$
|
(846)
|
Adjusted Earnings
(Loss) per Diluted Share (a non-GAAP measure)
|
$
|
0.67
|
|
$
|
0.07
|
|
$
|
1.21
|
|
$
|
(0.03)
|
|
1,2,3,4,5,6 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 statutory rate of
26.1%.
|
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SOURCE Lumber Liquidators