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 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 margin1 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&A1 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 margin1
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 Share1 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.
1Please refer 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
- Our commitment to quality, compliance, the communities we serve
and corporate giving: https://llflooring.com/corp/quality.html
- Follow us on social media: Facebook, Instagram and
Twitter.
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
Consolidated Balance
Sheets
(Unaudited, in
thousands)
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
Consolidated Statements of
Operations
(Unaudited, in thousands,
except per share amounts)
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
Consolidated Statements of
Cash Flows
(Unaudited, in
thousands)
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
GAAP to Non-GAAP
Reconciliation
(Unaudited, in thousands,
except percentages)
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
GAAP to Non-GAAP
Reconciliation
(Unaudited, in thousands,
except percentages)
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
GAAP to Non-GAAP
Reconciliation
(Unaudited, in thousands,
except per share data)
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
Products10
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/
Julie MacMedan Head of Investor Relations 804-420-9801
ir@lumberliquidators.com
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