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Share Name | Share Symbol | Market | Type |
---|---|---|---|
LL Flooring Holdings Inc | NYSE:LL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.05 | -2.99% | 1.62 | 1.68 | 1.59 | 1.68 | 288,047 | 00:21:22 |
-- Company to Increase Investment in Long-Term Strategies to Accelerate Growth --
Lumber Liquidators (“LL Flooring” or “Company”) (NYSE: LL), a leading specialty retailer of hard-surface flooring in the U.S., today announced financial results for the third quarter ended September 30, 2021.
President and Chief Executive Officer Charles Tyson said, “During the third quarter, our associates continued to do an outstanding job exceeding our customers’ needs in the face of an increasingly challenging supply chain and inflationary environment. We were pleased to report strong double-digit growth in sales to Pro customers and installation sales versus the third quarter of last year. As anticipated, our sales to DIY customers were down versus last year, reflecting a shift in consumer spending to other product and service categories, as well as tough comparisons to the nesting spending that we saw in the third quarter of 2020.”
Tyson continued, “Our strong net sales and profitability growth on a two-year basis underscore the continued traction we are gaining on our strategic initiatives. These are truly unprecedented times from a global supply chain perspective. Notwithstanding the volatile operating environment, we are focused on furthering our competitive advantages and positioning LL Flooring as customers’ first choice in hard-surface flooring. With more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs, we offer our customers quality choices and provide high-touch service and advice to help them achieve their flooring project needs. Our team’s agility in launching new innovative products sourced from expanded locations across our vast network of global sourcing partners further strengthens our unique competitive position.”
Tyson added, “As we see the opportunity to expand the LL Flooring brand and drive our accelerated growth, we are increasing our investment in our long-term strategies, initially in two key areas: We plan to increase the number of new stores we open each year to improve our omnichannel convenience, and to expand investments in our multi-pronged strategy to grow sales to Pro customers. The capabilities we are building and the investments we are making in these multi-year strategies will position LL Flooring to grow faster and gain market share.”
Third Quarter Financial Highlights
1Please refer to the GAAP to non-GAAP reconciliation tables below for more information.
Cash Flow & Liquidity
As of September 30, 2021, the Company had liquidity of $232.2 million, consisting of excess availability under its Credit Agreement of $128.0 million, and cash and cash equivalents of $104.2 million.
During the first nine months of 2021, the Company generated $50.3 million of cash flows from operating activities, primarily driven by $31.4 million of net income and positive working capital changes.
Business Outlook
The Company continues to navigate uncertainty in the macroeconomic environment related to global supply chain disruptions, consumer spending, inflation and a challenging labor market. As a result, the Company is not providing financial guidance at this time.
The Company is pleased with the traction it is gaining on its transformation initiatives and the momentum in its Pro customer and services sales; however, the Company currently expects challenging DIY customer comparisons to continue in the fourth quarter of 2021.
The Company also expects higher material and transportation costs will be a headwind to gross margins in the fourth quarter of 2021 and into 2022 as the goods sell through. The Company will continue to look to offset these higher costs through pricing and promotion strategies but will monitor the market to inform and guide its decisions.
The Company expects the increased investments in its field organization to result in higher SG&A as a percentage of sales in the fourth quarter of 2021 compared to the third quarter of 2021. In addition, the Company expects its increased investments in its growth strategies will increase its SG&A and capital spending in 2022 versus 2021.
The Company now expects capital expenditures in the range of approximately $19 million to $23 million in 2021.
“We believe the increased investments in our strategies to grow Pro customer sales and open a greater number of new stores each year as well as the investments we are making to attract and retain a talented workforce will fuel our accelerated growth over the next several years beginning in the second half of 2022,” said Tyson.
Learn More about LL Flooring
Conference Call and Webcast Information
The Company plans to host a conference call and audio webcast on November 3, 2021, at 8:00 a.m. Eastern Time. The conference may be accessed by dialing (844) 200-6205 or (646) 904-5544 and entering pin number 087906. A replay will be available approximately two hours after the call ends through November 10, 2021 and may be accessed by dialing (929) 458-6194 and entering pin number 673066. 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 the leading specialty retailers of hard-surface flooring in the U.S. with 422 stores as of September 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 Expense; (viii) Adjusted Other Expense as a percentage of net sales; (ix) Adjusted Earnings (Loss); and (x) Adjusted Earnings (Loss) 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 store closures, regulatory and legal settlements and associated legal and operating costs, and changes in antidumping and countervailing duties, as such items are outside of the Company’s control due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature.
(Tables Follow)
LL Flooring
Consolidated Balance Sheets
(Unaudited, in thousands)
September 30,
December 31,
2021
2020
Assets
Current Assets:
Cash and Cash Equivalents
$
104,211
$
169,941
Merchandise Inventories
224,998
244,409
Prepaid Expenses
10,173
9,370
Tariff Recovery Receivable
—
4,078
Other Current Assets
11,396
10,354
Total Current Assets
350,778
438,152
Property and Equipment, net
95,586
97,557
Operating Lease Right-of-Use
123,526
109,475
Goodwill
9,693
9,693
Deferred Tax Asset
11,583
11,611
Other Assets
8,669
7,860
Total Assets
$
599,835
$
674,348
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable
$
53,093
$
70,543
Customer Deposits and Store Credits
70,221
61,389
Accrued Compensation
9,203
15,347
Sales and Income Tax Liabilities
4,707
5,793
Accrual for Legal Matters and Settlements
34,903
30,398
Operating Lease Liabilities - Current
32,660
33,024
Other Current Liabilities
25,467
25,761
Total Current Liabilities
230,254
242,255
Other Long-Term Liabilities
6,714
13,293
Operating Lease Liabilities - Long-Term
101,964
90,194
Credit Agreement
—
101,000
Total Liabilities
338,932
446,742
Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 30,496 and 30,229 shares issued and 29,089 and 28,911 shares outstanding, respectively)
30
30
Treasury Stock, at cost (1,407 and 1,318 shares, respectively)
(145,078
)
(142,977
)
Additional Capital
226,636
222,628
Retained Earnings
179,315
147,925
Total Stockholders’ Equity
260,903
227,606
Total Liabilities and Stockholders’ Equity
$
599,835
$
674,348
LL Flooring
Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net Sales
Net Merchandise Sales
$
240,802
$
261,009
$
750,388
$
709,845
Net Services Sales
41,427
34,824
116,675
83,646
Total Net Sales
282,229
295,833
867,063
793,491
Cost of Sales
Cost of Merchandise Sold
144,307
152,530
442,914
419,230
Cost of Services Sold
32,721
26,777
90,626
64,472
Total Cost of Sales
177,028
179,307
533,540
483,702
Gross Profit
105,201
116,526
333,523
309,789
Selling, General and Administrative Expenses
93,165
93,374
291,767
271,869
Operating Income
12,036
23,152
41,756
37,920
Other Expense (Income)
18
685
(252
)
2,709
Income Before Income Taxes
12,018
22,467
42,008
35,211
Income Tax Expense
3,239
6,964
10,618
4,834
Net Income
$
8,779
$
15,503
$
31,390
$
30,377
Net Income per Common Share—Basic
$
0.30
$
0.54
$
1.08
$
1.05
Net Income per Common Share—Diluted
$
0.30
$
0.53
$
1.06
$
1.04
Weighted Average Common Shares Outstanding:
Basic
29,082
28,859
28,984
28,801
Diluted
29,455
29,334
29,494
29,075
LL Flooring
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine Months Ended September 30,
2021
2020
Cash Flows from Operating Activities:
Net Income
$
31,390
$
30,377
Adjustments to Reconcile Net Income:
Depreciation and Amortization
13,985
13,327
Deferred Income Taxes Provision
28
547
Income on Vouchers Redeemed for Legal Settlements
(1,183
)
—
Stock-Based Compensation Expense
3,945
2,112
Provision for Inventory Obsolescence Reserves
1,784
2,564
Impairment of Operating Lease Right-of-Use
—
935
Loss (Gain) on Disposal of Fixed Assets
31
(401
)
Changes in Operating Assets and Liabilities:
Merchandise Inventories
15,683
46,057
Accounts Payable
(17,277
)
31,308
Customer Deposits and Store Credits
8,832
22,165
Accrued Compensation
(6,144
)
2,530
Tariff Recovery Receivable
4,078
19,509
Prepaid Expenses and Other Current Assets
(792
)
821
Accrual for Legal Matters and Settlements
7,733
2,183
Payments for Legal Matters and Settlements
(101
)
(4,903
)
Deferred Rent Payments
(2,154
)
4,709
Other Assets and Liabilities
(9,558
)
6,922
Net Cash Provided by Operating Activities
50,280
180,762
Cash Flows from Investing Activities:
Purchases of Property and Equipment
(12,276
)
(9,822
)
Other Investing Activities
58
949
Net Cash Used in Investing Activities
(12,218
)
(8,873
)
Cash Flows from Financing Activities:
Borrowings on Credit Agreement
—
45,000
Payments on Credit Agreement
(101,000
)
(26,000
)
Common Stock Repurchased
(2,101
)
(513
)
Other Financing Activities
(691
)
7
Net Cash Provided by Financing Activities
(103,792
)
18,494
Effect of Exchange Rates on Cash and Cash Equivalents
—
(29
)
Net Increase in Cash and Cash Equivalents
(65,730
)
190,354
Cash and Cash Equivalents, Beginning of Period
169,941
8,993
Cash and Cash Equivalents, End of Period
$
104,211
$
199,347
Supplemental disclosure of non-cash operating activities:
Relief of Inventory for Vouchers Redeemed for Legal Settlements
$
1,944
$
—
Supplemental disclosure of non-cash operating and financing activities:
Tenant Improvement Allowance for Leases
$
(1,053
)
$
(676
)
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 September 30,
Nine Months Ended September 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)
$
105,201
37.3
%
$
116,526
39.4
%
$
95,674
36.2
%
$
333,523
38.5
%
$
309,789
39.0
%
$
291,772
35.6
%
HTS Classification Adjustments 3
—
—
%
—
—
%
—
—
%
—
—
%
—
—
%
(779
)
(0.1
)%
Antidumping Adjustments 4
—
—
%
—
—
%
780
0.3
%
(6,566
)
(0.8
)%
—
—
%
780
0.1
%
Store Closure Costs 5
—
—
%
761
0.3
%
—
—
%
—
—
%
761
0.1
%
—
—
%
Sub-Total Items above
—
—
%
761
0.3
%
780
0.3
%
(6,566
)
(0.8
)%
761
0.1
%
1
—
%
Adjusted Gross Profit (non-GAAP measures)
$
105,201
37.3
%
$
117,287
39.7
%
$
96,454
36.5
%
$
326,957
37.7
%
$
310,550
39.1
%
$
291,773
35.6
%
_________________2
Amounts may not sum due to rounding.
3
Represents classification adjustments related to the HTS duty categorization in prior periods during the nine months ended September 30, 2019.
4
Represents antidumping income associated with applicable prior-year shipments of engineered hardwood from China.
5
Represents the inventory write-offs related to the Canadian and U.S. 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 periods include:
Three Months Ended September 30,
Nine Months Ended September 30,
2021
2020
2019
2021
2020
2019
$
% of Sales
$
% of Sales
$
% of Sales
$
% of Sales
$
% of Sales
$
% of Sales
(dollars in thousands) 6
(dollars in thousands) 6
SG&A, as reported (GAAP)
$
93,165
33.0
%
$
93,374
31.6
%
$
93,495
35.4
%
$
291,767
33.7
%
$
271,869
34.3
%
$
294,392
36.0
%
(Recovery) Accrual for Legal Matters and Settlements 7
(400
)
(0.1
)%
2,000
0.7
%
—
—
%
7,275
0.8
%
1,500
0.2
%
4,575
0.6
%
Legal and Professional Fees 8
43
0.0
%
999
0.3
%
408
0.2
%
470
0.1
%
2,787
0.4
%
3,403
0.4
%
Store Closure Costs 9
—
—
%
1,803
0.6
%
—
—
%
—
—
%
1,803
0.2
%
—
—
%
Sub-Total Items above
(357
)
(0.1
)%
4,802
1.6
%
408
0.2
%
7,745
0.9
%
6,090
0.8
%
7,978
1.0
%
Adjusted SG&A (a non-GAAP measure)
$
93,522
33.1
%
$
88,572
29.9
%
$
93,087
35.2
%
$
284,022
32.8
%
$
265,779
33.5
%
$
286,414
35.0
%
_________________6
Amounts may not sum due to rounding.
7
This amount represents the charge to earnings for the Mason and Savidis matters in the first quarter of 2021 and a $0.4 million insurance recovery in the third quarter of 2021 of legal fees related to certain significant legal action. The 2020 amounts reflect expense of $2 million related to the Gold matter in the third quarter of 2020 and $0.5 million insurance recovery in the second quarter of 2020 of legal fees related to certain significant legal action. The 2019 amounts reflect a $4.75 million expense for the Kramer employment matter and certain Related Laminate matters. These items are described more fully in Item 1, Note 7 to the condensed consolidated financial statements filed in the September 30, 2021 10-Q.
8
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.
9
Represents store lease impairments, write down on fixed assets and employee termination benefits related to the Canadian and U.S. store closures described more fully in Note 8 to the condensed consolidated financial statements filed in the September 30, 2020 10-Q.
LL FlooringGAAP 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 September 30,
Nine Months Ended September 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)
$
12,036
4.3
%
$
23,152
7.8
%
$
2,179
0.8
%
$
41,756
4.8
%
$
37,920
4.8
%
$
(2,620
)
(0.3
)%
Gross Margin Items:
HTS Classification Adjustments 3
—
—
%
—
—
%
—
—
%
—
—
%
—
—
%
(779
)
(0.1
)%
Antidumping Adjustments 4
—
—
%
—
—
%
780
0.3
%
(6,566
)
(0.8
)%
—
—
%
780
0.1
%
Store Closure Costs 5
—
—
%
761
0.3
%
—
—
%
—
—
%
761
0.1
%
—
—
%
Gross Margin Subtotal
—
—
%
761
0.3
%
780
0.3
%
(6,566
)
(0.8
)%
761
0.1
%
1
—
%
SG&A Items:
(Recovery) Accrual for Legal Matters and Settlements 7
(400
)
(0.1
)%
2,000
0.7
%
—
—
%
7,275
0.8
%
1,500
0.2
%
4,575
0.6
%
Legal and Professional Fees 8
43
0.0
%
999
0.3
%
408
0.2
%
470
0.1
%
2,787
0.4
%
3,403
0.4
%
Store Closure Costs 9
—
—
%
1,803
0.6
%
—
—
%
—
—
%
1,803
0.2
%
—
—
%
SG&A Subtotal
(357
)
(0.1
)%
4,802
1.6
%
408
0.2
%
7,745
0.9
%
6,090
0.8
%
7,978
1.0
%
Adjusted Operating Income (a non-GAAP measure)
$
11,679
4.1
%
$
28,715
9.7
%
$
3,367
1.3
%
$
42,935
5.0
%
$
44,771
5.6
%
$
5,359
0.7
%
_________________2,3,4,5,6,7,8,9
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 September 30,
Nine Months Ended September 30
2021
2020
2019
2021
2020
2019
$
% of Sales
$
% of Sales
$
% of Sales
$
% of Sales
$
% of Sales
$
% of Sales
(dollars in thousands) 10
(dollars in thousands) 10
Other Expense (Income), as reported (GAAP)
$
18
0.0
%
$
685
0.2
%
$
909
0.3
%
$
(252
)
(0.0
)%
$
2,709
0.3
%
$
3,265
0.4
%
Interest impact related to antidumping adjustment 11
—
—
%
—
—
%
—
—
%
(1,841
)
(0.2
)%
—
—
%
—
—
%
Sub-Total Items above
—
—
%
—
—
%
—
—
%
(1,841
)
(0.2
)%
—
—
%
—
—
%
Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure)
$
18
0.0
%
$
685
0.2
%
$
909
0.3
%
$
1,589
0.2
%
$
2,709
0.3
%
$
3,265
0.4
%
_________________10
Amounts may not sum due to rounding.
11
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 September 30,
Nine Months Ended September 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)
$
8,779
$
15,503
$
1,045
$
31,390
$
30,377
$
(6,735
)
Net Income (Loss) per Diluted Share (GAAP)
$
0.30
$
0.53
$
0.04
$
1.06
$
1.04
$
(0.23
)
Gross Margin Items:
HTS Classification Adjustments 3
—
—
—
—
—
(575
)
Antidumping Adjustments 4
—
—
576
(4,846
)
—
576
Store Closure Costs 5
—
561
—
—
561
—
Gross Margin Subtotal
—
561
576
(4,846
)
561
1
SG&A Items:
(Recovery) Accrual for Legal Matters and Settlements 7
(295
)
1,476
—
5,369
1,107
3,376
Legal and Professional Fees 8
32
737
301
347
2,057
2,511
Store Closure Costs 9
—
1,331
—
—
1,331
—
SG&A Subtotal
(263
)
3,544
301
5,716
4,495
5,888
Other Expense Items:
Antidumping Adjustments Interest 11
—
—
—
(1,359
)
—
—
Other (Income) Expense Subtotal
—
—
—
(1,359
)
—
—
Adjusted Earnings (Loss)
$
8,516
$
19,608
$
1,922
$
30,901
$
35,433
$
(846
)
Adjusted Earnings (Loss) per Diluted Share (a non-GAAP measure)
$
0.29
$
0.67
$
0.07
$
1.05
$
1.21
$
(0.03
)
_________________3,4,5,7,8,9,11
See the Gross Profit, SG&A and Other Expense (Income) sections above for more detailed explanations of these individual items. These items have been tax affected at the Company’s federal incremental rate, which was 26.2% for the 2021 periods and 26.1% for the 2020 and 2019 periods.
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%12
48%
Increase in Tariffs
June 2019
25%
25% then 0%12
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%
September 30, 2021
25%
25%
22%
_________________12
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/20211103005131/en/
LL Flooring Investor Relations Julie MacMedan Head of Investor Relations ir@lumberliquidators.com Tel: 804-420-9801
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