LL Flooring Reports First Quarter 2021 Financial Results
Lumber Liquidators (LL Flooring) reported first-quarter 2021 results showing a 6.0% increase in net sales to $283.5 million compared to the previous year. Comparable store sales rose 6.9%. Despite a decrease in net income to $10.6 million from $12.2 million, operating income improved to $13.1 million. The company opened three new stores, resulting in a total of 412 locations. Liquidity increased to $239.9 million, while the credit agreement was amended to enhance financial flexibility. However, the company refrained from providing financial guidance for 2021 due to uncertainties.
- 6.9% increase in comparable store sales.
- $283.5 million in net sales, a 6.0% increase year-over-year.
- Operating income rose to $13.1 million from $8.8 million in the prior year.
- Liquor availability increased by $108.9 million to $239.9 million.
- Opened three new stores, totaling 412 locations.
- Net income decreased to $10.6 million from $12.2 million year-over-year.
- Adjusted earnings per diluted share fell to $0.34 from $0.44 the previous year.
- SG&A expenses increased 6.5% to $102.5 million.
RICHMOND, Va., May 5, 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 first quarter ended March 31, 2021.
"During the first quarter, we delivered positive
"We are intently focused on executing our strategies to drive sales and profitability in 2021. With more than 400 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. We will continue to pursue gross margin rate mitigation strategies and disciplined expense management to optimize profitability, and our strong balance sheet and liquidity support the investment in our strategies to position LL Flooring as the customer's first choice in hard surface flooring over the long term."
First Quarter Results
First quarter 2021 net sales of
Gross profit increased
SG&A expense increased
Excluding these items as shown in the table that follows, Adjusted SG&A (a non-GAAP measure) decreased
Operating income was
The Company had other income of
For the three months ended March 31, 2021, the Company recognized income tax expense of
Net income for the first quarter of 2021 decreased
Earnings per diluted share was
Cash Flow & Liquidity
As of March 31, 2021, the Company had liquidity of
During the first quarter of 2021, the Company generated
Credit Agreement Amendment
On April 30, 2021, the Company entered into a Second Amendment to the Credit Agreement (the "Second Amendment") with the Lenders. The execution of the Second Amendment, among other things, converted the FILO Term Loan into the Revolving Credit Facility. The total size of the Credit Agreement remained at
The Second Amendment decreased the margin for LIBOR Rate Loans (as defined in the Second Amendment) by
Except as set forth in the Second Amendment, all other terms and conditions of the Credit Agreement remain in place.
"We were pleased to amend our credit agreement to reduce our interest expense and fees, extend our maturity date and increase our financial flexibility," said Chief Financial Officer Nancy Walsh. "We are monitoring the current macro-economic conditions and the impact of COVID-19, especially as vaccine administration continues, and are considering the timing of repayment of some or all of our debt balance, perhaps as soon as the end of the second quarter of 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 but were reinstated in August 2020. The tariffs flow through the income statement as product is sold. The Company has deployed strategies to mitigate tariffs and improve gross margin, primarily through adjusting its pricing and promotion strategies and alternative country sourcing. 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.
2021 Outlook
The uncertainty surrounding the duration and extent of the impact of COVID-19 as it relates to consumer spending as well as global supply chain disruptions 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 May 5, 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 May 12, 2021 and may be accessed by dialing (844) 512-2921 or (412) 317-6671 and entering pin number 13718863. 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 412 stores as of March 31, 2021. 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 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.
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 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.
For further information contact:
LL Flooring Investor Relations
ir@lumberliquidators.com
Tel: 804-338-1195
(Tables Follow)
LL Flooring | ||||||
March 31, | December 31, | |||||
2021 | 2020 | |||||
Assets | ||||||
Current Assets: | ||||||
Cash and Cash Equivalents | $ | 208,864 | $ | 169,941 | ||
Merchandise Inventories | 225,404 | 244,409 | ||||
Prepaid Expenses | 9,661 | 9,370 | ||||
Tariff Recovery Receivable | 1,070 | 4,078 | ||||
Other Current Assets | 9,348 | 10,354 | ||||
Total Current Assets | 454,347 | 438,152 | ||||
Property and Equipment, net | 95,679 | 97,557 | ||||
Operating Lease Right-of-Use Assets | 111,775 | 109,475 | ||||
Goodwill | 9,693 | 9,693 | ||||
Deferred Tax Asset | 11,584 | 11,611 | ||||
Other Assets | 8,227 | 7,860 | ||||
Total Assets | $ | 691,305 | $ | 674,348 | ||
Liabilities and Stockholders' Equity | ||||||
Current Liabilities: | ||||||
Accounts Payable | $ | 75,103 | $ | 70,543 | ||
Customer Deposits and Store Credits | 68,211 | 61,389 | ||||
Accrued Compensation | 8,588 | 15,347 | ||||
Sales and Income Tax Liabilities | 6,244 | 5,793 | ||||
Accrual for Legal Matters and Settlements - Current | 36,594 | 30,398 | ||||
Operating Lease Liabilities - Current | 32,005 | 33,024 | ||||
Other Current Liabilities | 26,449 | 25,761 | ||||
Total Current Liabilities | 253,194 | 242,255 | ||||
Other Long-Term Liabilities | 6,825 | 13,293 | ||||
Operating Lease Liabilities - Long-Term | 92,162 | 90,194 | ||||
Credit Agreement | 101,000 | 101,000 | ||||
Total Liabilities | 453,181 | 446,742 | ||||
Stockholders' Equity: | ||||||
Common Stock ( | 30 | 30 | ||||
Treasury Stock, at cost (1,373 and 1,318 shares, respectively) | (144,352) | (142,977) | ||||
Additional Capital | 223,899 | 222,628 | ||||
Retained Earnings | 158,547 | 147,925 | ||||
Total Stockholders' Equity | 238,124 | 227,606 | ||||
Total Liabilities and Stockholders' Equity | $ | 691,305 | $ | 674,348 |
LL Flooring | ||||||
Three Months Ended March 31, | ||||||
2021 | 2020 | |||||
Net Sales | ||||||
Net Merchandise Sales | $ | 250,043 | $ | 238,782 | ||
Net Services Sales | 33,407 | 28,592 | ||||
Total Net Sales | 283,450 | 267,374 | ||||
Cost of Sales | ||||||
Cost of Merchandise Sold | 142,010 | 140,745 | ||||
Cost of Services Sold | 25,848 | 21,657 | ||||
Total Cost of Sales | 167,858 | 162,402 | ||||
Gross Profit | 115,592 | 104,972 | ||||
Selling, General and Administrative Expenses | 102,487 | 96,207 | ||||
Operating Income | 13,105 | 8,765 | ||||
Other (Income) Expense | (769) | 883 | ||||
Income Before Income Taxes | 13,874 | 7,882 | ||||
Income Tax Expense (Benefit) | 3,252 | (4,353) | ||||
Net Income | $ | 10,622 | $ | 12,235 | ||
Net Income per Common Share—Basic | $ | 0.37 | $ | 0.43 | ||
Net Income per Common Share—Diluted | $ | 0.36 | $ | 0.42 | ||
Weighted Average Common Shares Outstanding: | ||||||
Basic | 28,943 | 28,739 | ||||
Diluted | 29,547 | 28,853 |
LL Flooring | ||||||
Three Months Ended March 31, | ||||||
2021 | 2020 | |||||
Cash Flows from Operating Activities: | ||||||
Net Income | $ | 10,622 | $ | 12,235 | ||
Adjustments to Reconcile Net Income: | ||||||
Depreciation and Amortization | 4,664 | 4,493 | ||||
Deferred Income Taxes Provision | 27 | 378 | ||||
Income on Vouchers Redeemed for Legal Settlements | (503) | — | ||||
Stock-Based Compensation Expense | 1,230 | 120 | ||||
Provision for Inventory Obsolescence Reserves | 26 | 452 | ||||
Gain on Disposal of Fixed Assets | (30) | (743) | ||||
Changes in Operating Assets and Liabilities: | ||||||
Merchandise Inventories | 18,002 | 16,379 | ||||
Accounts Payable | 6,042 | 9,055 | ||||
Accrued Compensation | (6,759) | (1,805) | ||||
Customer Deposits and Store Credits | 6,822 | (3,735) | ||||
Tariff Recovery Receivable | 3,008 | (132) | ||||
Prepaid Expenses and Other Current Assets | 1,301 | 1,998 | ||||
Accrual for Legal Matters and Settlements | 7,698 | — | ||||
Payments for Legal Matters and Settlements | (23) | (5) | ||||
Other Assets and Liabilities | (7,632) | (2,725) | ||||
Net Cash Provided by Operating Activities | 44,495 | 35,965 | ||||
Cash Flows from Investing Activities: | ||||||
Purchases of Property and Equipment | (4,296) | (4,480) | ||||
Other Investing Activities | 58 | 306 | ||||
Net Cash Used in Investing Activities | (4,238) | (4,174) | ||||
Cash Flows from Financing Activities: | ||||||
Borrowings on Credit Agreement | — | 8,000 | ||||
Payments on Credit Agreement | — | (26,000) | ||||
Common Stock Repurchased | (1,375) | (316) | ||||
Other Financing Activities | 41 | — | ||||
Net Cash Used in Financing Activities | (1,334) | (18,316) | ||||
Effect of Exchange Rates on Cash and Cash Equivalents | — | (44) | ||||
Net Increase in Cash and Cash Equivalents | 38,923 | 13,431 | ||||
Cash and Cash Equivalents, Beginning of Period | 169,941 | 8,993 | ||||
Cash and Cash Equivalents, End of Period | $ | 208,864 | $ | 22,424 | ||
Supplemental disclosure of non-cash operating activities: | ||||||
Relief of Inventory for Vouchers Redeemed for Legal Settlements | $ | 977 | $ | — | ||
Supplemental disclosure of non-cash investing activities: | ||||||
Tenant Improvement Allowance for Leases | $ | (585) | $ | (496) |
LL Flooring
GAAP to Non-GAAP Reconciliation
(Unaudited, in thousands, except percentages)
Items impacting gross margin with comparisons to the prior-year period include:
Three Months Ended March 31, | ||||||||||||
2021 | 2020 | |||||||||||
$ | % of Sales | $ | % of Sales | |||||||||
(dollars in thousands) 1 | ||||||||||||
Gross Profit/Margin, as reported (GAAP) | $ | 115,592 | 40.8 | % | $ | 104,972 | 39.3 | % | ||||
Antidumping Adjustments 2 | (6,566) | (2.3) | % | — | — | % | ||||||
Sub-Total Items above | (6,566) | (2.3) | % | — | — | % | ||||||
Adjusted Gross Profit/Margin (non-GAAP measures) | $ | 109,026 | 38.5 | % | $ | 104,972 | 39.3 | % |
____________________________ | |
1 | Amounts may not sum due to rounding. |
2 | Represents antidumping income associated with applicable prior-year shipments of engineered hardwood from China. |
Items impacting SG&A with comparisons to the prior-year period include:
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
$ | % of Sales | $ | % of Sales | ||||||||
(dollars in thousands) 3 | |||||||||||
SG&A, as reported (GAAP) | $ | 102,487 | 36.2 | % | $ | 96,207 | 36.0 | % | |||
Accrual for Legal Matters and Settlements 4 | 7,675 | 2.7 | % | — | — | % | |||||
Legal and Professional Fees 5 | 148 | 0.1 | % | 793 | 0.3 | % | |||||
Sub-Total Items above | 7,823 | 2.8 | % | 793 | 0.3 | % | |||||
Adjusted SG&A/Adjusted SG&A as a % of Sales (a non-GAAP measure) | $ | 94,664 | 33.4 | % | $ | 95,414 | 35.7 | % |
____________________________ | |
3 | Amounts may not sum due to rounding. |
4 | 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 March 31, 2021 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. |
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 period include:
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
$ | % of Sales | $ | % of Sales | ||||||||
(dollars in thousands) 1 | |||||||||||
Operating Income, as reported (GAAP) | $ | 13,105 | 4.6 | % | $ | 8,765 | 3.3 | % | |||
Gross Margin Items: | |||||||||||
Antidumping Adjustments 2 | (6,566) | (2.3) | % | — | — | % | |||||
Gross Margin Subtotal | (6,566) | (2.3) | % | — | — | % | |||||
SG&A Items: | |||||||||||
Accrual for Legal Matters and Settlements 4 | 7,675 | 2.7 | % | — | — | % | |||||
Legal and Professional Fees 5 | 148 | 0.1 | % | 793 | 0.3 | % | |||||
SG&A Subtotal | 7,823 | 2.8 | % | 793 | 0.3 | % | |||||
Adjusted Operating Income/Margin (a non-GAAP measure) | $ | 14,362 | 5.1 | % | $ | 9,558 | 3.6 | % |
____________________________ | |
1,2,3,4,5 | See the Gross Profit and SG&A sections above for more detailed explanations of these individual items. |
Items impacting other (income) expense with comparisons to the prior year periods include:
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
$ | % of Sales | $ | % of Sales | ||||||||
(dollars in thousands) 6 | |||||||||||
Other (Income) Expense, as reported (GAAP) | $ | (769) | (0.3) | % | $ | 883 | 0.3 | % | |||
Interest impact related to antidumping adjustment 7 | (1,841) | (0.6) | % | — | — | % | |||||
Sub-Total Items above | (1,841) | (0.6) | % | — | — | % | |||||
Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure) | $ | 1,072 | 0.4 | % | $ | 883 | 0.3 | % |
____________________________ | |
6 | Amounts may not sum due to rounding. |
7 | 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 March 31, | ||||||
2021 | 2020 | |||||
(in thousands)1 | ||||||
Net Income, as reported (GAAP) | $ | 10,622 | $ | 12,235 | ||
Net Income per Diluted Share (GAAP) | $ | 0.36 | $ | 0.42 | ||
Gross Margin Items: | ||||||
Antidumping Adjustments 2 | (4,852) | — | ||||
Gross Margin Subtotal | (4,852) | — | ||||
SG&A Items: | ||||||
Accrual for Legal Matters and Settlements 4 | 5,672 | — | ||||
Legal and Professional Fees 5 | 109 | 586 | ||||
SG&A Subtotal | 5,781 | 586 | ||||
Other (Income) Expense Items: | ||||||
Antidumping Adjustments Interest 7 | (1,360) | — | ||||
Other (Income) Expense Subtotal | (1,360) | — | ||||
Adjusted Earnings | $ | 10,190 | $ | 12,821 | ||
Adjusted Earnings per Diluted Share (a non-GAAP measure) | $ | 0.34 | $ | 0.44 |
__________________________ | |
1,2,3,4,5,6,7 | 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 |
The following chart provides a timeline and tariff levels for the key events related to Section 301 tariffs (unaudited):
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 | |||
Increase in Tariff's | June 2019 | |||
Retroactive Exemption on Subset Products8 | November 2019 | |||
Exemption Not Renewed and Tariffs Re-imposed on Subset Products | August 2020 | |||
March 31, 2021 |
___________________________ | |
8 | 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 |
View original content to download multimedia:http://www.prnewswire.com/news-releases/ll-flooring-reports-first-quarter-2021-financial-results-301283883.html
SOURCE Lumber Liquidators
FAQ
What were the Q1 2021 financial results for LL Flooring?
How did LL Flooring's net income change in Q1 2021?
What is the current liquidity status of LL Flooring?
How many new stores did LL Flooring open in Q1 2021?