LL Flooring Reports Fourth Quarter and Full Year 2021 Financial Results

Rhea-AI Summary

LL Flooring Holdings announced its financial results for 2021, reporting a 5% increase in net sales to $1.15 billion and a 5.2% growth in comparable store sales. The company achieved record sales to Pro customers and plans to reach $1.5 billion in net revenue by 2024, with an expanded operating margin. The board also increased the share repurchase program to $50 million. Despite a 6.2% decline in Q4 sales year-over-year, the company maintains a strong balance sheet with $227.2 million in liquidity and anticipates growth in 2022, with expected new store openings.

Positive

• Achieved net sales of $1.15 billion, a 5% increase year-over-year.
• Plans to reach $1.5 billion in net revenue by 2024, representing a 9% CAGR.
• Increased share repurchase program to $50 million, demonstrating confidence in long-term growth.

Negative

• Q4 net sales decreased by 6.2% compared to the same period last year.
• Gross margin decreased 150 basis points year-over-year in Q4, primarily due to rising material costs.
• 2022 outlook indicates higher material and transportation costs will be a headwind to gross margins.

-- Company Announces Plan to Grow Net Revenue to $1.5 Billion with Expanded Operating Margin by 2024 --

-- Board Approves Increased Share Repurchase Program Authorization to $50 Million --

RICHMOND, Va.--(BUSINESS WIRE)-- LL Flooring Holdings, Inc. (“LL Flooring” or “Company”) (NYSE: LL), a leading specialty retailer of hard-surface flooring in the U.S., today announced financial results for the fourth quarter and year ended December 31, 2021.

“I am very proud of all that our associates accomplished in 2021 to deliver annual comparable store sales growth of 5.2% and excellent service to our customers throughout a second year marked by unprecedented macroeconomic uncertainty and supply chain turbulence,” said President and Chief Executive Officer Charles Tyson. “In 2021, we delivered record sales to Pro customers and record net services sales. Our merchant and sourcing teams broadened our network of global sourcing partners to launch new, innovative product and deployed effective pricing and promotion strategies to partially mitigate substantially higher material and transportation costs.”

Tyson continued, “We are excited to share today our target for $1.5 billion in net revenue with expanded operating margin by 2024. Our balance sheet is strong, with no debt and total liquidity of $227.2 million at year end, which enables us to invest in our organic growth. In addition, our Board has increased our share repurchase program authorization to $50 million, underscoring strong confidence in the long-term growth potential for our business as well as the financial flexibility we have created to invest in growth and return capital to our shareholders.”

Full Year Financial Highlights

• Net sales of $1,152.3 million increased 5.0% compared to last year, driven by double-digit growth in sales to Pro customers and net services sales that more than offset a decrease in DIY sales; and increased 5.5% compared to 2019, also driven primarily by double-digit growth in sales to Pro customers and net services sales that more than offset a decrease in DIY sales.
• Total comparable store sales increased 5.2% versus last year, and increased 4.7% on a two-year stack basis.
• Gross margin of 38.2% decreased 80 basis points as a percentage of sales compared to 2020 but increased 130 basis points compared to 2019.
  • Adjusted gross margin¹ of 37.6% decreased 120 basis points as a percentage of net sales compared to 2020, primarily reflecting significantly higher transportation, tariff and material costs (collectively up more than 500 basis points) that the Company was able to partially mitigate through pricing, promotion and alternative country/vendor sourcing strategies.
  • Adjusted gross margin increased 60 basis points compared to 2019, primarily reflecting the Company’s pricing, promotion and alternative country/vendor sourcing strategies that more than offset higher material, transportation and tariff costs (collectively up more than 500 basis points).
  • The Company paid a 25% tariff on certain flooring products imported from China (discussed in the "Section 301 Tariffs" section that follows) for the full year 2021, compared to paying this tariff for approximately five months in 2020. Through its sourcing strategy, the Company reduced the percent of product subject to Section 301 tariffs to 20% at the end of 2021 versus 34% at the end of 2020.
• SG&A as a percentage of net sales of 33.6% decreased 20 basis points compared to last year and decreased 180 basis points compared to 2019; Adjusted SG&A¹ as a percentage of net sales of 33.0% was flat compared to last year, primarily due to increased investment in customer facing and distribution center personnel that was offset by higher net sales; and decreased 170 basis points on higher net sales compared to 2019.
• Operating margin of 4.6% decreased 50 basis points compared to last year but increased 310 basis points compared to 2019; Adjusted operating margin¹ of 4.7% decreased 110 basis points compared to last year, but increased 240 basis points compared to 2019.
• Diluted EPS of $1.41 decreased $0.69 compared to last year, but increased $1.07 compared to 2019. The effective tax rate for 2021, 2020 and 2019 was 21.0%, -14.5% and 25.4%, respectively; Adjusted Earnings Per Diluted Share¹ of $1.39 decreased $0.86 compared to last year, reflecting $9.9 million lower adjusted operating income in 2021 and a $7.8 million income tax benefit in 2020 due primarily to the release of valuation allowance; but increased $0.85 compared to 2019.
• During 2021, the Company opened a net 14 new stores, bringing total stores to 424 as of December 31, 2021.

¹Please refer to the “Non-GAAP and Other Information” section and the GAAP to non-GAAP reconciliation tables below for more information.

Tyson said, “As much as we are proud of all that we accomplished in 2021, we were not happy with our sales performance in the second half of the year, which was pulled down by a decrease in sales to DIY customers. While we anticipated tough comparisons to the DIY nesting phenomenon last year, we also believe our lower DIY sales were impacted by less-than-optimal inventories and we are focused on increasing sales to DIY customers in 2022.”

Fourth Quarter Financial Highlights

• Net sales of $285.3 million decreased 6.2% compared to the same period last year, as double-digit growth in sales to Pro customers and a 6.4% increase in net services sales partially offset a decrease in DIY sales; and increased 4.2% compared to the fourth quarter of 2019, also driven primarily by double-digit growth in sales to Pro customers and net services sales that more than offset a decrease in DIY sales.
• Total comparable store sales decreased 6.7% versus the same period last year, but increased 3.8% on a two-year stack basis.
• Gross margin of 37.3% decreased 150 basis points as a percentage of sales compared to the same period last year and decreased 360 basis points compared to the fourth quarter of 2019.
  • Adjusted gross margin¹ of 37.4% decreased 70 basis points as a percentage of net sales compared to the same period last year, primarily reflecting significantly higher material and transportation costs (collectively up more than 800 basis points) that the Company was able to partially mitigate through pricing, promotion and alternative country/vendor sourcing strategies.
  • Adjusted gross margin decreased 360 basis points compared to the fourth quarter of 2019, primarily reflecting significantly higher material and transportation costs (collectively up more than 800 basis points), as well as the absence of the one-time approximately $13 million benefit recognized in the fourth quarter of 2019 from the retroactive exclusion of tariffs on certain flooring products imported from China, partially offset by the Company’s pricing, promotion and alternative country/vendor sourcing strategies.
• SG&A as a percentage of net sales of 33.5% increased 80 basis points compared to the fourth quarter of last year and decreased 30 basis points compared to the fourth quarter of 2019; Adjusted SG&A¹ as a percentage of net sales of 33.7% increased 180 basis points compared to the fourth quarter of last year, primarily due to increased investment in customer facing and distribution center personnel that was mostly offset by lower bonuses and commissions, and deleverage on lower net sales compared to the fourth quarter of 2020; Adjusted SG&A as a percentage of net sales decreased 20 basis points on higher net sales compared to the fourth quarter of 2019.
• Operating margin of 3.8% decreased 220 basis points compared to the fourth quarter of last year and decreased 330 basis points compared to the fourth quarter of 2019; Adjusted operating margin¹ of 3.8% decreased 240 basis points compared to the fourth quarter of last year, and decreased 330 basis points compared to the fourth quarter of 2019. The decrease compared to 2019 reflects the approximately $11 million one-time benefit to adjusted operating income recognized in the fourth quarter of 2019 as a result of the retroactive exclusion of tariffs on certain flooring products imported from China.
• Diluted EPS of $0.35 decreased $0.70 compared to the fourth quarter of last year and decreased $0.22 compared to the fourth quarter of 2019.
  • The effective tax rate for the fourth quarters of 2021, 2020 and 2019 was 4.4%, -68.5% and 12.9%, respectively;
  • Adjusted Earnings Per Diluted Share¹ of $0.35 decreased $0.68 compared to the fourth quarter of last year, reflecting $8.0 million lower adjusted operating income in the fourth quarter of 2021 and a $12.6 million income tax benefit in the fourth quarter of 2020 primarily due to the release of valuation allowance;
  • Adjusted Earnings Per Diluted Share decreased $0.22 compared to the fourth quarter of 2019 when we recognized an approximately $8 million after-tax one-time benefit to operating margin as a result of the retroactive exclusion of tariffs on certain flooring products imported from China.
• During the fourth quarter, the Company opened two new stores, bringing total stores to 424 as of December 31, 2021.

¹Please refer to the “Non-GAAP and Other Information” section and the GAAP to non-GAAP reconciliation tables below for more information.

Cash Flow & Liquidity

As of December 31, 2021, the Company had liquidity of $227.2 million, consisting of excess availability under its Credit Agreement of $142.0 million, and cash and cash equivalents of $85.2 million.

During 2021, the Company generated $38.7 million of cash flows from operating activities, primarily driven by $41.7 million of net income, somewhat offset by rebuilding inventory.

Share Repurchase Program

LL Flooring today announced that its Board of Directors has increased the authorization under its existing share repurchase program by $35.3 million to a total of $50.0 million. Previously, the Company had $14.7 million remaining authorization under its share repurchase program. The timing and amount of any share repurchases under the authorization will be determined by management at its discretion and based on market conditions and other considerations. Share repurchases under the authorizations may be made through open market purchases or pursuant to pre-set trading plans meeting the requirements of Rule 10b-1 under the Securities Exchange Act of 1934. The program does not obligate LL Flooring to acquire any particular amount of its common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion.

Three-Year Growth Plan

The Company also announced today a plan to achieve $1.5 billion of net revenue by 2024, which represents a 9% three-year-compound annual growth rate from 2021. LL Flooring is also targeting expanded operating margin by 2024. The plan is anchored by six core growth strategies:

• Accelerate new store openings
• Grow sales to Pro customers
• Broaden awareness of the LL Flooring brand
• Improve the customer experience to deliver on the brand promise
• Innovate new products, and
• Drive people & culture initiatives

2022 Business Outlook

The Company continues to navigate uncertainty in the macroeconomic environment related to COVID-19, 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, however, sharing the following outlook:

Tyson said, “In the near term, our teams continue to navigate supply chain constraints and cost increases, store staffing challenges related to the Omicron variant and consumer spending headwinds of inflation and last year’s stimulus. We expect 2022 to be a tale of two halves, with a challenging first half turning to growth in the second half. We expect comparable store sales for the first quarter to improve slightly on a percentage basis from the fourth quarter of 2021, to improve again for the second quarter versus the first quarter of 2022, and to show positive growth for the full year 2022.”

• The Company’s outlook for net sales and comparable store sales growth anticipates inventories returning to optimal levels by the end of the first half and increasing traction on its growth strategies as the year progresses and the macroeconomic headwinds lessen.

• The Company expects higher material and transportation costs will be a headwind to gross margins in 2022. The Company expects to continue to partially offset these higher costs through pricing, promotion and sourcing strategies but will monitor the market to inform and guide its decisions.

• The Company expects SG&A as a percent of sales to increase in 2022 compared to 2021, reflecting an investment year in support of its plan to grow net sales to $1.5 billion by 2024.

• The Company expects to invest $50 million to $70 million to rebuild inventory in 2022.

• The Company expects capital expenditures in the range of approximately $28 million to $32 million, primarily to support growth strategies such as new stores.

• The Company expects to open 20 to 25 new stores in 2022.

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 February 23, 2022, 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 050670. A replay will be available approximately two hours after the call ends through Wednesday, March 2, 2022 and may be accessed by dialing (929) 458-6194 and entering pin number 240292. 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 LL Flooring

LL Flooring is one of the leading specialty retailers of hard-surface flooring in the U.S. with more than 420 stores. 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 waterproof 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, 2021, 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 in the body of this press release and in the supplemental tables at the end of the release: (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; and (x) 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 and analysts use 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, and store closures, 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
(in thousands)
		December 31,				December 31,
		2021				2020
Assets
Current Assets:
Cash and Cash Equivalents		$	85,189			$	169,941
Merchandise Inventories			254,385				244,409
Prepaid Expenses			9,160				9,370
Tariff Recovery Receivable			—				4,078
Other Current Assets			11,094				10,354
Total Current Assets			359,828				438,152
Property and Equipment, net			96,926				97,557
Operating Lease Right-of-Use			119,510				109,475
Goodwill			9,693				9,693
Net Deferred Tax Assets			11,336				11,611
Other Assets			8,599				7,860
Total Assets		$	605,892			$	674,348
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable		$	63,464			$	70,543
Customer Deposits and Store Credits			67,063				61,389
Accrued Compensation			10,128				15,347
Sales and Income Tax Liabilities			4,297				5,793
Accrual for Legal Matters and Settlements			33,611				30,398
Operating Lease Liabilities - Current			33,060				33,024
Other Current Liabilities			20,717				25,761
Total Current Liabilities			232,340				242,255
Other Long-Term Liabilities			4,268				13,293
Operating Lease Liabilities - Long-Term			97,163				90,194
Credit Agreement			—				101,000
Total Liabilities			333,771				446,742
Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 30,536 and 30,229 shares issued and 29,113 and 28,911 shares outstanding, respectively)			31				30
Treasury Stock, at cost (1,423 and 1,318 shares, respectively)			(145,337	)			(142,977	)
Additional Capital			227,804				222,628
Retained Earnings			189,623				147,925
Total Stockholders’ Equity			272,121				227,606
Total Liabilities and Stockholders’ Equity		$	605,892			$	674,348

LL Flooring
Consolidated Statements of Income
(in thousands, except per share amounts)
		Three Months Ended							Year Ended
		December 31, (unaudited)							December 31,
		2021			2020				2021				2020
Net Sales
Net Merchandise Sales		$	243,555		$	264,983			$	993,943			$	974,829
Net Services Sales			41,726			39,228				158,401				122,873
Total Net Sales			285,281			304,211				1,152,344				1,097,702
Cost of Sales
Cost of Merchandise Sold			145,252			155,715				588,166				574,944
Cost of Services Sold			33,510			30,574				124,136				95,046
Total Cost of Sales			178,762			186,289				712,302				669,990
Gross Profit			106,519			117,922				440,042				427,712
Selling, General and Administrative Expenses			95,589			99,561				387,356				371,430
Operating Income			10,930			18,361				52,686				56,282
Other Expense (Income)			148			(68	)			(104	)			2,642
Income Before Income Taxes			10,782			18,429				52,790				53,640
Income Tax Expense (Benefit)			474			(12,621	)			11,092				(7,787	)
Net Income		$	10,308		$	31,050			$	41,698			$	61,427
Net Income per Common Share—Basic		$	0.35		$	1.07			$	1.44			$	2.13
Net Income per Common Share—Diluted		$	0.35		$	1.05			$	1.41			$	2.10
Weighted Average Common Shares Outstanding:
Basic			29,095			28,890				29,041				28,830
Diluted			29,451			29,498				29,525				29,247

LL Flooring
Consolidated Statements of Cash Flows
(in thousands)
		Year Ended December 31,
		2021				2020
Cash Flows from Operating Activities:
Net Income		$	41,698			$	61,427
Adjustments to Reconcile Net Income:
Depreciation and Amortization			18,833				17,645
Deferred Income Taxes Provision (Benefit)			276				(12,037	)
Income on Vouchers Redeemed for Legal Settlements			(1,676	)			-
Stock-Based Compensation Expense			5,113				3,333
Provision for Inventory Obsolescence Reserves			2,345				3,036
Antidumping Adjustments			(6,279	)			(2,208	)
Impairment of Operating Lease Right-Of-Use			—				935
Reclassification of Foreign Currency Translation to Earnings			—				757
Loss (Gain) on Disposal of Fixed Assets			44				(211	)
Changes in Operating Assets and Liabilities:
Merchandise Inventories			(15,104	)			38,617
Accounts Payable			(8,538	)			9,910
Customer Deposits and Store Credits			5,674				19,818
Tariff Recovery Receivable			4,078				22,947
Prepaid Expenses and Other Current Assets			700				(4,094	)
Accrued Compensation			(5,219	)			3,605
Accrual for Legal Matters and Settlements			7,773				2,507
Payments for Legal Matters and Settlements			(101	)			(18,080	)
Deferred Rent Payments			(2,315	)			2,947
Deferred Payroll Taxes			(2,542	)			5,131
Other Assets and Liabilities			(6,090	)			1,061
Net Cash Provided by Operating Activities			38,670				157,046
Cash Flows from Investing Activities:
Purchases of Property and Equipment			(19,443	)			(15,828	)
Other Investing Activities			71				966
Net Cash Used in Investing Activities			(19,372	)			(14,862	)
Cash Flows from Financing Activities:
Borrowings on Credit Agreement			—				45,000
Payments on Credit Agreement			(101,000	)			(26,000	)
Common Stock Repurchased			(2,360	)			(663	)
Other Financing Activities			(690	)			441
Net Cash (Used In) Provided by Financing Activities			(104,050	)			18,778
Effect of Exchange Rates on Cash and Cash Equivalents			—				(14	)
Net (Decrease) Increase in Cash and Cash Equivalents			(84,752	)			160,948
Cash and Cash Equivalents, Beginning of Period			169,941				8,993
Cash and Cash Equivalents, End of Period		$	85,189			$	169,941
Supplemental disclosure of non-cash operating and financing activities:
Relief of Inventory for Vouchers Redeemed for Legal Settlements		$	2,783			$	—
Release of Deposit for Legal Settlement and Liability			—				21,500
Tenant Improvement Allowance for Leases			(1,230	)			(726	)

LL Flooring
GAAP to Non-GAAP Reconciliation
(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 December 31, (unaudited)																			Year Ended December 31,
		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/Gross Margin, as reported (GAAP)		$	106,519		37.3	%		$	117,922			38.8	%		$	111,914		40.9	%		$	440,042			38.2	%		$	427,712			39.0	%		$	403,686			36.9	%
HTS Classification Adjustments 3			—		—	%			—			—	%			—		—	%			—			—	%			—			—	%			(779	)		—	%
Antidumping Adjustments 4			287		0.1	%			(2,208	)		(0.7	)%			364		0.1	%			(6,279	)		(0.5	)%			(2,208	)		(0.2	)%			1,143			0.1	%
Store Closure Costs 5			—		—	%			61			—	%			—		—	%			—			—	%			822			—	%			—			—	%
Sub-Total Items above			287		0.1	%			(2,147	)		(0.7	)%			364		0.1	%			(6,279	)		(0.5	)%			(1,386	)		(0.2	)%			364			0.1	%
Adjusted Gross Profit/Gross Margin (non-GAAP measures)		$	106,806		37.4	%		$	115,775			38.1	%		$	112,278		41.0	%		$	433,763			37.6	%		$	426,326			38.8	%		$	404,050			37.0	%

____________
2		Amounts may not sum due to rounding.
3		Represents classification adjustments related to the HTS duty categorization in prior periods during the year ended December 31, 2019.
4		Represents net antidumping and countervailing (income)/expense 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 Item 8. Note 11 to the consolidated financial statements filed in the December 31, 2020 10-K.

Items impacting SG&A with comparisons to the prior-year periods include:
	Three Months Ended December 31, (unaudited)																				Year Ended December 31,
	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)	$	95,589			33.5	%		$	99,561		32.7	%		$	92,578			33.8	%		$	387,356		33.6	%		$	371,430		33.8	%		$	386,970		35.4	%
(Recovery) Accrual for Legal Matters and Settlements 7		(475	)		(0.2	)%			—		—	%			(1,100	)		(0.4	)%			6,800		0.6	%			1,500		0.2	%			3,475		0.3	%
Legal and Professional Fees 8		31			0.0	%			1,433		0.5	%			766			0.3	%			501		—	%			4,220		0.4	%			4,169		0.4	%
Store Closure Costs 9		—			—	%			1,159		0.4	%			—			—	%			—		—	%			2,962		0.3	%			—		—	%
Sub-Total Items above		(444	)		(0.2	)%			2,592		0.9	%			(334	)		(0.1	)%			7,301		0.6	%			8,682		0.9	%			7,644		0.7	%
Adjusted SG&A (a non-GAAP measure)	$	96,033			33.7	%		$	96,969		31.9	%		$	92,912			33.9	%		$	380,055		33.0	%		$	362,748		33.0	%		$	379,326		34.7	%

____________
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 $0.9 million of insurance recoveries in the second half of 2021 related to certain significant legal actions. The 2020 amounts reflect expense of $2 million related to the Gold matter in the third quarter and a $0.5 million insurance recovery in the second quarter 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 8. Note 10 to the consolidated financial statements filed in the December 31, 2021 10-K.
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 Item 8. Note 11 to the consolidated financial statements filed in the December 31, 2020 10-K.

LL Flooring
GAAP to Non-GAAP Reconciliation
(in thousands, except percentages)
Items impacting operating income and operating margin with comparisons to the prior-year periods include:
	Three Months Ended December 31, (unaudited)																					Year Ended December 31,
	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, as reported (GAAP)	$	10,930			3.8	%		$	18,361			6.0	%		$	19,336			7.1	%		$	52,686			4.6	%		$	56,282			5.1	%		$	16,716			1.5	%
Gross Margin Items:
HTS Classification Adjustments 3		—			—	%			—			—	%			—			—	%			—			—	%			—			—	%			(779	)		—	%
Antidumping Adjustments 4		287			0.1	%			(2,208	)		(0.7	)%			364			0.1	%			(6,279	)		(0.5	)%			(2,208	)		(0.2	)%			1,143			0.1	%
Store Closure Costs 5		—			—	%			61			—	%			—			—	%			—			—	%			822			—	%			—			—	%
Gross Margin Subtotal		287			0.1	%			(2,147	)		(0.7	)%			364			0.1	%			(6,279	)		(0.5	)%			(1,386	)		(0.2	)%			364			0.1	%
SG&A Items:
(Recovery) Accrual for Legal Matters and Settlements 7		(475	)		(0.2	)%			—			—	%			(1,100	)		(0.4	)%			6,800			0.6	%			1,500			0.2	%			3,475			0.3	%
Legal and Professional Fees 8		31			0.0	%			1,433			0.5	%			766			0.3	%			501			—	%			4,220			0.4	%			4,169			0.4	%
Store Closure Costs 9		—			—	%			1,159			0.4	%			—			—	%			—			—	%			2,962			0.3	%			—			—	%
SG&A Subtotal		(444	)		(0.2	)%			2,592			0.9	%			(334	)		(0.1	)%			7,301			0.6	%			8,682			0.9	%			7,644			0.7	%
Adjusted Operating Income (a non-GAAP measure)	$	10,773			3.8	%		$	18,806			6.2	%		$	19,366			7.1	%		$	53,708			4.7	%		$	63,578			5.8	%		$	24,724			2.3	%

____________

2,3,4,5,,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 December 31, (unaudited)																			Year Ended December 31,
		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)		$	148		0.1	%		$	(68	)		—	%		$	499		0.2	%		$	(104	)		—	%		$	2,642			0.2	%		$	3,764		0.3	%
Interest impact related to antidumping adjustment 11			44		—	%			(1,275	)		(0.4	)%			—		—	%			(1,797	)		(0.2	)%			(1,275	)		(0.1	)%			—		—	%
Sub-Total Items above			44		—	%			(1,275	)		(0.4	)%			—		—	%			(1,797	)		(0.2	)%			(1,275	)		(0.1	)%			—		—	%
Adjusted Other Expense (Income)/Adjusted Other Expense (Income) as a % of Sales (a non-GAAP measure)		$	104		—	%		$	1,207			0.4	%		$	499		0.2	%		$	1,693			0.2	%		$	3,917			0.4	%		$	3,764		0.3	%

____________
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
(in thousands, except per share data)
Items impacting earnings per diluted share with comparisons to the prior-year periods include:
	Three Months Ended December 31, (unaudited)												Year Ended December 31,
	2021					2020			2019				2021				2020				2019
	(dollars in thousands, except per share amounts)2												(dollars in thousands, except per share amounts)2
Net Income, as reported (GAAP)	$	10,308			$	31,050			$	16,398			$	41,698			$	61,427			$	9,663
Net Income per Diluted Share (GAAP)	$	0.35			$	1.05			$	0.57			$	1.41			$	2.10			$	0.34
Gross Margin Items:
HTS Classification Adjustments 3		—				—				—				—				—				(576	)
Antidumping Adjustments 4		212				(1,632	)			269				(4,628	)			(1,632	)			845
Store Closure Costs 5		—				45				—				—				607				—
Gross Margin Subtotal		212				(1,587	)			269				(4,628	)			(1,025	)			269
SG&A Items:
(Recovery) Accrual for Legal Matters and Settlements 7		(350	)			—				(813	)			5,012				1,109				2,568
Legal and Professional Fees 8		23				1,059				567				369				3,119				3,081
Store Closure Costs 9		—				857				—				—				2,189				—
SG&A Subtotal		(327	)			1,916				(246	)			5,381				6,417				5,649
Other Expense Items:
Antidumping Adjustments Interest 11		32				(942	)			—				(1,324	)			(942	)			—
Other Expense (Income) Subtotal		32				(942	)			—				(1,324	)			(942	)			—
Adjusted Earnings	$	10,225			$	30,437			$	16,421			$	41,127			$	65,877			$	15,581
Adjusted Earnings per Diluted Share (a non-GAAP measure)	$	0.35			$	1.03			$	0.57			$	1.39			$	2.25			$	0.54

____________

2,3,4,5,7,8,9,11 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 26.3% for the 2021 period and 26.2% for the 2020 and 26.1% for 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%
	December 31, 2020	25%	25%	34%
	December 31, 2021	25%	25%	20%

____________

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/20220223005189/en/

LL Flooring Investor Relations

Julie MacMedan

ir@llflooring.com

Tel: 804-420-9801

Source: Lumber Liquidators

FAQ

What are LL Flooring's financial results for 2021?

LL Flooring reported net sales of $1.15 billion, a 5% increase from the previous year.

What is LL Flooring's revenue target for 2024?

The company aims to reach $1.5 billion in net revenue by 2024.

When will LL Flooring conduct their next conference call?

The next conference call is scheduled for February 23, 2022, at 8:00 a.m. Eastern Time.

What are the challenges LL Flooring expects in 2022?

LL Flooring anticipates supply chain constraints, inflationary pressures, and staffing challenges.

Did LL Flooring increase its share repurchase program?

Yes, the board approved an increase to $50 million in the share repurchase program.