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LL Flooring Reports Third Quarter 2021 Financial Results

-- 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

  • Net sales of $282.2 million decreased 4.6% compared to the same period last year, as double-digit growth in Pro and services sales partially offset a decrease in DIY sales; and increased 6.9% compared to the third quarter of 2019, driven primarily by strong growth in Pro customer and services sales.
  • Total comparable store sales decreased 4.5% versus the same period last year, but increased 6.4% on a two-year stack basis (which does not reflect the impact of store closures and openings between periods).
  • Gross margin of 37.3% decreased 210 basis points as a percentage of sales compared to the same period last year and increased 110 basis points compared to the third quarter of 2019; Adjusted gross margin1 of 37.3% decreased 240 basis points as a percentage of sales compared to the same period last year, primarily reflecting significantly higher transportation and material costs, and higher tariffs (collectively up more than 700 basis points) that the Company was able to partially mitigate by pricing, promotion and alternative country/vendor sourcing strategies; and increased 80 basis points compared to the third quarter of 2019, primarily reflecting the Company’s pricing, promotion and alternative country/vendor sourcing strategies that more than mitigated higher material and transportation costs.
  • SG&A as a percentage of sales of 33.0% increased 140 basis points compared to the third quarter of last year and decreased 240 basis points compared to the third quarter of 2019; Adjusted SG&A1 as a percentage of sales of 33.1% increased 320 basis points compared to the third quarter of last year, primarily due to increased investment in the field and to support growth initiatives, last year’s $2.5 million favorable business interruption insurance settlement and lower net sales compared to the third quarter of 2020; and decreased 210 basis points on higher net sales compared to the third quarter of 2019.
  • Operating margin of 4.3% decreased 350 basis points compared to the third quarter of last year and increased 350 basis points compared to the third quarter of 2019; Adjusted operating margin1 of 4.1% decreased 560 basis points compared to the third quarter of last year, and increased 280 basis points compared to the third quarter of 2019.
  • Diluted EPS of $0.30 decreased $0.23 compared to the third quarter of last year and increased $0.26 compared to the third quarter of 2019; Adjusted Earnings Per Diluted Share1 of $0.29 decreased $0.38 compared to the third quarter of last year and increased $0.22 compared to the third quarter of 2019.
  • During the third quarter, the Company opened six new stores, bringing total stores to 422 as of September 30, 2021.

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 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 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%.

 

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