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    Lumber Liquidators Announces Fourth Quarter and Full Year 2012 Financial Results and Provides Full Year 2013 Outlook

    ~ Fourth Quarter Net Sales Increased 20.8% to $210.7 Million and Comparable Store Net Sales Increased 13.2% ~

    ~ Fourth Quarter Operating Margin of 11.6% ~

    ~ Fourth Quarter Net Income Increased 63.2% to $13.8 Million, or $0.50 per Diluted Share ~

    ~ Full Year 2013 Net Sales Expected to be $885 million to $920 million ~

    ~ Full Year 2013 EPS Expected to be $1.90 to $2.15 ~

    Feb 20, 2013

    TOANO, Va.--(BUSINESS WIRE)--Feb. 20, 2013-- Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America , today announced financial results for the fourth quarter and full year ended December 31, 2012 , as well as its outlook for 2013.

    Fourth Quarter Results

    Net sales increased $36.2 million, or 20.8%, to $210.7 million in the fourth quarter of 2012 from $174.5 million in the fourth quarter of 2011. Comparable store net sales increased 13.2% for the quarter, driven by a 9.1% increase in the number of customers invoiced and a 3.9% increase in the average sale. Non-comparable store net sales increased $13.1 million over the prior year period. As of December 31, 2012, the Company operated 288 stores, including four stores opened during the fourth quarter of 2012, for a total of 25 stores opened during the year.

    Gross margin was 39.1% in the fourth quarter of 2012 compared to 35.5% in the fourth quarter of 2011. The increase in gross margin reflects generally lower product costs due to sourcing initiatives and sales mix, as well as lower net transportation costs and a reduction in the estimated shrink of merchandise inventories.

    Selling, general and administrative (“SG&A”) expenses decreased as a percentage of net sales to 27.4% for the fourth quarter of 2012 compared to 27.7% for the fourth quarter of 2011. Operating margin increased 390 basis points to 11.6% in the fourth quarter of 2012, from 7.7% in the fourth quarter of 2011.

    Net income increased 63.2% to $13.8 million, or $0.50 per diluted share, in the fourth quarter of 2012 from $8.5 million, or $0.30 per diluted share, in the fourth quarter of the prior year. The Company’s effective tax rate was 43.7% for the fourth quarter of 2012, compared to an effective tax rate of 38.7% in the fourth quarter of 2011, primarily due to the recording of a $1.3 million valuation allowance on certain deferred tax assets.

    Cash and cash equivalents at December 31, 2012 totaled $64.2 million compared with $61.7 million at December 31, 2011.

    Robert M. Lynch, President and Chief Executive Officer, commented, “Our team continued to execute on our key strategic initiatives to enhance the value proposition to our customer. In doing so, we delivered a record quarter, in total net sales, gross and operating margin, net income and free cash flow. We were particularly pleased with the increases in both traffic and ticket as the broadening of our advertising and branding message resonated with a larger population of flooring customers. Our team’s focus on continuous improvement helped drive our performance, and with these outstanding fourth quarter and full year results, we have a strong foundation upon which we can generate sustainable additional growth as we enter 2013.”

    Full Year Results

    Net sales increased 19.3% to $813.3 million in 2012 from $681.6 million in 2011, as comparable store net sales increased 11.4%, or $77.2 million, and non-comparable store net sales increased $54.5 million.

    Gross margin increased to 38.0% in 2012 compared to 35.3% in the prior year. SG&A expenses decreased as a percentage of net sales to 28.3% in 2012, compared to 29.1% in 2011. Operating margin increased to 9.6% in 2012 from 6.2% in 2011.

    Net income increased 79.2% to $47.1 million, or $1.68 per diluted share, in 2012 compared to $26.3 million, or $0.93 per diluted share, in the prior year. The Company’s effective tax rate was 40.0% for 2012 compared to an effective tax rate of 39.0% in 2011.

    During 2012, pursuant to its previously announced stock repurchase program, the Company repurchased approximately 1.6 million shares of its common stock for $49.1 million, including approximately 171,000 shares in the fourth quarter of 2012. At December 31, 2012, approximately $50.9 million remained available under the Company’s $100 million stock repurchase program.

    Company Outlook

    In 2013, the Company expects to achieve the following for the full year:

    • Net sales in the range of $885 million to $920 million.
    • Comparable store net sales increasing in the mid-single digits.
    • The opening of a total of 25 to 35 new store locations.
    • Earnings per diluted share in the range of $1.90 to $2.15, based on a diluted share count of approximately 28.0 million shares, which is exclusive of any future impact of the stock repurchase program.

    Mr. Lynch concluded, “I am excited to lead this team into 2013. We expect to deliver continued growth in our operating margin by building on strategic initiatives both currently underway and those to be launched in 2013, including our ‘store of the future’ with its expanded showroom. In the coming year, we will aggressively pursue share in our highly fragmented market, and we expect to further enhance our assortment of quality products, optimize our supply chain and strengthen our commitment to develop the best people serving our customers. We are pleased that we have been able to maintain our strong capital structure and debt-free balance sheet, allowing us to invest in the long-term health of our business while rewarding our long-term shareholders. As we move forward, we believe we are well-positioned to further expand our footprint and deliver multi-year expansion of our net sales and operating margin.”

    Conference Call and Webcast Information

    The Company plans to host a conference call and audio webcast today, February 20, 2013, at 10:00 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 through February 27, 2013 and may be accessed by dialing (877) 870-5176 or (858) 384-5517 and entering conference ID number 408486. The live conference call and replay may also be accessed via audio webcast at the Investor Relations section of the Company’s website, www.lumberliquidators.com.

    Raymond James Annual Institutional Investors Conference

    The Company today also announced that Mr. Lynch and Daniel E. Terrell, Chief Financial Officer, will present at the Raymond James Annual Institutional Investors Conference. The Company’s presentation is scheduled for Monday, March 4, 2013, at 10:25 a.m. Eastern Time in Orlando. The live webcast and replay of the Company’s presentation may be accessed via audio webcast at the Investor Relations section of the Company’s website, www.lumberliquidators.com.

    About Lumber Liquidators

    With over 290 locations, Lumber Liquidators is North America’s largest specialty retailer of hardwood flooring. The Company features more than 340 first quality flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate and resilient vinyl. Additionally, Lumber Liquidators provides a wide selection of flooring enhancements and accessories to complement, install and maintain your new floor. Every location is staffed with flooring experts who can provide advice and useful information about Lumber Liquidators’ low priced product, much of which is in-stock and ready for delivery.

    With quality brands including Bellawood Prefinished Hardwood and Morning Star Bamboo, Lumber Liquidators’ flooring is often featured on popular television shows such as HGTV’s Dream Home.

    For more information, please visit www.lumberliquidators.com or call 1.800.HARDWOOD. You can also follow the Company on Facebook and Twitter.

    Forward-Looking Statements

    This press release and accompanying financial tables may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act. These statements are based on currently available information as of the date of such statements and are subject to risks and uncertainties that may cause actual results to differ. The Company specifically disclaims any obligation to update these statements which speak only as of their respective dates, except as may be required under the federal securities laws. Information regarding these additional risks and uncertainties is contained in the Company’s filings with the Securities and Exchange Commission.

             
    Lumber Liquidators Holdings, Inc.
     
    Consolidated Balance Sheets
    (in thousands, except share data)
             
        December 31,
          2012       2011  
    Assets        
    Current Assets:        
    Cash and Cash Equivalents   $ 64,167     $ 61,675  
    Merchandise Inventories     206,704       164,139  
    Prepaid Expenses     5,168       4,292  
    Other Current Assets     12,106       7,863  
    Total Current Assets     288,145       237,969  
    Property and Equipment, net     47,764       44,147  
    Goodwill     9,693       9,693  
    Other Assets     1,785       3,045  
    Total Assets   $ 347,387     $ 294,854  
             
    Liabilities and Stockholders’ Equity        
    Current Liabilities:        
    Accounts Payable   $ 55,110     $ 38,161  
    Customer Deposits and Store Credits     25,747       18,120  
    Accrued Compensation     7,969       2,509  
    Sales and Income Tax Liabilities     4,314       5,092  
    Other Current Liabilities     7,887       6,839  
    Total Current Liabilities     101,027       70,721  
             
    Deferred Rent     3,653       3,328  
    Deferred Tax Liability     8,166       5,721  
             
    Stockholders’ Equity:        
    Common Stock ($0.001 par value; 35,000,000 authorized; 27,214,144 and 27,894,543 outstanding, respectively)     29       28  
    Treasury Stock, at cost (1,719,706 and 58,730 shares, respectively)     (50,552 )     (1,116 )
    Additional Capital     131,724       110,163  
    Retained Earnings     153,267       106,203  
    Accumulated Other Comprehensive Income (Loss)     73       (194 )
    Total Stockholders’ Equity     234,541       215,084  
    Total Liabilities and Stockholders’ Equity   $ 347,387     $ 294,854  
             
    Lumber Liquidators Holdings, Inc.
     
    Consolidated Statements of Income
    (in thousands, except share data and per share amounts)
             
        Three Months Ended   Year Ended
        December 31,   December 31,
          2012       2011       2012       2011  
        (unaudited)        
    Net Sales   $ 210,655     $ 174,454     $ 813,327     $ 681,587  
    Cost of Sales     128,373       112,544       504,542       440,912  
    Gross Profit     82,282       61,910       308,785       240,675  
                     
    Selling, General and Administrative Expenses     57,800       48,405       230,439       198,237  
    Operating Income     24,482       13,505       78,346       42,438  
                     
    Interest and Other Income, net     (40 )     (284 )     (140 )     (587 )
    Income Before Income Taxes     24,522       13,789       78,486       43,025  
                     
    Provision for Income Taxes     10,714       5,331       31,422       16,769  
    Net Income   $ 13,808     $ 8,458     $ 47,064     $ 26,256  
    Net Income per Common Share—Basic   $ 0.51     $ 0.30     $ 1.71     $ 0.95  
    Net Income per Common Share—Diluted   $ 0.50     $ 0.30     $ 1.68     $ 0.93  
    Weighted Average Common Shares Outstanding:                
    Basic     27,240,235       27,804,219       27,448,333       27,706,629  
    Diluted     27,845,214       28,379,994       28,031,453       28,379,693  
         
    Lumber Liquidators Holdings, Inc.
     
    Consolidated Statements of Cash Flows
    (in thousands)
         
        Year Ended December 31,
          2012       2011       2010  
    Cash Flows from Operating Activities:            
    Net Income   $ 47,064     $ 26,256     $ 26,266  
    Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:            
    Depreciation and Amortization     9,957       8,328       5,773  
    Deferred Income Taxes     160       2,402       4,300  
    Stock-Based Compensation Expense     3,997       4,005       3,091  
    Changes in Operating Assets and Liabilities:            
    Merchandise Inventories     (42,712 )     (9,197 )     (21,789 )
    Accounts Payable     16,756       4,467       1,136  
    Customer Deposits and Store Credits     7,626       6,104       2,234  
    Prepaid Expenses and Other Current Assets     (2,835 )     (1,943 )     (3,548 )
    Other Assets and Liabilities     7,256       3,679       (487 )
    Net Cash Provided by Operating Activities     47,269       44,101       16,976  
                 
    Cash Flows from Investing Activities:            
    Purchases of Property and Equipment     (13,376 )     (16,988 )     (20,535 )
    Cash Paid for Acquisition           (4,725 )      
    Net Cash Used in Investing Activities     (13,376 )     (21,713 )     (20,535 )
                 
    Cash Flows from Financing Activities:            
    Payments for Stock Repurchases     (49,436 )     (249 )     (389 )
    Proceeds from the Exercise of Stock Options     10,454       3,070       1,796  
    Excess Tax Benefits on Stock Option Exercises     7,131       1,690       1,307  
    Net Cash (Used in) Provided by Financing Activities     (31,851 )     4,511       2,714  
    Effect of Exchange Rates on Cash and Cash Equivalents     450       (54 )      
    Net Increase (Decrease) in Cash and Cash Equivalents     2,492       26,845       (845 )
    Cash and Cash Equivalents, Beginning of Year     61,675       34,830       35,675  
    Cash and Cash Equivalents, End of Year   $ 64,167     $ 61,675     $ 34,830  
             
    Lumber Liquidators Holdings, Inc.
     
    Other Supporting Schedules
    (unaudited)
             
        Three Months Ended   Year Ended
        December 31,   December 31,
          2012       2011       2012       2011  
        (dollars in thousands)
    Net sales   $ 210,655     $ 174,454     $ 813,327     $ 681,587  
    Percentage increase     20.8 %     13.9 %     19.3 %     9.9 %
                     
    Number of stores open at end of period     288       263       288       263  
    Number of stores opened in period     4       7       25       40  
        Percentage increase (decrease)
                     
    Average sale1     3.9 %     1.0 %     2.5 %     2.8 %
    Average retail price per unit sold2     2.2 %     6.4 %     0.2 %     6.8 %
                     
    Comparable Stores3:                
    Net sales     13.2 %     1.9 %     11.4 %     (2.0 %)
    Customers invoiced4     9.1 %     0.9 %     8.6 %     (4.7 %)
    Net sales of stores operating for 13 to 36 months     19.7 %     14.8 %     23.3 %     12.0 %
    Net sales of stores operating for more than 36 months     12.5 %     (2.5 %)     9.1 %     (5.5 %)
                     
    Net sales in markets with all stores comparable (no cannibalization)     15.6 %     6.8 %     13.3 %     2.2 %
    Net sales in cannibalized markets     34.5 %     19.1 %     33.3 %     18.6 %

    ___________________

    1 Average sale, calculated on a total company basis, is defined as the average invoiced sale per customer, measured on a monthly basis and excluding transactions of less than $250 (which are generally sample orders, or add-ons or fill-ins to previous orders) and of more than $30,000 (which are usually contractor orders)
    2 Average retail price per unit sold is calculated on a total company basis and excludes certain service revenue, which consists primarily of freight charges for in-home delivery
    3A store is generally considered comparable on the first day of the thirteenth full calendar month after opening
    4Approximated by applying our average sale to total net sales at comparable stores

    The significant drivers of gross margin expansion and their estimated impact compared to the prior quarter and the prior year are as follows:

            Three Months Ended   Year Ended
            December 31,   December 31,
    Driver   Description   2012   2011   2012   2011
              (in basis points)

    expansion (contraction)

                                     
    Cost of Product   Cost of acquiring the products we sell from our suppliers, including the impact of our sourcing initiatives; Changes in the mix of products sold; Changes in the average retail price per unit sold.     220       260       200       140  
                                     
    Transportation   International and domestic transportation costs, including the impact of international container rates; Customs and duty charges; Fuel and fuel surcharges; Impact of mill shipments received directly by our stores; Transportation charges from our distribution centers to our stores; Transportation charges between stores and the cost of delivery to our customers.     20       (80 )     40       (60 )
                                     
    All Other   Investments in our quality control procedures; Warranty costs; Changes in finishing costs to produce a unit of our proprietary brands; Inventory shrink; Net costs of producing samples.     120       (30 )     30       (30 )
                                     
    Total Change in Gross Margin from the prior year     360      

    150

          270       50  
                                     

    The following table sets forth components of SG&A expenses for the periods indicated, as a percentage of net sales.

             
        Three Months Ended   Year Ended
        December 31,   December 31,
        2012   2011   2012   2011
    Total SG&A expenses   27.4 %   27.7 %   28.3 %   29.1 %
    Salaries, Commissions and Benefits   11.9 %   12.2 %   12.1 %   11.8 %
    Advertising   6.4 %   6.2 %   7.2 %   7.7 %
    Occupancy   3.8 %   4.1 %   3.8 %   4.0 %
    Depreciation and Amortization   1.2 %   1.2 %   1.2 %   1.2 %
    Stock-based Compensation   0.5 %   0.6 %   0.5 %   0.6 %
    Other SG&A Expenses   3.7 %   3.5 %   3.5 %   3.8 %

    Source: Lumber Liquidators

    Lumber Liquidators Investor Relations
    Ashleigh McDermott, 757-566-7512


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