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    Lumber Liquidators Announces Second Quarter 2014 Financial Results And Reiterates Full Year 2014 Outlook

    ~ Net Sales Increased 2.3% to $263.1 Million

    ~~ Net Income of $16.6 Million, or $0.60 per Diluted Share

    Jul 30, 2014

    TOANO, Va., July 30, 2014 /PRNewswire/ -- Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today announced financial results for the second quarter and six months ended June 30, 2014.

    Lumber Liquidators

    Second Quarter Results

    Net sales increased $6.0 million, or 2.3%, to $263.1 million in the second quarter of 2014 from $257.1 million in the second quarter of 2013.  In comparable stores, net sales decreased 7.1% in the second quarter of 2014.  The Company's average sale declined 1.8% in the second quarter of 2014, indicating a 5.3% decrease in the number of customers invoiced.  Reduced customer traffic has coincided with certain weak macroeconomic trends and has remained particularly low in geographic areas most severely impacted by the unusually harsh winter weather.  Additionally, constrained inventory levels in certain key merchandise categories reduced the conversion of customer interest into invoiced sales.  The Company estimates an aggregate net sales shortfall in the second quarter of up to $18 million in those products impacted.  Non-comparable store net sales increased $24.1 million and included net sales from 13 new stores opened during the second quarter of 2014.

    Gross margin was 40.4% in the second quarter of 2014 compared to 41.3% in the second quarter of 2013 due primarily to adverse net shifts in sales mix, greater discounting at the point of sale and higher net transportation costs.

    Selling, general and administrative ("SG&A") expenses in the second quarter of 2014 increased $6.1 million, or 8.3%, to $79.1 million primarily due to higher advertising, occupancy, legal and professional expenses.  SG&A expenses were 30.1% of net sales in the second quarter of 2014, up from 28.4% of net sales in the second quarter of 2013. 

    Net income decreased 18.7% to $16.6 million, or $0.60 per diluted share, in the second quarter of 2014 from $20.4 million, or $0.73 per diluted share, in the second quarter of the prior year.

    Cash and cash equivalents at June 30, 2014 totaled $48.1 million compared with $84.7 million at June 30, 2013 and $80.6 million at December 31, 2013. 

    Robert M. Lynch, President and Chief Executive Officer, commented, "Our second quarter net sales and earnings per diluted share were in-line with our revised expectations communicated earlier this month.  Despite the challenges we faced in the second quarter and results that were not at the level we would have hoped, our value proposition is as strong and relevant as ever to our customers.  We remain focused on continuous improvement across our operations and implementing our multi-year strategic initiatives to position the Company for long-term growth."   

    First Six Months Results

    Net sales increased 4.5% to $509.4 million in the first six months of 2014 from $487.5 million in the first six months of 2013.  Comparable store net sales decreased 4.0% for the first half of 2014.  Non-comparable store net sales increased $41.4 million over the prior year.  The Company opened 26 new stores during the first six months of 2014 and as of June 30, 2014, operated 344 stores in 46 states and Canada. 

    Gross margin decreased to 40.7% for the first six months of 2014 from 40.8% in the same period of 2013.  SG&A expenses were 31.0% of net sales for the first half of 2014, compared to 28.8% of net sales for the first half of 2013. 

    Net income decreased 16.3% to $30.3 million, or $1.09 per diluted share, in the first half of 2014 compared to $36.2 million, or $1.30 per diluted share, in the first half of the prior year. 

    Company Outlook

    The Company has reiterated its outlook for the full year 2014 released earlier this month and expects the following:

    • Net sales in the range of $1.05 billion to $1.10 billion.
    • Change in comparable store net sales in the low single digits, either positive or negative.
    • The opening of a total of 33 to 37 new store locations in the expanded showroom format.
    • The remodeling of a total of 15 to 20 existing stores in the expanded showroom format, from a previous range of 25 to 30 existing stores. 
    • Capital expenditures between $80 million and $85 million, including up to $50 million for supply chain investments, from a previous range of $80 million to $90 million.
    • Earnings per diluted share in the range of $2.65 to $3.00 based on a diluted share count of 27.6 million shares, which is exclusive of any future impact of the stock repurchase program.

    Mr. Lynch concluded, "We continue to invest record capital into the infrastructure that enables us to deliver on our value proposition and our long-term growth plans, with the expansion of our distribution capacity progressing as planned.  Further, we are executing our real estate strategy and remain confident in our ability to expand our store base.  Overall, our team is focused and motivated, and we are positioned well to capture share in our highly fragmented market.  We expect to drive growth in the second half of the year and set the stage for operating margin expansion in 2015 and beyond." 

    Conference Call and Webcast Information

    The Company plans to host a conference call and audio webcast today, July 30, 2014, 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 ends through August 6, 2014 and may be accessed by dialing (877) 870-5176 or (858) 384-5517 and entering pin number 13585249.  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.

    About Lumber Liquidators

    In its 20th year and with more than 345 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. Lumber Liquidators features more than 350 top 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 premier 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 and This Old House.

    For more information, please visit www.LumberLiquidators.com or call 1.800.HARDWOOD.  You can also follow the company on Facebook and Twitter, and learn more about its corporate giving program at LayItForward.LumberLiquidators.com.

    Forward-Looking Statements

    This press release and accompanying financial tables may contain "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. Forward-looking statements in this press release may include, without limitation, statements regarding sales growth, comparable store net sales, impact of cannibalization, price changes, earnings performance, stock-based compensation expense, margins, return on invested capital, strategic direction, the demand for the Company's products, and store openings.  The Company's actual results could differ materially from those projected in or contemplated by the forward-looking statements as a result of potential risks, uncertainties and other factors including, but not limited to, changes in general economic and financial conditions, such as the rate of unemployment, consumer access to credit, and interest rate; the volatility in mortgage rates; the legislative/regulatory climate; political unrest in the countries of the Company's suppliers; the availability of sufficient suitable hardwood; the strength of the Company's competitors and their ability to increase their market share; slower growth in personal income; changes in business and consumer spending; changes in transportation costs; the rate of growth of residential remodeling and new home construction; the impact weather may have on customer traffic and sales; and inventory levels.  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. Information regarding these additional risks and uncertainties is contained in the Company's other reports filed with the Securities and Exchange Commission, including the Item 1A, "Risk Factors," section of the Form 10-K for the year ended December 31, 2013.

    For further information contact:

    Lumber Liquidators Investor Relations
    Ashleigh McDermott
    Tel: 757.566.7512

     


    (Tables Follow)




    Lumber Liquidators Holdings, Inc.


    Condensed Consolidated Balance Sheets
    (in thousands, except share data)





    June 30,

    December 31,


    2014

    2013


    (unaudited)


    Assets



    Current Assets:



    Cash and Cash Equivalents

    $       48,062

    $       80,634

    Merchandise Inventories

    272,740

    252,428

    Prepaid Expenses

    6,171

    6,229

    Other Current Assets

    15,591

    12,916




    Total Current Assets

    342,564

    352,207

    Property and Equipment, net

    100,628

    65,947

    Goodwill

    9,693

    9,693

    Other Assets

    1,678

    1,712




    Total Assets

    $   454,563

    $   429,559




    Liabilities and Stockholders' Equity



    Current Liabilities:



    Accounts Payable

    $       66,211

    $       56,327

    Customer Deposits and Store Credits

    31,256

    22,377

    Accrued Compensation

    3,918

    11,709

    Sales and Income Tax Liabilities

    4,451

    4,878

    Other Current Liabilities

    23,493

    11,709




    Total Current Liabilities

    129,329

    107,000




    Deferred Rent

    5,562

    4,169

    Deferred Tax Liability

    9,374

    9,061




    Stockholders' Equity:



    Common Stock ($0.001 par value; 35,000,000 shares authorized;
       27,282,138 and 27,557,570 shares outstanding, respectively)

    30

    30

    Treasury Stock, at cost (2,558,013 and 2,133,307 shares, respectively)

    (123,889)

    (85,382)

    Additional Capital

    173,365

    164,581

    Retained Earnings

    260,963

    230,662

    Accumulated Other Comprehensive Loss

    (171)

    (562)




    Total Stockholders' Equity

    310,298

    309,329




    Total Liabilities and Stockholders' Equity

    $   454,563

    $   429,559

     

     


    Lumber Liquidators Holdings, Inc.


    Condensed Consolidated Statements of Income
    (in thousands, except share data and per share amounts)


    (unaudited)



    Three Months Ended
    June 30,

    Six Months Ended
    June 30,


    2014

    2013

    2014

    2013






    Net Sales

    $    263,085

    $    257,111

    $     509,376

    $     487,530

    Cost of Sales

    156,847

    151,032

    301,851

    288,453






    Gross Profit

    106,238

    106,079

    207,525

    199,077






    Selling, General and Administrative Expenses

    79,066

    72,992

    157,932

    140,582






    Operating Income

    27,172

    33,087

    49,593

    58,495






    Other (Income) Expense

    70

    (150)

    164

    (360)






    Income Before Income Taxes

    27,102

    33,237

    49,429

    58,855






    Provision for Income Taxes

    10,495

    12,815

    19,128

    22,652






    Net Income

    $       16,607

    $       20,422

    $       30,301

    $       36,203






    Net Income per Common Share—Basic

    $           0.61

    $           0.74

    $           1.10

    $           1.32






    Net Income per Common Share—Diluted

    $           0.60

    $           0.73

    $           1.09

    $           1.30






    Weighted Average Common Shares Outstanding:





    Basic

    27,384,255

    27,535,034

    27,452,470

    27,374,164

    Diluted

    27,610,969

    27,973,457

    27,721,161

    27,879,428

     

     


    Lumber Liquidators Holdings, Inc.


    Condensed Consolidated Statements of Cash Flows
    (in thousands)


    (unaudited)



    Six Months Ended

    June 30,


    2014

    2013




    Cash Flows from Operating Activities:



    Net Income

    $        30,301

    $        36,203

    Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:



    Depreciation and Amortization

    7,085

    5,595

    Stock-Based Compensation Expense

    2,777

    2,633

    Changes in Operating Assets and Liabilities:



    Merchandise Inventories

    (20,462)

    (23,921)

    Accounts Payable

    3,509

    (1,957)

    Customer Deposits and Store Credits

    8,899

    4,568

    Prepaid Expenses and Other Current Assets

    (2,470)

    (4,202)

    Other Assets and Liabilities

    (1,551)

    4,819




    Net Cash Provided by Operating Activities

    28,088

    23,738




    Cash Flows from Investing Activities:



    Purchases of Property and Equipment

    (28,269)

    (6,767)




    Net Cash Used in Investing Activities

    (28,269)

    (6,767)




    Cash Flows from Financing Activities:



    Payments for Stock Repurchases

    (38,507)

    (14,637)

    Proceeds from the Exercise of Stock Options

    2,644

    6,744

    Excess Tax Benefit from Stock-Based Compensation

    3,236

    11,794




    Net Cash (Used in) Provided by Financing Activities

    (32,627)

    3,901




    Effect of Exchange Rates on Cash and Cash Equivalents

    236

    (375)




    Net (Decrease) Increase in Cash and Cash Equivalents

    (32,572)

    20,497

    Cash and Cash Equivalents, Beginning of Period

    80,634

    64,167




    Cash and Cash Equivalents, End of Period

    $      48,062

    $      84,664




     

     

    Lumber Liquidators Holdings, Inc.


    Other Supporting Schedules
    (dollars in thousands)


    (unaudited)


    The tables below reflect a segregation of those stores the Company believes were impacted by weather or Hurricane Sandy from all other stores when comparing second quarter and first half of 2014 net sales and the percentage change to the second quarter and first half of 2013:



    Three Months Ended June 30, 2014


    All Stores


    All Other Stores

    Stores Significantly
    Impacted by Weather
    1

    Hurricane Sandy Stores2




    Number of stores at June 30, 2014

    344


    206

    131

    7







    Net sales

    $       263,085


    $       163,882

    $       93,176

    $       6,027

         Percentage increase (decrease)

    2.3%


    5.5%

    0.4%

    (32.5)%



                       percentage increase (decrease)

    Comparable stores3:






         Net sales

    (7.1)%


    (2.1)%

    (12.9)%

    (32.5)%







         Customers invoiced4

    (5.3)%


    (1.9)%

    (9.6)%

    (25.7)%

         Average sale5

    (1.8)%


    (0.2)%

    (3.3)%

    (6.8)%




    Six Months Ended June 30, 2014


    All Stores


    All Other Stores

    Stores Significantly
    Impacted by Weather
    1

    Hurricane Sandy Stores2




    Number of stores at June 30, 2014

    344


    206

    131

    7







    Net sales

    $ 509,376


    $ 316,545

    $ 181,181

    $ 11,650

         Percentage increase (decrease)

    4.5%


    9.7%

    0.5%

    (37.7)%



                       percentage increase (decrease)

    Comparable stores3:






         Net sales

    (4.0)%


    2.8%

    (11.4)%

    (37.7)%







         Customers invoiced4

    (4.3)%


    0.0%

    (9.0)%

    (29.0)%

         Average sale5

    0.3%


    2.8%

    (2.4)%

    (8.7)%







    _________________

    1 Segregation of those stores the Company believes were significantly impacted by the unusually severe weather is consistent with that presented in the first quarter of 2014, except that those stores impacted by Hurricane Sandy are further segregated.

    2 Includes store locations serving communities that were impacted by Hurricane Sandy and benefited net sales from the fourth quarter of 2012 through the third quarter of 2013.

    3A store is generally considered comparable on the first day of the thirteenth full calendar month after opening.

    4 Change in number of customers invoiced is calculated by applying our average sale to total net sales at comparable stores.

    5Average 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).

     

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    SOURCE Lumber Liquidators


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