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    Lumber Liquidators Announces Fourth Quarter And Full Year 2014 Financial Results And Provides Full Year 2015 Outlook

    ~ Fourth Quarter Net Sales Increased 5.2% to $272.0 Million

    ~~ Fourth Quarter Net Income of $17.3 Million, or $0.64 per Diluted Share

    ~~ Full Year 2015 Net Sales Expected to be $1.14 billion to $1.21 billion

    ~~ Full Year 2015 EPS Expected to be $2.50 to $3.00

    Feb 25, 2015

    TOANO, Va., Feb. 25, 2015 /PRNewswire/ -- 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, 2014, as well as its outlook for 2015.

    Lumber Liquidators.

    Fourth Quarter Results

    Net sales increased $13.6 million, or 5.2%, to $272.0 million in the fourth quarter of 2014 from $258.4 million in the fourth quarter of 2013.  Comparable store net sales decreased 4.2% for the quarter, driven by a 5.3% decrease in the average sale partially offset by a 1.1% increase in the number of customers invoiced.  Non-comparable store net sales increased $24.5 million and included net sales from three new stores opened during the fourth quarter of 2014. 

    Gross margin was 39.2% in the fourth quarter of 2014 compared to 40.8% in the fourth quarter of 2013 primarily due to adverse net shifts in sales mix, marketing changes and greater costs of inventory shrink and obsolescence.  These costs were partially offset by lower net transportation costs.

    Selling, general and administrative ("SG&A") expenses in the fourth quarter of 2014 increased $6.5 million, or 9.2%, over the fourth quarter of 2013, to $77.8 million primarily due to higher advertising, depreciation, occupancy and payroll expenses.  SG&A expenses were 28.6% of net sales in the fourth quarter of 2014, compared to 27.6% of net sales in the fourth quarter of 2013. 

    Net income was $17.3 million, or $0.64 per diluted share, in the fourth quarter of 2014 and $20.8 million, or $0.74 per diluted share, in the fourth quarter of the prior year. 

    Robert M. Lynch, President and Chief Executive Officer, commented, "The availability of our assortment was materially restored in the fourth quarter, and though our results were short of our expectations, we implemented changes to the marketing of our value proposition during the quarter which were the primary drivers of significant customer traffic late in the quarter and into 2015.  In December, the number of customers invoiced increased 8% and we ended the year with a 69% increase in open orders.  The marketing changes implemented during the quarter featured modifications to our promotional focus, advertising cadence and outstanding advertised retail price points with limited point of sale discounting, which pressured gross margin late in the quarter.  Fourth quarter gross margin was also adversely impacted by shifts within our sales mix, including the Bellawood transition, clearance markdowns and a successful next step in the multi-year rollout of our installation services.  We also completed construction of our million square foot distribution center in Virginia, and began the transition and consolidation of the four existing facilities.  Though we experienced a number of challenges in 2014 as well as significant infrastructure investments, I believe we are well positioned for a stronger 2015." 

    Full Year Results

    Net sales increased 4.7% to $1.05 billion in 2014 from $1.00 billion in 2013.  Comparable store net sales decreased 4.3% for the year, and non-comparable store net sales increased $90.1 million over the prior year.  The Company opened 34 new stores in 2014, and as of December 31, 2014, operated 352 stores in 46 states and Canada.  The Company also remodeled 17 existing stores during the year. 

    Gross margin decreased to 39.9% in 2014 compared to 41.1% in the prior year.  SG&A expenses increased as a percentage of net sales to 30.0% in 2014, compared to 28.5% in 2013. 

    Net income decreased 18.1% to $63.4 million, or $2.31 per diluted share, in 2014 compared to $77.4 million, or $2.77 per diluted share, in the prior year.

    Company Outlook

    Strong customer demand seen in December 2014 has continued in 2015, with total net sales through February 23, 2015 increasing 21.4%, including a 12.1% increase in net sales at comparable stores, driven by a 16.8% increase in the number of customers invoiced, partially offset by a 4.7% decrease in the average sale.  In addition, open orders increased 24.5% over the same day in the prior year.  Though results for the same period in the prior year had been adversely impacted by the severe winter weather, the current year increase in total net sales represents a three-year compound annual growth rate of 16.8%.  The Company expects percentage increases over 2014 to moderate over the remainder of the first quarter, a period that includes the beginning of the spring flooring season and historically represents approximately half of the first quarter's total net sales.  As a result, in the first quarter of 2015, the Company currently expects comparable store net sales to increase in the mid to high single digits, driven by an increase in the number of customers invoiced and partially offset by a lower average sale.  Further, with the new distribution center becoming fully operational in the first quarter of 2015, the Company expects to incur approximately $2.7 million of incremental costs to transition and consolidate existing operations, including $1.5 million of transportation costs and $1.2 million of SG&A expenses. 

    Considering these strong early indications and expectation of continued positive trends in the core business, the Company expects to achieve the following for the full year 2015:

    • Net sales in the range of $1.14 billion to $1.21 billion.
    • Comparable store net sales increasing in the single digits.
    • The opening of a total of 30 to 35 new store locations and remodeling of a total of 15 to 20 existing stores, all in the expanded showroom format. 
    • Gross margin in the range of 39.0% to 40.0% with the second half of the year generally stronger than the first half, pressured in comparison to 2014 by a range of factors, including shifts in sales mix, net changes in retail pricing, modifications in promotional plans and higher net transportation costs. 
    • Capital expenditures between $20 million and $30 million.
    • Earnings per diluted share in the range of approximately $2.50 to $3.00 based on a diluted share count of approximately 27.2 million shares, which is exclusive of any future impact of the stock repurchase program or resolution of any legal or regulatory matters not accrued at December 31, 2014.

    Mr. Lynch concluded, "Year to date, we have maintained our momentum from December, as we have prioritized and refined our emphasis on value to our customers and the marketing of that message.  We expect to win market share in 2015 with a value proposition that offers a widening customer base the largest assortment of high-quality, readily available flooring, that is offered at truly outstanding values and recommended by our flooring experts.  We made significant investment in the infrastructure supporting our long-term growth and we intend to begin levering those investments in 2015 to once again expand operating margin."

    Conference Call and Webcast Information

    The Company plans to host a conference call and audio webcast today, February 25, 2015, 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 March 4, 2015 and may be accessed by dialing (877) 870-5176 or (858) 384-5517 and entering pin number 13600138.  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

    With more than 350 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. The Company features more than 400 top quality flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate and vinyl plank. 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 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. 

    Lumber Liquidators aims to be the industry leader in sustainability. For more information, please visit www.LumberLiquidators.com/Sustainability. Learn more about our corporate giving program at LayItForward.LumberLiquidators.com. 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" 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, number of stores providing installation services, impact of cannibalization, price changes, inventory availability and inventory per store, impact of constrained inventory, earnings performance, stock-based compensation expense, margins, return on invested capital, advertising costs, strategic direction, supply chain, clearance events, the demand for the Company's products, benefits from an improving housing market, the completion of the Company's second finishing line, construction of engineered hardwood as to not be subject to anti-dumping and countervailing duties, and store openings and remodels.  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 Company's suppliers' ability to meet its quality assurance requirements; disruption in the Company's suppliers' abilities to supply needed inventory; disruptions or delays in the production, shipment, delivery or processing through ports of entry, including, without limitation, those resulting from strikes, lockouts, work-stoppages or slowdowns, or other forms of labor unrest; 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; the demand for and profitability of installation services; changes in the scope or rates of any antidumping or countervailing duty rates applicable to the Company's products; 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, 2014.

    For further information contact:

    Lumber Liquidators Investor Relations

    Ashleigh McDermott

    Tel: 757.566.7512

    (Tables Follow)

    Lumber Liquidators Holdings, Inc.

    Consolidated Balance Sheets

    (in thousands, except share data)





    December 31,


    2014

    2013

    Assets



    Current Assets:



    Cash and Cash Equivalents

    $     20,287

    $     80,634

    Merchandise Inventories

    314,371

    252,428

    Prepaid Expenses

    5,575

    6,229

    Other Current Assets

    17,044

    12,916




    Total Current Assets

    357,277

    352,207

    Property and Equipment, net

    124,867

    65,947

    Goodwill

    9,693

    9,693

    Other Assets

    1,625

    1,712




    Total Assets

    $   493,462

    $   429,559




    Liabilities and Stockholders' Equity



    Current Liabilities:



    Accounts Payable

    $     80,303

    $     56,327

    Customer Deposits and Store Credits

    34,943

    22,377

    Accrued Compensation

    3,693

    11,709

    Sales and Income Tax Liabilities

    7,472

    4,878

    Other Current Liabilities

    17,836

    11,709




    Total Current Liabilities

    144,247

    107,000




    Deferred Rent

    6,603

    4,169

    Deferred Tax Liability

    10,558

    9,061




    Stockholders' Equity:



    Common Stock ($0.001 par value; 35,000,000 authorized; 27,069,307 and
    27,557,570 outstanding, respectively)

    30

    30

    Treasury Stock, at cost (2,816,780 and 2,133,307 shares, respectively)

    (138,692)

    (85,382)

    Additional Capital

    177,479

    164,581

    Retained Earnings

    294,033

    230,662

    Accumulated Other Comprehensive Loss

    (796)

    (562)




    Total Stockholders' Equity

    332,054

    309,329




    Total Liabilities and Stockholders' Equity

    $   493,462

    $   429,559




     

     

    Lumber Liquidators Holdings, Inc.

    Consolidated Statements of Income

    (in thousands, except share data and per share amounts)





    Three Months Ended

    December 31,

    Year Ended

    December 31,


    2014

    2013

    2014

    2013


    (unaudited)



    Net Sales

    $  271,976

    $  258,433

    $ 1,047,419

    $ 1,000,240

    Cost of Sales

    165,492

    152,902

    629,252

    589,257






    Gross Profit

    106,484

    105,531

    418,167

    410,983






    Selling, General and Administrative Expenses

    77,805

    71,270

    314,094

    284,960






    Operating Income

    28,679

    34,261

    104,073

    126,023






    Other (Income) Expense

    224

    (18)

    490

    (442)






    Income Before Income Taxes

    28,455

    34,279

    103,583

    126,465






    Provision for Income Taxes

    11,110

    13,484

    40,212

    49,070






    Net Income

    $    17,345

    $    20,795

    $    63,371

    $    77,395






    Net Income per Common Share—Basic

    $         0.64

    $        0.75

    $        2.32

    $        2.82






    Net Income per Common Share—Diluted

    $         0.64

    $        0.74

    $        2.31

    $        2.77






    Weighted Average Common Shares Outstanding:





    Basic

    27,064,475

    27,592,651

    27,264,882

    27,484,790

    Diluted

    27,236,206

    27,940,706

    27,485,852

    27,914,322

     

     

    Lumber Liquidators Holdings, Inc.

    Consolidated Statements of Cash Flows

    (in thousands)




    Year Ended December 31,


    2014

    2013

    Cash Flows from Operating Activities:



    Net Income

    $      63,371

    $      77,395

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



    Depreciation and Amortization

    14,714

    11,666

    Deferred Income Taxes

    (152)

    (846)

    Stock-Based Compensation Expense

    5,593

    5,974

    Changes in Operating Assets and Liabilities:



    Merchandise Inventories

    (62,140)

    (45,834)

    Accounts Payable

    21,478

    (15)

    Customer Deposits and Store Credits

    12,623

    (3,354)

    Prepaid Expenses and Other Current Assets

    (1,836)

    (257)

    Other Assets and Liabilities

    3,436

    8,271




    Net Cash Provided by Operating Activities

    57,087

    53,000




    Cash Flows from Investing Activities:



    Purchases of Property and Equipment

    (71,138)

    (28,585)




    Net Cash Used in Investing Activities

    (71,138)

    (28,585)




    Cash Flows from Financing Activities:



    Payments for Stock Repurchases

    (53,310)

    (34,830)

    Proceeds from the Exercise of Stock Options

    3,150

    10,255

    Excess Tax Benefit from Stock-Based Compensation

    4,004

    17,132

    Borrowings on Revolving Credit Facility

    53,000

    Payments on Revolving Credit Facility

    (53,000)




    Net Cash Used in Financing Activities

    (46,156)

    (7,443)




    Effect of Exchange Rates on Cash and Cash Equivalents

    (140)

    (505)

    Net (Decrease) Increase in Cash and Cash Equivalents

    (60,347)

    16,467

    Cash and Cash Equivalents, Beginning of Year

    80,634

    64,167




    Cash and Cash Equivalents, End of Year

    $      20,287

    $      80,634




      

     


    Lumber Liquidators Holdings, Inc.

    Other Supporting Schedules

    (unaudited)





    Three Months Ended

    December 31,

    Year Ended

    December 31,



    2014

    2013

    2014

    2013


    (dollars in thousands)

    Net sales

    $  271,976

    $ 258,433

    $ 1,047,419

    $ 1,000,240

         Percentage increase

    5.2%

    22.7%

    4.7%

    23.0%






    Number of stores open at end of period

    352

    318

    352

    318

    Number of stores opened in period

    3

    11

    34

    30


    percentage increase (decrease)






    Average sale1

    (5.3)%

    7.0%

    (1.8)%

    6.6%

    Average retail price per unit sold2

    (4.9)%

    3.2%

    (1.9)%

    5.7%






    Comparable stores3:





          Net sales

    (4.2)%

    15.6%

    (4.3)%

    15.8%

          Customers invoiced4

    1.1%

    8.6%

    (2.5)%

    9.2%

          Net sales of stores operating for 13 to 36 months

    3.3%

    19.2%

    4.2%

    21.8%

          Net sales of stores operating for more than 36 months

    (5.2)%

    14.9%

    (5.1)%

    14.9%






    Net sales in markets with all stores comparable (no cannibalization)

    (0.3)%

    18.9%

    (0.3)%

    18.2%

    Net sales in cannibalized markets5

    18.2%

    42.7%

    17.2%

    45.2%

    ___________________

    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 non-merchandise revenue.

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

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

    5 A cannibalized market has at least one comparable store and one non-comparable store.







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



    Three Months Ended
    December 31,

    Year Ended

    December 31,

    Driver

    Description

    2014

    2013

    2014

    2013



    expansion (contraction) in basis points







    Product....

    Cost of acquiring the Company's products from suppliers, including the impact of sourcing initiatives; Customs and duty charges; Changes in the mix of products sold; Changes in the average retail price per unit sold; Changes in the average retail price and related cost of services, including installation and delivery; Changes in finishing costs to produce a unit of the Company's proprietary brands

    (160)

    210

    (130)

    300








    Transportation....

    International and domestic transportation costs, including the impact of international container rates; Fuel and fuel surcharges; Impact of vendor shipments received directly by the stores; Transportation charges from distribution centers to the stores and between stores

    10

    (10)

    10

    20








    All Other....

    Investments in quality control procedures; Warranty and customer satisfaction costs; Inventory shrink; Net costs of producing samples

    (10)

    (30)

    (10)







    Total Change in Gross Margin from the prior year

    (160)

    170

    (120)

    310

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


    Three Months Ended

    December 31, 

    Year Ended

    December 31,


    2014

    2013

    2014

    2013

    Total SG&A expenses

    28.6%

    27.6%

    30.0%

    28.5%

         Salaries, Commissions and Benefits

    11.8%

    11.9%

    11.8%

    12.1%

         Advertising

    6.4%

    6.3%

    7.9%

    7.6%

         Occupancy

    4.2%

    3.6%

    4.2%

    3.5%

         Depreciation and Amortization

    1.4%

    1.2%

    1.4%

    1.1%

         Stock-based Compensation

    0.6%

    0.7%

    0.5%

    0.6%

         Other SG&A Expenses

    4.2%

    3.9%

    4.2%

    3.6%

    Logo - http://photos.prnewswire.com/prnh/20130529/NY21644LOGO

    To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/lumber-liquidators-announces-fourth-quarter-and-full-year-2014-financial-results-and-provides-full-year-2015-outlook-300040530.html

    SOURCE Lumber Liquidators, Inc.


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