Lumber Liquidators Announces Fourth Quarter And Full Year 2013 Financial Results And Updates Full Year 2014 Outlook

~ Fourth Quarter Net Sales Increased 22.7% to $258.4 Million and Comparable Store Net Sales Increased 15.6% ~

~ Fourth Quarter Net Income Increased 50.6% to $20.8 Million, or $0.74 per Diluted Share

~~ Full Year 2014 Net Sales Expected to be $1.15 billion to $1.20 billion

~~ Full Year 2014 EPS Expected to be $3.25 to $3.60

~~ Board Authorizes New $50 Million Share Repurchase Program

TOANO, Va. -- 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, 2013, as well as its updated outlook for 2014.

Fourth Quarter Results

Net sales increased $47.8 million, or 22.7%, to $258.4 million in the fourth quarter of 2013 from $210.7 million in the fourth quarter of 2012. Comparable store net sales increased 15.6% for the quarter, driven by an 8.6% increase in the number of customers invoiced and a 7.0% increase in the average sale. Non-comparable store net sales increased $14.9 million over the prior year period. As of December 31, 2013, the Company operated 318 stores, including 11 stores opened during the fourth quarter of 2013, for a total of 30 stores opened during the year. The Company also remodeled 22 existing stores during the year.

Gross margin was 40.8% in the fourth quarter of 2013 compared to 39.1% in the fourth quarter of 2012. The increase in gross margin reflects generally lower net product costs partially offset by higher transportation and other costs. Transportation costs in the fourth quarter of 2013 included certain costs related to the new West Coast distribution center, which is expected to be fully operational in the first quarter of 2014.

Selling, general and administrative ("SG&A") expenses increased as a percentage of net sales to 27.6% for the fourth quarter of 2013 compared to 27.4% for the fourth quarter of 2012. SG&A expenses in the fourth quarter of 2013 included costs of approximately $1.7 million, primarily related to the start-up of the West Coast distribution center and certain incremental legal and professional fees.

Operating margin increased 170 basis points to 13.3% in the fourth quarter of 2013, from 11.6% in the fourth quarter of 2012.

Net income increased 50.6% to $20.8 million, or $0.74 per diluted share, in the fourth quarter of 2013 from $13.8 million, or $0.50 per diluted share, in the fourth quarter of the prior year. The Company's effective tax rate was 39.3% for the fourth quarter of 2013, compared to an effective tax rate of 43.7% in the fourth quarter of 2012.

Cash and cash equivalents at December 31, 2013 totaled $80.6 million compared with $64.2 million at December 31, 2012.

Robert M. Lynch, President and Chief Executive Officer, commented, "We achieved record highs for net sales and operating margin in the fourth quarter as we continued to gain share in a highly fragmented market. We gained further traction in our key, multi-year strategic initiatives while continuing to deliver value and legendary service to each customer. Customer demand was inconsistent during the quarter, with certain regions of the country periodically impacted by difficult weather conditions. Nevertheless, our store team, with support across the organization, delivered an unprecedented level of individualized customer service and focus on operating results. I could not be more proud of this team as we crossed the milestone of $1.0 billion in annual net sales in 2013, and the results we have achieved throughout the year are a direct reflection of the commitment and efforts of our team. This was a year of significant accomplishments by our team, and we believe that our intense focus, unified vision and coordinated efforts set the foundation for an exciting 2014."

Full Year Results

Net sales increased 23.0% to $1.0 billion in 2013 from $813.3 million in 2012, as comparable store net sales increased 15.8%, or $128.2 million, and non-comparable store net sales increased $58.7 million.

Gross margin increased to 41.1% in 2013 compared to 38.0% in the prior year. SG&A expenses increased as a percentage of net sales to 28.5% in 2013, compared to 28.3% in 2012.

Operating margin increased 300 basis points to 12.6% in 2013 from 9.6% in 2012.

Net income increased 64.4% to $77.4 million, or $2.77 per diluted share, in 2013 compared to $47.1 million, or $1.68 per diluted share, in the prior year. The Company's effective tax rate was 38.8% for 2013 compared to an effective tax rate of 40.0% in 2012.

Share Repurchase Program

Lumber Liquidators also announced today that its Board of Directors has authorized the repurchase of an additional $50 million of its common stock. The repurchases will be subject to market conditions and other factors and will be made from time to time through open market purchases or through privately negotiated transactions.

Company Outlook

In 2014, as previously announced, the Company expects to achieve the following for the full year:

Net sales in the range of $1.15 billion to $1.20 billion.

Comparable store net sales increasing in the high single to low-double digits.

The opening of a total of 30 to 40 new store locations and remodeling of a total of 25 to 35 existing stores, all in the store of the future format.

Capital expenditures between $80 million and $90 million, including up to $50 million for supply chain investments.

De-leverage of SG&A expenses primarily related to store base expansion, advertising expenses increasing at a rate greater than net sales, the opening and continuing operation of the West Coast distribution center and higher than normal legal and professional fees.

Operating margin expansion to a range of 13.0% to 13.8%.

Earnings per diluted share in the range of approximately $3.25 to $3.60, based on a diluted share count of approximately 28.1 million shares, which is exclusive of any future impact of the stock repurchase program.

Mr. Lynch concluded, "We are looking forward to another great year as we continue to roll out the store of the future format to both new and existing stores and implement enhancements to our supply chain. To support our continuing growth, our planned capital investment in 2014 will be the largest in our history. We are pleased that we can make this investment in our business while also returning value to our long-term shareholders through our expanded share repurchase authorization. The first quarter of 2014 to date has been disrupted by unseasonably harsh weather across much of the country, but the important spring remodeling season is in front of us. Our team is focused to deliver growth this year, and our industry-leading value proposition is stronger than ever. We continue to invest in the quality of an expanding assortment of products more readily available to meet our customers' needs. Most important is our commitment and continuing investment in our people. Led by our flooring experts, we plan to reach an even broader customer base and capture additional share to drive long-term growth and operating margin expansion in 2014 and for years to come."

KeyBanc Consumer Conference

The Company today also announced that Mr. Lynch and Daniel E. Terrell, Chief Financial Officer, will participate in the KeyBanc's Consumer Conference in New York City on February 26, 2014. Mr. Lynch and Mr. Terrell will be meeting with investors throughout the day.

About Lumber Liquidators

In its 20th year and with more than 320 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. The Company features more than 340 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.