TOANO, VA - Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today announced financial results for the first quarter ended March 31, 2014, and reiterated its outlook for 2014.

First Quarter Results

Net sales increased $15.9 million, or 6.9%, to $246.3 million in the first quarter of 2014 from $230.4 million in the first quarter of 2013. The Company estimates unusually severe winter weather adversely impacted net sales in as many as 135 of its 331 store locations in operation at March 31, 2014. In those stores adversely impacted by weather, net sales declined 3.8% to $93.6 million, and in all other stores, net sales increased 14.6% to $152.7 million.

In comparable stores, net sales decreased 0.6% overall, including a 13.1% decrease in weather-impacted stores and an 8.5% increase in all other stores. The Company's average sale across all stores rose 2.6% in the first quarter of 2014, indicating a 3.2% decrease in the number of customers invoiced. As the weather moderated, customer demand generally strengthened across comparable stores. The Company believes a significant portion of the customer demand delayed by adverse weather in the first quarter will be recovered in the second and third quarters of 2014.

Gross margin was 41.1% in the first quarter of 2014 compared to 40.4% in the first quarter of 2013. The increase in gross margin reflects generally higher net product margin due to continued shifts in sales mix and lower product costs, partially offset by higher net transportation costs. Transportation costs included certain expenses related to the start-up of the West Coast distribution center, which began serving over 90 western store locations in March 2014.

Selling, general and administrative ("SG&A") expenses increased $11.3 million, or 16.7%, to $78.9 million, and included incremental costs of $1.0 million related to the West Coast distribution center and a $1.7 million increase in legal and professional fees compared to the first quarter of 2013. SG&A expenses were 32.0% of net sales in the first quarter of 2014, up from 29.3% in the first quarter of 2013.

Net income decreased 13.2% to $13.7 million, or $0.49 per diluted share, in the first quarter of 2014 from $15.8 million, or $0.57 per diluted share, in the first quarter of the prior year.

Cash and cash equivalents at March 31, 2014 totaled $76.1 million compared with $72.7 million at March 31, 2013 and $80.6 million at December 31, 2013.

Robert M. Lynch, President and Chief Executive Officer, commented, "Like so many, our team was frustrated by the severity, scale and duration of the harsh winter and the adverse impact it had on our net sales. Our customers generally follow a long purchase cycle, which we believe was either interrupted or completely suspended due to the unusually severe winter weather. However, as conditions generally became more seasonal in mid-March, customer demand increased. The key strategic initiatives we have implemented over the last two years have strengthened our operations, and we believe we are more capable than ever of serving customers who postponed their flooring purchase in the first quarter."

Company Outlook

The Company has reiterated its previously provided full year outlook for net sales and earnings per share, and now expects to achieve the following for the full year 2014:

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

•Comparable store net sales increasing in the mid to high single digits, from a previous range of high single to low-double digits.

•The opening of a total of 35 to 40 new store locations in the expanded showroom format, from a previous range of 30 to 40 new store locations.

•The remodeling of a total of 25 to 30 existing stores in the expanded showroom format, from a previous range of 25 to 35 existing stores.

•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 27.9 million shares, which is exclusive of any future impact of the stock repurchase program.

Mr. Lynch concluded, "As we look forward, we remain confident in the long-term strength of our business model and believe that our value proposition will allow us to gain further share in the fragmented wood flooring market. Our infrastructure investment this year will be the largest in our history, as we open key facilities in our supply chain, expand our finishing capacity, explore vertical integration and continue our store base expansion. Our new stores continue to exceed our plans, and we expect that the long-term investments we have made implementing our key strategic initiatives will enable us to expand operating margin in the remainder of the year and beyond."

About Lumber Liquidators

In its 20th year and with more than 335 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. Lumber Liquidators 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.HARDWOOD1.800.HARDWOOD  . You can also follow the company on Facebook and Twitter, and learn more about its corporate giving program at LayItForward.LumberLiquidators.com.

Lumber Liquidators Holdings, Inc

Condensed Consolidated Balance Sheets

(in thousands, except share data)

March 31,

2014

December 31,

2013

(unaudited)

Assets

Current Assets:

Cash and Cash Equivalents

$       76,065

$       80,634

Merchandise Inventories

247,370

252,428

Prepaid Expenses

7,926

6,229

Other Current Assets

11,880

12,916

Total Current Assets

343,241

352,207

Property and Equipment, net

78,409

65,947

Goodwill

9,693

9,693

Other Assets

1,698

1,712

Total Assets

$   433,041

$   429,559

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts Payable

$       41,496

$       56,327

Customer Deposits and Store Credits

33,510

22,377

Accrued Compensation

4,813

11,709

Sales and Income Tax Liabilities

8,046

4,878

Other Current Liabilities

18,330

11,709

Total Current Liabilities

106,195

107,000

Deferred Rent

4,862

4,169

Deferred Tax Liability

9,636

9,061

Stockholders' Equity:

Common Stock ($0.001 par value; 35,000,000 authorized; 27,505,476

   and 27,557,570 outstanding, respectively)    

30

30

Treasury Stock, at cost (2,311,285 and 2,133,307 shares, respectively)

(103,046)

(85,382)

Additional Capital

171,419

164,581

Retained Earnings

244,356

230,662

Accumulated Other Comprehensive Loss

(411)

(562)

Total Stockholders' Equity

312,348

309,329

Total Liabilities and Stockholders' Equity

$   433,041

$   429,559

 

 

Lumber Liquidators Holdings, Inc

Condensed Consolidated Statements of Income

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

(unaudited)

Three Months Ended

March 31,

2014

2013

Net Sales

$   246,291

$       230,419

Cost of Sales

145,004

137,422

Gross Profit

101,287

92,997

Selling, General and Administrative Expenses

78,866

67,589

Operating Income

22,421

25,408

Other (Income) Expense

94

(210)

Income Before Income Taxes

22,327

25,618

Provision for Income Taxes

8,633

9,837

Net Income

$      13,694

$            15,781

Net Income per Common Share—Basic

$           0.50

$                 0.58

Net Income per Common Share—Diluted

$           0.49

$                 0.57

Weighted Average Common Shares Outstanding:

Basic

27,521,443

27,211,506

Diluted

27,832,110

27,783,611

 

 

Lumber Liquidators Holdings, Inc

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended

March 31,

2014

2013

Cash Flows from Operating Activities:

Net Income

$        13,694

$        15,781

Adjustments to Reconcile Net Income to Net Cash Provided by Operating

   Activities:

Depreciation and Amortization

3,437

2,716

Stock-Based Compensation Expense

1,514

1,107

Changes in Operating Assets and Liabilities:

Merchandise Inventories

4,897

(3,522)

Accounts Payable

(16,305)

(15,966)

Customer Deposits and Store Credits

11,170

2,874

Prepaid Expenses and Other Current Assets

(533)

1,952

Other Assets and Liabilities

4,421

6,122

Net Cash Provided by Operating Activities

22,295

11,064

Cash Flows from Investing Activities:

Purchases of Property and Equipment

(14,384)

(2,589)

Net Cash Used in Investing Activities

(14,384)

(2,589)

Cash Flows from Financing Activities:

Payments for Stock Repurchases

(17,664)

(4,276)

Proceeds from the Exercise of Stock Options

2,089

1,278

Excess Tax Benefit from Stock-Based Compensation

3,224

3,367

Net Cash (Used in) Provided by Financing Activities

(12,351)

369

Effect of Exchange Rates on Cash and Cash Equivalents

(129)

(283)

Net (Decrease) Increase in Cash and Cash Equivalents

(4,569)

8,561

Cash and Cash Equivalents, Beginning of Period

80,634

64,167

Cash and Cash Equivalents, End of Period

$      76,065

$      72,728

 

 

Lumber Liquidators Holdings, Inc.

Other Supporting Schedules

(in thousands)

(unaudited)

Segregation of total first quarter 2014 net sales and the percentage change in comparison to the first quarter of 2013 into those stores the Company believes were significantly impacted by the unusually severe weather from all other stores:

Three Months Ended March 31, 2014

All Stores

Stores Significantly

Impacted by Weather

All Other Stores

Net sales

$       246,291

$       93,628

$       152,663

     Percentage increase (decrease)

6.9%

(3.8)%

14.6%

percentage increase (decrease)

Comparable stores net sales1

(0.6)%

(13.1)%

8.5%

Net sales in markets with all stores

   comparable (no cannibalization)

3.2%

(7.1)%

9.8%

Net sales in cannibalized markets2

17.2%

0.6%

37.0%

___________________

1A store is generally considered comparable on the first day of the thirteenth full calendar month after opening

2A cannibalized market has at least one comparable store and one non-comparable store

Source: Lumber Liquidators

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