TOANO, VA  --  Lumber Liquidators, the largest specialty retailer of hardwood flooring in the U.S., today announced financial results for the third quarter and nine months ended Sept. 30, 2011 and updated its outlook for the fourth quarter of 2011.

Third Quarter Results

Net sales increased 16.8% to $172.0 million in the third quarter of 2011 from $147.2 million in the third quarter of 2010. Comparable store net sales increased 3.0% for the third quarter of 2011, in comparison to a decrease of 5.7% for the third quarter of the prior year. Net sales at non-comparable stores increased $20.3 million over the prior year period. The Company has opened 33 new store locations in 2011, including six opened during the third quarter.

Gross margin was 35.6% in the third quarter of 2011, an increase from 35.2% in the third quarter of 2010. Gross margin benefited from the continued implementation of sourcing initiatives, partially offset by net sales mix shifts and higher net transportation costs.

Selling, general and administrative (SG&A) expenses were $50.3 million, or 29.3% of net sales, for the third quarter of 2011 compared to $44.9 million, or 30.5% of net sales, for the third quarter of 2010. The decrease in SG&A expenses as a percentage of net sales for the third quarter of 2011 is primarily due to improved operating productivity relative to the third quarter of 2010 when the Company implemented its integrated information technology solution. In addition, SG&A as a percentage of net sales in the third quarter of 2011 benefited from leverage of the Company's national advertising expenditures, partially offset by the costs of store base expansion and infrastructure investments.

As the Company previously announced, it recently entered into an agreement to acquire certain assets of Sequoia Floorings ("Sequoia") relating to Sequoia's quality control and assurance, product development and logistics operations in China. As a part of the transaction, the Company established a representative office in Shanghai in October 2011, and assumed direct control of sourcing previously managed by Sequoia. Acquisition costs of approximately $0.5 million are included in SG&A expenses for the third quarter of 2011.

Net income increased 57.2% to $6.7 million, or $0.24 per diluted share, in the third quarter of 2011 compared to $4.3 million, or $0.15 per diluted share, in the third quarter of the prior year. The effective tax rate was 39.2% in the third quarter of 2011 and 38.7% in the third quarter of 2010, with the increase in 2011 primarily due to increases in certain reserves, higher state income taxes and certain non-deductible acquisition expenses.

First Nine Months Results

Net sales increased 8.6% to $507.1 million in the first nine months of 2011 from $467.1 million in the first nine months of 2010. Comparable store net sales decreased 3.3% for the first nine months of 2011, compared to an increase of 2.4% for the first nine months of the prior year. Non-comparable store net sales increased $55.5 million over the prior year. As of September 30, 2011, the Company operated 256 stores in 46 states and Canada.

Gross profit increased 9.1% to $178.8 million as gross margin increased to 35.3% in the first nine months of 2011 from 35.1% in the same period of 2010. SG&A expenses increased 14.4% to $149.8 million, or 29.5% of net sales, for the first nine months of 2011 compared to $131.0 million, or 28.0% of net sales, for the prior year period.

Net income decreased 12.5% to $17.8 million, or $0.63 per diluted share, in the first nine months of 2011 compared to $20.3 million, or $0.72 per diluted share, in the prior year period. Net income for the first nine months of 2011 reflects an effective tax rate of 39.1% compared to 38.7% in the first nine months of 2010.

Jeffrey W. Griffiths, chief executive officer, commented, "We made good progress on our strategic initiatives in the third quarter, despite a difficult macroeconomic environment which has caused our customers to remain cautious and price sensitive with regard to large-ticket discretionary purchases. During the quarter, we further laid the foundation for the Company's long-term success by continuing our investment in our sourcing initiatives. Specifically, with the recent acquisition of certain of Sequoia's assets, we further strengthened our direct relationships with mills in China, allowing us to more efficiently and effectively control the quality and costs of products sourced in this region. We believe these enhancements will enable us to strengthen the value proposition to our customer, ultimately expanding our operating margins over the longer-term."

Company Outlook

The Company has updated its outlook for fiscal 2011 and now expects the following:

  • Net sales for the full year in the range of $674 million to $681 million, from the previous range of $673 million to $686 million, with fourth quarter net sales in the range of $167 million to $174 million, from the previous range of $170 million to $180 million.
  • The opening of seven to nine new store locations in the fourth quarter of the year, for a total of 40 to 42 new store locations in 2011.
  • Earnings per diluted share for the full year 2011 in the range of approximately $0.96 to $1.02, from the previous range of approximately $1.00 to $1.08, each based on a diluted share count of approximately 28.5 million shares, with fourth quarter earnings per diluted share in the range of approximately $0.33 to $0.39, from the previous range of $0.39 to $0.44.
  • The opening of seven to nine new store locations in the fourth quarter of the year, for a total of 40 to 42 new store locations in 2011.

Supply Chain Team Addition

The Company also announced that Carl R. Daniels has joined as its senior vice president, supply chain, effective Oct. 31, 2011. In this position, Daniels will oversee the Company's international and domestic logistics, warehousing and distribution operations. He will report directly to Robert M. Lynch, president and chief operating officer. Daniels most recently served as senior vice president of supply chain and operations at Harbor Freight Tools, where he was responsible for all organizational operations including distribution, transportation, international consolidations and procurement. Daniels also served in executive level logistics positions at Michaels, Inc., Retail Ventures Services, Inc. and Midas International, Inc., among other retailers.

Griffiths said, "As we look to the remainder of the year, we believe wood flooring customers will remain cautious and price sensitive. However, we expect continued gross margin improvement in the coming months from the benefits of our sourcing initiatives. As Carl joins our team, we are pleased to add a leader with more than 30 years of extensive on-the-ground experience who will be an integral part of further developing world-class supply chain capability at Lumber Liquidators. We have a strong team in place, a unique value proposition, a profitable store model and a focus on long-term growth to deliver value to our customers and shareholders. Overall, we are well positioned to compete effectively in a highly fragmented market and excited about the future opportunities."

About Lumber Liquidators:

With over 255 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. 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.

Named one of Forbes' 100 Most Trustworthy Companies of 2010, the Company's quality products--such as Bellawood Prefinished Hardwood and Morning Star Bamboo--regularly appear on popular television shows, such as Extreme Makeover: Home Edition and HGTV's Dream Home.

For more information, please visit LumberLiquidators.com or call 1.800.HARDWOOD.

Lumber Liquidators Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2011

 

2010

Assets

 

(unaudited)

 

 

Current Assets:

 

 

 

 

Cash and Cash Equivalents

 

$

37,817

 

 

$

34,830

Merchandise Inventories

 

 

160,847

 

 

 

155,131

Prepaid Expenses

 

 

5,138

 

 

 

4,837

Other Current Assets

 

 

6,409

 

 

 

8,007

Total Current Assets

 

 

210,211

 

 

 

202,805

 

Property and Equipment, net

 

 

41,357

 

 

 

35,314

 

Goodwill

 

 

9,523

 

 

 

1,050

 

Other Assets

 

 

3,118

 

 

 

3,121

 

Total Assets

 

$

264,209

 

 

$

242,290

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts Payable

 

$

19,476

 

 

$

33,744

 

Customer Deposits and Store Credits

 

 

18,992

 

 

 

12,039

 

Accrued Compensation

 

 

1,632

 

 

 

2,460

 

Sales and Income Tax Liabilities

 

 

4,877

 

 

 

2,859

 

Other Current Liabilities

 

 

8,819

 

 

 

5,585

 

Total Current Liabilities

 

 

53,796

 

 

 

56,687

 

 

 

 

 

 

 

Deferred Rent

 

 

3,298

 

 

 

2,746

 

Deferred Tax Liability

 

 

2,726

 

 

 

2,352

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

Common Stock ($0.001 par value; 35,000,000 authorized; 27,761,062 and 27,472,680 outstanding, respectively)

 

 

28

 

 

 

27

 

Additional Capital

 

 

106,917

 

 

 

100,531

 

Retained Earnings

 

 

97,744

 

 

 

79,947

 

Accumulated Other Comprehensive Loss

 

 

(300

)

 

 

--

 

Total Stockholders' Equity

 

 

204,389

 

 

 

180,505

 

Total Liabilities and Stockholders' Equity

 

$

264,209

 

 

$

242,290

 

 

 

 

 

 

 

Lumber Liquidators Holdings, Inc.

Condensed Consolidated Statements of Income

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

(unaudited)

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2011

 

 

 

2010

 

 

 

2011

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

171,993

 

 

$

147,192

 

 

$

507,133

 

 

$

467,061

 

Cost of Sales

 

 

110,745

 

 

 

95,431

 

 

 

328,368

 

 

 

303,256

 

Gross Profit

 

 

61,248

 

 

 

51,761

 

 

 

178,765

 

 

 

163,805

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative Expenses

 

 

50,327

 

 

 

44,909

 

 

 

149,832

 

 

 

130,985

 

Operating Income

 

 

10,921

 

 

 

6,852

 

 

 

28,933

 

 

 

32,820

 

 

 

 

 

 

 

 

 

 

Interest and Other Income, net

 

 

(148

)

 

 

(143

)

 

 

(303

)

 

 

(371

)

Income Before Income Taxes

 

 

11,069

 

 

 

6,995

 

 

 

29,236

 

 

 

33,191

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

4,334

 

 

 

2,711

 

 

 

11,438

 

 

 

12,846

 

Net Income

 

$

6,735

 

 

$

4,284

 

 

$

17,798

 

 

$

20,345

 

Net Income per Common Share--Basic

 

$

0.24

 

 

$

0.16

 

 

$

0.64

 

 

$

0.74

 

Net Income per Common Share--Diluted

 

$

0.24

 

 

$

0.15

 

 

$

0.63

 

 

$

0.72

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

27,759,306

 

 

 

27,420,415

 

 

 

27,673,741

 

 

 

27,363,621

 

Diluted

 

 

28,327,375

 

 

 

28,234,339

 

 

 

28,379,234

 

 

 

28,236,042

 

                                           

 

 

 

 

Lumber Liquidators Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

2011

 

 

 

2010

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

Net Income

 

$

17,798

 

 

$

20,345

 

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

 

 

 

 

Depreciation and Amortization

 

 

6,129

 

 

 

3,993

 

Stock-Based Compensation Expense

 

 

3,002

 

 

 

2,355

 

Changes in Operating Assets and Liabilities:

 

 

 

 

Merchandise Inventories

 

 

(5,789

)

 

 

(23,621

)

Accounts Payable

 

 

(14,184

)

 

 

(11,135

)

Customer Deposits and Store Credits

 

 

6,967

 

 

 

11,503

 

Prepaid Expenses and Other Current Assets

 

 

(2,866

)

 

 

(1,671

)

Other Assets and Liabilities

 

 

4,960

 

 

 

1,188

 

Net Cash Provided by Operating Activities

 

 

16,017

 

 

 

2,957

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

Purchases of Property and Equipment

 

 

(11,637

)

 

 

(14,127

)

Cash Paid for Acquisition

 

 

(4,725

)

 

 

--

 

Net Cash Used in Investing Activities

 

 

(16,362

)

 

 

(14,127

)

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

Proceeds from the Exercise of Stock Options

 

 

2,116

 

 

 

1,321

 

Excess Tax Benefits on Stock Option Exercises

 

 

1,421

 

 

 

1,110

 

Common Stock Purchased Pursuant to Equity Compensation Plans

 

 

(151

)

 

 

(149

)

Net Cash Provided by Financing Activities

 

 

3,386

 

 

 

2,282

 

Effect of Exchange Rates on Cash and Cash Equivalents

 

 

(54

)

 

 

--

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

2,987

 

 

 

(8,888

)

Cash and Cash Equivalents, Beginning of Period

 

 

34,830

 

 

 

35,675

 

Cash and Cash Equivalents, End of Period

 

$

37,817

 

 

$

26,787

 

 

SOURCE: Lumber Liquidators


 

 

 

 

 

 

 

 

 

 

 

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