Business Wire | Nov 3, 2021 06:00AM EDT

LL Flooring Reports Third Quarter 2021 Financial Results

Nov. 03, 2021

RICHMOND, Va.--(BUSINESS WIRE)--Nov. 03, 2021--Lumber Liquidators ("LL Flooring" or "Company") (NYSE: LL), a leading specialty retailer of hard-surface flooring in the U.S., today announced financial results for the third quarter ended September 30, 2021.

President and Chief Executive Officer Charles Tyson said, "During the third quarter, our associates continued to do an outstanding job exceeding our customers' needs in the face of an increasingly challenging supply chain and inflationary environment. We were pleased to report strong double-digit growth in sales to Pro customers and installation sales versus the third quarter of last year. As anticipated, our sales to DIY customers were down versus last year, reflecting a shift in consumer spending to other product and service categories, as well as tough comparisons to the nesting spending that we saw in the third quarter of 2020."

Tyson continued, "Our strong net sales and profitability growth on a two-year basis underscore the continued traction we are gaining on our strategic initiatives. These are truly unprecedented times from a global supply chain perspective. Notwithstanding the volatile operating environment, we are focused on furthering our competitive advantages and positioning LL Flooring as customers' first choice in hard-surface flooring. With more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs, we offer our customers quality choices and provide high-touch service and advice to help them achieve their flooring project needs. Our team's agility in launching new innovative products sourced from expanded locations across our vast network of global sourcing partners further strengthens our unique competitive position."

Tyson added, "As we see the opportunity to expand the LL Flooring brand and drive our accelerated growth, we are increasing our investment in our long-term strategies, initially in two key areas: We plan to increase the number of new stores we open each year to improve our omnichannel convenience, and to expand investments in our multi-pronged strategy to grow sales to Pro customers. The capabilities we are building and the investments we are making in these multi-year strategies will position LL Flooring to grow faster and gain market share."

Third Quarter Financial Highlights

* Net sales of $282.2 million decreased 4.6% compared to the same period last year, as double-digit growth in Pro and services sales partially offset a decrease in DIY sales; and increased 6.9% compared to the third quarter of 2019, driven primarily by strong growth in Pro customer and services sales. * Total comparable store sales decreased 4.5% versus the same period last year, but increased 6.4% on a two-year stack basis (which does not reflect the impact of store closures and openings between periods). * Gross margin of 37.3% decreased 210 basis points as a percentage of sales compared to the same period last year and increased 110 basis points compared to the third quarter of 2019; Adjusted gross margin1 of 37.3% decreased 240 basis points as a percentage of sales compared to the same period last year, primarily reflecting significantly higher transportation and material costs, and higher tariffs (collectively up more than 700 basis points) that the Company was able to partially mitigate by pricing, promotion and alternative country/vendor sourcing strategies; and increased 80 basis points compared to the third quarter of 2019, primarily reflecting the Company's pricing, promotion and alternative country/vendor sourcing strategies that more than mitigated higher material and transportation costs. * SG&A as a percentage of sales of 33.0% increased 140 basis points compared to the third quarter of last year and decreased 240 basis points compared to the third quarter of 2019; Adjusted SG&A1 as a percentage of sales of 33.1% increased 320 basis points compared to the third quarter of last year, primarily due to increased investment in the field and to support growth initiatives, last year's $2.5 million favorable business interruption insurance settlement and lower net sales compared to the third quarter of 2020; and decreased 210 basis points on higher net sales compared to the third quarter of 2019. * Operating margin of 4.3% decreased 350 basis points compared to the third quarter of last year and increased 350 basis points compared to the third quarter of 2019; Adjusted operating margin1 of 4.1% decreased 560 basis points compared to the third quarter of last year, and increased 280 basis points compared to the third quarter of 2019. * Diluted EPS of $0.30 decreased $0.23 compared to the third quarter of last year and increased $0.26 compared to the third quarter of 2019; Adjusted Earnings Per Diluted Share1 of $0.29 decreased $0.38 compared to the third quarter of last year and increased $0.22 compared to the third quarter of 2019. * During the third quarter, the Company opened six new stores, bringing total stores to 422 as of September 30, 2021.

1Please refer to the GAAP to non-GAAP reconciliation tables below for more information.

Cash Flow & Liquidity

As of September 30, 2021, the Company had liquidity of $232.2 million, consisting of excess availability under its Credit Agreement of $128.0 million, and cash and cash equivalents of $104.2 million.

During the first nine months of 2021, the Company generated $50.3 million of cash flows from operating activities, primarily driven by $31.4 million of net income and positive working capital changes.

Business Outlook

The Company continues to navigate uncertainty in the macroeconomic environment related to global supply chain disruptions, consumer spending, inflation and a challenging labor market. As a result, the Company is not providing financial guidance at this time.

The Company is pleased with the traction it is gaining on its transformation initiatives and the momentum in its Pro customer and services sales; however, the Company currently expects challenging DIY customer comparisons to continue in the fourth quarter of 2021.

The Company also expects higher material and transportation costs will be a headwind to gross margins in the fourth quarter of 2021 and into 2022 as the goods sell through. The Company will continue to look to offset these higher costs through pricing and promotion strategies but will monitor the market to inform and guide its decisions.

The Company expects the increased investments in its field organization to result in higher SG&A as a percentage of sales in the fourth quarter of 2021 compared to the third quarter of 2021. In addition, the Company expects its increased investments in its growth strategies will increase its SG&A and capital spending in 2022 versus 2021.

The Company now expects capital expenditures in the range of approximately $19 million to $23 million in 2021.

"We believe the increased investments in our strategies to grow Pro customer sales and open a greater number of new stores each year as well as the investments we are making to attract and retain a talented workforce will fuel our accelerated growth over the next several years beginning in the second half of 2022," said Tyson.

Learn More about LL Flooring

* Our commitment to quality, compliance, the communities we serve and corporate giving: https://llflooring.com/corp/quality.html * Follow us on social media: Facebook, Instagram and Twitter.

Conference Call and Webcast Information

The Company plans to host a conference call and audio webcast on November 3, 2021, at 8:00 a.m. Eastern Time. The conference may be accessed by dialing (844) 200-6205 or (646) 904-5544 and entering pin number 087906. A replay will be available approximately two hours after the call ends through November 10, 2021 and may be accessed by dialing (929) 458-6194 and entering pin number 673066. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company's website, https://investors.llflooring.com.

About Lumber Liquidators

LL Flooring is one of the leading specialty retailers of hard-surface flooring in the U.S. with 422 stores as of September 30, 2021. The Company seeks to offer the best customer experience online and in stores, with more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs. LL Flooring's online tools also help empower customers to find the right solution for the space they've envisioned. LL Flooring's extensive selection includes vinyl plank, solid and engineered hardwood, laminate, bamboo, porcelain tile, and cork, with a wide range of flooring enhancements and accessories to complement. Our stores are staffed with flooring experts who provide advice, Pro partnership services and installation options for all of LL Flooring's products, the majority of which is in stock and ready for delivery.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release includes statements of the Company's expectations, intentions, plans and beliefs that constitute "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.

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. For a discussion of the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see the "Risk Factors" section of the Company's annual report on Form 10-K for the year ended December 31, 2020, and the Company's other filings with the Securities and Exchange Commission ("SEC"). Such filings are available on the SEC's website at www.sec.gov and the Company's Investor Relations website at https://investors.llflooring.com.

Non-GAAP and Other Information

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses the following non-GAAP financial measures: (i) Adjusted Gross Profit; (ii) Adjusted Gross Margin; (iii) Adjusted SG&A; (iv) Adjusted SG&A as a percentage of net sales; (v) Adjusted Operating Income; (vi) Adjusted Operating Margin; (vii) Adjusted Other Expense; (viii) Adjusted Other Expense as a percentage of net sales; (ix) Adjusted Earnings (Loss); and (x) Adjusted Earnings (Loss) per Diluted Share. These non-GAAP financial measures should be viewed in addition to, and not in lieu of, financial measures calculated in accordance with GAAP. These supplemental measures may vary from, and may not be comparable to, similarly titled measures by other companies.

The non-GAAP financial measures are presented because management uses these non-GAAP financial measures to evaluate the Company's operating performance and, in certain cases, to determine incentive compensation. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors. The presented non-GAAP financial measures exclude items that management does not believe reflect the Company's core operating performance, which include store closures, regulatory and legal settlements and associated legal and operating costs, and changes in antidumping and countervailing duties, as such items are outside of the Company's control due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature.

(Tables Follow)

LL Flooring

Consolidated Balance Sheets

(Unaudited, in thousands)



September December 31, 30,

2021 2020

Assets

Current Assets:

Cash and Cash Equivalents $ 104,211 $ 169,941

Merchandise Inventories 224,998 244,409

Prepaid Expenses 10,173 9,370

Tariff Recovery Receivable - 4,078

Other Current Assets 11,396 10,354

Total Current Assets 350,778 438,152

Property and Equipment, net 95,586 97,557

Operating Lease Right-of-Use 123,526 109,475

Goodwill 9,693 9,693

Deferred Tax Asset 11,583 11,611

Other Assets 8,669 7,860

Total Assets $ 599,835 $ 674,348



Liabilities and Stockholders' Equity

Current Liabilities:

Accounts Payable $ 53,093 $ 70,543

Customer Deposits and Store Credits 70,221 61,389

Accrued Compensation 9,203 15,347

Sales and Income Tax Liabilities 4,707 5,793

Accrual for Legal Matters and Settlements 34,903 30,398

Operating Lease Liabilities - Current 32,660 33,024

Other Current Liabilities 25,467 25,761

Total Current Liabilities 230,254 242,255

Other Long-Term Liabilities 6,714 13,293

Operating Lease Liabilities - Long-Term 101,964 90,194

Credit Agreement - 101,000

Total Liabilities 338,932 446,742



Stockholders' Equity:

Common Stock ($0.001 par value; 35,000 sharesauthorized; 30,496 and 30,229 shares issued and 30 30 29,089 and 28,911 shares outstanding,respectively)

Treasury Stock, at cost (1,407 and 1,318 shares, (145,078 ) (142,977 )respectively)

Additional Capital 226,636 222,628

Retained Earnings 179,315 147,925

Total Stockholders' Equity 260,903 227,606

Total Liabilities and Stockholders' Equity $ 599,835 $ 674,348

LL Flooring

Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Net Sales

Net Merchandise Sales

$

240,802

$

261,009

$

750,388

$

709,845

Net Services Sales

41,427

34,824

116,675

83,646

Total Net Sales

282,229

295,833

867,063

793,491

Cost of Sales

Cost of Merchandise Sold

144,307

152,530

442,914

419,230

Cost of Services Sold

32,721

26,777

90,626

64,472

Total Cost of Sales

177,028

179,307

533,540

483,702

Gross Profit

105,201

116,526

333,523

309,789

Selling, General and Administrative Expenses

93,165

93,374

291,767

271,869

Operating Income

12,036

23,152

41,756

37,920

Other Expense (Income)

18

685

(252

)

2,709

Income Before Income Taxes

12,018

22,467

42,008

35,211

Income Tax Expense

3,239

6,964

10,618

4,834

Net Income

$

8,779

$

15,503

$

31,390

$

30,377

Net Income per Common Share-Basic

$

0.30

$

0.54

$

1.08

$

1.05

Net Income per Common Share-Diluted

$

0.30

$

0.53

$

1.06

$

1.04

Weighted Average Common Shares Outstanding:

Basic

29,082

28,859

28,984

28,801

Diluted

29,455

29,334

29,494

29,075

LL Flooring

Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts)



Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020



Net Sales

Net Merchandise Sales $ 240,802 $ 261,009 $ 750,388 $ 709,845

Net Services Sales 41,427 34,824 116,675 83,646

Total Net Sales 282,229 295,833 867,063 793,491

Cost of Sales

Cost of Merchandise Sold 144,307 152,530 442,914 419,230

Cost of Services Sold 32,721 26,777 90,626 64,472

Total Cost of Sales 177,028 179,307 533,540 483,702

Gross Profit 105,201 116,526 333,523 309,789

Selling, General and 93,165 93,374 291,767 271,869Administrative Expenses

Operating Income 12,036 23,152 41,756 37,920

Other Expense (Income) 18 685 (252 ) 2,709

Income Before Income Taxes 12,018 22,467 42,008 35,211

Income Tax Expense 3,239 6,964 10,618 4,834

Net Income $ 8,779 $ 15,503 $ 31,390 $ 30,377

Net Income per Common Share-Basic $ 0.30 $ 0.54 $ 1.08 $ 1.05

Net Income per Common $ 0.30 $ 0.53 $ 1.06 $ 1.04Share-Diluted

Weighted Average Common Shares Outstanding:

Basic 29,082 28,859 28,984 28,801

Diluted 29,455 29,334 29,494 29,075

LL Flooring

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

Nine Months Ended September 30,

2021

2020

Cash Flows from Operating Activities:

Net Income

$

31,390

$

30,377

Adjustments to Reconcile Net Income:

Depreciation and Amortization

13,985

13,327

Deferred Income Taxes Provision

28

547

Income on Vouchers Redeemed for Legal Settlements

(1,183

)

-

Stock-Based Compensation Expense

3,945

2,112

Provision for Inventory Obsolescence Reserves

1,784

2,564

Impairment of Operating Lease Right-of-Use

-

935

Loss (Gain) on Disposal of Fixed Assets

31

(401

)

Changes in Operating Assets and Liabilities:

Merchandise Inventories

15,683

46,057

Accounts Payable

(17,277

)

31,308

Customer Deposits and Store Credits

8,832

22,165

Accrued Compensation

(6,144

)

2,530

Tariff Recovery Receivable

4,078

19,509

Prepaid Expenses and Other Current Assets

(792

)

821

Accrual for Legal Matters and Settlements

7,733

2,183

Payments for Legal Matters and Settlements

(101

)

(4,903

)

Deferred Rent Payments

(2,154

)

4,709

Other Assets and Liabilities

(9,558

)

6,922

Net Cash Provided by Operating Activities

50,280

180,762

Cash Flows from Investing Activities:

Purchases of Property and Equipment

(12,276

)

(9,822

)

Other Investing Activities

58

949

Net Cash Used in Investing Activities

(12,218

)

(8,873

)

Cash Flows from Financing Activities:

Borrowings on Credit Agreement

-

45,000

Payments on Credit Agreement

(101,000

)

(26,000

)

Common Stock Repurchased

(2,101

)

(513

)

Other Financing Activities

(691

)

7

Net Cash Provided by Financing Activities

(103,792

)

18,494

Effect of Exchange Rates on Cash and Cash Equivalents

-

(29

)

Net Increase in Cash and Cash Equivalents

(65,730

)

190,354

Cash and Cash Equivalents, Beginning of Period

169,941

8,993

Cash and Cash Equivalents, End of Period

$

104,211

$

199,347

Supplemental disclosure of non-cash operating activities:

Relief of Inventory for Vouchers Redeemed for Legal Settlements

$

1,944

$

-

Supplemental disclosure of non-cash operating and financing activities:

Tenant Improvement Allowance for Leases

$

(1,053

)

$

(676

)

LL Flooring

Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Nine Months Ended September 30,

2021 2020



Cash Flows from Operating Activities:

Net Income $ 31,390 $ 30,377

Adjustments to Reconcile Net Income:

Depreciation and Amortization 13,985 13,327

Deferred Income Taxes Provision 28 547

Income on Vouchers Redeemed for Legal Settlements (1,183 ) -

Stock-Based Compensation Expense 3,945 2,112

Provision for Inventory Obsolescence Reserves 1,784 2,564

Impairment of Operating Lease Right-of-Use - 935

Loss (Gain) on Disposal of Fixed Assets 31 (401 )

Changes in Operating Assets and Liabilities:

Merchandise Inventories 15,683 46,057

Accounts Payable (17,277 ) 31,308

Customer Deposits and Store Credits 8,832 22,165

Accrued Compensation (6,144 ) 2,530

Tariff Recovery Receivable 4,078 19,509

Prepaid Expenses and Other Current Assets (792 ) 821

Accrual for Legal Matters and Settlements 7,733 2,183

Payments for Legal Matters and Settlements (101 ) (4,903 )

Deferred Rent Payments (2,154 ) 4,709

Other Assets and Liabilities (9,558 ) 6,922

Net Cash Provided by Operating Activities 50,280 180,762



Cash Flows from Investing Activities:

Purchases of Property and Equipment (12,276 ) (9,822 )

Other Investing Activities 58 949

Net Cash Used in Investing Activities (12,218 ) (8,873 )



Cash Flows from Financing Activities:

Borrowings on Credit Agreement - 45,000

Payments on Credit Agreement (101,000 ) (26,000 )

Common Stock Repurchased (2,101 ) (513 )

Other Financing Activities (691 ) 7

Net Cash Provided by Financing Activities (103,792 ) 18,494

Effect of Exchange Rates on Cash and Cash - (29 )Equivalents

Net Increase in Cash and Cash Equivalents (65,730 ) 190,354

Cash and Cash Equivalents, Beginning of Period 169,941 8,993

Cash and Cash Equivalents, End of Period $ 104,211 $ 199,347



Supplemental disclosure of non-cash operating activities:

Relief of Inventory for Vouchers Redeemed for Legal $ 1,944 $ - Settlements



Supplemental disclosure of non-cash operating and financing activities:

Tenant Improvement Allowance for Leases $ (1,053 ) $ (676 )

LL Flooring

GAAP to Non-GAAP Reconciliation

(Unaudited, in thousands, except percentages)

Due to the significant fluctuations that occurred during 2020 as a result of the COVID-19 pandemic, to better illustrate comparable two-year growth from our ongoing business for the current year we are also providing comparisons to 2019.

Items impacting gross margin with comparisons to the prior-year periods include:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2019

2021

2020

2019

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

(dollars in thousands) 2

(dollars in thousands) 2

Gross Profit, as reported (GAAP)

$

105,201

37.3

%

$

116,526

39.4

%

$

95,674

36.2

%

$

333,523

38.5

%

$

309,789

39.0

%

$

291,772

35.6

%

HTS Classification Adjustments 3

-

-

%

-

-

%

-

-

%

-

-

%

-

-

%

(779

)

(0.1

)%

Antidumping Adjustments 4

-

-

%

-

-

%

780

0.3

%

(6,566

)

(0.8

)%

-

-

%

780

0.1

%

Store Closure Costs 5

-

-

%

761

0.3

%

-

-

%

-

-

%

761

0.1

%

-

-

%

Sub-Total Items above

-

-

%

761

0.3

%

780

0.3

%

(6,566

)

(0.8

)%

761

0.1

%

1

-

%

Adjusted Gross Profit (non-GAAP measures)

$

105,201

37.3

%

$

117,287

39.7

%

$

96,454

36.5

%

$

326,957

37.7

%

$

310,550

39.1

%

$

291,773

35.6

%

LL Flooring

GAAP to Non-GAAP Reconciliation

(Unaudited, in thousands, except percentages)

Due to the significant fluctuations that occurred during 2020 as a result ofthe COVID-19 pandemic, to better illustrate comparable two-year growth from ourongoing business for the current year we are also providing comparisons to2019.

Items impacting gross margin with comparisons to the prior-year periodsinclude:



Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2019 2021 2020 2019

$ % of $ % of $ % of $ % of $ % of $ % of Sales Sales Sales Sales Sales Sales

(dollars in thousands) ^2 (dollars in thousands) ^2

Gross Profit,as reported $ 105,201 37.3 % $ 116,526 39.4 % $ 95,674 36.2 % $ 333,523 38.5 % $ 309,789 39.0 % $ 291,772 35.6 %(GAAP)



HTS )Classification - - % - - % - - % - - % - - % (779 ) (0.1 %Adjustments ^3

Antidumping - - % - - % 780 0.3 % (6,566 ) (0.8 ) - - % 780 0.1 %Adjustments ^4 %

Store Closure - - % 761 0.3 % - - % - - % 761 0.1 % - - %Costs ^5

Sub-Total - - % 761 0.3 % 780 0.3 % (6,566 ) (0.8 ) 761 0.1 % 1 - %Items above %



Adjusted GrossProfit $ 105,201 37.3 % $ 117,287 39.7 % $ 96,454 36.5 % $ 326,957 37.7 % $ 310,550 39.1 % $ 291,773 35.6 %(non-GAAPmeasures)

_________________2

Amounts may not sum due to rounding.

3

Represents classification adjustments related to the HTS duty categorization in prior periods during the nine months ended September 30, 2019.

4

Represents antidumping income associated with applicable prior-year shipments of engineered hardwood from China.

5

Represents the inventory write-offs related to the Canadian and U.S. store closures described more fully in Note 8 to the condensed consolidated financial statements filed in the September 30, 2020 10-Q.

_________________^ Amounts may not sum due to rounding.2

^ Represents classification adjustments related to the HTS duty categorization3 in prior periods during the nine months ended September 30, 2019.

^ Represents antidumping income associated with applicable prior-year shipments4 of engineered hardwood from China.

^ Represents the inventory write-offs related to the Canadian and U.S. store5 closures described more fully in Note 8 to the condensed consolidated financial statements filed in the September 30, 2020 10-Q.

Items impacting SG&A with comparisons to the prior-year periods include:Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2019

2021

2020

2019

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

(dollars in thousands) 6

(dollars in thousands) 6

SG&A, as reported (GAAP)

$

93,165

33.0

%

$

93,374

31.6

%

$

93,495

35.4

%

$

291,767

33.7

%

$

271,869

34.3

%

$

294,392

36.0

%

(Recovery) Accrual for Legal Matters and Settlements 7

(400

)

(0.1

)%

2,000

0.7

%

-

-

%

7,275

0.8

%

1,500

0.2

%

4,575

0.6

%

Legal and Professional Fees 8

43

0.0

%

999

0.3

%

408

0.2

%

470

0.1

%

2,787

0.4

%

3,403

0.4

%

Store Closure Costs 9

-

-

%

1,803

0.6

%

-

-

%

-

-

%

1,803

0.2

%

-

-

%

Sub-Total Items above

(357

)

(0.1

)%

4,802

1.6

%

408

0.2

%

7,745

0.9

%

6,090

0.8

%

7,978

1.0

%

Adjusted SG&A (a non-GAAP measure)

$

93,522

33.1

%

$

88,572

29.9

%

$

93,087

35.2

%

$

284,022

32.8

%

$

265,779

33.5

%

$

286,414

35.0

%

Items impacting SG&A with comparisons to the prior-year periods include:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2019 2021 2020 2019

$ % of $ % of $ % of $ % of $ % of $ % of Sales Sales Sales Sales Sales Sales

(dollars in thousands) ^6 (dollars in thousands) ^6

SG&A, asreported $ 93,165 33.0 % $ 93,374 31.6 % $ 93,495 35.4 % $ 291,767 33.7 % $ 271,869 34.3 % $ 294,392 36.0 %(GAAP)



(Recovery)Accrual forLegal (400 ) (0.1 ) 2,000 0.7 % - - % 7,275 0.8 % 1,500 0.2 % 4,575 0.6 %Matters and %Settlements^7

Legal andProfessional 43 0.0 % 999 0.3 % 408 0.2 % 470 0.1 % 2,787 0.4 % 3,403 0.4 %Fees^ 8

StoreClosure - - % 1,803 0.6 % - - % - - % 1,803 0.2 % - - %Costs^ 9

Sub-Total (357 ) (0.1 ) 4,802 1.6 % 408 0.2 % 7,745 0.9 % 6,090 0.8 % 7,978 1.0 %Items above %



Adjusted SG&A (a $ 93,522 33.1 % $ 88,572 29.9 % $ 93,087 35.2 % $ 284,022 32.8 % $ 265,779 33.5 % $ 286,414 35.0 %non-GAAPmeasure)

_________________6

Amounts may not sum due to rounding.

7

This amount represents the charge to earnings for the Mason and Savidis matters in the first quarter of 2021 and a $0.4 million insurance recovery in the third quarter of 2021 of legal fees related to certain significant legal action. The 2020 amounts reflect expense of $2 million related to the Gold matter in the third quarter of 2020 and $0.5 million insurance recovery in the second quarter of 2020 of legal fees related to certain significant legal action. The 2019 amounts reflect a $4.75 million expense for the Kramer employment matter and certain Related Laminate matters. These items are described more fully in Item 1, Note 7 to the condensed consolidated financial statements filed in the September 30, 2021 10-Q.

8

This amount represents charges to earnings related to our defense of certain significant legal actions during the period. This does not include all legal costs incurred by the Company.

9

Represents store lease impairments, write down on fixed assets and employee termination benefits related to the Canadian and U.S. store closures described more fully in Note 8 to the condensed consolidated financial statements filed in the September 30, 2020 10-Q.

_________________^ Amounts may not sum due to rounding.6

This amount represents the charge to earnings for the Mason and Savidis matters in the first quarter of 2021 and a $0.4 million insurance recovery in the third quarter of 2021 of legal fees related to certain significant legal action. The 2020 amounts reflect expense of $2 million related to the Gold^ matter in the third quarter of 2020 and $0.5 million insurance recovery in7 the second quarter of 2020 of legal fees related to certain significant legal action. The 2019 amounts reflect a $4.75 million expense for the Kramer employment matter and certain Related Laminate matters. These items are described more fully in Item 1, Note 7 to the condensed consolidated financial statements filed in the September 30, 2021 10-Q.

^ This amount represents charges to earnings related to our defense of certain8 significant legal actions during the period. This does not include all legal costs incurred by the Company.

Represents store lease impairments, write down on fixed assets and employee^ termination benefits related to the Canadian and U.S. store closures9 described more fully in Note 8 to the condensed consolidated financial statements filed in the September 30, 2020 10-Q.

LL FlooringGAAP to Non-GAAP Reconciliation

(Unaudited, in thousands, except percentages)

Items impacting operating income and operating margin with comparisons to the prior-year periods include:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2019

2021

2020

2019

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

(dollars in thousands) 2

(dollars in thousands) 2

Operating Income (Loss), as reported (GAAP)

$

12,036

4.3

%

$

23,152

7.8

%

$

2,179

0.8

%

$

41,756

4.8

%

$

37,920

4.8

%

$

(2,620

)

(0.3

)%

Gross Margin Items:

HTS Classification Adjustments 3

-

-

%

-

-

%

-

-

%

-

-

%

-

-

%

(779

)

(0.1

)%

Antidumping Adjustments 4

-

-

%

-

-

%

780

0.3

%

(6,566

)

(0.8

)%

-

-

%

780

0.1

%

Store Closure Costs 5

-

-

%

761

0.3

%

-

-

%

-

-

%

761

0.1

%

-

-

%

Gross Margin Subtotal

-

-

%

761

0.3

%

780

0.3

%

(6,566

)

(0.8

)%

761

0.1

%

1

-

%

SG&A Items:

(Recovery) Accrual for Legal Matters and Settlements 7

(400

)

(0.1

)%

2,000

0.7

%

-

-

%

7,275

0.8

%

1,500

0.2

%

4,575

0.6

%

Legal and Professional Fees 8

43

0.0

%

999

0.3

%

408

0.2

%

470

0.1

%

2,787

0.4

%

3,403

0.4

%

Store Closure Costs 9

-

-

%

1,803

0.6

%

-

-

%

-

-

%

1,803

0.2

%

-

-

%

SG&A Subtotal

(357

)

(0.1

)%

4,802

1.6

%

408

0.2

%

7,745

0.9

%

6,090

0.8

%

7,978

1.0

%

Adjusted Operating Income (a non-GAAP measure)

$

11,679

4.1

%

$

28,715

9.7

%

$

3,367

1.3

%

$

42,935

5.0

%

$

44,771

5.6

%

$

5,359

0.7

%

LL FlooringGAAP to Non-GAAP Reconciliation

(Unaudited, in thousands, except percentages)

Items impacting operating income and operating margin with comparisons to theprior-year periods include:



Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2019 2021 2020 2019

$ % of $ % of $ % of $ % of $ % of $ % of Sales Sales Sales Sales Sales Sales

(dollars in thousands) ^2 (dollars in thousands) ^2

Operating Income )(Loss), as reported $ 12,036 4.3 % $ 23,152 7.8 % $ 2,179 0.8 % $ 41,756 4.8 % $ 37,920 4.8 % $ (2,620 ) (0.3 %(GAAP)



Gross Margin Items:

HTS Classification - - % - - % - - % - - % - - % (779 ) (0.1 )Adjustments ^3 %

Antidumping - - % - - % 780 0.3 % (6,566 ) (0.8 ) - - % 780 0.1 %Adjustments ^4 %

Store Closure Costs ^ - - % 761 0.3 % - - % - - % 761 0.1 % - - %5

Gross Margin Subtotal - - % 761 0.3 % 780 0.3 % (6,566 ) (0.8 ) 761 0.1 % 1 - % %



SG&A Items:

(Recovery) Accrual )for Legal Matters and (400 ) (0.1 % 2,000 0.7 % - - % 7,275 0.8 % 1,500 0.2 % 4,575 0.6 %Settlements ^7

Legal and 43 0.0 % 999 0.3 % 408 0.2 % 470 0.1 % 2,787 0.4 % 3,403 0.4 %Professional Fees^ 8

Store Closure Costs^ - - % 1,803 0.6 % - - % - - % 1,803 0.2 % - - %9

SG&A Subtotal (357 ) (0.1 ) 4,802 1.6 % 408 0.2 % 7,745 0.9 % 6,090 0.8 % 7,978 1.0 % %



Adjusted OperatingIncome (a non-GAAP $ 11,679 4.1 % $ 28,715 9.7 % $ 3,367 1.3 % $ 42,935 5.0 % $ 44,771 5.6 % $ 5,359 0.7 %measure)

_________________2,3,4,5,6,7,8,9

See the Gross Profit and SG&A sections above for more detailed explanations of these individual items.

_________________^ See the Gross Profit and SG&A sections above for more detailed2,3,4,5,6,7,8,9 explanations of these individual items.

Items impacting other expense (income) with comparisons to the prior year periods include:Three Months Ended September 30,

Nine Months Ended September 30

2021

2020

2019

2021

2020

2019

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

(dollars in thousands) 10

(dollars in thousands) 10

Other Expense (Income), as reported (GAAP)

$

18

0.0

%

$

685

0.2

%

$

909

0.3

%

$

(252

)

(0.0

)%

$

2,709

0.3

%

$

3,265

0.4

%

Interest impact related to antidumping adjustment 11

-

-

%

-

-

%

-

-

%

(1,841

)

(0.2

)%

-

-

%

-

-

%

Sub-Total Items above

-

-

%

-

-

%

-

-

%

(1,841

)

(0.2

)%

-

-

%

-

-

%

Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure)

$

18

0.0

%

$

685

0.2

%

$

909

0.3

%

$

1,589

0.2

%

$

2,709

0.3

%

$

3,265

0.4

%

Items impacting other expense (income) with comparisons to the prior yearperiods include:

Three Months Ended September 30, Nine Months Ended September 30

2021 2020 2019 2021 2020 2019

$ % of $ % of $ % of $ % of $ % of $ % of Sales Sales Sales Sales Sales Sales

(dollars in thousands) ^10 (dollars in thousands) ^10

Other Expense (Income), $ 18 0.0 % $ 685 0.2 % $ 909 0.3 % $ (252 ) (0.0 ) $ 2,709 0.3 % $ 3,265 0.4 %as reported (GAAP) %



Interest impact related )to antidumping - - % - - % - - % (1,841 ) (0.2 % - - % - - %adjustment^ 11

Sub-Total Items above - - % - - % - - % (1,841 ) (0.2 ) - - % - - % %



Adjusted Other Expense/Adjusted Other Expense $ 18 0.0 % $ 685 0.2 % $ 909 0.3 % $ 1,589 0.2 % $ 2,709 0.3 % $ 3,265 0.4 %as a % of Sales (anon-GAAP measure)

_________________10

Amounts may not sum due to rounding.

11

Represents antidumping interest income associated with applicable prior-year shipments of engineered hardwood from China.

_________________^ Amounts may not sum due to rounding.10

^ Represents antidumping interest income associated with applicable prior-year11 shipments of engineered hardwood from China.

LL Flooring

GAAP to Non-GAAP Reconciliation

(Unaudited, in thousands, except per share data)

Items impacting earnings per diluted share with comparisons to the prior-year periods include:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2019

2021

2020

2019

(dollars in thousands, except per share amounts)

(dollars in thousands, except per share amounts)

Net Income (Loss), as reported (GAAP)

$

8,779

$

15,503

$

1,045

$

31,390

$

30,377

$

(6,735

)

Net Income (Loss) per Diluted Share (GAAP)

$

0.30

$

0.53

$

0.04

$

1.06

$

1.04

$

(0.23

)

Gross Margin Items:

HTS Classification Adjustments 3

-

-

-

-

-

(575

)

Antidumping Adjustments 4

-

-

576

(4,846

)

-

576

Store Closure Costs 5

-

561

-

-

561

-

Gross Margin Subtotal

-

561

576

(4,846

)

561

1

SG&A Items:

(Recovery) Accrual for Legal Matters and Settlements 7

(295

)

1,476

-

5,369

1,107

3,376

Legal and Professional Fees 8

32

737

301

347

2,057

2,511

Store Closure Costs 9

-

1,331

-

-

1,331

-

SG&A Subtotal

(263

)

3,544

301

5,716

4,495

5,888

Other Expense Items:

Antidumping Adjustments Interest 11

-

-

-

(1,359

)

-

-

Other (Income) Expense Subtotal

-

-

-

(1,359

)

-

-

Adjusted Earnings (Loss)

$

8,516

$

19,608

$

1,922

$

30,901

$

35,433

$

(846

)

Adjusted Earnings (Loss) per Diluted Share (a non-GAAP measure)

$

0.29

$

0.67

$

0.07

$

1.05

$

1.21

$

(0.03

)

LL Flooring

GAAP to Non-GAAP Reconciliation

(Unaudited, in thousands, except per share data)

Items impacting earnings per diluted share with comparisons to the prior-yearperiods include:



Three Months Ended September Nine Months Ended September 30, 30,

2021 2020 2019 2021 2020 2019

(dollars in thousands, except (dollars in thousands, except per per share amounts) share amounts)

Net Income(Loss), as $ 8,779 $ 15,503 $ 1,045 $ 31,390 $ 30,377 $ (6,735 )reported(GAAP)

Net Income(Loss) per $ 0.30 $ 0.53 $ 0.04 $ 1.06 $ 1.04 $ (0.23 )Diluted Share(GAAP)



Gross Margin Items:

HTSClassification - - - - - (575 )Adjustments ^3

Antidumping - - 576 (4,846 ) - 576 Adjustments ^4

Store Closure - 561 - - 561 - Costs ^5

Gross Margin - 561 576 (4,846 ) 561 1 Subtotal



SG&A Items:

(Recovery)Accrual forLegal Matters (295 ) 1,476 - 5,369 1,107 3,376 andSettlements ^7

Legal andProfessional 32 737 301 347 2,057 2,511 Fees^ 8

Store Closure - 1,331 - - 1,331 - Costs^ 9

SG&A Subtotal (263 ) 3,544 301 5,716 4,495 5,888



Other Expense Items:

AntidumpingAdjustments - - - (1,359 ) - - Interest^ 11

Other (Income)Expense - - - (1,359 ) - - Subtotal



AdjustedEarnings $ 8,516 $ 19,608 $ 1,922 $ 30,901 $ 35,433 $ (846 )(Loss)

AdjustedEarnings(Loss) per $ 0.29 $ 0.67 $ 0.07 $ 1.05 $ 1.21 $ (0.03 )Diluted Share(a non-GAAPmeasure)

_________________3,4,5,7,8,9,11

See the Gross Profit, SG&A and Other Expense (Income) sections above for more detailed explanations of these individual items. These items have been tax affected at the Company's federal incremental rate, which was 26.2% for the 2021 periods and 26.1% for the 2020 and 2019 periods.

_________________ See the Gross Profit, SG&A and Other Expense (Income) sections^ above for more detailed explanations of these individual items.3,4,5,7,8,9,11 These items have been tax affected at the Company's federal incremental rate, which was 26.2% for the 2021 periods and 26.1% for the 2020 and 2019 periods.

The following chart provides a timeline and tariff levels for the key events related to Section 301 tariffs (unaudited):Section 301 tariff

Corresponding approximate

Event

Timing

level on imports

Tariff level on

percentage of Company's

from China

Subset Products

merchandise subject to tariff

Imposition of Tariffs

September 2018

10%

10% then 0%12

48%

Increase in Tariffs

June 2019

25%

25% then 0%12

44%

Retroactive Exemption on Subset Products10

November 2019

25%

0%

10%

Exemption Not Renewed and Tariffs Re-imposed on Subset Products

August 2020

25%

25%

32%

September 30, 2021

25%

25%

22%

The following chart provides a timeline and tariff levels for the key eventsrelated to Section 301 tariffs (unaudited):

Section Corresponding 301 tariff approximate

Event Timing level on Tariff percentage of imports level on Company's

Subset merchandise from China Products subject to tariff

Imposition of Tariffs September 10% 10% then 48% 2018 0%^12

Increase in Tariffs June 2019 25% 25% then 44% 0%^12

Retroactive Exemption on Subset November 25% 0% 10%Products^10 2019

Exemption Not Renewed and Tariffs August 25% 25% 32%Re-imposed on Subset Products 2020

September 25% 25% 22% 30, 2021

_________________12

On November 7, 2019, the U.S. Trade Representative granted a retroactive exclusion to September 2018 on Subset Products as defined in the Section 301 Tariffs section above bringing the rate to 0%.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103005131/en/

CONTACT: LL Flooring Investor Relations Julie MacMedan Head of Investor Relations ir@lumberliquidators.com Tel: 804-420-9801