LL Flooring (LL) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements. This section presents LL Flooring's unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021, and related accounting notes Condensed Consolidated Balance Sheets This section provides a snapshot of LL Flooring's financial position as of September 30, 2021, and December 31, 2020 | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | Cash and Cash Equivalents | $104,211 | $169,941 | | Merchandise Inventories | $224,998 | $244,409 | | Total Current Assets | $350,778 | $438,152 | | Total Assets | $599,835 | $674,348 | | Total Current Liabilities | $230,254 | $242,255 | | Credit Agreement | $0 | $101,000 | | Total Liabilities | $338,932 | $446,742 | | Total Stockholders' Equity | $260,903 | $227,606 | - Cash and cash equivalents decreased by $65.73 million from December 31, 2020, to September 30, 2021[8] - The company fully repaid its Credit Agreement balance of $101 million by September 30, 2021[9] Condensed Consolidated Statements of Operations This section details LL Flooring's financial performance for the three and nine months ended September 30, 2021 and 2020 | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Net Sales | $282,229 | $295,833 | $867,063 | $793,491 | | Gross Profit | $105,201 | $116,526 | $333,523 | $309,789 | | Operating Income | $12,036 | $23,152 | $41,756 | $37,920 | | Net Income | $8,779 | $15,503 | $31,390 | $30,377 | | Net Income per Common Share—Diluted | $0.30 | $0.53 | $1.06 | $1.04 | - Total Net Sales decreased by 4.6% for the three months ended September 30, 2021, but increased by 9.3% for the nine months ended September 30, 2021[11] - Net Income decreased by 43.4% for the three months ended September 30, 2021, but increased by 3.3% for the nine months ended September 30, 2021[11] Condensed Consolidated Statements of Comprehensive Income This section outlines LL Flooring's comprehensive income for the three and nine months ended September 30, 2021 and 2020 | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $8,779 | $15,503 | $31,390 | $30,377 | | Foreign Currency Translation Adjustments | — | $247 | — | $519 | | Total Other Comprehensive Income | — | $247 | — | $519 | | Comprehensive Income | $8,779 | $15,750 | $31,390 | $30,896 | Condensed Consolidated Statements of Stockholders' Equity This section presents changes in LL Flooring's stockholders' equity for the nine months ended September 30, 2021 | Metric (in thousands) | September 30, 2021 | December 31, 2020 | | :-------------------- | :----------------- | :---------------- | | Total Stockholders' Equity | $260,903 | $227,606 | | Retained Earnings | $179,315 | $147,925 | | Treasury Stock, at cost | $(145,078) | $(142,977) | - Total Stockholders' Equity increased by $33.297 million from December 31, 2020, to September 30, 2021[10] - The company repurchased 89 shares of common stock for $2.101 million during the nine months ended September 30, 2021[21] Condensed Consolidated Statements of Cash Flows This section summarizes LL Flooring's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 | Metric (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $50,280 | $180,762 | | Net Cash Used in Investing Activities | $(12,218) | $(8,873) | | Net Cash (Used in) Provided by Financing Activities | $(103,792) | $18,494 | | Net (Decrease) Increase in Cash and Cash Equivalents | $(65,730) | $190,354 | | Cash and Cash Equivalents, End of Period | $104,211 | $199,347 | - Net cash provided by operating activities significantly decreased from $180.762 million in 2020 to $50.280 million in 2021[23] - Net cash used in financing activities was $103.792 million in 2021, primarily due to the repayment of $101 million on the Credit Agreement[23] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Basis of Presentation This note describes the foundational principles and scope used in preparing the interim financial statements - LL Flooring operates as a multi-channel specialty retailer of hard-surface flooring and accessories, with 422 stores across 47 U.S. states as of September 30, 2021[26] - The company's products are available through stores, a customer relationship center, and its digital platform, LLFlooring.com[26] - Interim financial statements are prepared in accordance with Form 10-Q and U.S. GAAP, but do not include all information required for complete annual financial statements[27] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods applied in the preparation of the financial statements Fair Value of Financial Instruments This sub-section explains the valuation methods for financial instruments - The carrying amounts of financial instruments like cash, accounts payable, and other liabilities approximate fair value due to their short-term nature[29] Merchandise Inventories This sub-section details the accounting policies for merchandise inventories, including valuation and tariff impacts - Merchandise inventories are valued at the lower of cost or net realizable value, using the weighted average cost method[30] - The company faces risks from international sourcing, including supply chain disruptions and COVID-19 impacts[30] - Tariff-related costs, including Section 301 tariffs on Chinese imports, are included in merchandise inventories, with strategies to mitigate tariffs including pricing adjustments and alternative sourcing[32] Section 301 Tariff Levels on Chinese Imports | Event | Timing | Section