10-Q

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b‑2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). ☐ Yes ☒ No

As of November 3, 2023, there are 30,862,752 shares of the registrant’s common stock, par value of $0.001 per share, outstanding.

Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)

Note 1. Basis of Presentation

LL Flooring Holdings, Inc., formerly Lumber Liquidators Holdings, Inc., and its direct and indirect subsidiaries (collectively and, where applicable, individually, "LL Flooring" or the "Company") engage in business as a multi-channel specialty retailer of hard-surface flooring, and hard-surface flooring enhancements and accessories, operating as a single operating segment. The Company offers an extensive assortment of hard-surface flooring including waterproof hybrid resilient, waterproof vinyl plank, solid and engineered hardwood, laminate, bamboo, tile, and cork, with a wide range of flooring enhancements and accessories to complement. In addition, the Company also began offering carpet during 2023, with 61 store locations offering carpet as of the end of the third quarter. The Company also provides in-home delivery and installation services to its customers. The Company primarily sells to consumers or to Pros on behalf of consumers through a network of store locations in metropolitan areas. As of September 30, 2023, the Company’s 443 stores spanned 47 states in the United States ("U.S."). In addition to the store locations, the Company’s products may be ordered, and customer questions or concerns addressed, through both its customer contact center in Richmond, Virginia, and its digital platform, LLFlooring.com (information contained on or connected to our website is not incorporated by reference in this report and should not be considered part of this or any other report that we file with or furnish to the Securities and Exchange Commission ("SEC")).

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10‑Q for interim financial reporting pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments (consisting of normal and recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included in the accompanying consolidated financial statements. However, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. Therefore, the interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s annual report filed on Form 10‑K for the year ended December 31, 2022.

The consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

Note 2. Summary of Significant Accounting Policies

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash and cash equivalents, accounts payable and other liabilities approximate fair value because of the short-term nature of these items. The carrying value of the Revolving Credit Facility approximates fair value due to the variable rate of interest.

Merchandise Inventories

The Company values merchandise inventories at the lower of cost or net realizable value. The method by which amounts are removed from inventory is weighted average cost. All of the hardwood flooring purchased from vendors is either prefinished or unfinished, and in immediate saleable form. The Company relies on a select group of international and domestic suppliers to provide imported flooring products that meet the Company’s specifications. The Company is subject to risks associated with obtaining products from abroad, including disruptions or delays in production, shipments, supply chain, delivery or processing, including due to trade restrictions. Also included in merchandise inventories are tariff-related costs.

Table of Contents

Recognition of Net Sales

The Company generates revenues primarily by retailing merchandise in the form of hard-surface flooring, carpet, and accessories. Additionally, the Company expands its revenues by offering services to deliver and/or install this merchandise for its customers; it considers these services to be separate performance obligations. The separate performance obligations are detailed on the customer’s invoice(s) and the customer often purchases flooring merchandise without purchasing installation or delivery services. Sales occur through the Company’s network of 443 stores, which spanned 47 states on September 30, 2023, and its digital platform, LLFlooring.com. The Company’s agreements with its customers are of short duration (less than a year), and as such the Company has elected not to disclose revenue for partially satisfied contracts that will be completed in the days following the end of a period as permitted by GAAP. The Company reports its revenues exclusive of sales taxes collected from customers and remitted to governmental taxing authorities, consistent with past practice.

Revenue is based on consideration specified in a contract with a customer and excludes any sales incentives from vendors. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or performing services for a customer. Revenues from installation and freight services are recognized when the delivery is made or the installation is complete, which approximates the recognition of revenue over time due to the short duration of service provided. The price of the Company’s merchandise and services is specified in the respective contract and detailed on the invoice agreed to with the customer including any discounts. The Company generally requires customers to pay a deposit, equal to approximately half of the retail sales value, when ordering merchandise not regularly carried in a given location or not currently in stock. In addition, the Company generally does not extend credit to its customers with payment due in full at the time the customer takes possession of merchandise or when the service is provided. Customer payments and deposits received in advance of the customer taking possession of the merchandise or receiving the services are recorded as deferred revenues in the accompanying consolidated balance sheet caption "Customer Deposits and Store Credits."

The following table shows the activity in this account for the periods noted:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(in thousands)
Customer Deposits and Store Credits, Beginning Balance	$	(42,404	)	$	(58,427	)	$	(43,767	)	$	(67,063	)
New Deposits		(


Delaware	27-1310817
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4901 Bakers Mill Lane Richmond, Virginia	23230
(Address of Principal Executive Offices)	(Zip Code)


Title of each class:	Trading Symbol:	Name of exchange on which registered:
Common Stock, par value $0.001 per share	LL	New York Stock Exchange


☐ Large accelerated filer	☒ Accelerated filer	☐ Non-accelerated filer	☐ Smaller reporting company	☐ Emerging growth company


		Page

	PART I - FINANCIAL INFORMATION	2

Item 1.	Consolidated Financial Statements and Supplementary Data	2
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	28

	PART II - OTHER INFORMATION	29

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
	Signatures	31


	September 30,			December 31,
	2023			2022
Assets
Current Assets:
Cash and Cash Equivalents	$	9,965		$	10,800
Merchandise Inventories, Net		282,622			332,296
Prepaid Expenses		8,477			9,054
Other Current Assets		18,834			17,598
Total Current Assets		319,898			369,748
Property and Equipment, Net		98,979			101,758
Operating Lease Right-of-Use Assets		144,512			123,172
Deferred Tax Assets, Net		—			13,697
Other Assets		5,426			5,578
Total Assets	$	568,815		$	613,953

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable	$	61,205		$	47,733
Customer Deposits and Store Credits		42,252			43,767
Accrued Compensation		6,867			9,070
Sales and Income Tax Liabilities		2,170			3,574
Accrual for Legal Matters and Settlements		20,589			22,159
Operating Lease Liabilities - Current		31,666			34,509
Other Current Liabilities		26,488			19,712
Total Current Liabilities		191,237			180,524
Other Long-Term Liabilities		6,670			6,162
Operating Lease Liabilities - Long-Term		120,048			99,186
Credit Agreement		77,000			72,000
Total Liabilities		394,955			357,872

Commitments and Contingencies

Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 30,971 and 30,758 shares issued and 28,840 and 28,695 shares outstanding at September 30, 2023, and December 31, 2022, respectively)		31			31
Treasury Stock, at cost (2,131 and 2,063 shares, respectively)		(153,607	)		(153,331	)
Additional Capital		235,443			231,839
Retained Earnings		91,993			177,542
Total Stockholders’ Equity		173,860			256,081
Total Liabilities and Stockholders’ Equity	$	568,815		$	613,953


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the Three Months Ended September 30, 2023 and 2022
																Total
	Common Stock					Treasury Stock					Additional		Retained			Stockholders’
	Shares			Par Value		Shares		Value			Capital		Earnings			Equity
June 30, 2022		28,680		$	31		2,053	$	(153,244	)	$	230,086	$	196,396		$	273,269
Stock-Based Compensation Expense		—			—		—		—			832		—			832
Release of Restricted Shares		6			—		—		—			—		—			—
Common Stock Repurchased		—			—		4		(40	)		—		—			(40	)
Net Loss		—			—		—		—			—		(3,774	)		(3,774	)
September 30, 2022		28,686		$	31		2,057	$	(153,284	)	$	230,918	$	192,622		$	270,287

June 30, 2023		28,838		$	31		2,130	$	(153,605	)	$	234,232	$	127,955		$	208,613
Stock-Based Compensation Expense		—			—		—		—			1,211		—			1,211
Release of Restricted Shares		2			—		—		—			—		—			—
Common Stock Repurchased		—			—		1		(2	)		—		—			(2	)
Net Loss		—			—		—		—			—		(35,962	)		(35,962	)
September 30, 2023		28,840		$	31		2,131	$	(153,607	)	$	235,443	$	91,993		$	173,860

For the Nine Months Ended September 30, 2023 and 2022
																Total
	Common Stock					Treasury Stock					Additional		Retained			Stockholders’
	Shares			Par Value		Shares		Value			Capital		Earnings			Equity
December 31, 2021		29,113		$	31		1,423	$	(145,337	)	$	227,804	$	189,623		$	272,121
Stock-Based Compensation Expense		—			—		—		—			2,818		—			2,818
Exercise of Stock Options		21			—		—		—			296		—			296
Release of Restricted Shares		123			—		—		—			—		—			—
Common Stock Repurchased		(571	)		—		634		(7,947	)		—		—			(7,947	)
Net Income		—			—		—		—			—		2,999			2,999
September 30, 2022		28,686		$	31		2,057	$	(153,284	)	$	230,918	$	192,622		$	270,287

December 31, 2022		28,695		$	31		2,063	$	(153,331	)	$	231,839	$	177,542		$	256,081
Stock-Based Compensation Expense		—			—		—		—			3,604		—			3,604
Release of Restricted Shares		145			—		—		—			—		—			—
Common Stock Repurchased		—			—		68		(276	)		—		—			(276	)
Net Loss		—			—		—		—			—		(85,549	)		(85,549	)
September 30, 2023		28,840		$	31		2,131	$	(153,607	)	$	235,443	$	91,993		$	173,860


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022

Net Sales
Net Merchandise Sales	$	183,579		$	229,204		$	596,267		$	731,044
Net Services Sales		32,267			39,617			96,699			115,766
Total Net Sales		215,846			268,821			692,966			846,810
Cost of Sales
Cost of Merchandise Sold		120,878			142,041			373,568			449,987
Cost of Services Sold		26,460			31,198			78,359			90,412
Total Cost of Sales		147,338			173,239			451,927			540,399
Gross Profit		68,508			95,582			241,039			306,411
Selling, General and Administrative Expenses		98,109			99,692			304,294			300,804
Operating (Loss) Income		(29,601	)		(4,110	)		(63,255	)		5,607
Other Expense		6,391			646			8,225			830
(Loss) Income Before Income Taxes		(35,992	)		(4,756	)		(71,480	)		4,777
Income Tax (Benefit) Expense		(30	)		(982	)		14,069			1,778
Net (Loss) Income and Comprehensive (Loss) Income	$	(35,962	)	$	(3,774	)	$	(85,549	)	$	2,999

Net (Loss) Income per Common Share—Basic	$	(1.25	)	$	(0.13	)	$	(2.97	)	$	0.10
Net (Loss) Income per Common Share—Diluted	$	(1.25	)	$	(0.13	)	$	(2.97	)	$	0.10

Weighted Average Common Shares Outstanding:
Basic		28,839			28,668			28,769			28,859
Diluted		28,839			28,668			28,769			29,010