UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 202~~March 31, 20221

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

For the transition period from to

Commission File Number: 001-33767

~~Lumber Liquidators~~LL Flooring Holdings, Inc.

(Exact name of registrant as specified in its charter)


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)

(800) 366-4204

(Registrant’s telephone number, including area code)

Not Applicable

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

Securities registered pursuant to Section 12(b) of the Act:


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

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:


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

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 ~~October 28, 2021,~~April 29, 2022, there are ~~29,088,188~~29,778,711 shares of the registrant’s common stock, par value of $0.001 per share, outstanding.

Table of Contents

~~LUMBER LIQUIDATORS~~LL FLOORING HOLDINGS, INC.

Quarterly Report on Form 10-Q

For the quarter ended ~~September 30, 2021~~March 31, 2022

TABLE OF CONTENTS

Table of Contents

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.

~~Lumber Liquidators~~LL Flooring Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Assets
Current Assets:
Cash and Cash Equivalents	$	104,211	$	169,941	$	56,071	$	85,189
Merchandise Inventories		224,998		244,409		318,574		254,385
Prepaid Expenses		10,173		9,370		10,549		9,160
Tariff Recovery Receivable		—		4,078
Other Current Assets		11,396		10,354		12,793		11,094
Total Current Assets		350,778		438,152		397,987		359,828
Property and Equipment, net		95,586		97,557		99,365		96,926
Operating Lease Right-of-Use		123,526		109,475
Operating Lease Right-of-Use Assets						125,747		119,510
Goodwill		9,693		9,693		9,693		9,693
Deferred Tax Asset		11,583		11,611
Net Deferred Tax Assets						11,179		11,336
Other Assets		8,669		7,860		6,659		8,599
Total Assets	$	599,835	$	674,348	$	650,630	$	605,892

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable	$	53,093	$	70,543	$	91,109	$	63,464
Customer Deposits and Store Credits		70,221		61,389		69,314		67,063
Accrued Compensation		9,203		15,347		7,605		10,128
Sales and Income Tax Liabilities		4,707		5,793		5,070		4,297
Accrual for Legal Matters and Settlements		34,903		30,398		32,527		33,611
Operating Lease Liabilities - Current		32,660		33,024		33,730		33,060
Other Current Liabilities		25,467		25,761		26,404		20,717
Total Current Liabilities		230,254		242,255		265,759		232,340
Other Long-Term Liabilities		6,714		13,293		5,714		4,268
Operating Lease Liabilities - Long-Term		101,964		90,194		102,654		97,163
Credit Agreement		—		101,000		—		—
Total Liabilities		338,932		446,742		374,127		333,771

Commitments and Contingencies

Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 30,496 and 30,229 shares issued and 29,089 and 28,911 shares outstanding, respectively)		30		30
Treasury Stock, at cost (1,407 and 1,318 shares, respectively)		(145,078)		(142,977)
Common Stock ($0.001 par value; 35,000 shares authorized; 30,702 and 30,536 shares issued and 29,228 and 29,113 shares outstanding, respectively)						31		31
Treasury Stock, at cost (1,474 and 1,423 shares, respectively)						(146,147)		(145,337)
Additional Capital		226,636		222,628		228,959		227,804
Retained Earnings		179,315		147,925		193,660		189,623
Total Stockholders’ Equity		260,903		227,606		276,503		272,121
Total Liabilities and Stockholders’ Equity	$	599,835	$	674,348	$	650,630	$	605,892

See accompanying notes to condensed consolidated financial statements

Table of Contents

~~Lumber Liquidators~~LL Flooring Holdings, Inc.
Condensed Consolidated Statements of ~~Operations~~Income and Comprehensive Income
(Unaudited, in thousands, except per share amounts)


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022		2021

Net Sales
Net Merchandise Sales	$	240,802	$	261,009	$	750,388	$	709,845		244,271		250,043
Net Services Sales		41,427		34,824		116,675		83,646		34,761		33,407
Total Net Sales		282,229		295,833		867,063		793,491	$	279,032	$	283,450
Cost of Sales
Cost of Merchandise Sold		144,307		152,530		442,914		419,230		147,419		142,010
Cost of Services Sold		32,721		26,777		90,626		64,472		27,534		25,848
Total Cost of Sales		177,028		179,307		533,540		483,702		174,953		167,858
Gross Profit		105,201		116,526		333,523		309,789		104,079		115,592
Selling, General and Administrative Expenses		93,165		93,374		291,767		271,869		99,025		102,487
Operating Income		12,036		23,152		41,756		37,920		5,054		13,105
Other Expense (Income)		18		685		(252)		2,709
Other Income										(15)		(769)
Income Before Income Taxes		12,018		22,467		42,008		35,211		5,069		13,874
Income Tax Expense		3,239		6,964		10,618		4,834		1,032		3,252
Net Income	$	8,779	$	15,503	$	31,390	$	30,377
Net Income and Comprehensive Income									$	4,037	$	10,622

Net Income per Common Share—Basic	$	0.30	$	0.54	$	1.08	$	1.05	$	0.14	$	0.37
Net Income per Common Share—Diluted	$	0.30	$	0.53	$	1.06	$	1.04	$	0.14	$	0.36

Weighted Average Common Shares Outstanding:
Basic		29,082		28,859		28,984		28,801		29,145		28,943
Diluted		29,455		29,334		29,494		29,075		29,417		29,547

See accompanying notes to condensed consolidated financial statements

Table of Contents

Lumber Liquidators Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited, in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,


2021

2020

2021

2020

Net Income

$
8,779

$
15,503

$
31,390

$
30,377

Other Comprehensive Income:









Foreign Currency Translation Adjustments

—

247

—

519

Total Other Comprehensive Income

—

247

—

519

Comprehensive Income

$
8,779

$
15,750

$
31,390

$
30,896

~~See accompanying notes to condensed consolidated financial statements~~

~~Table of Contents~~

~~Lumber Liquidators~~LL Flooring Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited, in thousands)

Total

Common Stock

Treasury Stock

Additional

Retained

Stockholders'


Shares

Value

Shares

Value

Capital

Earnings

AOCL

Equity

July 1, 2020

28,852

$
30

1,309

$
(142,752)

$
219,618

$
101,372

$
(1,308)

$
176,960
Stock-Based Compensation Expense

—

—

—

—

1,146

—

—

1,146
Exercise of Stock Options

11

—

—

—

205

—

—

205
Release of Restricted Shares

8

—

—

—

—

—

—

—
Common Stock Repurchased

—

—

4

(75)

—

—

—

(75)
Translation Adjustment

—

—

—

—

—

—

247

247
Net Income

—

—

—

—

—

15,503

—

15,503
September 30, 2020

28,871

$
30

1,313

$
(142,827)

$
220,969

$
116,875

$
(1,061)

$
193,986

July 1, 2021

29,063

$
30

1,392

$
(144,788)

$
225,287

$
170,536

$
—

$
251,065
Stock-Based Compensation Expense

—

—

—

—

1,349

—

—

1,349
Release of Restricted Shares

26

—

—

—

—

—

—

—
Common Stock Repurchased

—

—

15

(290)

—

—

—

(290)
Net Income

—

—

—

—

—

8,779

—

8,779
September 30, 2021

29,089

$
30

1,407

$
(145,078)

$
226,636

$
179,315

$
—

$
260,903

Total

Common Stock

Treasury Stock

Additional

Retained

Stockholders'


Shares

Value

Shares

Value

Capital

Earnings

AOCL

Equity

January 1, 2020

28,714

$
30

1,245

$
(142,314)

$
218,616

$
86,498

$
(1,580)

$
161,250
Stock-Based Compensation Expense

—

—

—

—

2,112

—

—

2,112
Exercise of Stock Options

14

—

—

—

241

—

—

241
Release of Restricted Shares

143

—

—

—

—

—
��

—

—
Common Stock Repurchased

—

—

68

(513)

—

—

—

(513)
Translation Adjustment

—

—

—

—

—

—

519

519
Net Income

—

—

—

—

—

30,377

—

30,377
September 30, 2020

28,871

$
30

1,313

$
(142,827)

$
220,969

$
116,875

$
(1,061)

$
193,986

January 1, 2021

28,911

$
30

1,318

$
(142,977)

$
222,628

$
147,925

$
—

$
227,606
Stock-Based Compensation Expense

—

—

—

—

3,945

—

—

3,945
Exercise of Stock Options

6

—

—

—

63

—

—

63
Release of Restricted Shares

172

—

—

—

—

—

—

—
Common Stock Repurchased

—

—

89

(2,101)

—

—

—

(2,101)
Net Income

—

—

—

—

—

31,390

—

31,390
September 30, 2021

29,089

$
30

1,407

$
(145,078)

$
226,636

$
179,315

$
—

$
260,903


											Total
	Common Stock			Treasury Stock			Additional		Retained		Stockholders'
	Shares	Value		Shares	Value		Capital		Earnings		Equity

December 31, 2020	28,911	$	30	1,318	$	(142,977)	$	222,628	$	147,925	$	227,606
Stock-Based Compensation Expense	—		—	—		—		1,230		—		1,230
Exercise of Stock Options	3		—	—		—		41		—		41
Release of Restricted Shares	111		—	—		—		—		—		—
Common Stock Repurchased	—		—	55		(1,375)		—		—		(1,375)
Net Income	—		—	—		—		—		10,622		10,622
March 31, 2021	29,025	$	30	1,373	$	(144,352)	$	223,899	$	158,547	$	238,124

December 31, 2021	29,113	$	31	1,423	$	(145,337)	$	227,804	$	189,623	$	272,121
Stock-Based Compensation Expense	—		—	—		—		873		—		873
Exercise of Stock Options	20		—	—		—		282		—		282
Release of Restricted Shares	95		—	—		—		—		—		—
Common Stock Repurchased	—		—	51		(810)		—		—		(810)
Net Income	—		—	—		—		—		4,037		4,037
March 31, 2022	29,228	$	31	1,474	$	(146,147)	$	228,959	$	193,660	$	276,503

See accompanying notes to condensed consolidated financial statements

Table of Contents

~~Lumber Liquidators~~LL Flooring Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)


	Nine Months Ended September 30,				Three Months Ended March 31,
	2021		2020		2022		2021

Cash Flows from Operating Activities:
Net Income	$	31,390	$	30,377	$	4,037	$	10,622
Adjustments to Reconcile Net Income:
Depreciation and Amortization		13,985		13,327		4,492		4,664
Deferred Income Taxes Provision		28		547		157		27
Income on Vouchers Redeemed for Legal Settlements		(1,183)		—		(423)		(503)
Stock-Based Compensation Expense		3,945		2,112		873		1,230
Provision for Inventory Obsolescence Reserves		1,784		2,564		(110)		26
Impairment of Operating Lease Right-of-Use		—		935
Loss (Gain) on Disposal of Fixed Assets		31		(401)
Gain on Disposal of Fixed Assets						(9)		(30)
Changes in Operating Assets and Liabilities:
Merchandise Inventories		15,683		46,057		(64,793)		18,002
Accounts Payable		(17,277)		31,308		26,037		6,042
Customer Deposits and Store Credits		8,832		22,165		2,251		6,822
Accrued Compensation		(6,144)		2,530		(2,523)		(6,759)
Tariff Recovery Receivable		4,078		19,509		-		3,008
Prepaid Expenses and Other Current Assets		(792)		821		(2,448)		1,301
Accrual for Legal Matters and Settlements		7,733		2,183		53		7,698
Payments for Legal Matters and Settlements		(101)		(4,903)
Deferred Rent Payments		(2,154)		4,709
Other Assets and Liabilities		(9,558)		6,922		9,005		(7,655)
Net Cash Provided by Operating Activities		50,280		180,762
Net Cash (Used in) Provided by Operating Activities						(23,401)		44,495

Cash Flows from Investing Activities:
Purchases of Property and Equipment		(12,276)		(9,822)		(5,250)		(4,296)
Other Investing Activities		58		949
Proceeds from Disposal of Fixed Assets						61		58
Net Cash Used in Investing Activities		(12,218)		(8,873)		(5,189)		(4,238)

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)		(810)		(1,375)
Other Financing Activities		(691)		7		282		41
Net Cash (Used in) Provided by Financing Activities		(103,792)		18,494
Effect of Exchange Rates on Cash and Cash Equivalents		—		(29)
Net Cash Used in Financing Activities						(528)		(1,334)
Net (Decrease) Increase in Cash and Cash Equivalents		(65,730)		190,354		(29,118)		38,923
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	$	—
Cash and Cash Equivalents, Beginning of Year						85,189		169,941
Cash and Cash Equivalents, End of Year					$	56,071	$	208,864

Supplemental disclosure of non-cash operating and financing activities:
Relief of Inventory for Vouchers Redeemed for Legal Settlements					$	714	$	977
Tenant Improvement Allowance for Leases	$	(1,053)	$	(676)		(665)		(585)

See accompanying notes to condensed consolidated financial statements

Table of Contents

~~Lumber Liquidators~~LL Flooring Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except per share amounts)

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 exotic~~direct to the consumer including waterproof vinyl plank, solid and ~~domestic hardwood species,~~ engineered hardwood, laminate, ~~resilient vinyl, water-resistant vinyl plank and~~bamboo, porcelain tile, ~~flooring direct to the consumer. The Company features renewable flooring products, bamboo~~ and cork, ~~and provides~~with a wide ~~selection~~range of flooring enhancements and accessories ~~including moldings, noise-reducing underlayment, adhesives and flooring tools.~~to complement. The Company also provides in-home delivery and installation services to its customers. The Company primarily sells to homeowners or to ~~contractors~~Pros on behalf of homeowners through a network of store locations in metropolitan areas. ~~As of September 30, 2021,~~At March 31, 2022, the Company’s ~~network of 422~~431 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/concerns addressed, through both its customer ~~relationship~~contact center in Richmond, Virginia, and its digital platform, LLFlooring.com.

The accompanying unaudited condensed 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 Securities and Exchange Commission (“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 condensed 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 condensed 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, ~~2020.~~2021.

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

~~Results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of future results to be expected for the full~~ year due to a number of factors, including supply chain, seasonality, tariffs, and general economic conditions, as well as the uncertainty and ongoing impact of the COVID-19 pandemic that may impact supply chain and/or sales for the remainder of fiscal 2021.

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 approximates fair value because of the short-term nature of these items.

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. Both international and domestic inventory is subject to increased cost as a result of inflation. 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 the COVID-19 pandemic.

Included in merchandise inventories are tariff-related costs, including Section 301 tariffs on certain products imported from China in recent years. The Company has deployed pricing, promotion, and alternative country sourcing strategies to mitigate tariff-related costs and improve gross margin. The Company continues to ~~execute contingency plans~~monitor the market to ~~minimize ongoing disruptions to supply chain, domestic distribution centers~~inform its pricing and ~~store operations.~~promotional strategies.

Table of Contents

~~Included in merchandise inventories are tariff-related costs, including Section 301 tariffs on certain products imported from China in recent years.~~ A subset of these imports for certain click vinyl and other engineered products (the “Subset Products”) received an exemption that was made retroactive to the beginning of the Section 301 Tariffs for a period of time. The Company has deployed strategies to mitigate tariffs and improve gross margin, primarily through adjusting its pricing and promotion strategies and alternative country sourcing. The Company continues to monitor market pricing and promotional strategies to inform and guide its decisions. ~~The following chart provides a timeline and tariff levels for the key events related to Section 301 Tariffs~~.

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%¹
48%
Increase in Tariffs
June 2019
25%
25% then 0%¹
44%
Retroactive Exemption on Subset Products¹
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%

1	~~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%.~~

Recognition of Net Sales

The Company generates revenues primarily by retailing merchandise in the form of hard-surface and porcelain flooring 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~~Merchandise and services sales occur through athe Company’s network of ~~422~~431 stores ~~which spanned 47 states in~~across the U.S. ~~at September 30, 2021. In addition, both the merchandise and services can be ordered through~~, a ~~call~~customer contact center, and ~~from the Company’s~~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 and amounts collected on behalf of third parties. 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 condensed consolidated balance sheet caption “Customer Deposits and Store Credits.”

~~Table of Contents~~

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
Customer Deposits and Store Credits, Beginning Balance	$	(67,731)	$	(55,492)	$	(61,389)	$	(41,571)	$	(67,063)	$	(61,389)
New Deposits		(304,604)		(324,726)		(935,576)		(870,052)		(300,970)		(310,459)
Recognition of Revenue		282,229		295,833		867,063		793,491		279,032		283,450
Sales Tax included in Customer Deposits		16,936		18,389		52,708		49,932		17,155		17,541
Other		2,949		2,260		6,973		4,464		2,532		2,646
Customer Deposits and Store Credits, Ending Balance	$	(70,221)	$	(63,736)	$	(70,221)	$	(63,736)	$	(69,314)	$	(68,211)

Subject to limitations under the Company’s policy, return of unopened merchandise is accepted for 90 days, subject to the discretion of the store manager. The amount of revenue recognized for flooring merchandise is adjusted for expected returns, which are estimated based on the Company’s historical data, current sales levels, and forecasted economic trends. The Company uses the expected value method to estimate returns because it has a large number of contracts with similar characteristics. The Company reduces revenue by the amount of expected returns and records it within “Other Current Liabilities” on the condensed consolidated balance sheet. ~~The Company continues to estimate the amount of returns based on historical data.~~ In addition, the Company recognizes a related asset for the right to recover returned merchandise and records it in the “Other Current Assets” caption of the accompanying condensed consolidated balance sheet. This amount was ~~$1.3~~$1.4 million at ~~September 30, 2021.~~March 31, 2022. The Company recognizes sales commissions as incurred since the amortization period is less than one year.

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In total, the Company offers hundreds of different flooring products; however, no single flooring product represented a significant portion of its sales mix. By major product category, the Company’s sales mix was as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2021				2020				2021				2020				2022				2021
Manufactured Products ¹	$	129,543	46	%	$	135,119	46	%	$	401,373	46	%	$	366,632	46	%	$	134,639	48	%	$	132,093	46	%
Solid and Engineered Hardwood		69,090	24	%		80,643	27	%		220,887	26	%		219,444	28	%		69,035	25	%		76,195	27	%
Moldings and Accessories and Other		42,169	15	%		45,247	15	%		128,128	15	%		123,769	16	%		40,597	15	%		41,755	15	%
Installation and Delivery Services		41,427	15	%		34,824	12	%		116,675	13	%		83,646	10	%		34,761	12	%		33,407	12	%
Total	$	282,229	100	%	$	295,833	100	%	$	867,063	100	%	$	793,491	100	%	$	279,032	100	%	$	283,450	100	%

¹ Includes engineered vinyl plank, laminate, vinyl and porcelain tile.

Cost of Sales

Cost of sales includes the cost of products sold, including tariffs, the cost of installation services, and transportation costs from vendors to the Company’s distribution centers or store locations. It also includes transportation costs from distribution centers to store locations, transportation costs for the delivery of products from store locations to customers, certain costs of quality control procedures, warranty and customer satisfaction costs, inventory adjustments including obsolescence and shrinkage, and costs to produce and ship samples, which are net of vendor allowances.

The Company offers a range of limited warranties for the durability of the finish on its prefinished products to its services provided. These limited warranties range from one to 100 years,, with lifetime warranties for certain of the Company’s products. Warranty reserves are based primarily on claims experience, sales history and other considerations, including payments made to satisfy customers for claims not directly related to the warranty on the Company’s products. ~~This warranty reserve was~~ ~~$1.0 million at September 30, 2021.~~ Warranty costs are recorded in cost of sales. The related reserve of $0.9 million at March 31, 2022, was recorded in “Other Current Liabilities” on the accompanying condensed consolidated balance sheet. The Company seeks recovery from its vendors and third-party independent contractors of installation services for certain amounts paid.

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Vendor allowances mostly consist of volume rebates and are accrued as earned, with those allowances received as a result of attaining certain purchase levels accrued over the incentive period based on estimates of purchases. Volume rebates earned are initially recorded as a reduction in merchandise inventories and a subsequent reduction in cost of sales when the related product is sold. Reimbursement received for the cost of producing samples is recorded as an offset against cost of sales.

Note 3. Stockholders’ Equity

Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per common share:


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022		2021
Net Income	$	8,779	$	15,503	$	31,390	$	30,377	$	4,037	$	10,622
Weighted Average Common Shares Outstanding—Basic		29,082		28,859		28,984		28,801		29,145		28,943
Effect of Dilutive Securities:
Common Stock Equivalents		373		475		510		274		272		604
Weighted Average Common Shares Outstanding—Diluted		29,455		29,334		29,494		29,075		29,417		29,547
Net Income per Common Share—Basic	$	0.30	$	0.54	$	1.08	$	1.05	$	0.14	$	0.37
Net Income per Common Share—Diluted	$	0.30	$	0.53	$	1.06	$	1.04	$	0.14	$	0.36

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The following shares have been excluded from the computation of Weighted Average Common Shares Outstanding—Diluted because the effect would be anti-dilutive:


	Three Months Ended		Nine Months Ended		Three Months Ended
	September 30,		September 30,		March 31,
	2021	2020	2021	2020	2022	2021
Stock Options	222	112	167	390	373	111
Restricted Shares	280	110	100	113	239	109

Stock Repurchase Program

In February of 2022, the Company’s board of directors raised its authorization for the repurchase of up to $50 million of the Company’s common stock. The Company did 0t purchase any shares under this authorization during the three months ended March 31, 2022.

Note 4. Stock-based Compensation

The following table summarizes share activity related to employee stock options and restricted stock awards (“RSAs”):


		Restricted Stock		Restricted Stock
	Stock Options	Awards	Stock Options	Awards
Options Outstanding/Nonvested RSAs, January 1, 2021	554	872
Options Outstanding/Nonvested RSAs, December 31, 2021			625	631
Granted	109	265	169	393
Options Exercised/RSAs Released	(6)	(261)	(20)	(147)
Forfeited	(20)	(43)	(25)	(29)
Options Outstanding/Nonvested RSAs, September 30, 2021	637	833
Options Outstanding/Nonvested RSAs, March 31, 2022			749	848

The Company granted a target of 94,621 performance-based RSAs with a grant date fair value of $1.5 million during the three months ended March 31, 2022 and a target of 47,768 performance-based RSAs with a grant date fair value of $1.1 million during the ~~nine~~three months ended ~~September 30, 2021 and a target of 94,591 performance-based RSAs with a grant date fair value of $0.9 million during the nine months ended September 30, 2020.~~ March 31, 2021. The performance-based RSAs in both years were awarded to certain members of senior management in connection with the achievement of specific key financial metrics that will be measured over separate respective three-year periods and which will vest at the end of each respective three-year period if the respective performance conditions are met. In addition, the number of 2020 performance-based awards that will ultimately vest is also contingent upon the results of a relative total shareholder return multiple by the end of year three. The Company assesses the probability of achieving these metrics on a quarterly basis. For these awards, the Company recognizes the fair value expense ratably over the performance and vesting period. These awards are included above in RSAs Granted.

Under the Company’s equity incentive plan, the Company’s non-employee directors are compensated with an annual RSA grant. The amount of outstanding nonvested RSAs granted to non-employee directors was 18,306 shares at both March 31, 2022 and December 31, 2021. The Company also maintains the Outside Directors Deferral Plan under which each of the Company’s non-employee directors has the opportunity to elect annually to defer certain fees (which are payable in cash or in shares of Common Stock with a vesting period of at least one year) until departure from the board. A non-employee director may elect to defer up to 100% of his or her fees and have such fees invested in deferred stock units. Deferred stock units must be settled in common stock upon the director’s departure from the board. There were 202,413 and 177,448 deferred stock units outstanding at March 31, 2022 and December 31, 2021, respectively.

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Note 5. Credit Agreement

The Company has a credit agreement (the “Credit Agreement”) with Bank of America, N.A. and Wells Fargo Bank, N.A. (the “Lenders”). On April 30, 2021, the Company entered into a Second Amendment to the Credit Agreement (the “Second Amendment”) with the Lenders. The execution of the Second Amendment, among other things, terminated the FILO Term Loans and converted those commitments to the Revolving Credit Facility. The total size of the Credit Agreement remained at $200 million, and the Company has an option to ~~the~~ increase the Revolving Credit Facility to a maximum total amount of $250 million. The maturity date of the Credit Agreement was extended to April 30, 2026.

The Revolving Credit Facility is secured by security interests in the Collateral (as defined in the Credit Agreement), which includes substantially all assets of the Company including, among other things, the Company’s inventory and credit card receivables, and the Company’s East Coast distribution center located in Sandston, Virginia. Under the terms of the Credit Agreement, the Company has the ability to release the East Coast distribution center from the Collateral under certain conditions.

The Second Amendment decreased the margin for LIBOR Rate Loans (as defined in the Second Amendment) to a range of 1.25% to 1.75% over the applicable LIBOR Rate with respect to revolving loans (as defined in the Second Amendment) depending on the ~~Company’s’~~Company’s average daily excess borrowing availability, a decrease of 1.25% from rates prior to the Second Amendment. As previously stated, the FILO Term Loans were terminated by this Second Amendment. The amendment decreased the LIBOR Rate Floor from 1.00% to 0.25%. The Second Amendment also decreased the unused commitment fee of 0.50% per annum to 0.25% per annum on the average daily unused amount of the Revolving Credit Facility during the most recently completed calendar quarter. As of ~~September 30, 2021,~~March 31, 2022, had the Company ~~re-borrowed,~~borrowed, the Revolving Credit Facility would have carried an interest rate subject to the terms stated directly above.

The Credit Agreement contains a fixed charge coverage ratio covenant that becomes effective only when specified availability under the Revolving Credit Facility falls below the greater of $17.5 million or 10% of the Combined Loan Cap (as defined in the Credit Agreement).

Except as set forth in the Second Amendment, all other terms and conditions of the Credit Agreement remain in place.

~~The Company repaid all $101.0 million of borrowings during the second quarter of 2021.~~ As of ~~September 30, 2021,~~March 31, 2022, there was 0 amount outstanding under the Revolving Credit Facility. The Company had $3.0 million in letters of credit which reduces its availability. As of ~~September 30, 2021,~~March 31, 2022, there was ~~$128.0~~$175.3 million of availability under the Revolving Credit Facility.

Note 6. ~~Income~~ Taxes

The Company calculates its quarterly tax provision pursuant to the guidelines in Accounting Standards Codification ("ASC") 740-270 "Income Taxes." Generally, ASC 740-270 requires companies to estimate the annual effective tax rate for current year ordinary income. The estimated annual effective tax rate represents the best estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision and is adjusted for discrete items that occur within the period. ~~This~~ ~~process has been employed in 2021. Due to disruption related to the COVID-19 pandemic in 2020, the Company applied~~ ~~the actual year-to-date effective tax rate for the tax provision in the three and nine-month periods ended September 30, 2020.~~

For the three months ended ~~September 30,~~March 31, 2022, the Company recognized income tax expense of $1.0 million, which represented an effective tax rate of 20.4%. For the three months ended March 31, 2021, the Company recognized income tax expense of ~~$3.2~~$3.3 million, which represented an effective tax rate of ~~27.0%~~23.4%. ~~For the three months ended September 30, 2020, the Company recognized income tax expense of $7.0 million, which represented an~~The lower effective tax rate ~~of 31.0%.~~

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~~For~~in the ~~nine months ended September 30, 2021,~~current period primarily reflects the ~~Company recognized income tax expense of~~ $10.6 million, which represented an effective tax rate of 25.3%. For the nine months ended September 30, 2020, the Company recognized an income tax expense of $4.8 million, which represented an effective tax rate of 13.7%~~. The variability of the tax rate between the two periods is due to the use of the effective tax rate method in 2021 compared to discrete provision in 2020, including the favorable~~greater impact of permanent items on the ~~Coronavirus Aid, Relief, and Economic Security Act (CARES Act).~~lower pre-tax ordinary income.

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uncertain. The Company intends to maintain this valuation allowance on its deferred tax assets until there is sufficient evidence to support the realizability of those deferred tax ~~assets~~assets.

In February 2022 the Company received sales tax and use tax assessments from the Commonwealth of Virginia covering part of 2014 through 2017. The Company believes there are some factual errors, is disputing this assessment, and will defend itself vigorously in this matter. Given the uncertainty of the final resolution, the Company cannot reasonably estimate the loss or ~~time lapses without opportunity~~range of loss, if any, that may result from this action and therefore no specific accrual has been made related to ~~realize those assets.~~this. Any losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition and liquidity.

Note 7. Commitments and Contingencies

The following chart shows the activity related to the Balance Sheet “Accrual for Legal Matters and Settlements”. The matters themselves are described in greater detail in the paragraphs that follow the chart.


		January 1, 2021								September 30, 2021
Litigation Matter		Accrual for Legal Matters								Accrual for Legal Matters
Description		and Settlements		Accruals		Settlement Payments		Vouchers Redeemed		and Settlements
Litigation Matter Description													December 31, 2021 Accrual for Legal Matters and Settlements - Current		Accruals		Settlement Payments		Vouchers Redeemed		March 31, 2022 Accrual for Legal Matters and Settlements - Current
MDL	$	14,000	$	—	$	—	$	(2,781)	$	11,219	¹	$	10,656	$	—	$	—	$	(464)	$	10,192	¹
Gold		16,000		—		—		(346)		15,654	¹		14,885		—		—		(673)		14,212	¹
Mason		—		7,000		—		—		7,000			7,000		—		—		—		7,000
Other Matters		398		733		(101)		—		1,030			1,070		53		—		—		1,123
	$	30,398	$	7,733	$	(101)	$	(3,127)	$	34,903		$	33,611	$	53	$	—	$	(1,137)	$	32,527

		January 1, 2020								September 30, 2020
Litigation Matter		Accrual for Legal Matters								Accrual for Legal Matters
Description		and Settlements		Accruals		Settlement Payments		Vouchers Redeemed		and Settlements
Litigation Matter Description													December 31, 2020 Accrual for Legal Matters and Settlements - Current		Accruals		Settlement Payments		Vouchers Redeemed		March 31, 2021 Accrual for Legal Matters and Settlements - Current
MDL	$	35,500	$	—	$	—	$	—	$	35,500		$	14,000	$	—	$	—	$	(1,479)	$	12,521
Gold		27,000		2,000		—		—		29,000			16,000		—		—		—		16,000
Kramer		4,750		—		(4,750)		—		—
Mason													—		7,000		—		—		7,000
Other Matters		221		183		(153)		—		251			398		698		(23)		—		1,073
	$	67,471	$	2,183	$	(4,903)	$	—	$	64,751		$	30,398	$	7,698	$	(23)	$	(1,479)	$	36,594

1	The remaining accrual will be fulfilled by redeeming vouchers as discussed below.

Employment Cases

Mason Lawsuit

In August 2017, Ashleigh Mason, Dan Morse, Ryan Carroll and Osagie Ehigie filed a purported class action lawsuit in the United States District Court for the Eastern District of New York on behalf of all current and former store managers, store managers in training, and similarly situated current and former employees (collectively, the “Mason Putative Class Employees”) alleging that the Company violated the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”) by classifying the Mason Putative Class Employees as exempt. The alleged violations include failure to pay for overtime work. The plaintiffs sought certification of the Mason Putative Class Employees for (i) a collective action covering the period beginning three years prior to the filing of the complaint (plus a tolling period) through the disposition of this action for the Mason Putative Class Employees nationwide in connection with FLSA and

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(ii) a class action covering the period beginning six years prior to the filing of the complaint (plus a tolling period) through the disposition of this action for members of the Mason Putative Class Employees who currently are or were

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employed in New York in connection with NYLL. The plaintiffs did not quantify any alleged damages but, in addition to attorneys’ fees and costs, the plaintiffs seek class certification, unspecified amounts for unpaid wages and overtime wages, liquidated and/or punitive damages, declaratory relief, restitution, statutory penalties, injunctive relief and other damages.

In November 2018, the plaintiffs filed a motion requesting conditional certification for all store managers and store managers in training who worked within the federal statute of limitations period. In May 2019, the magistrate judge granted plaintiffs’ motion for conditional certification. On January 6, 2021, the magistrate judge ruled in favor of a motion by the Company to exclude from the Mason Putative Class the claims of 55 opt-in plaintiffs who participated in a prior California state class-action settlement that released all claims arising from the same facts on which the Mason matter is based.

In April 2021, the Company entered into a Memorandum of Understanding (“Mason MOU”) with counsel for the lead plaintiffs in the Mason matter. Under the terms of the Mason MOU, the Company will pay up to ~~$7.0~~$7.0 million to settle the claims asserted in the Mason matter on behalf of all Mason Putative Class Employees who (i) opted-in to the collective action (“Collective Members”) and (ii) are currently or were employed in New York and did not previously file an opt-in notice to participate in the collective action (the “New York Non Opt-Ins”). The New York Non Opt-Ins will have an opportunity to file an opt-in notice to participate in the settlement. To the extent that a New York Non Opt-In does not subsequently file such a notice, then the amount apportioned to that claim shall revert to the Company. Subsequent to the end of the quarter, the court gave final approval to the settlement described above. As a result of the final approval, the Company will pay $7.0 million in the second quarter of 2022 to a court appointed administrator who will handle distribution to the plaintiffs. In addition, any checks issued to the Collective Members and the New York Non Opt-Ins which are not cashed ~~within one hundred eighty days~~by March 1, 2023, will revert to the Company. ~~The Mason MOU is subject to certain contingencies, including court approval~~As of ~~the definitive settlement agreement. There can be no assurance that a settlement will be approved or as to the ultimate outcome of the litigation. If a final, court approved settlement is not reached,~~March 31, 2022, the Company will defend the matter vigorously and believes there are meritorious defenses and legal standards that must be met for success on the merits. If the parties are unable to finalize the settlement, the Mason matter could havehad a ~~material adverse effect on the Company’s financial condition and results of operations. As a result of these developments,~~$7.0 million liability; the Company ~~determined that a probable loss has been incurred and has~~ accrued ~~within SG&A a~~ ~~$7.0~~ ~~million~~the liability during the first quarter of ~~2021. As of September 30,~~ 2021 when the ~~remaining accrual related to this matter is~~ ~~$7.0 million, which has been~~Mason MOU was signed. The Company included those amounts in “Mason” in the ~~caption “Accrual for Legal Matters and Settlements” on its condensed consolidated balance sheet.~~chart above.

Savidis Lawsuit

On April 9, 2020, ~~Lumber Liquidators~~LL Flooring was served with a lawsuit filed by Tanya Savidis, on behalf of herself and all others similarly situated (collectively, the “Savidis Plaintiffs”). Ms. Savidis filed a purported class action lawsuit in the Superior Court of California, County of Alameda on March 6, 2020, on behalf of all current and former ~~Lumber Liquidators~~LL Flooring employees employed as non-exempt employees. The complaint alleges violation of the California Labor Code including, among other items, failure to pay minimum wages and overtime wages, failure to provide meal periods, failure to permit rest breaks, failure to reimburse business expenses, failure to provide accurate wage statements, failure to pay all wages due upon separation within the required time, and engaging in unfair business practices (the “Savidis matter”). On or about May 22, 2020, the Savidis Plaintiffs provided notice to the California Department of Industrial Relations requesting they be permitted to seek penalties under the California Private Attorney General Act for the same substantive alleged violations asserted in the Complaint. The Savidis Plaintiffs seek certification of a class action covering the prior four-year period prior to the filing of the complaint to the date of class certification (the “California Employee Class”), as well as a subclass of class members who separated their employment within three years of the filing of the suit to the date of class certification (the “Waiting Time Subclass”). The Savidis Plaintiffs did not quantify any alleged damages but, in addition to attorneys’ fees and costs, seek statutory penalties, unspecified amounts for unpaid wages, benefits, and penalties, interest, and other damages.

In December 2020, the Company began contacting individuals who constitute the Savidis Plaintiffs and offered individual settlements in satisfaction of their claims. In April 2021, the Company entered into a Memorandum of Understanding (“Savidis MOU”) with counsel for the lead plaintiffs in the Savidis matter. Under the terms of the Savidis MOU, the Company will pay ~~$0.9~~$0.9 million reduced by a credit of $0.1 million for amounts already paid to the

~~Table of Contents~~

individuals who accepted the Company’s prior settlement offer. The Company accrued an additional ~~$675~~$675 thousand related to this matter in the first quarter 2021. ~~The Savidis MOU is subject~~In October 2021, notices were mailed to ~~certain contingencies, including court~~class members advising them of the settlement. Class members who do not exclude themselves from the settlement and who did not receive an individual settlement payment will automatically receive a payment. In January 2022, the Court provided final approval of the ~~definitive~~ settlement ~~agreement. There can be no assurance~~and the Company anticipates that ~~a settlement~~the Settlement Administrator will ~~be approved or as~~mail checks to the ~~ultimate outcome~~class members who did not opt out of the litigation. If a final, court approved settlement is not reached, the Company will defend the matter vigorously and believes there are meritorious defenses and legal standards that must be met for success on the merits. If the parties are unable to finalizeparticipating in the settlement in the ~~Savidis matter could have a material adverse effect on the Company’s financial condition and results~~second quarter of ~~operations.~~2022.

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Visnack Lawsuit

On June 29, 2020, Michael Visnack, on behalf of himself and all others similarly situated (collectively, the “Visnack Plaintiffs”) filed a purported class action lawsuit in the Superior Court of California, County of San Diego, on behalf of all current and former store managers, and others similarly situated. The Complaint alleges violation of the California Labor Code including, among other items, failure to pay wages and overtime, wage statement violations, meal and rest break violations, unpaid reimbursements and waiting time, and engaging in unfair business practices (the “Visnack matter”). The Visnack Plaintiffs seek certification of a class period beginning September 20, 2019, through the date of Notice of Class Certification, if granted. The Visnack Plaintiffs did not quantify any alleged damages but, in addition to attorneys’ fees and costs, they seek unspecified amounts for each of the causes of action such as unpaid wages and overtime wages, failure to provide meal periods and rest breaks, payroll record and wage statement violations, failure to reimburse expenses and waiting time, liquidated and/or punitive damages, declaratory relief, restitution, statutory penalties, injunctive relief and other damages.

On December 14, 2020, the court ruled in favor of a motion by the Company to compel arbitration for Michael Visnack under the existing agreement between the Company and Mr. Visnack. The court declined to outright dismiss the putative class claims but stayed the putative class claims and Private Attorneys General Act claims pending arbitration. The court denied plaintiff’s request to conduct discovery. In the first quarter of 2021, the Company received notice that Mr. Visnack has filed an arbitration claim, which the Company intends to defend. Mr. Visnack is a Collective Member of the Mason Putative Class and will have the opportunity to decide whether to participate in the Mason settlement and release his claims against the Company, in which case he would be removed as the lead Plaintiff in the Visnack matter. In December 2020, the Company began contacting individuals who constitute the purported class in the Visnack matter and has offered individual settlements in satisfaction of their claims. To the extent individuals accepted these settlement offers, they have released the Company from the claims and been removed from the purported class. As of March 31, 2021, the Company had reached agreement with a portion of the purported class incurring less than $50 thousand in fees, taxes, and other costs. The Company included those amounts in “Other Matters” in the chart above.

The Company is evaluating the Visnack Putative Class Employees' claims and intends to defend itself vigorously in this matter. Given the uncertainty of litigation, the preliminary stage of the case and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss, if any, that may result from this action and therefore no accrual has been made related to this. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition and liquidity.

~~Kramer lawsuit~~

In November 2017, Robert J. Kramer, on behalf of himself and all others similarly situated (collectively, the “Kramer Plaintiffs”) filed a purported class action lawsuit in the Superior Court of California, County of Sacramento on behalf of all current and former store managers, all others with similar job functions and/or titles and all current and former employees classified as non-exempt or incorrectly classified as exempt and who worked for the Company in the State of California alleging violation of the California Labor Code including, among other items, failure to pay wages and overtime and engaging in unfair business practices (the “Kramer matter”). The Company reached settlement for this matter for ~~$4.75 million in the third quarter of 2019 and paid that amount to the settlement administrator in the second quarter of 2020 for distribution to class members.~~

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Antidumping and Countervailing Duties Investigation

~~In October 2010, a conglomeration of domestic manufacturers of multilayered wood flooring (“Petitioners”) filed a petition seeking the imposition of~~The Company is subject to antidumping (“AD”) and countervailing duties (“CVD”) ~~with the United States Department of Commerce (“DOC”) and the United States International Trade Commission (“ITC”) against~~for its certain imports of multilayered wood flooring from China. ~~This ruling applies to companies importing multilayered wood flooring from Chinese suppliers subject to the AD and CVD orders.~~ The Company’s multilayered wood flooring imports from China accounted for approximately ~~4% and 6%~~3% of its flooring purchases in ~~2020 and 2019, respectively.~~2021.

As part of its processes in these proceedings, the DOC conducts annual reviews of the AD and CVD rates. In such cases, the DOC will issue preliminary rates that are not binding and are subject to comment by interested parties. After consideration of the comments received, the DOC will issue final rates for the applicable period, which may lag by a year or more. At the time of import, the Company makes deposits at the then prevailing rate. This rate ~~even while~~is subsequently reviewed to establish the ~~annual review is in process.~~final rate. When rates are declared final by the ~~DOC,~~United States Department of Commerce (“DOC”), the Company accrues a receivable or payable depending on where that final rate compares to the deposits it has made. The Company and/or the domestic manufacturers can appeal the final rate for any ~~period and can place a hold on final settlement by U.S. Customs and Border Protection while the appeals are pending.~~

The Company as well as other involved parties have appealed many of the final rate determinations. Certain of those appeals are pending and, at times, have resulted in delays in settling the shortfalls and refunds shown in the table below.period. Because of the length of time for finalization of rates as well as appeals, any subsequent adjustment of AD and CVD rates typically flows through a period different from those in which the inventory was originally purchased and/or sold.

Results by period for the Company are shown below. The column labeled ~~‘September 30, 2021~~“March 31, 2022 Receivable/Liability ~~Balance’~~Balance” represents the amount the Company would receive or pay (net of any collections or payments) as the result of subsequent adjustment to rates whether due to finalization by the DOC or because of action of a court based on appeals by various parties. It does not include any initial amounts paid for AD or CVD in the current period at the in-effect rate at that time.

~~The Company recorded net interest income related to antidumping of $1.8~~ million for the nine months ended September 30, 2021, with the amount included in other expense on the condensed consolidated statements of operations. The estimated associated interest payable and receivable for each period is not included in the table below but is included in the same financial statement line item on the Company’s condensed consolidated balance sheet as the associated liability and receivable balance for each period.

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Review

Rates at which

September 30, 2021
Period
Period Covered
Company
Final Rate
Receivable/Liability

Deposited

Balance
Antidumping
1
May 2011 through
6.78% and 3.3%
0.73%¹
$1.3 million

November 2012

receivable¹
2
December 2012 through
3.30%
3.92% ²
$0.2 million

November 2013

liability ²
3
December 2013 through
3.3% and 5.92%
0.0%³
$1.8 million

November 2014

receivable³
4
December 2014 through
5.92% and 13.74%
0.0%
Settled

November 2015

5
December 2015 through
5.92%. 13.74%. and 17.37%
0.0%
Settled

November 2016

6
December 2016 through
17.37% and 0.0%
42.57% and 0.0%⁴
$0.5 million receivable

November 2017

$1.5 million liability⁴
7
December 2017 through
0.0%
0.0%⁵
NA

November 2018

8
December 2018 through
0.0%
0.0%⁶
NA

November 2019

Included on the Condensed Consolidated Balance Sheet in
Other Current Assets
$2.3 million

Included on the Condensed Consolidated Balance Sheet in
Other Assets
$1.3 million

Included on the Condensed Consolidated Balance Sheet in Other Current Liabilities
$0.2 million

Included on the Condensed Consolidated Balance Sheet in
Other Long-Term Liabilities
$1.5 million
Countervailing
1&2
April 2011 through
1.50%
0.83% / 0.99%
$0.2 million

December 2012

receivable
3
January 2013 through
December 2013
1.50%
1.38%
$0.05 million
receivable
4
January 2014 through
December 2014
1.50% and 0.83%
1.06%
$0.02 million
receivable
5
January 2015 through
December 2015
0.83% and 0.99%
Final at 0.11% and 0.85%⁷
$0.07 million
receivable⁷
6
January 2016 through
December 2016
0.99% and 1.38%
Final at 3.10% and 2.96%
$0.04 million
liability⁸
7
January 2017 through
December 2017
1.38% and 1.06%
20.75%⁹
$1.7 million
liability⁹
8
January 2018 through
December 2018
1.06%
5.81% ¹⁰
NA

Included on the Condensed Consolidated Balance Sheet in
Other Current Assets
$0.07 million

Included on the Condensed Consolidated Balance Sheet in
Other Assets
$0.3 million

Included on the Condensed Consolidated Balance Sheet in Other Current Liabilities
$0.04 million

Included on the Condensed Consolidated Balance Sheet in Other Long-Term Liabilities
$1.7 million

The Company recorded net interest income related to antidumping of $0.07 million for the three months ended March 31, 2022 compared to net interest income of $1.8 million for the three months ended March 31, 2021. The amounts for both years are included in “Other Expense” on the condensed consolidated statements of income. The estimated associated interest payable and receivable for each period is not included in the table below but is included in the same financial statement line item on the Company’s condensed consolidated balance sheet as the associated liability and receivable balance for each period.


Review Period¹	Period Covered	Rates at which Company Deposited	Final Rate	March 31, 2022 Receivable/Liability Balance
Antidumping
1	May 2011 through November 2012	6.78% and 3.3%	0.0%²	$1.5 million receivable²
2	December 2012 through November 2013	3.30%	3.92% ³	$0.2 million liability³
3	December 2013 through November 2014	3.3% and 5.92%	0.0%⁴	$1.8 million receivable⁴
6	December 2016 through November 2017	17.37% and 0.00%	42.57% and 0.0%⁵	$0.5 million receivable $1.5 million liability⁵
7	December 2017 through November 2018	0.00%	0.0%⁶	NA
8	December 2018 through November 2019	0.00%	0.0%⁷	NA
9	December 2019 through November 2020	0.00%	0.0%⁸	NA
			Included on the Consolidated Balance Sheet in Other Current Assets	$3.8 million
			Included on the Consolidated Balance Sheet in Other Current Liabilities	$0.2 million
			Included on the Consolidated Balance Sheet in Other Long-Term Liabilities	$1.5 million
Countervailing
1&2	April 2011 through December 2012	1.50%	0.83% / 0.99%	$0.2 million receivable
3	January 2013 through December 2013	1.50%	1.38%	$0.04 million receivable
4	January 2014 through December 2014	1.50% and 0.83%	1.06%	$0.02 million receivable
5	January 2015 through December 2015	0.83% and 0.99%	Final at 0.11% and 0.85%⁹	$0.07 million receivable⁹
6	January 2016 through December 2016	0.99% and 1.38%	Final at 3.10% and 2.96%¹⁰	$0.04 million liability¹⁰
7	January 2017 through December 2017	1.38% and 1.06%	20.75%¹¹	$1.7 million liability¹¹
8	January 2018 through December 2018	1.06%	6.13%¹²	$0.3 million liability¹²
9	January 2019 through December 2019	0.00%, 0.85%, 2.96%	5.50% / 15.71%¹³	NA
			Included on the Consolidated Balance Sheet in Other Current Assets	$0.07 million
			Included on the Consolidated Balance Sheet in Other Assets	$0.3 million
			Included on the Consolidated Balance Sheet in Other Current Liabilities	$0.04 million
			Included on the Consolidated Balance Sheet in Other Long-Term Liabilities	$2.0 million

1	The fourth and fifth annual anti-dumping review periods have been settled and are no longer included on the chart above.

1614

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In the ~~second~~first quarter of ~~2018,~~2022, pursuant to CIT order on appeal the ~~Court of International Trade (“CIT”) sustained~~DOC recalculated the ~~DOC’s recommendation to reduce the rate~~final rates for the first annual review period ~~to 0.73% (from 5.92%~~)at 0.0%. As a result, the Company ~~reversed its~~ ~~$0.8 million liability and~~ recorded ~~a $1.3~~an additional $0.2 million receivable with a corresponding reduction of cost of sales during the ~~year ended December 31, 2018~~.first quarter of 2022.

In the second quarter of 2020, ~~the CIT received a recommendation from~~on appeal the DOC offered to reduce the rate for the second annual review period to 3.92% ~~(from~~from 13.74%). The ~~recommendation~~reduced rate was accepted by the CIT in the fourth quarter of 2020, and the Company reversed ~~$3.9~~$3.9 million of its $4.1 million liability, with a corresponding reduction of cost of sales.

In the third quarter of 2020, ~~the CIT received a recommendation from~~on appeal the DOC offered to reduce the rate for the third annual review period to 0.0% from 17.37%. The ~~recommendation~~reduced rate was accepted by the CIT in the first quarter of 2021, and the Company reversed the entire ~~$4.7~~$4.7 million liability, with a corresponding reduction of cost of sales, and recorded a $1.8 million receivable and favorable adjustment to cost of sales for deposits made at previous preliminary rates.

In the third quarter of 2019, the DOC issued the final rates for the sixth annual review period at 42.57% and 0% depending on the vendor. As a result, the Company recorded a liability of ~~$0.8~~$0.8 million with a corresponding reduction of cost of sales during the year ended December 31, 2019. The Company received payments during 2019 for its vendor with a final rate of 0.0% and the remaining balance of $0.5 million as of June 30, 2021 was included in other current assets on the condensed consolidated balance sheet. The vendors with a final rate of 42.57% are under appeal and the balance of $1.5 million as of ~~September 30, 2021~~March 31, 2022 was included in other long-term liabilities on the condensed consolidated balance sheet.

56	In the first quarter of 2020, the DOC issued a preliminary rate of 0.0% for the seventh annual review period. The final rate is currently under appeal.

67	In April 2021, the DOC issued a preliminary rate of 0.0% for the eighth annual review period. ~~This rate was finalized at~~ The DOC issued a final of 0.0% in October 2021. The final rate is currently under appeal.

78	In the fourth quarter of 2021, the DOC issued a preliminary rate of 0.0% for the ninth annual review period.

In the second quarter of 2018, the DOC issued the final rates for the fifth annual review period at 0.11% and 0.85% depending on the vendor. As a result, in the second quarter of 2018, the Company recorded a receivable of $0.07 million for deposits made at previous preliminary rates, with a corresponding reduction of cost of sales.

810

In the third quarter of 2019, the DOC issued the final rates for the sixth annual review period at 3.1% and 2.96% depending on the vendor. As a result, the Company recorded a liability of ~~$0.4~~$0.4 million with a corresponding reduction of cost of sales during the year ended December 31, 2019. ~~The~~As of March 31, 2022, the remaining liability balance ~~after payments,~~ was approximately ~~$40 thousand as of September 30, 2021.~~$40 thousand.

911

In the fourth quarter of 2020, the DOC issued the final rate 20.75% for the seventh annual review period. As a result, the Company recorded a liability of ~~$1.7~~$1.7 million with a corresponding increase to cost of sales during the year ended December 31, 2020. The Company ~~has~~ appealed this final rate during the first quarter of 2021.

1012

In October 2021, the DOC issued the final rate of ~~5.81%~~6.13% for the eighth annual review ~~period~~.period. As a result, in October 2021 the Company recorded a ~~$0.3~~$0.3 million liability with a corresponding increase in cost of sales. The Company appealed this final rate during the first quarter of 2022.

13	In the fourth quarter of 2021, the DOC issued preliminary rates of 5.5% and 15.71% for the ninth annual review period. If the preliminary rates remain at 5.5% and 15.71%, the Company will record a liability of $0.2 million in the period in which the ruling is finalized.

Litigation Relating to Bamboo Flooring

~~Dana Gold filed~~In 2019, the Company finalized a ~~purported class action lawsuit in the United States District Court for the Northern District of California alleging that the~~settlement agreement to resolve claims related to Morning Star bamboo flooring ~~that the Company sells was defective~~ (the “Gold Litigation”). In the third quarter of 2019, the parties finalized a settlement agreement that is consistent with the terms of the Memorandum of Understanding previously disclosed by the Company, to resolve the Gold Litigation on a nationwide basis. Under the terms of the settlement agreement, the Company contributed ~~$14~~$14 million in cash (the “Gold Cash Payment”) and provided $16 million in store-credit vouchers, for an aggregate settlement of up to $30 million. ~~The settlement agreement made clear that the settlement does not constitute or include an admission~~Cash and vouchers, which generally have a three-year life, were distributed by the administrator in 2021. The Company will monitor and evaluate the redemption of ~~any fault or liability and the Company does not admit any fault, wrongdoing or liability. Following the preliminary approval, and pursuant to the terms~~vouchers on a quarterly basis. The Company’s current expectation is that recipients bargained for this compensation as part of the settlement ~~agreement, in December 2019, the Company paid $1 million~~and therefore will redeem their voucher for ~~settlement administrative costs, which is part of the Gold Cash Payment, to the plaintiff’s settlement escrow account.~~Notice has been disseminated to class members by the settlement administrator, and final approval was granted by the court on October 22, 2020. The Company has notified its insurance carriers and continues to pursue coverage, but the insurers to date have denied coverage. As the insurance claim is still pending, the Company has not recognized any insurance recovery related to the Gold Litigation.product as intended.

~~The Company recognized a charge to earnings of $28~~ million within selling, general and administrative expense during the fourth quarter of 2018 as its loss became probable and estimable. During the third quarter of 2020, the Company recognized an additional charge to earnings for in-store vouchers of $2 ~~million within selling, general and administrative expense as the Company became aware that a threshold in the settlement agreement was met. The Company paid the remaining~~ ~~$13~~ ~~million of the Gold Cash Payment in the fourth quarter of 2020. The vouchers were issued in the middle of the third quarter of 2021.~~ As of ~~September 30, 2021,~~March 31, 2022, the remaining accrual related to these matters was ~~$15.7~~$14.2 million for ~~vouchers, which has been included in the caption “Accrual for Legal Matters and~~

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~~Settlements” on its condensed consolidated balance sheet.~~vouchers. As ~~$0.3~~$0.7 million of vouchers were redeemed during the first ~~nine~~three months of ~~2021,~~2022, the Company relieved the accrual for legal matters and settlements for the full amount, relieved inventory at its cost, and the remaining amount -- the gross margin for the items sold of ~~$0.1~~$0.2 million was recorded as a reduction in “Selling, General and ~~administrative~~Administrative Expenses” (“SG&A”) on the condensed consolidated statement of operations.

In addition, there are a number of individual claims and lawsuits alleging damages involving Strand Bamboo Product (the “Bamboo Flooring Litigation”). While the Company believes that a loss associated with the Bamboo Flooring Litigation is reasonably possible, the Company is unable to reasonably estimate the amount or range of possible loss. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition and liquidity. The Company ~~disputes the claims~~included those amounts in “Gold” in the ~~Bamboo Flooring Litigation and intends to defend such matters vigorously.~~chart above.

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On September 9, 2021, Larry and Kathy Fluharty filed a purported class action lawsuit in the United States District Court for the Eastern District of Arkansas alleging substantially the same allegations as the Gold Litigation, for a class period beginning March 16, 2019 to present (the “Fluharty Litigation”). ~~The~~Subsequent to the end of the quarter, the Company ~~is evaluating~~reached a settlement of the Fluharty ~~Litigation and~~Litigation. The amount of the settlement is ~~unable~~not material to ~~determine if a loss is reasonably possible or to estimate~~ the ~~amount or range~~Company’s results of ~~possible loss, if any. The Company disputes~~operations for the ~~claims in the Fluharty Litigation and intends to defend the matter vigorously.~~

quarter.

Litigation Related to Formaldehyde-Abrasion MDLs

Beginning in 2015, numerous purported class action cases were filed in various United States federal district courts and state courts involving claims of excessive formaldehyde emissions and product claims about durability and abrasion from the Company’s Chinese-manufactured laminate flooring products. The United States Judicial Panel on Multidistrict Litigation transferred and consolidated the federal cases to the United States District Court for the Eastern District of Virginia (the “Virginia Court”) as two cases: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales, Practices and Products Liability Litigation (the “Formaldehyde MDL”) and Lumber Liquidators Chinese-Manufactured Laminate Flooring Durability Marketing and Sales Practices Litigation (the “Abrasion MDL”).

In 2018, the Company entered into a settlement agreement to ~~jointly settle the Formaldehyde MDL and the Abrasion MDL.~~resolve claims related to Chinese-manufactured laminate products (the “Formaldehyde-Abrasion MDL”). Under the terms of the settlement agreement, the Company ~~agreed to fund~~funded $22 million ~~(the “MDL Cash Payment”)~~in cash and ~~provide~~provided $14 million in store-credit vouchers for an aggregate settlement amount of $36 million to settle claims brought on behalf of purchasers of Chinese-manufactured laminate flooring sold by the Company between January 1, 2009 and May 31, 2015. The Court approved the settlement in the fourth quarter of, 2018 and the Company paid $21.5 million in cash into the plaintiffs’ settlement escrow account.

claims. Cash and vouchers, which generally have a three-year life, were distributed by the administrator in the fourth quarter of ~~2020 upon order of the Virginia Court.~~2020. The Company will monitor and evaluate the redemption of vouchers on a quarterly basis. The Company’s current expectation is that recipients bargained for this compensation as part of the settlement and therefore will redeem their voucher for product as intended.

~~The $36~~ ~~million aggregate settlement amount was accrued in 2017. The Company had held~~ ~~$21.5~~ ~~million of the Settlement as a deposit pending the appeals and the distribution of cash by the administrator, which occurred in the fourth quarter of 2020.~~ As of ~~September 30, 2021,~~March 31, 2022, the remaining accrual related to these matters was ~~$11.2~~$10.2 million for ~~vouchers, which has been included in the caption “Accrual for Legal Matters and Settlements – Current” on its condensed consolidated balance sheet.~~vouchers. As ~~$2.8~~$0.5 million of vouchers were redeemed during the first ~~nine~~three months of ~~2021,~~2022, the Company relieved the accrual for legal matters and settlements for the full amount, relieved inventory at its cost, and the remaining amount -- the gross margin for the items sold of ~~$1.1~~$0.2 million was recorded as a reduction in “Selling, General and ~~administrative~~Administrative Expenses” (“SG&A”) on the condensed consolidated statement of operations.

In addition to those purchasers who elected to opt out of the above settlement (the “Opt Outs”), there are a number of individual claims and lawsuits alleging personal injuries, breach of warranty claims or violation of state consumer protection statutes that remain pending (collectively, the “Related Laminate Matters”). Certain of these Related Laminate Matters were settled in 2019. The Company ~~did 0t have any expense for these matters for the nine~~

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~~months ended September 30, 2021, or for the nine months ended September 30, 2020. As of September 30, 2021 and 2020, the remaining accrual related to these matters was~~ ~~$0.1 million, which has been~~ included those amounts in “MDL” in the caption “Accrual for Legal Matters and Settlements” on the condensed consolidated balance sheet. While the Company believes that a further loss associated with the Opt Outs and Related Laminate Matters is possible, the Company is unable to reasonably estimate the amount or range of possible loss beyond what has been provided. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition and liquidity.

~~During the third quarter of 2021, the Company reached a settlement with its insurance carrier related to legal fees for the MDL matter for $0.4 million and received payment in October 2021.~~

chart above.

Canadian Litigation

On or about April 1, 2015, Sarah Steele (“Steele”) filed a purported class action lawsuit in the Ontario, Canada Superior Court of Justice against the Company. In the complaint, Steele’s allegations include strict liability, breach of implied warranty of fitness for a particular purpose, breach of implied warranty of merchantability, fraud by concealment, civil negligence, negligent misrepresentation and breach of implied covenant of good faith and fair dealing relating to the Company’s Chinese-manufactured laminate flooring products. Steele did not quantify any alleged damages in her complaint, but seeks compensatory damages, punitive, exemplary and aggravated damages, statutory remedies, attorneys’ fees and costs. ~~While the Company believes that a further loss associated with~~On March 23, 2022 the Steele ~~litigation is reasonably possible, the Company is unable to reasonably estimate the amount or range of possible loss.~~

matter was dismissed for delay.

Section 301 Tariffs

Since September 2018, pursuant to Section 301 of the Trade Act of 1974, the United States Trade Representative (“USTR”) has imposed tariffs on certain goods imported from China over four tranches ~~or Lists.~~(“Lists”). Products imported by the Company fall within Lists 3 and 4 for which tariffs range from 10% to 25%. On September 10, 2020 several importers of vinyl flooring filed a lawsuit with the CIT challenging the Section 301 tariffs under Lists 3 and 4. The Company has also filed a companion case at the CIT challenging Section 301 tariffs it has paid. On April 1, 2022 the CIT remanded the matter back to the USTR to reconsider its decisions in light of the ruling and to reply to the CIT by June 30, 2022. The Company is unable to predict the timing or outcome of the ruling by the USTR and/or CIT. If these appeals are successful, the Company should qualify for refunds on these Section 301 tariffs.

Other Matters

The Company is also, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, while the outcome of any such claims and disputes cannot be predicted with certainty, its ultimate liability in connection with these matters is not expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

This report 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. These risks include, without limitation, the impact on us of any of the following:

●

a sustained period of inflation impacting product cost and consumer spending;

●

transportation availability and costs;

●

inability to hire and/or retain employees;

●

obtaining products from abroad, including the effects of the COVID-19 pandemic and tariffs, delays in shipping, as well as the effects of antidumping and countervailing duties;

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●

having sufficient inventory for consumer demand;

●

~~a sustained period of inflation impacting~~reduced consumer ~~spending;~~spending due to last year’s significant government stimulus;

●

inability to ~~hire and/or retain employees;~~

●

~~an overall decline in the health of the economy, the hard-surface flooring industry, the housing market and overall consumer spending, including the effects of~~staff stores due to the COVID-19 pandemic;

●

~~impact on sales, ability to obtain and distribute products, and employee safety and retention, including~~ the ~~effects~~impact of the ~~COVID-19 pandemic;~~war in Ukraine on the Company’s European suppliers and transportation costs;

●

the outcomes of legal proceedings, and the related impact on liquidity;

●

reputational harm;

●

obligations under various settlement agreements and other compliance matters;

●

disruptions due to cybersecurity threats, including any impacts from a network security incident;

●

inability to open new stores, find suitable locations for ~~our~~ new ~~store concept,~~stores, and fund other capital expenditures;

●

inability to execute on our key initiatives or such key initiatives do not yield desired results;

●

managing growth;

●

damage to our assets;

●

disruption into our ability to distribute our products, including due to ~~disruptions from the impacts of~~ severe weather;

●

operating an office in China;

●

managing third-party installers and product delivery companies;

●

~~our ability to develop, grow and maintain business relationships with professional contractors;~~

●

renewing store, warehouse, or other corporate leases;

●

~~international and domestic transportation costs and availability;~~

●

having sufficient suppliers;

●

our, and our suppliers’, compliance with complex and evolving rules, regulations, and laws at the federal, state, and local level;

●

product liability claims, marketing substantiation claims, wage and hour claims, employment classification claims and other labor and employment claims;

●

availability of suitable hardwood, including due to disruptions from the impacts of severe weather;

●

sufficient insurance coverage, including cybersecurity insurance;

●

access to and costs of capital;

●

the handling of confidential customer information, including the impacts from the California Consumer Privacy Act and other applicable data privacy laws and regulations;

●

~~our ability to develop digital technology needed to grow our business and meet customer expectations;~~

●

management information systems disruptions;

●

alternative e-commerce offerings;

●

our advertising and overall marketing strategy, including anticipating consumer trends;

●

competition;

●

impact of changes in accounting and regulatory guidance, including implementation guidelines and ~~interpretations;~~interpretations related to Environmental, Social, and Governance (“ESG”) matters;

●

internal controls;

●

stock price volatility; and

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●

anti-takeover provisions.

Information regarding risks and uncertainties is contained in the Company’s reports filed with the SEC, including the Item 1A, “Risk Factors,” section of this quarterly report and the Form 10-K for the year ended December 31, ~~2020.~~2021.

This management discussion should be read in conjunction with the financial statements and notes included in Part I, Item 1. “Financial Statements” of this quarterly report and the audited financial statements and notes and management discussion included in the Company’s annual report filed on Form 10-K for the year ended December 31, ~~2020.~~2021.

Overview

LL Flooring is one of the leading specialty retailers of hard-surface flooring in the U.S. with ~~422~~431 stores as of

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~~September 30, 2021.~~ March 31, 2022. Our 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. Our online tools also help empower customers to find the right solution for the space they’ve envisioned. Our extensive selection includes waterproof 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 our products, the majority of which is in stock and ready for delivery.

Our vision is to be ~~the customer’s~~customers’ first choice in hard-surface flooring by providing the best experience, from start to finish. We offer a wide selection of high-quality, locally stocked products and the accessible flooring expertise and service of a local store, with the scale, omni-channel convenience and value of a national chain. We plan to leverage this advantage to differentiate ourselves in the highly fragmented flooring market. ~~We launched our new digital platform,~~ ~~LLFlooring.com~~~~, in December 2020. In February 2021, we launched our new mobile app featuring our popular Picture It and Floor Finder tools and making it easy to order installations.~~

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; and (x) Adjusted Earnings 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 our operating performance and, in certain cases, to determine incentive compensation. Therefore, we believe 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 our 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 our control due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature.

Results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of future results to be expected for the full year due to a number of factors, including supply chain, seasonality, tariffs, and general economic conditions, as well as the uncertainty and ongoing impact of the COVID-19 pandemic that may impact sales for the remainder of fiscal 2021.

~~Third~~First Quarter Financial Highlights

●

Net sales of ~~$282.2~~$279.0 million decreased ~~4.6%~~1.6% compared to the same period last year, as ~~double-digit~~record growth in sales to Pro customers and a 4.1% increase in net services sales partially offset a decrease in ~~DIY~~homeowner sales.

●

Total comparable store sales decreased ~~4.5%~~3.6% versus the same period last ~~year.~~year. The decrease in comparable store sales primarily reflected the same drivers as the change in net sales.

●

Gross margin of 37.3% decreased ~~210~~350 basis points as a percentage of sales compared to the same period last year, Adjusted Gross Margin (a non-GAAP measure) of ~~37.3%~~37.2% decreased ~~240~~130 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~~1,000 basis points) that the Company was able to ~~partially~~largely mitigate by pricing, promotion and alternative country/vendor sourcing strategies.

●

SG&A expense as a percentage of sales of ~~33.0% increased 140~~35.5% decreased 70 basis points compared to the ~~third~~first quarter of last year. Adjusted SG&A (a non-GAAP measure) as a percentage of sales of ~~33.1%~~35.5% increased ~~320~~210 basis points

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compared to the ~~third~~first quarter of last year, primarily due to increased investment in ~~the field~~growth strategies, including new stores and ~~to support growth~~Pro initiatives, as well as ~~last year’s $2.5 million favorable business interruption insurance settlement.~~continued investment in customer-facing and distribution center personnel.

●

Operating margin of ~~4.3%~~1.8% decreased ~~350~~280 basis points compared to the ~~third~~first quarter of last year. Adjusted operating margin (a non-GAAP measure) of~~4.1%~~1.7% decreased ~~560~~340 basis points compared to the ~~third~~first quarter of last year.

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●

Diluted EPS of ~~$0.30~~$0.14 decreased ~~$0.23~~$0.22 compared to the ~~third~~first quarter of last year. Adjusted Earnings per Diluted Share (a non-GAAP measure) of ~~$0.29~~$0.13 decreased ~~$0.38~~$0.21 compared to the ~~third~~first quarter of last year.

●

During the ~~third~~first quarter, the Company opened ~~six~~seven new stores, bringing total stores to ~~422~~431 as of ~~September 30, 2021.~~March 31, 2022.

Other Items

Liquidity and Credit Agreement

As of ~~September 30, 2021,~~March 31, 2022, we had liquidity of ~~$232.2~~$231 million, consisting of excess availability under our Credit Agreement of ~~$128.0~~$175 million, and cash and cash equivalents of ~~$104.2~~$56 million. This represents an increase in liquidity of ~~$18.2~~$4 million from December 31, ~~2020. We repaid all $101.0~~2021. The Company rebuilt its inventory balance by more than $60 million during the quarter.

In February of 2022, the Company’s board of directors raised its authorization for the repurchase of up to $50 million of ~~our outstanding debt~~the Company’s common stock from the previous $14 million authorized, underscoring its confidence in ~~the second quarter of 2021~~its long-term net sales and ~~did not access borrowings under the Credit Agreement during the third quarter.~~

profitability growth.

We believe that cash flows from operations, together with cash on hand, and the availability under our Credit Agreement will be sufficient to meet our obligations, fund our settlements, operations, share repurchases, and anticipated capital expenditures for the next 12 months. InWe made substantial progress in rebuilding inventory in the ~~coming quarters~~first quarter of 2022 including what is prepaid and in-transit. As this inventory is received into our distribution centers and stores, we ~~also plan~~will continue to ~~increase~~work to optimize our ~~inventories as supply chain disruptions abate.~~inventory levels. We prepare our forecasted cash flow and liquidity estimates based on assumptions that we believe to be reasonable but are also inherently uncertain. Actual future cash flows could differ from these estimates.

Impact of Macroeconomic Environment

We continue to navigate uncertainty in the macroeconomic environment related to inflation, consumer spending, global supply chain disruptions, ~~consumer spending, inflation~~COVID-19, and a challenging labor market. During the second quarter of 2020 we limited our inventory purchases as a direct result COVID-19. Supply chain disruption on replenishment kept inventory below our targeted level during ~~the second half of 2020 and first nine months of~~ 2021. As a result, we believe we could have captured more sales in 2021 and the ~~fourth~~first quarter of ~~2020 and first nine months of 2021~~2022 if our inventories had been higher. While our supply chain teams ~~continue to work diligently~~have done an excellent job this quarter to bring in new inventory and allocate it effectively across our stores, we anticipate the supply chain to continue to remain constrained, ~~into~~exacerbated by the war in Ukraine throughout 2022, limiting inventory availability and increasing transportation and material costs. Supply chain constraints include international container access, congestion in major ports, ~~and~~ a shortage of domestic truckers, and increased fuel costs, as well as ~~renewed~~sporadic COVID-19 related ~~shutdowns~~shutdowns. We are also monitoring the impact of inflation on consumer purchasing trends as it could affect our prices, demand for ~~some of~~ our ~~sourcing partners across southeast Asia.~~products, our sales and our profit margins.

Section 301 Tariffs

The Company’s financial statements have been impacted by Section 301 tariffs on certain products imported from China in recent years. A subset of these imports for certain click vinyl and other engineered products (the “Subset Products”) received an exemption that was made retroactive to the beginning of the Section 301 Tariffs for a period of time but were reinstated in August 2020. The tariffs flow through the income statement as the product is sold. The Company has deployed strategies to mitigate tariffs and improve gross margin, primarily through adjusting its pricing and promotion ~~strategies and alternative country sourcing. The following chart provides a timeline of tariff levels for the key events related to Section 301 Tariffs.~~

2219

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1	~~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%.~~

strategies and alternative country sourcing. During the first quarter of 2022, the Company reduced the percent of merchandise receipts subject to Section 301 tariffs to 16% from 23% during the first quarter of 2021.

As discussed in Item 1, Note 7 to the condensed consolidated financial statements, the Company is unable to predict the timing or outcome of the ruling by the USTR and/or CIT. If these appeals are successful, the Company should qualify for refunds on these Section 301 tariffs.

Results of Operations

We believe the selected sales data, the percentage relationship between net sales and major categories in the condensed consolidated statements of operations and the percentage change in the dollar amounts of each of the items presented below are important in evaluating the performance of our business operations.


							% Increase									% Improvement
	% of Net Sales						(Decrease) in			% of Net Sales						(Decline) in
	Three Months Ended September 30,						Dollar Amounts			Three Months Ended March 31,						Dollar Amounts
	2021			2020			2021 VS 2020			2022			2021			2022 VS 2021
Net Sales
Net Merchandise Sales		85.3	%		88.2	%		(7.7)	%		87.5	%		88.2	%		(2.3)	%
Net Services Sales		14.7	%		11.8	%		19.0	%		12.5	%		11.8	%		4.1	%
Total Net Sales		100.0	%		100.0	%		(4.6)	%		100.0	%		100.0	%		(1.6)	%
Gross Profit		37.3	%		39.4	%		(9.7)	%		37.3	%		40.8	%		(10.0)	%
Selling, General, and Administrative Expenses		33.0	%		31.6	%		(0.2)	%		35.5	%		36.2	%		(3.4)	%
Operating Income		4.3	%		7.8	%		(48.0)	%		1.8	%		4.6	%		(61.4)	%
Other Expense		0.0	%		0.2	%		(97.4)	%		(0.0)	%		(0.3)	%		(98.0)	%
Income Before Income Taxes		4.3	%		7.6	%		(46.5)	%		1.8	%		4.9	%		(63.5)	%
Income Tax Expense		1.2	%		2.4	%		(53.5)	%		0.4	%		1.1	%		(68.3)	%
Net Income		3.1	%		5.2	%		(43.4)	%		1.4	%		3.7	%		(62.0)	%

							% Increase
	% of Net Sales						(Decrease) in
	Nine Months Ended September 30,						Dollar Amounts
	2021			2020			2021 VS 2020
Net Sales
Net Merchandise Sales		86.5	%		89.5	%		5.7	%
Net Services Sales		13.5	%		10.5	%		39.5	%
Total Net Sales		100.0	%		100.0	%		9.3	%
Gross Profit		38.5	%		39.0	%		7.7	%
Selling, General, and Administrative Expenses		33.7	%		34.3	%		7.3	%
Operating Income		4.8	%		4.8	%		10.1	%
Other Expense		0.0	%		0.3	%		NM	%
Income Before Income Taxes		4.8	%		4.4	%		19.3	%
Income Tax Expense		1.2	%		0.6	%		119.7	%
Net Income		3.6	%		3.8	%		3.3	%


													Three Months Ended
		Three Months Ended						Nine Months Ended					March 31,
		September 30,						September 30,					2022			2021
SELECTED SALES DATA		2021			2020			2021			2020
Average Sale¹	$	1,625		$	1,366		$	1,530		$	1,313		$	1,695		$	1,415
Average Retail Price per Unit Sold Increase (Decrease)²		6.8	%		0.7	%		7.9	%		(0.3)	%
Comparable Store Sales (Decrease) Increase³		(4.5)	%		10.9	%		9.8	%		(4.3)	%
Customers Invoiced (Decrease) Increase ⁴		(23.5)	%		13.8	%		(9.4)	%		(1.0)	%
Comparable Stores (Decrease) Increase²														(3.6)	%		6.9	%
Transaction Count (Decrease) Increase³														(23.3)	%		2.5	%
Average Retail Price per Unit Sold Increase⁴														10.3	%		4.7	%

Number of Stores Open, end of period		422			423			422			423			431			412
Number of Stores Opened in Period, net		6			1			12			4			7			2
Number of Stores Relocated in Period⁵		—			—			—			1			—			—

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1	Average sale is defined as the average invoiced sales order, measured quarterly, excluding returns as well as transactions under $100 (which are generally sample orders or add-on/accessories to existing orders).

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

3	Transaction count is calculated by applying the average sale to total net sales at comparable stores.

4	Average retail price per unit (square feet for flooring and other units of measures for moldings and accessories) sold is calculated on a total company basis and excludes non-merchandise revenue.

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

4	~~Change in number of customers invoiced is calculated by applying the average sale, described above, to total net sales at comparable stores.~~

5	A relocated store remains a comparable store as long as it is relocated within the primary trade area.

~~NM Not meaningful.~~

Net Sales

~~Third~~First quarter ~~2021~~2022 net sales of ~~$282.2~~$279.0 million decreased ~~$13.6~~$4.4 million, or ~~4.6%~~1.6%, versus the ~~third~~first quarter of ~~2020.~~2021. Net merchandise sales decreased ~~7.7%~~2.3%, partially offset by a ~~19.0%~~4.1% increase in net service sales (install and freight). The

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increase in net service sales primarily reflects ~~consumers’ increased comfort with having professionals enter their homes compared~~the Company’s continued execution on its strategy to improve the ~~third quarter 2020.~~ installation and delivery consumer experience.

Average ticket increased ~~19.0%~~19.8%, reflecting a greater ~~penetration~~mix of ~~installation~~net services sales which grew to 13% of net sales from 12% in the first quarter of 2021, as well as higher merchandise average ticket. ~~This~~The higher merchandise average ticket was driven by pricing and promotion strategies as well as favorable product mix, which primarily reflected a ~~result~~greater mix of ~~us refreshing~~hardwood flooring and the launch of our ~~assortment with~~ new ~~higher-quality products and sharing a portion of increased costs with consumers.~~ Duravana performance flooring brand.

Comparable store sales for the ~~third~~first quarter of ~~2021~~2022 decreased ~~4.5%~~3.6% from the ~~third~~first quarter of ~~2020, due~~2021. The Company reported record sales to ~~consumer demand shifts given increased consumer mobility this year, continued supply chain constraints, as well as the substantial nesting spending that we saw~~Pro customers and an increase in ~~the third quarter of 2020. We~~net services sales, however, it also ~~had~~experienced a ~~23.5%~~23.3% decrease in transaction count compared to the same period in ~~2020,~~2021, primarily reflecting the decrease in sales to ~~DIY customers, as well as lower than optimal inventory levels. During~~homeowners. Macroeconomic factors impacting homeowner sales transactions included inflation, a shift in consumer spending to travel and leisure this year compared to stimulus and nesting spending in the ~~third~~first quarter of 2021, continued supply chain constraints, and significant store closures due to a COVID-19 variant.

During the first quarter of 2022, the Company opened ~~six~~seven new stores bringing the total store count to ~~422~~431 as of ~~September 30, 2021.~~

Net sales for the nine months ended September 30, 2021 increased 9.3% from the comparable period in 2020. Net merchandise sales increased 5.7% and net service sales increased 39.5% over the comparable period in 2020. Comparable store sales for the nine months ended September 30, 2021 increased 9.8% from the comparable period in 2020.

March 31, 2022.

Gross Profit

Gross profit decreased ~~9.7%~~10.0% in the ~~third~~first quarter of ~~2021~~2022 to ~~$105.2~~$104.1 million from ~~$116.5~~$115.6 million in the comparable period in ~~2020~~2021 and gross margin decreased ~~210~~350 basis points to 37.3% in the ~~third~~first quarter of ~~2021~~2022 from ~~39.4%~~40.8% in the ~~third~~first quarter of ~~2020. The third~~2021. For the first quarter of ~~2020 was impacted by store closure costs~~2022, the Company reported a favorable $0.2 million impact from anti-dumping duty rate changes, compared to income of ~~Canadian and certain U.S. stores.~~$6.6 million in the prior-year period. Excluding ~~this item~~these items as shown on the table that follows, Adjusted Gross Margin (a non-GAAP measure) of ~~37.3%~~37.2% decreased ~~240~~130 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~~1,000 basis points) that the Company was able to partially mitigate by pricing, promotion and alternative country/vendor sourcing strategies.

Gross profit increased 7.7% for the nine months ended September 30, 2021 to $333.5 million from $309.8 million in the comparable period in 2020 and gross margin decreased 50 basis points to 38.5% in the nine month period 2021 from 39.0% in 2020. For the first nine months of 2021, the Company reported a positive $6.6 million impact from anti-dumping duty rate changes. Excluding this item as shown on the table that follows, Adjusted Gross Profit (a non-GAAP measure) increased by $16.4 million and Adjusted Gross Margin (a non-GAAP measure) of 37.7% decreased by 140 basis points compared to 2020. The decrease in adjusted gross margin was due primarily to the August 2020 reinstatement of tariffs on certain flooring products imported from China (discussed in the “Section 301 Tariffs” section that follows) and higher transportation and material costs (collectively up more than 400 basis points) that the Company was able to partially mitigate by pricing, promotion and alternative country/vendor sourcing strategies.

We believe that the following items set forth in the table below can distort the visibility of our ongoing performance and that the evaluation of our financial performance can be enhanced by use of supplemental presentation of our results that exclude the impact of these items.

~~Table of Contents~~


																	Three Months Ended
	Three Months Ended September 30,								Nine Months Ended September 30,								March 31,
	2021				2020				2021				2020				2022				2021
	$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales

	(dollars in thousands)								(dollars in thousands)								(dollars in thousands)
Gross Profit, as reported (GAAP)	$	105,201	37.3	%	$	116,526	39.4	%	$	333,523	38.5	%	$	309,789	39.0	%
Gross Profit/Margin, as reported (GAAP)																	$	104,079	37.3	%	$	115,592	40.8	%

Antidumping Adjustments ¹		—	—	%		—	—	%		(6,566)	(0.8)	%		—	—	%		(241)	(0.1)	%		(6,566)	(2.3)	%
Store Closure Costs ²		—	—	%		761	0.3	%		—	—	%		761	0.1	%
Sub-Total Items above		—	—	%		761	0.3	%		(6,566)	(0.8)	%		761	0.1	%

Adjusted Gross Profit (non-GAAP measures)	$	105,201	37.3	%	$	117,287	39.7	%	$	326,957	37.7	%	$	310,550	39.1	%
Adjusted Gross Profit/Margin (non-GAAP measures)																	$	103,838	37.2	%	$	109,026	38.5	%

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

2	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,

Selling, General and Administrative Expenses

SG&A expense for the ~~third~~first quarter of ~~2021~~2022 decreased ~~$0.2~~$3.5 million to ~~$93.2~~$99.0 million, or ~~33.0%~~35.5% of sales, compared to ~~$93.4~~$102.5 million, or ~~31.6%~~36.2% of sales, in the ~~third~~first quarter of ~~2020.~~2021. SG&A in ~~both quarters~~first quarter 2021 included certain ~~recoveries and~~ costs related to legal matters and settlements. ~~Additionally, the third quarter of 2020 included costs related to Canadian and U.S. store closures.~~ Excluding these items as shown in the table that follows, Adjusted SG&A (a non-GAAP measure) for the ~~third~~first quarter of ~~2021~~2022 was ~~$93.5~~$99.0 million, compared to ~~$88.6~~$94.7 million in the ~~third~~first quarter of ~~2020.~~2021. As a percentage of sales, ~~adjusted~~Adjusted SG&A increased ~~320~~210 basis points, to ~~33.1%~~35.5% of sales, compared to ~~29.9%~~33.4% for the ~~third~~first quarter in ~~2020,~~2021, which ~~reflected~~is primarily due to increased investment in ~~the field~~growth strategies, including new stores and ~~our growth~~Pro initiatives, as well as ~~last year’s $2.5~~continued investment in customer-facing and distribution center personnel. The Company

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redeemed $1.1 million ~~favorable final settlement of the business insurance claim related to the August 2019 network security incident.~~

SG&A expense for the first nine months of 2021 was $291.8 million, or 33.7% of sales, improving by 60 basis points from the comparable period in 2020. SG&A in both periods included certain costs related to legal matters and settlements. Additionally, the 2020 period included costs related to Canadian and U.S. store closures. Excluding these items as shown in the table that follows, Adjusted SG&A (a non-GAAP measure) was $284.0 million for the 2021 nine-month period, compared to $265.8 million in 2020. As a percentage of sales, adjusted SG&A improved 70 basis points, to 32.8% of sales, compared to 33.5% for the same period in the prior year, which was a result of the higher sales volume in 2021. The higher overall SG&A was primarily driven by the substantial actions taken last year to address the COVID-19 pandemic, including lower payroll and benefits expense as we proactively aligned staffing with demand levels, temporary salary reductions for corporate office personnel and the Board of Directors, and lower advertising expense. The Company redeemed $3.1$1.5 million of MDL and Gold vouchers during the first ~~nine~~three months of 2022 and 2021, respectively, and relieved the accrual for legal matters and settlements for the full amount, relieved inventory at its cost, and the remaining amount -- the gross margin for the items sold of ~~$1.2~~$0.4 million in 2022 and $0.5 million in 2021 -- was recorded as a reduction in SG&A expense.


	Three Months Ended
	March 31,
	2022				2021
	$		% of Sales		$		% of Sales

	(dollars in thousands)²
SG&A, as reported (GAAP)	$	99,025	35.5	%	$	102,487	36.2	%

Accrual for Legal Matters and Settlements³		—	—	%		7,675	2.7	%
Legal and Professional Fees⁴		—	—	%		148	0.1	%
Sub-Total Items above		—	—	%		7,823	2.8	%

Adjusted SG&A (a non-GAAP measure)	$	99,025	35.5	%	$	94,664	33.4	%

2	Amounts may not sum due to rounding.

3	This amount represents the charge to earnings for the Mason and Savidas matters recorded in the first quarter of 2021, which are described more fully in Item 1, Note 7 to the condensed consolidated financial statements.

4	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.

Operating Income and Operating Margin

Operating income was $5.1 million for the first quarter of 2022 compared to $13.1 million for the first quarter of 2021. Adjusted Operating Income (a non-GAAP measure) in the first quarter of 2022 was $4.8 million, down $9.6 million from the $14.4 million for the prior-year period. As a percentage of net sales, Adjusted Operating Margin (a non-GAAP measure) for the first quarter of 2022 was 1.7%, down 340 basis points from 5.1% in the first quarter of 2021, which reflected the increased selling, general and administrative expenses and decreased gross margin as described in the above sections.

2522

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Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

(dollars in thousands)

(dollars in thousands)

SG&A, as reported (GAAP)
$
93,165

33.0
%
$
93,374

31.6
%
$
291,767

33.7
%
$
271,869

34.3
%

(Recovery) Accrual for Legal Matters and Settlements ³

(400)

(0.1)
%

2,000

0.7
%

7,275

0.8
%

1,500

0.2
%
Legal and Professional Fees⁴

43

0.0
%

999

0.3
%

470

0.1
%

2,787

0.4
%
Store Closure Costs⁵

—

—
%

1,803

0.6
%

—

—
%

1,803

0.2
%
Sub-Total Items above

(357)

(0.1)
%

4,802

1.6
%

7,745

0.9
%

6,090

0.8
%

Adjusted SG&A (a non-GAAP measure)
$
93,522

33.1
%
$
88,572

29.9
%
$
284,022

32.8
%
$
265,779

33.5
%

The 2021 amounts represent 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. 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.

4	~~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.~~

5	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.

~~Operating Income and Operating Margin~~

Operating income was $12.0 million for the third quarter of 2021 compared to $23.2 million for the third quarter of 2020. Adjusted Operating Income (a non-GAAP measure) in the third quarter of 2021 was $11.7 million, down $17.0 million from the $28.7 million for the prior-year period. As a percentage of net sales, adjusted operating margin (a non-GAAP measure) for the third quarter of 2021 was 4.1%, down 560 basis points from 9.7% in the third quarter of 2020, which reflected the decreased gross margin and increased SG&A expenses as described in the above sections.

Operating income was $41.8 million for the first nine months of 2021 compared to $37.9 million for the comparable period in 2020. Adjusted Operating Income was $42.9 million for the nine months ended September 30, 2021, a year-over-year decrease of $1.8 million compared to Adjusted Operating Income of $44.8 million in 2020.

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																	Three Months Ended
	Three Months Ended September 30,								Nine Months Ended September 30,								March 31,
	2021				2020				2021				2020				2022					2021
	$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales			$			% of Sales

	(dollars in thousands)								(dollars in thousands)								(dollars in thousands)²
Operating Income, as reported (GAAP)	$	12,036	4.3	%	$	23,152	7.8	%	$	41,756	4.8	%	$	37,920	4.8	%	$	5,054	$	1.8	%	$	13,105	$	4.6	%

Gross Margin Items:
Antidumping Adjustments ¹		—	—	%		—	—	%		(6,566)	(0.8)	%		—	—	%		(241)		(0.1)	%		(6,566)		(2.3)	%
Store Closure Costs ²		—	—	%		761	0.3	%		—	—	%		761	0.1	%
Gross Margin Subtotal		—	—	%		761	0.3	%		(6,566)	(0.8)	%		761	0.1	%		(241)		(0.1)	%		(6,566)		(2.3)	%

SG&A Items:
(Recovery) Accrual for Legal Matters and Settlements ³		(400)	(0.1)	%		2,000	0.7	%		7,275	0.8	%		1,500	0.2	%
Accrual for Legal Matters and Settlements³																		—		—	%		7,675		2.7	%
Legal and Professional Fees⁴		43	0.0	%		999	0.3	%		470	0.1	%		2,787	0.4	%		—		—	%		148		0.1	%
Store Closure Costs⁵		—	—	%		1,803	0.6	%		—	—	%		1,803	0.2	%
SG&A Subtotal		(357)	(0.1)	%		4,802	1.6	%		7,745	0.9	%		6,090	0.8	%		—		—	%		7,823		2.8	%

Adjusted Operating Income (a non-GAAP measure)	$	11,679	4.1	%	$	28,715	9.7	%	$	42,935	5.0	%	$	44,771	5.6	%
Adjusted Operating Income/Margin (a non-GAAP measure)																	$	4,813	$	1.7	%	$	14,362	$	5.1	%

^{1,2,3,4,51,2,3,4} See the Gross Profit and SG&A sections above for more detailed explanations of these individual items.

Other Expense (Income)

In the ~~third~~first quarter of ~~2021~~2022 we had other ~~expense~~income of ~~$18~~$15 thousand compared to other expense of $685 thousand for the third quarter of 2020. The decrease of $667 thousand was due to the absence of interest because of the repayment of all outstanding debt during the second quarter of 2021.

~~We had other~~ income of ~~$252~~$769 thousand for the first ~~nine months~~quarter of 2021 compared to other expense of $2.7 million for the comparable period 2020. Both periods included interest on borrowings on our Credit Agreement. The interest expense on borrowings in 2021 was offset by a favorable adjustment of $1.8 million for the reversal of interest expense associated with the $6.6 million anti-dumping duty rate refund recognized during the first quarter.2021. Adjusted Other Expense (a non-GAAP measure) was ~~$1.6 million~~$69 thousand for the first ~~nine months~~quarter of 2021, which is a decrease of ~~$1.1~~$1.0 million compared to the first ~~nine months~~quarter of ~~2020~~2021 driven by the repayment of all outstanding debt during the second quarter of ~~2021 and lower interest rates on our Credit Agreement due to the amendment in April~~ 2021.

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We believe that the following item set forth in the table below can distort the visibility of our ongoing performance and that the evaluation of our financial performance can be enhanced by use of supplemental presentation of our results that exclude the impact of these items.


																	Three Months Ended
	Three Months Ended September 30,								Nine Months Ended September 30,								March 31,
	2021				2020				2021				2020				2022				2021
	$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales		$		% of Sales

	(dollars in thousands)								(dollars in thousands)								(dollars in thousands)⁵
Other Expense (Income), as reported (GAAP)	$	18	0.0	%	$	685	0.2	%	$	(252)	(0.0)	%	$	2,709	0.3	%
Other Income, as reported (GAAP)																	$	(15)	(0.0)	%	$	(769)	(0.3)	%

Interest impact related to antidumping adjustment⁶		—	—	%		—	—	%		(1,841)	(0.2)	%		—	—	%		(84)	(0.0)	%		(1,841)	(0.6)	%
Sub-Total Items above		—	—	%		—	—	%		(1,841)	(0.2)	%		—	—	%		(84)	(0.0)	%		(1,841)	(0.6)	%

Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure)	$	18	0.0	%	$	685	0.2	%	$	1,589	0.2	%	$	2,709	0.3	%	$	69	0.0	%	$	1,072	0.4	%

5	Amounts may not sum due to rounding.

6	Represents the interest income impact of certain antidumping adjustments related to applicable prior-year shipments of engineered hardwood from China.

Provision for Income Taxes

The Company calculates its quarterly tax provision pursuant to the guidelines in Accounting Standards Codification ("ASC") 740-270 "Income Taxes." Generally, ASC 740-270 requires companies to estimate the annual effective tax rate for current year ordinary income. The estimated annual effective tax rate represents the best estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision and is adjusted for discrete items that occur within the period. This process was employed in 2021. Due to disruptions related to the COVID-19 pandemic in 2020, the Company applied the actual year-to-date effective tax rate for the tax provision in the three and nine-month periods ended September 30, 2020.

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~~For~~in the ~~nine months ended September 30, 2021,~~current period primarily reflects the Company recognized income tax expense of $10.6 million, which represented an effective tax rate of 25.3%. For the nine months ended September 30, 2020, the Company recognized an income tax expense of $4.8 million, which represented an effective tax rate of 13.7%. The variability of the tax rate between the two periods is due to the use of the effective tax rate method in 2021 compared to discrete provision in 2020, including the favorablegreater impact of permanent items on the ~~CARES Act.~~lower pre-tax ordinary income.

The Company has a valuation allowance recorded against certain of its net deferred tax assets of ~~$5.6~~$2.4 million as of ~~September 30, 2021~~March 31, 2022 because the jurisdiction and nature of the assets makes realization of these deferred tax assets uncertain. The Company intends to maintain this valuation allowance on its deferred tax assets until there is sufficient evidence to support the realizability of those deferred tax ~~assets or time lapses without opportunity to realize those~~ assets.

Net Income per Diluted Share

Net income per diluted share was ~~$0.30~~$0.14 for the ~~third quarter of 2021~~three months ended March 31, 2022, compared to ~~$0.53 in the year ago quarter. Adjusted Earnings Per Diluted Share (a non-GAAP measure) was $0.29~~$0.36 for the ~~third quarter of 2021 compared to $0.67 for the third quarter of 2020.~~

~~Table of Contents~~

~~Net income per diluted share was $1.06 for the nine~~three months ended ~~September 30, 2021, compared to $1.04 for the nine months ended September 30, 2020.~~March 31, 2021. Adjusted Earnings Per Diluted Share was ~~$1.05~~$0.13 for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$1.21~~$0.34 for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021.

We believe that each of the items below can distort the visibility of our ongoing performance and that the evaluation of our financial performance can be enhanced by use of supplemental presentation of our results that exclude the impact of these items.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended
	2021		2020		2021		2020		March 31,
									2022		2021

	(dollars in thousands, except per share amounts)				(dollars in thousands, except per share amounts)				(in thousands)²
Net Income, as reported (GAAP)	$	8,779	$	15,503	$	31,390	$	30,377	$	4,037	$	10,622
Net Income per Diluted Share (GAAP)	$	0.30	$	0.53	$	1.06	$	1.04	$	0.14	$	0.36

Gross Margin Items:
Antidumping Adjustments ¹		—		—		(4,846)		—		(178)		(4,852)
Store Closure Costs ²		—		561		—		561
Gross Margin Subtotal		—		561		(4,846)		561		(178)		(4,852)

SG&A Items:
(Recovery) Accrual for Legal Matters and Settlements ³		(295)		1,476		5,369		1,107
Accrual for Legal Matters and Settlements³										—		5,672
Legal and Professional Fees⁴		32		737		347		2,057		—		109
Store Closure Costs⁵		—		1,331		—		1,331
SG&A Subtotal		(263)		3,544		5,716		4,495		—		5,781

Other Expense Items:
Other Income Items:
Antidumping Adjustments Interest⁶	��	—		—		(1,359)		—		(62)		(1,360)
Other (Income) Expense Subtotal		—		—		(1,359)		—
Other Income Subtotal										(62)		(1,360)

Adjusted Earnings	$	8,516	$	19,608	$	30,901	$	35,433	$	3,797	$	10,190
Adjusted Earnings per Diluted Share (a non-GAAP measure)	$	0.29	$	0.67	$	1.05	$	1.21	$	0.13	$	0.34

^1,2,3,4,5,6 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%~~26.3% for the ~~2021 periods~~2022 period and 26.1% for the ~~2020 periods.~~

2021 period.

Seasonality

Our net sales fluctuate slightly as a result of seasonal factors, and we adjust merchandise inventories in anticipation of those factors, causing variations in our build of merchandise inventories. Generally, we experience higher-than-average net sales in the spring and fall, when more home remodeling activities are taking place, and lower-than-average net sales in the winter months and during the hottest summer months. These seasonal fluctuations, however, are minimized to some extent by our national presence, as markets experience different seasonal characteristics. Those historical trends have been and continue to be affected by supply chain constraints and the COVID-19 pandemic.

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Liquidity, Capital Resources and Cash Flows

Our strong balance sheet and liquidity provide us with the financial flexibility to fund our growth initiatives and position LL Flooring for long-term success. We had cash and cash equivalents of ~~$104.2~~$56.1 million ~~as of September 30, 2021~~ and ~~repaid all $101.0 of our~~no outstanding debt ~~during the second quarter of 2021.~~at March 31, 2022.

Our principal sources of liquidity at ~~September~~ ~~30, 2021~~March 31, 2022 were ~~cash from our ongoing operations, $104.2~~$56.1 million of cash and cash equivalents on our balance sheet and ~~$128.0~~$175.3 million of availability under our Revolving Loan. As of ~~September 30, 2021,~~March 31, 2022, there was no outstanding balance on our Revolving Loan.

Our net cash flows ~~from~~used in operating activities were ~~$50.3~~$23.4 million during the first ~~nine~~three months of ~~2021~~2022, which was primarily the result of ~~our net income during the period ($31.4 million), sell through~~purchases of inventory ($~~15.7 million), growth in customer deposits ($8.8 million), and accruals for legal matters and settlements ($7.7~~64.8 million), partially offset by ~~decreased~~increased accounts payable ~~of $17.3 million.~~($26.0 million), and net income ($4.0 million).

Through the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, net cash flows used in investing activities included ~~$12.3~~$5.2 million in capital expenditures for store rebranding, opening ~~12 net~~seven new stores and investments in digital. For ~~2021 we~~2022 we currently expect capital expenditure investments of ~~$19~~$28 million to ~~$23~~$32 million as our business results support the opening of 1520 to 25 new stores and the continuation of the investing activities described above.

Through the nine months ended September 30, 2021, net cash used in financing activities was $103.8 million, compared to $18.5 million provided by financing activities in the nine months ended September 30, 2020. This activity in the current nine-month period was primarily due to the paydown of all our outstanding debt under the Credit Agreement of $101.0 million in the second quarter of 2021. The comparable 2020 nine-month period was primarily due to net borrowings of $19.0 million under our Credit Agreement.

On April 30, 2021 we entered into a Second Amendment to the Credit Agreement to extend the maturity date to April 30, 2026, convert the FILO Term Loan into the Revolving Credit Facility, decrease the margin for LIBOR Rate Loans, and reduce the LIBOR floor, which is described more fully in Item 1, Note 5 to the condensed consolidated financial statements.

Our focus on liquidity since the onset of the COVID-19 pandemic in March 2020 has allowed us to build a strong position to navigate the continuing COVID-19 environment, and our business continues to generate solid cash flow. We are monitoring the current macroeconomic conditions, including the increasing cost of transportation and supply chain disruptions and the impact of COVID-19, including the potential impact of ~~emerging~~ variants. We believe that cash flows from operations, together with cash on hand, and the liquidity under our Credit Agreement will be sufficient to meet our obligations, fund our settlements, operations, stock repurchases, and anticipated capital expenditures for the next 12 months. InWe made substantial progress in rebuilding inventory in the ~~coming quarters~~ first quarter of 2022 including what is prepaid and in-transit. As this inventory is received into our distribution centers and stores, we ~~also plan~~will continue to ~~increase~~work to optimize our ~~inventories as supply chain disruptions abate.~~inventory levels. We prepare our forecasted cash flow and liquidity estimates based on assumptions that we believe to be reasonable but are also inherently uncertain. Actual future cash flows could differ from these estimates.

Merchandise Inventories

Merchandise inventories at ~~September 30, 2021 decreased $19.4~~March 31, 2022 increased $64.2 million from December 31, ~~2020~~ 2021 primarily due to ~~supply chain constraints on replenishment.~~increased purchases in an effort to replenish inventory to more optimal levels. We consider merchandise inventories either “available for sale” or “inbound in-transit,” based on whether we have physically received and inspected the products at an individual store location, in our distribution centers or in another facility where we control and monitor inspection.

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Merchandise inventories and available inventory per store in operation were as follows:


							As of March 31,		As of December 31,		As of March 31,
	As of September 30, 2021		As of December 31, 2020		As of September 30, 2020		2022		2021		2021

	(in thousands)						(in thousands)
Inventory – Available for Sale	$	190,985	$	205,664	$	199,609	$	266,228	$	197,927	$	198,924
Inventory – Inbound In-Transit		34,013		38,745		37,831		52,346		56,458		26,480
Total Merchandise Inventories	$	224,998	$	244,409	$	237,440	$	318,574	$	254,385	$	225,404

Available Inventory Per Store	$	453	$	502	$	472	$	618	$	467	$	483

Available inventory per store at ~~September 30, 2021~~March 31, 2022 was ~~lower~~higher than at December 31, ~~2020~~2021 and ~~September 30, 2020.~~March 31, 2021. The ~~decrease~~increase in available inventory was primarily driven by ~~supply chain constraints on replenishment.~~efforts to replenish inventory to a more optimal level.

Inbound in-transit inventory generally varies due to the timing of certain international shipments and certain seasonal factors, including international holidays, rainy seasons, and specific merchandise category planning. Due to supply chain difficulties, international shipment times have lengthened.

Critical Accounting Policies and Estimates

Critical accounting policies are those that we believe are both significant and that require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. We have had no significant changes in our Critical Accounting Policies and Estimates since our annual report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk.

We are exposed to interest rate risk through the investment of our cash and cash equivalents. Our policy is to invest our cash in short-term investments with maturities of three months or less. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations. Borrowings under our Credit Agreement are exposed to interest rate risk due to the variable rate of the facility, and the expected transition from the LIBOR reference rate in ~~2021.~~2022. As of ~~September 30, 2021,~~March 31, 2022, we had no amount outstanding under our Credit Agreement. IfThe Company’s incremental borrowing rate was 1.5%. At this rate, each $1 million borrowed would cost the ~~interest rate had varied by 1%~~Company $15 thousand in ~~either direction during the 2020~~ annual ~~period, interest expense would have fluctuated by $1 million.~~interest.

We currently do not engage in any interest rate hedging activity. However, in the future, in an effort to mitigate losses associated with interest rate risks, we may at times enter into derivative financial instruments, although we have not historically done so. We do not, and do not intend to, engage in the practice of trading derivative securities for profit.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarter ended ~~September 30, 2021.~~March 31, 2022. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of ~~September 30, 2021.~~

March 31, 2022.

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Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting that occurred during the most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings.

Information with respect to this item may be found in Note 7, “Commitments and Contingencies”, to the condensed consolidated financial statements in Item 1 of Part I, which is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” in our annual report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents our share repurchase activity for the quarter ended ~~September 30, 2021~~March 31, 2022 (in thousands, except per share amounts):


			Total Number	Maximum Dollar Value
			of Shares	of Shares That May Yet
			Purchased as	Be Purchased as
	Total Number	Average	Part of Publicly	Part of Publicly
	of Shares	Price Paid	Announced	Announced
Period	Purchased¹	per Share¹	Programs	Programs
~~July~~January 1, ~~2021~~2022 to ~~July~~January 31, ~~2021~~2022	—	—	—	—
~~August~~February 1, ~~2021~~2022 to ~~August 31, 2021~~February 28, 2022	—	—	—	—
~~September~~March 1, ~~2021~~2022 to ~~September 30, 2021~~March 31, 2022	—	—	—	—
Total	—	—	—	—

1	We repurchased ~~15,404~~50,974 shares of our common stock, at an average price of ~~$18.80,~~$15.89, in connection with the net settlement of shares issued as a result of the vesting of restricted shares during the quarter ended ~~September 30, 2021.~~March 31, 2022.

In February of 2022, the Company’s board of directors raised its authorization for the repurchase of up to $50 million of the Company’s common stock. The Company did not begin repurchasing shares until April 2022.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.

The exhibits listed in the following exhibit index are furnished as part of this report.

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EXHIBIT INDEX


Exhibit
Number		Exhibit Description
31.1		Certification of Principal Executive Officer of ~~Lumber Liquidators~~LL Flooring Holdings, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer of ~~Lumber Liquidators~~LL Flooring Holdings, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Principal Executive Officer and Principal Financial Officer of ~~Lumber Liquidators~~LL Flooring Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following financial statements from the Company’s Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		~~LIQUIDATORS~~LL FLOORING HOLDINGS, INC.
		(Registrant)

Date: ~~November 2, 2021~~May 3, 2022	By:	/s/ Nancy A. Walsh
		Nancy A. Walsh
		Chief Financial Officer (Principal Financial Officer)

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		Page

	PART I – FINANCIAL INFORMATION	2

Item 1.	Condensed Consolidated Financial Statements and Supplementary Data	2

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1917

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3126

Item 4.	Controls and Procedures	3126

	PART II – OTHER INFORMATION	3227

Item 1.	Legal Proceedings	3227

Item 1A.	Risk Factors	3227

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3227

Item 3.	Defaults Upon Senior Securities	3227

Item 4.	Mine Safety Disclosures	3227

Item 5.	Other Information	3227

Item 6.	Exhibits	3228

	Signatures	3429


		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%¹	48%
Increase in Tariffs	June 2019	25%	25% then 0%¹	44%
Retroactive Exemption on Subset Products¹	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%


Review		Rates at which		September 30, 2021
Period	Period Covered	Company	Final Rate	Receivable/Liability
		Deposited		Balance
Antidumping
1	May 2011 through	6.78% and 3.3%	0.73%¹	$1.3 million
	November 2012			receivable¹
2	December 2012 through	3.30%	3.92% ²	$0.2 million
	November 2013			liability ²
3	December 2013 through	3.3% and 5.92%	0.0%³	$1.8 million
	November 2014			receivable³
4	December 2014 through	5.92% and 13.74%	0.0%	Settled
	November 2015
5	December 2015 through	5.92%. 13.74%. and 17.37%	0.0%	Settled
	November 2016
6	December 2016 through	17.37% and 0.0%	42.57% and 0.0%⁴	$0.5 million receivable
	November 2017			$1.5 million liability⁴
7	December 2017 through	0.0%	0.0%⁵	NA
	November 2018
8	December 2018 through	0.0%	0.0%⁶	NA
	November 2019
			Included on the Condensed Consolidated Balance Sheet in Other Current Assets	$2.3 million
			Included on the Condensed Consolidated Balance Sheet in Other Assets	$1.3 million
			Included on the Condensed Consolidated Balance Sheet in Other Current Liabilities	$0.2 million
			Included on the Condensed Consolidated Balance Sheet in Other Long-Term Liabilities	$1.5 million
Countervailing
1&2	April 2011 through	1.50%	0.83% / 0.99%	$0.2 million
	December 2012			receivable
3	January 2013 through December 2013	1.50%	1.38%	$0.05 million receivable
4	January 2014 through December 2014	1.50% and 0.83%	1.06%	$0.02 million receivable
5	January 2015 through December 2015	0.83% and 0.99%	Final at 0.11% and 0.85%⁷	$0.07 million receivable⁷
6	January 2016 through December 2016	0.99% and 1.38%	Final at 3.10% and 2.96%	$0.04 million liability⁸
7	January 2017 through December 2017	1.38% and 1.06%	20.75%⁹	$1.7 million liability⁹
8	January 2018 through December 2018	1.06%	5.81% ¹⁰	NA
			Included on the Condensed Consolidated Balance Sheet in Other Current Assets	$0.07 million
			Included on the Condensed Consolidated Balance Sheet in Other Assets	$0.3 million
			Included on the Condensed Consolidated Balance Sheet in Other Current Liabilities	$0.04 million
			Included on the Condensed Consolidated Balance Sheet in Other Long-Term Liabilities	$1.7 million