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 ~~June 30, 2022~~

orMarch 31, 2023

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


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

For the transition period from to

Commission File Number: 001-33767

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~~12b‑2 of the Exchange Act:


☐ Large accelerated filer	☒ Accelerated filer	☐ Non-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~~12b‑2 of the Exchange Act). ☐ Yes ☒ No

As of ~~July 29, 2022,~~May 5, 2023, there are ~~29,337,314~~ 30,495,996shares of the registrant’s common stock, par value of $0.001 per share, outstanding.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

LL Flooring Holdings, Inc.
~~Condensed~~

Consolidated Balance Sheets
~~(Unaudited, in thousands)~~

June 30,

December 31,

2022

2021
Assets

Current Assets:

Cash and Cash Equivalents

$
5,032

$
85,189
Merchandise Inventories

358,804

254,385
Prepaid Expenses

10,959

9,160
Other Current Assets

14,995

11,094
Total Current Assets

389,790

359,828
Property and Equipment, net

100,148

96,926
Operating Lease Right-of-Use Assets

123,756

119,510
Goodwill

9,693

9,693
Net Deferred Tax Assets

11,469

11,336
Other Assets

6,404

8,599
Total Assets

$
641,260

$
605,892

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts Payable

$
88,954

$
63,464
Customer Deposits and Store Credits

58,427

67,063
Accrued Compensation

8,042

10,128
Sales and Income Tax Liabilities

5,560

4,297
Accrual for Legal Matters and Settlements

23,799

33,611
Operating Lease Liabilities - Current

34,064

33,060
Other Current Liabilities

27,093

20,717
Total Current Liabilities

245,939

232,340
Other Long-Term Liabilities

6,979

4,268
Operating Lease Liabilities - Long-Term

100,073

97,163
Credit Agreement

15,000

—
Total Liabilities

367,991

333,771

Commitments and Contingencies

Stockholders’ Equity:

Common Stock ($0.001 par value; 35,000 shares authorized; 30,733 and 30,536 shares issued and 28,680 and 29,113 shares outstanding, respectively)

31

31
Treasury Stock, at cost (2,053 and 1,423 shares, respectively)

(153,244)

(145,337)
Additional Capital

230,086

227,804
Retained Earnings

196,396

189,623
Total Stockholders’ Equity

273,269

272,121
Total Liabilities and Stockholders’ Equity

$
641,260

$
605,892

(Unaudited)

In Thousands

March 31,

December 31,

2023

2022

Assets

Current Assets:

Cash and Cash Equivalents

$
6,977

$
10,800

Merchandise Inventories

307,738

332,296

Prepaid Expenses

10,443

9,054

Other Current Assets

14,441

17,598

Total Current Assets

339,599

369,748

Property and Equipment, net

100,421

101,758

Operating Lease Right-of-Use Assets

125,096

123,172

Net Deferred Tax Assets

17,533

13,697

Other Assets

5,628

5,578

Total Assets

$
588,277

$
613,953

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts Payable

$
54,361

$
47,733

Customer Deposits and Store Credits

46,560

43,767

Accrued Compensation

6,429

9,070

Sales and Income Tax Liabilities

3,462

3,574

Accrual for Legal Matters and Settlements

21,494

22,159

Operating Lease Liabilities - Current

30,564

34,509

Other Current Liabilities

24,680

19,712

Total Current Liabilities

187,550

180,524

Other Long-Term Liabilities

6,192

6,162

Operating Lease Liabilities - Long-Term

101,219

99,186

Credit Agreement

47,000

72,000

Total Liabilities

341,961

357,872

Commitments and Contingencies

Stockholders’ Equity:

Common Stock ($0.001 par value; 35,000 shares authorized; 30,916 and 30,758 shares issued and 28,798 and 28,695 shares outstanding at March 31, 2023, and December 31, 2022, respectively)

31

31

Treasury Stock, at cost (2,118 and 2,063 shares, respectively)

(153,562
)

(153,331
)
Additional Capital

232,890

231,839

Retained Earnings

166,957

177,542

Total Stockholders’ Equity

246,316

256,081

Total Liabilities and Stockholders’ Equity

$
588,277

$
613,953

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

Table of Contents

LL Flooring Holdings, Inc.
~~Condensed~~

Consolidated Statements of ~~Income~~Operations and Comprehensive (Loss) Income
~~(Unaudited, in thousands, except per share amounts)~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

Net Sales

Net Merchandise Sales

$
257,569

$
259,542

$
501,840

$
509,585
Net Services Sales

41,388

41,842

76,149

75,249
Total Net Sales

298,957

301,384

577,989

584,834
Cost of Sales

Cost of Merchandise Sold

160,527

156,597

307,946

298,607
Cost of Services Sold

31,680

32,057

59,214

57,905
Total Cost of Sales

192,207

188,654

367,160

356,512
Gross Profit

106,750

112,730

210,829

228,322
Selling, General and Administrative Expenses

102,087

96,116

201,112

198,602
Operating Income

4,663

16,614

9,717

29,720
Other Expense (Income)

199

498

184

(270)
Income Before Income Taxes

4,464

16,116

9,533

29,990
Income Tax Expense

1,728

4,127

2,760

7,379
Net Income and Comprehensive Income

$
2,736

$
11,989

$
6,773

$
22,611

Net Income per Common Share—Basic

$
0.09

$
0.41

$
0.23

$
0.78
Net Income per Common Share—Diluted

$
0.09

$
0.41

$
0.23

$
0.77

Weighted Average Common Shares Outstanding:

Basic

28,927

29,042

28,856

28,993
Diluted

29,065

29,488

29,079

29,543

(Unaudited)

In Thousands, Except Per Share Data

Three Months Ended March 31,

2023

2022

Net Sales

Net Merchandise Sales

$
210,497

$
244,271

Net Services Sales

30,201

34,761

Total Net Sales

240,698

279,032

Cost of Sales

Cost of Merchandise Sold

128,397

147,419

Cost of Services Sold

24,301

27,534

Total Cost of Sales

152,698

174,953

Gross Profit

88,000

104,079

Selling, General and Administrative Expenses

101,185

99,025

Operating (Loss) Income

(13,185
)

5,054

Other Expense (Income)

1,159

(15
)
(Loss) Income Before Income Taxes

(14,344
)

5,069

Income Tax (Benefit) Expense

(3,759
)

1,032

Net (Loss) Income and Comprehensive (Loss) Income

$
(10,585
)

$
4,037

Net (Loss) Income per Common Share—Basic

$
(0.37
)

$
0.14

Net (Loss) Income per Common Share—Diluted

$
(0.37
)

$
0.14

Weighted Average Common Shares Outstanding:

Basic

28,717

29,145

Diluted

28,717

29,417

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

Table of Contents

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

Equity

March 31, 2021

29,025

$
30

1,373

$
(144,352)

$
223,899

$
158,547

$
238,124
Stock-Based Compensation Expense

—

—

—

—

1,365

—

1,365
Exercise of Stock Options

3

—

—

—

23

—

23
Release of Restricted Shares

35

—

—

—

—

—

—
Common Stock Repurchased

—

—

19

(436)

—

—

(436)
Net Income

—

—

—

—

—

11,989

11,989
June 30, 2021

29,063

$
30

1,392

$
(144,788)

$
225,287

$
170,536

$
251,065

March 31, 2022

29,228

$
31

1,474

$
(146,147)

$
228,959

$
193,660

$
276,503
Stock-Based Compensation Expense

—

—

—

—

1,113

—

1,113
Exercise of Stock Options

1

—

—

—

14

—

14
Release of Restricted Shares

22

—

—

—

—

—

—
Common Stock Repurchased

(571)

—

579

(7,097)

—

—

(7,097)
Net Income

—

—

—

—

—

2,736

2,736
June 30, 2022

28,680

$
31

2,053

$
(153,244)

$
230,086

$
196,396

$
273,269

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

—

—

—

—

2,596

—

2,596
Exercise of Stock Options

6

—

—

—

63

—

63
Release of Restricted Shares

146

—

—

—

—

—

—
Common Stock Repurchased

—

—

74

(1,811)

—

—

(1,811)
Net Income

—

—

—

—

—

22,611

22,611
June 30, 2021

29,063

$
30

1,392

$
(144,788)

$
225,287

$
170,536

$
251,065

December 31, 2021

29,113

$
31

1,423

$
(145,337)

$
227,804

$
189,623

$
272,121
Stock-Based Compensation Expense

—

—

—

—

1,986

—

1,986
Exercise of Stock Options

21

—

—

—

296

—

296
Release of Restricted Shares

117

—

—

—

—

—

—
Common Stock Repurchased

(571)

—

630

(7,907)

—

—

(7,907)
Net Income

—

—

—

—

—

6,773

6,773
June 30, 2022

28,680

$
31

2,053

$
(153,244)

$
230,086

$
196,396

$
273,269

(Unaudited)

In Thousands

Total

Common Stock

Treasury Stock

Additional

Retained

Stockholders’

Shares

Par Value

Shares

Value

Capital

Earnings

Equity

December 31, 2021

29,113

$
31

1,423

$
(145,337
)

$
227,804

$
189,623

$
272,121

Stock-Based Compensation Expense

—

—

—

—

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

December 31, 2022

28,695

$
31

2,063

$
(153,331
)

$
231,839

$
177,542

$
256,081

Stock-Based Compensation Expense

—

—

—

—

1,051

—

1,051

Exercise of Stock Options

—

—

—

—

—

—

—

Release of Restricted Shares

103

—

—

—

—

—

—

Common Stock Repurchased

—

—

55

(231
)

—

—

(231
)
Net Loss

—

—

—

—

—

(10,585
)

(10,585
)
March 31, 2023

28,798

$
31

2,118

$
(153,562
)

$
232,890

$
166,957

$
246,316

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

Table of Contents

LL Flooring Holdings, Inc.
~~Condensed~~

Consolidated Statements of Cash Flows
~~(Unaudited, in thousands)~~

Six Months Ended June 30,

2022

2021

Cash Flows from Operating Activities:




Net Income

$
6,773

$
22,611
Adjustments to Reconcile Net Income:

Depreciation and Amortization

9,047

9,282
Deferred Income Taxes Provision

(133)

28
Income on Vouchers Redeemed for Legal Settlements

(750)

(821)
Stock-Based Compensation Expense

1,986

2,596
Provision for Inventory Obsolescence Reserves

292

1,420
Gain (Loss) on Disposal of Fixed Assets

(1)

18
Changes in Operating Assets and Liabilities:

Merchandise Inventories

(106,004)

17,583
Accounts Payable

25,036

(596)
Customer Deposits and Store Credits

(8,636)

6,342
Accrued Compensation

(2,086)

(4,633)
Prepaid Expenses and Other Current Assets

(3,327)

293
Advertising Accrual

6,141

1,086
Accrual for Legal Matters and Settlements

293

7,733
Payments for Legal Matters and Settlements

(8,062)

(62)
Other Assets and Liabilities

3,449

(9,546)
Net Cash (Used in) Provided by Operating Activities

(75,982)

53,334

Cash Flows from Investing Activities:

Purchases of Property and Equipment

(11,628)

(7,435)
Proceeds from Disposal of Fixed Assets

64

57
Net Cash Used in Investing Activities

(11,564)

(7,378)

Cash Flows from Financing Activities:

Borrowings on Credit Agreement

51,500

—
Payments on Credit Agreement

(36,500)

(101,000)
Proceeds from the Exercise of Stock Options

296

64
Common Stock Repurchased

(7,907)

(1,811)
Other Financing Activities

—

(755)
Net Cash Provided by (Used in) Financing Activities

7,389

(103,502)
Net Decrease in Cash and Cash Equivalents

(80,157)

(57,546)
Cash and Cash Equivalents, Beginning of Year

85,189

169,941
Cash and Cash Equivalents, End of Year

$
5,032

$
112,395

Supplemental disclosure of non-cash operating and financing activities:

Relief of Inventory for Vouchers Redeemed for Legal Settlements

$
1,293

$
1,498
Tenant Improvement Allowance for Leases

(742)

(765)

(Unaudited)

In Thousands

Three Months Ended March 31,

2023

2022

Cash Flows from Operating Activities:

Net (Loss) Income

$
(10,585
)

$
4,037

Adjustments to Reconcile Net (Loss) Income:

Depreciation and Amortization

4,669

4,492

Deferred Income Taxes (Benefit) Provision

(3,836
)

157

Income on Vouchers Redeemed for Legal Settlements

(253
)

(423
)
Stock-Based Compensation Expense

1,051

873

Provision for Inventory Obsolescence Reserves

572

(110
)
Gain on Disposal of Fixed Assets

—

(9
)
Changes in Operating Assets and Liabilities:

Merchandise Inventories

23,574

(64,793
)
Accounts Payable

8,045

26,037

Customer Deposits and Store Credits

2,793

2,251

Prepaid Expenses and Other Current Assets

1,826

(2,448
)
Accrued Compensation

(2,641
)

(2,523
)
Other Assets and Liabilities

934

9,058

Net Cash Provided by (Used in) Operating Activities

26,149

(23,401
)
Cash Flows from Investing Activities:

Purchases of Property and Equipment

(4,741
)

(5,250
)
Other Investing Activities

—

61

Net Cash Used in Investing Activities

(4,741
)

(5,189
)
Cash Flows from Financing Activities:

Borrowings on Credit Agreement

66,000

—

Payments on Credit Agreement

(91,000
)

—

Common Stock Repurchased

(231
)

(810
)
Other Financing Activities

—

282

Net Cash Used in Financing Activities

(25,231
)

(528
)
Net Decrease in Cash and Cash Equivalents

(3,823
)

(29,118
)
Cash and Cash Equivalents, Beginning of Period

10,800

85,189

Cash and Cash Equivalents, End of Period

$
6,977

$
56,071

Supplemental Disclosure of Non-Cash Operating and Financing Activities:

Relief of Inventory for Vouchers Redeemed for Legal Settlements

$
412

$
714

Tenant Improvement Allowance for Leases

(66
)

(665
)

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

Table of Contents

LL Flooring Holdings, Inc.

Notes to ~~Condensed~~ Consolidated Financial Statements
~~(Unaudited, amounts in thousands, except per share amounts)~~ (Unaudited)

Note 1. Basis of Presentation

LL Flooring Holdings, Inc., formerly Lumber Liquidators Holdings, Inc., and its direct and indirect subsidiaries (collectively and, where applicable, individually, “LL Flooring” or the “Company”) engage in business as a multi-channel specialty retailer of hard-surface flooring, and hard-surface flooring enhancements and accessories, operating as a single operating segment. The Company offers an extensive assortment ~~direct to the consumer~~of hard-surface flooring including waterproof hybrid resilient, waterproof vinyl plank, solid and engineered hardwood, laminate, bamboo, tile, and cork, with a wide range of flooring enhancements and accessories to complement. The Company also provides in-home delivery and installation services to its customers. The Company primarily sells to ~~homeowners~~consumers or to Pros on behalf of ~~homeowners~~consumers through a network of store locations in metropolitan areas. ~~At June 30, 2022,~~As of March 31, 2023, the Company’s ~~437~~443 stores spanned 47 states in the United States (“U.S.”). In addition to the store locations, the Company’s products may be ordered, and customer ~~questions/~~questions or concerns addressed, through both its customer 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~~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~~10‑K for the year ended December 31, ~~2021.~~2022.

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

Note 2. Summary of Significant Accounting Policies

Fair Value of Financial Instruments

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

Merchandise Inventories

The Company values merchandise inventories at the lower of cost or net realizable value. The method by which amounts are removed from inventory is weighted average cost. All of the hardwood flooring purchased from vendors is either prefinished or unfinished, and in immediate saleable form. The Company relies on a select group of international and domestic suppliers to provide imported flooring products that meet the Company’s specifications. ~~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~~processing. Also 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 monitor the market to inform its pricing and promotional strategies.costs.

Table of Contents

Recognition of Net Sales

The Company generates revenues primarily by retailing merchandise in the form of hard-surface 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. ~~Merchandise and services sales~~Sales occur through the Company’s network of ~~437~~443 stores, ~~across~~which spanned 47 states on March 31, 2023. In addition to the ~~U.S., a~~store locations, the Company's products may be ordered, and customer questions or concerns addressed, through both its customer contact center in Richmond, Virginia, and its digital platform, LLFlooring.com. 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.~~vendors. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or performing services for a customer. Revenues from installation and freight services are recognized when the delivery is made or the installation is complete, which approximates the recognition of revenue over time due to the short duration of service provided. The price of the Company’s merchandise and services is specified in the respective contract and detailed on the invoice agreed to with the customer including any discounts. The Company generally requires customers to pay a deposit, equal to approximately half of the retail sales value, when ordering merchandise not regularly carried in a given location or not currently in stock. In addition, the Company generally does not extend credit to its customers with payment due in full at the time the customer takes possession of merchandise or when the service is provided. Customer payments and deposits received in advance of the customer taking possession of the merchandise or receiving the services are recorded as deferred revenues in the accompanying ~~condensed~~ consolidated balance sheet caption “Customer Deposits and Store Credits.”

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

									Three Months Ended March 31,
									2023			2022
									(in thousands)
Customer Deposits and Store Credits, Beginning Balance	$	(69,314)	$	(68,211)	$	(67,063)	$	(61,389)	$	(43,767	)	$	(67,063	)
New Deposits		(307,346)		(320,513)		(608,316)		(630,972)		(259,164	)		(300,970	)
Recognition of Revenue		298,957		301,384		577,989		584,834		240,698			279,032
Sales Tax included in Customer Deposits		18,017		18,231		35,172		35,772		14,616			17,155
Other		1,259		1,378		3,791		4,024		1,057			2,532
Customer Deposits and Store Credits, Ending Balance	$	(58,427)	$	(67,731)	$	(58,427)	$	(67,731)	$	(46,560	)	$	(69,314	)

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~~number of expected returns and records it within “Other Current Liabilities” on the ~~condensed~~ consolidated balance sheet. 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 ~~$1.5~~$1.1 million ~~at June 30, 2022.~~and $1.2 million on March 31, 2023 and December 31, 2022, respectively. The Company recognizes sales commissions as incurred since the amortization period is less than one year.

Table of Contents

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 June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Manufactured Products ¹

$
142,803

48
%
$
139,736

46
%

$
277,441

48
%
$
271,829

46
%
Solid and Engineered Hardwood

71,912

24
%

75,602

25
%

140,947

24
%

151,797

26
%
Moldings and Accessories and Other

42,854

14
%

44,204

15
%

83,452

15
%

85,959

15
%
Installation and Delivery Services

41,388

14
%

41,842

14
%

76,149

13
%

75,249

13
%
Total

$
298,957

100
%
$
301,384

100
%

$
577,989

100
%
$
584,834

100
%


	Three Months Ended March 31,
	2023				2022
	(in thousands, except percentage data)
Manufactured Products1	$	120,832	50	%	$	134,639	48	%
Solid and Engineered Hardwood		55,808	23	%		69,035	25	%
Moldings and Accessories and Other		33,857	14	%		40,597	15	%
Installation and Delivery Services		30,201	13	%		34,761	12	%
Total	$	240,698	100	%	$	279,032	100	%

1Includes engineered vinyl plank, laminate, vinyl and 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. For the period ended March 31, 2023, cost of sales also included incremental costs associated with customs delays related to certain shipments of vinyl flooring.

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. Warranty costs are recorded in cost of sales. The related reserve ~~of $0.9~~was $0.9 million ~~at June 30,~~and $1.0 million on March 31, 2023 and December 31, 2022, ~~was~~respectively, and recorded in “Other Current Liabilities” on the accompanying ~~condensed~~ consolidated balance ~~sheet.~~sheets. The Company seeks recovery from its vendors and third-party independent contractors of installation services for certain amounts paid.

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 (Loss) Income per Common Share

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021
Net Income

$
2,736

$
11,989

$
6,773

$
22,611
Weighted Average Common Shares Outstanding—Basic

28,927

29,042

28,856

28,993
Effect of Dilutive Securities:








Common Stock Equivalents

138

446

223

550
Weighted Average Common Shares Outstanding—Diluted

29,065

29,488

29,079

29,543
Net Income per Common Share—Basic

$
0.09

$
0.41

$
0.23

$
0.78
Net Income per Common Share—Diluted

$
0.09

$
0.41

$
0.23

$
0.77


	Three Months Ended March 31,
	2023			2022
	(in thousands, except per share data)
Net (Loss) Income	$	(10,585	)	$	4,037
Weighted Average Common Shares Outstanding—Basic		28,717			29,145
Effect of Dilutive Securities:
Common Stock Equivalents		—			272
Weighted Average Common Shares Outstanding—Diluted		28,717			29,417
Net (Loss) Income per Common Share—Basic	$	(0.37	)	$	0.14
Net (Loss) Income per Common Share—Diluted	$	(0.37	)	$	0.14

Table of Contents

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

Six Months Ended

June 30,

June 30,


2022

2021

2022

2021
Stock Options

506

193

438

148
Restricted Shares

504

127

367

125


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Stock Options		649		373
Restricted Shares		832		239

Stock Repurchase Program

In ~~February 2022,~~January 2012, the Company’s board of directors ~~raised its~~adopted an authorization for the repurchase of up to ~~$50.0~~a total of $50.0 million of the Company’s common ~~stock.~~stock, which it increased by $50.0 million in each of November 2012 and January 2014. In ~~April~~February 2022, the ~~Company resumed its~~board of directors further increased this authority by an additional $35.3 million for a total authorization to repurchase up to $50.0 million of the Company’s common stock on the open market or in private transactions. As of March 31, 2023, there remains $43.0 million outstanding under the share repurchase ~~program.~~authorization, which does not have an expiration date. The Company ~~made cash payments of $7.0 million to~~did not repurchase ~~571,332~~any shares under the ~~share repurchase~~previous authorization during the three months ended ~~June 30, 2022. There remains $43.0 million outstanding~~March 31, 2023.

The timing and amount of any share repurchases under the ~~share~~authorization will be determined in the Company's discretion and based on market conditions and other considerations. Share repurchases under the authorizations may be made through open market purchases or pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934. The program does not obligate LL Flooring to acquire any particular amount of its common stock, and the repurchase ~~authorization.~~program may be suspended or discontinued at any time at the Company’s discretion.

Outside of the share repurchase program, during the three months ended March 31, 2023, the Company repurchased ~~$0.9~~$0.2 million, or ~~59,288~~54.7 thousand shares, of its common stock through ~~the~~ net settlement of shares issued as a result of the vesting of restricted ~~shares during the six months ended June 30, 2022.~~

shares.

board.~~Table of Contents~~

~~the board.~~ There were ~~225,456~~257.7 thousand and ~~177,448~~245.0 thousand deferred stock units outstanding at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Note 5. Credit Agreement

~~The~~On December 27, 2022, the Company ~~has~~entered into a ~~credit agreement~~Waiver and Third Amendment to the Credit Agreement (the ~~“Credit Agreement”~~“Amendment”) with Bank of America, N.A. ("the "Bank") 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”)~~National Association ("Wells" and, collectively with the ~~Lenders.~~Bank, the "Lenders") and the Bank in its capacity as administrative agent and collateral agent (in this capacity, the “Agent”) and Wells as syndication agent. The ~~execution of the Second~~ Amendment, among other things, ~~terminated~~(i) changed the ~~FILO~~rate under the Agreement for borrowings from a LIBOR-based rate to a Term ~~Loans~~SOFR-based rate (as defined in the Amendment), subject to certain adjustments specified in the Amendment and ~~converted those commitments~~(ii) provided a waiver of a technical event of default under the Credit Agreement related to providing notice to the ~~Revolving~~Lenders of the Company’s name change from Lumber Liquidators Holdings, Inc. to LL Flooring Holdings, Inc. Except as set forth in the Amendment, all other terms and conditions of the Credit ~~Facility.~~ Agreement remain in place.

The total size of the Credit Agreement ~~remained at $200~~is $200.0 million, and the Company has an option to increase the Revolving Credit Facility to a maximum total amount of ~~$250~~$250.0 million. The Credit Agreement has a maturity date of ~~the Credit Agreement was extended to~~ April 30, ~~2026.~~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~~defines the margin for ~~LIBOR~~Term SOFR Rate Loans (as defined in the ~~Second~~ Amendment) toas a range of ~~1.25%~~1.25% to ~~1.75%~~1.75% over the applicable ~~LIBOR~~Term SOFR Rate with respect to revolving loans ~~(as defined in the Second Amendment)~~ depending on the Company’s average daily excess borrowing ~~availability, a decrease of 1.25% from rates prior to the Second Amendment. As previously stated, the FILO~~availability. The Term ~~Loans were terminated by this Second Amendment. The amendment decreased the LIBOR~~SOFR Rate Floor ~~from 1.00% to 0.25%~~is 0.25%. The ~~Second Amendment also decreased the~~ unused commitment fee ~~of 0.50%~~is 0.25% per annum ~~to 0.25% per annum~~based on the average daily unused amount of the Revolving Credit Facility during the most recently completed calendar quarter. The weighted average interest rate applicable to the ~~Company’s~~Company's Revolving Credit Facility for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was ~~4.7%~~6.1%.

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~~$17.5 million or ~~10%~~10% of the Revolving 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.~~

As of ~~June 30, 2022,~~March 31, 2023, there was ~~$15~~$47.0 million outstanding under the Revolving Credit Facility. The Company had ~~$3.2~~$3.2 million in letters of credit which reduces its availability. As of ~~June 30, 2022,~~March 31, 2023, there was ~~$181.9~~$149.8 million of availability under the ~~Revolving~~ Credit ~~Facility.~~Agreement.

Note 6. 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.

Table of Contents

For the three months ended ~~June 30,~~March 31, 2023, the Company recognized an income tax benefit of $3.8 million, which represented an effective tax rate of 26.2%. For the three months ended March 31, 2022, the Company recognized income tax expense of ~~$1.7~~$1.0 million, which represented an effective tax rate of ~~38.7%. For the three months ended June 30, 2021, the Company recognized income tax expense of $4.1 million, which represented an effective tax rate of 25.6%~~20.4%. The higher effective tax rate in the current period primarily reflects the ~~greater~~ impact of permanent items on the ~~lower~~ pretax ordinary ~~income.~~loss.

~~Table~~Based on the Company’s evaluation at a jurisdictional level as of ~~Contents~~

~~For the six months ended June 30, 2022,~~March 31, 2023, the Company ~~recognized~~believes sufficient future taxable income, including consideration of future performance, market, or economic conditions, will be generated to use existing deferred tax expense of $2.8 million, which represented an effective tax rate of 29.0%. For the six months ended June 30, 2021, the Company recognized income tax expense of $7.4 million, which represented an effective tax rate of 24.6%.assets. The ~~higher effective tax rate is caused by the same drivers~~amount of the ~~increase in effective tax rate for the quarter.~~

~~The Company has a valuation allowance recorded against certain of its net~~ deferred tax assets of $2.4 million as of June 30, 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 sufficientconsidered realizable could be adjusted in future periods if evidence ~~to support the realizability of those deferred tax assets.~~warrants such a change.

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. The Company is pursuing an administrative appeal, which was filed on April 15, 2022. Given the uncertainty of the final resolution, the Company cannot reasonably estimate the loss or range of loss, if any, that may result from this action and therefore no specific accrual has been made related to 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 (in thousands) 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.


Litigation Matter Description		December 31, 2021 Accrual for Legal Matters and Settlements - Current		Accruals		Settlement Payments		Vouchers Redeemed		June 30, 2022 Accrual for Legal Matters and Settlements - Current

												December 31, 2022									March 31, 2023
Litigation Matter												Accrual for Legal Matters				Settlement		Vouchers			Accrual for Legal Matters
Description												and Settlements - Current		Accruals		Payments		Redeemed			and Settlements - Current
MDL												$	9,070	$	—	$	—	$	(320	)	$	8,750	1
Gold													12,864		—		—		(345	)		12,519	1
Other Matters													225		—		—		—			225
												$	22,159	$	—	$	—	$	(665	)	$	21,494

												December 31, 2021									March 31, 2022
Litigation Matter												Accrual for Legal Matters				Settlement		Vouchers			Accrual for Legal Matters
Description												and Settlements - Current		Accruals		Payments		Redeemed			and Settlements - Current
MDL	$	10,656	$	—	$	—	$	(877)	$	9,779	¹	$	10,656	$	—	$	—	$	(464	)	$	10,192
Gold		14,885		—		—		(1,166)		13,719	¹		14,885		—		—		(673	)		14,212
Mason		7,000		129		(7,129)		—		—			7,000		—		—		—			7,000
Other Matters		1,070		164		(933)		—		301			1,070		53		—		—			1,123
	$	33,611	$	293	$	(8,062)	$	(2,043)	$	23,799

Litigation Matter Description		December 31, 2020 Accrual for Legal Matters and Settlements - Current		Accruals		Settlement Payments		Vouchers Redeemed		June 30, 2021 Accrual for Legal Matters and Settlements - Current
MDL	$	14,000	$	—	$	—	$	(2,319)	$	11,681
Gold		16,000		—		—		—		16,000
Mason		—		7,000		—		—		7,000
Other Matters		398		733		(62)		—		1,069
	$	30,398	$	7,733	$	(62)	$	(2,319)	$	35,750
												$	33,611	$	53	$	—	$	(1,137	)	$	32,527

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

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

~~Employment Cases~~Litigation Related to Formaldehyde-Abrasion MDLs

~~Mason Lawsuit~~

In ~~August 2017, Ashleigh Mason, Dan Morse, Ryan Carroll~~2018, the Company entered into a settlement agreement to resolve claims related to Chinese-manufactured laminate products (the “Formaldehyde-Abrasion MDL”). Under the terms of the settlement agreement, the Company funded $22.0 million in cash and ~~Osagie Ehigie filed~~provided $14.0 million in store-credit vouchers for an aggregate settlement amount of $36.0 million to settle claims. Cash and vouchers, which generally have a ~~purported collective and class action lawsuit~~three-year life, were distributed by the administrator in the ~~United States District Court~~fourth quarter of 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 ~~Eastern District~~settlement and therefore will redeem their voucher for product as intended. The rules on the expiration or escheat of ~~New York on behalf of all current~~any unused vouchers vary by state, and ~~former store managers, store managers~~to the extent any expire unused, they will be terminated in ~~training, and similarly situated current and former employees (collectively, the~~accordance with those respective rules.

Table of Contents

~~“Mason Putative Class Employees”) alleging that~~As of March 31, 2023, the remaining accrual related to these matters was $8.8 million for vouchers. As $0.3 million of vouchers were redeemed during the three months ended March 31, 2023, the Company ~~violated~~reduced the ~~Fair Labor Standards Act (“FLSA”)~~accrual for legal matters and ~~New York Labor Law (“NYLL”) by classifying the Mason Putative Class Employees as exempt (the “Mason matter”). The alleged violations include failure to pay for overtime work.~~

~~In April 2021, the Company entered into a Memorandum of Understanding (“Mason MOU”) with counsel~~settlements for the ~~lead plaintiffs in the Mason matter. Under the terms of the Mason MOU, the Company agreed to pay up to $7.0 million to settle the claims asserted in the Mason matter.~~

In the first quarter of 2022, the court gave final approval to the settlement. As a result of the final approval, the Company paid $7.0 million, plus an additional $0.1 million in taxes, in the current quarter to a court appointed administrator who handles distribution to the plaintiffs. Any checks issued to the Collective Membersfull amount, relieved inventory at its cost, and the ~~New York Non Opt-Ins which are not cashed by March 1, 2023, will revert to~~remaining amount -- the ~~Company.~~

~~Savidis Lawsuit~~

In April 2020, 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 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”).

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 counselgross margin for the ~~lead plaintiffs~~items sold of $0.1 million was recorded as a reduction in “Selling, General and Administrative Expenses” (“SG&A”) on the ~~Savidis matter. Under the terms~~consolidated statement of the Savidis MOU, the Company agreed to pay $0.9 million reduced by a credit of $0.1 million for amounts already paid to the individuals who accepted the Company’s prior settlement offer. In January 2022, the Court provided final approval of the settlement. In April 2022, the Company paid $0.8 million to a court appointed administrator who handles the distribution to the class members who did not opt out of participating in the settlement.

~~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 sought certification of a class period beginning September 20, 2019, through the date of Notice of Class Certification, if granted.

In December 2020, the Company began contacting individuals who constitute the purported class in the Visnack matter and 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 June 30, 2021, the Company had reached agreement with a portion of the purported class incurring less than $50 thousand in fees, taxes, and other costs.operations. The Company included those amounts in ~~“Other Matters”~~“MDL” in the chart above. ~~On July 6, 2022, the Visnack Plaintiffs filed a notice of dismissal of the Visnack matter with the court.~~

~~Antidumping and Countervailing Duties Investigation~~

The Company is subject to antidumping (“AD”) and countervailing duties (“CVD”) for certain imports of multilayered wood flooring from China. The Company’s multilayered wood flooring imports from China accounted for approximately 3% of its flooring purchases in 2021.

~~Table of Contents~~

At the time of import, the Company makes deposits at the then prevailing rate. This rate is subsequently reviewed to establish the final rate. When rates are declared final by the 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. 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 “June 30, 2022 Receivable/Liability Balance” represents the amount the Company would receive or pay (net of any collections or payments) as the result of subsequent adjustmentLitigation Relating 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 expense related to antidumping of $0.02 million for the six months ended June 30, 2022 compared to net interest income of $1.8 million for the six months ended June 30, 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.

~~Table of Contents~~

Review Period¹
Period Covered
Rates at which Company Deposited
Final Rate
June 30, 2022 Receivable/Liability Balance
Antidumping
1
May 2011 through November 2012
6.78% and 3.3%
0.0%²
$1.53 million receivable²
2
December 2012 through November 2013
3.30%
3.92% ³
$0.21 million liability³
3
December 2013 through November 2014
3.3% and 5.92%
0.0%⁴
$1.82 million receivable⁴
6
December 2016 through November 2017
17.37% and 0.00%
42.57% and 0.0%⁵
$0.50 million receivable $1.46 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%
39.27%⁸
$1.14 million liability⁸

Included on the Consolidated Balance Sheet in Other Current Assets
$3.85 million

Included on the Consolidated Balance Sheet in Other Current Liabilities
$0.21 million

Included on the Consolidated Balance Sheet in Other Long-Term Liabilities
$2.60 million
Countervailing
1&2
April 2011 through December 2012
1.50%
0.83% / 0.99%
$0.24 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
$1.65 million
liability¹¹
8
January 2018 through
December 2018
1.06%
6.13%¹²
$0.29 million
liability¹²
9
January 2019 through
December 2019
0.00%, 0.85%, 2.96%
3.36% / 9.85%¹³
$0.08 million
liability¹³

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

Included on the Consolidated Balance Sheet in Other Assets
$0.30 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
$2.02 million

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

2	In the first quarter of 2022, pursuant to CIT order on appeal the DOC recalculated the final rates for the first annual review period at 0.0%. As a result, the Company recorded an additional $0.2 million receivable with a corresponding reduction of cost of sales during the first quarter of 2022.

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

~~Table of Contents~~

In the third quarter of 2020, on appeal the DOC offered to reduce the rate for the third annual review period to 0.0% from 17.37%. The reduced rate was accepted by the CIT in the first quarter of 2021, and the Company reversed the entire $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 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 June 30, 2022 was included in other long-term liabilities on the condensed consolidated balance sheet.

6	~~In the fourth quarter of 2021, the DOC issued a final rate of 0.0% for the seventh annual review period. The final rate is currently under appeal.~~

7	~~In the fourth quarter of 2021, the DOC issued a final rate of 0.0% for the eighth annual review period. The final rate is currently under appeal.~~

8	~~In the second quarter of 2022, the DOC issued the final rate for the ninth annual review period at 39.27%.As a result, the Company recorded a $1.1 million liability with a corresponding increase in cost of sales during the second quarter of 2022. The final rate is currently under appeal.~~

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.

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 million with a corresponding reduction of cost of sales during the year ended December 31, 2019~~. As of June 30, 2022, the remaining liability balance was approximately $40 thousand.~~

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 million with a corresponding increase to cost of sales during the year ended December 31, 2020. The Company appealed this final rate during the first quarter of 2021.

12	In October 2021, the DOC issued the final rate of 6.13% for the eighth annual review period. As a result, in October 2021 the Company recorded a $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 second quarter of 2022, the DOC issued the final rates for the ninth annual review period at 3.36% and 9.85% depending on the vendor. As a result, the Company recorded a liability of $0.08 million with a corresponding increase in cost of sales in the second quarter of 2022.

~~LitigationRelating~~toBamboo Flooring

In 2019, the Company finalized a settlement agreement to resolve claims related to Morning Star bamboo flooring (the “Gold Litigation”). Under the terms of the settlement agreement, the Company contributed ~~$14~~$14.0 million in cash ~~(the “Gold Cash Payment”)~~ and provided ~~$16~~$16.0 million in store-credit vouchers, for an aggregate settlement of up to ~~$30~~$30.0 million. 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 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 rules on the expiration or escheat of any unused vouchers vary by state, and to the extent any expire unused, they will be terminated in accordance with those respective rules.

As of ~~June 30, 2022,~~March 31, 2023, the remaining accrual related to these matters was ~~$13.7~~$12.5 million for vouchers. As ~~$1.2~~$0.3 million of vouchers were redeemed during the ~~first six~~three months ~~of 2022,~~ended March 31, 2023, the Company ~~relieved~~reduced 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 ~~$0.4~~$0.1 million was recorded as a reduction in “Selling, General and Administrative Expenses” (“SG&A”) on the ~~condensed~~ consolidated statement of operations. The Company included those amounts in “Gold” in the chart above.

~~Litigation Related to Formaldehyde-Abrasion MDLs~~Mason Lawsuit

In ~~2018,~~the second quarter of 2022, the Company ~~entered into~~paid $7.1 million in settlement of a ~~settlement agreement~~purported collective and 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 "Mason matter"). The alleged violations include failure to ~~resolve claims~~pay for overtime work. The Company included the amounts related to ~~Chinese-manufactured laminate products (the “Formaldehyde-Abrasion MDL”). Under~~ the ~~terms~~Mason matter in the first quarter of 2022 in the chart above, as the matter was resolved in the second quarter of 2022.

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 antidumping (“AD”) and countervailing duties (“CVD”) with the United States Department of Commerce (“DOC”) and the United States International Trade Commission (“ITC”) against 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 4.9% of its flooring purchases for the year ended December 31, 2022.

As part of its processes in these proceedings, the DOC conducts annual reviews of the ~~settlement agreement,~~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 ~~funded $22~~makes deposits at the then prevailing rate, even while the annual review is in process. When rates are declared final by the 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. 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.

As of March 31, 2023, the outstanding AD and CVD principal balances were $2.5 million in ~~cash and provided $14~~other current assets, $0.2 million in ~~store-credit vouchers for an aggregate settlement amount~~other current liabilities, and $4.1 million in other long-term liabilities recorded on the consolidated balance sheet. These amounts represent what the Company would receive or pay (net of ~~$36 million~~any collections or payments) as the result of subsequent adjustment to ~~settle claims. Cash and vouchers, which generally have a three-year life, were distributed~~rates whether due to finalization by the ~~administrator~~DOC or because of action of a court based on appeals by various parties. These amounts do not include any initial amounts paid for AD or CVD in the ~~fourth quarter of 2020.The Company will monitor and evaluate~~current period at the ~~redemption of vouchers on a quarterly basis.~~in-effect rate at that time.

1512

Table of Contents

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.~~

~~As of June 30, 2022, the remaining accrual~~Company recorded net interest expense related to ~~these matters was $9.8~~antidumping and countervailing duties of $0.2 million for ~~vouchers.~~ ~~As $0.9 million~~the three months ended March 31, 2023 compared to net interest income of ~~vouchers were redeemed during the first six months of 2022, the Company relieved the accrual for legal matters and settlements~~$0.07 million for the ~~full amount, relieved inventory at its cost, and the remaining amount -- the gross margin~~three months ended March 31, 2022. The amounts for ~~the items sold of $0.3 million was recorded as a reduction~~both years are included in ~~“Selling, General and Administrative Expenses” (“SG&A”)~~other expense on the ~~condensed consolidated statement~~Statements of ~~operations.~~Operations. The ~~Company included those amounts in “MDL”~~estimated associated interest payable and receivable for each period is recorded separately from the principal balance in the ~~chart above.~~respective other current assets, other current liabilities, or long-term liabilities financial statement line item on the Company’s consolidated balance sheet.

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 ~~(“Lists”~~("Lists"). Products imported by the Company fall within Lists 3 and 44a for which tariffs range from 10% to 25%. On September 10, 2020 several importers of vinyl flooring ("the plaintiffs") filed a lawsuit with the ~~CIT~~Court of International Trade ("CIT") challenging the Section 301 tariffs under Lists 3 and 4.4a and the USTR's actions. The ~~Company has also filed a companion case at~~plaintiffs argued that the USTR had not acted within its statutory authority when it modified the original Section 301 determinations on certain goods from China by adding Lists 3 and 4a and that the agency had not demonstrated that it satisfied the procedural requirements of the Administrative Procedure Act. On March 17, 2023, the CIT ~~challenging Section 301 tariffs it has paid. On April 1, 2022~~issued a decision sustaining the ~~CIT remanded~~List 3 and 4a tariffs. The CIT’s decision is expected to be appealed by the ~~matter back~~plaintiffs to the ~~USTR to reconsider its decisions in light~~Court of Appeals for the ~~ruling and to reply to the CIT~~Federal Circuit ("CAFC") by June 30, 2022. On June 22, 2022, the CIT granted the USTR its motion for extension to file the remand on or before August 1, 2022. The Company is unable to predict the timing or outcome of the ruling by the USTR and/or CIT.May 16, 2023. If these appeals are successful, the Company should qualify for refunds on these Section 301 tariffs. At this time, the Company is unable to predict the timing or outcome of the ruling by the CAFC.

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.

Note 8. Leases

On March 3, 2023, the Company entered into a ten-year lease agreement for a 457,363 square foot distribution center in Dallas, Texas, which will enable us to more efficiently serve our stores located in the Central United States. The lease commences on May 1, 2023. Future minimum rental payments under this lease are approximately $30 million over the ten-year lease term.

Table of Contents

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,” "assumes," “believes,” “thinks,” “estimates,” “seeks,” “predicts,” “could,” “projects,” ~~“potential”~~"targets," “potential,” "will likely result," 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;~~

●

•

reduced consumer spending due to slower growth, economic recession, inflation, higher interest rates, and consumer sentiment;

●

~~transportation availability and costs;~~

●

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

●

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

●

~~potential disruptions to supply chain related to forced labor and other trade regulations;~~

●

~~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;~~

•

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

•

a sustained period of inflation impacting consumer spending;

•

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

•

stock price volatility;

•

competition, including alternative e-commerce offerings;

•

liquidity and/or capital resources changes and the impact of any changes or limitations, including, without limitation, ability to borrow funds and/or renew or roll over existing indebtedness;

•

transportation availability and costs, including the impact of the war in Ukraine and the Company's European suppliers;

•

disruptions to supply chain and product availability related to forced labor and other trade regulations, including with respect to the Uyghur Forced Labor Prevention Act ("UFLPA");

•

inability to hire and/or retain employees;

•

inability to staff stores due to overall pressures in the labor market;

•

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

•

reputational harm;

•

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

•

managing growth;

•

disruption in our ability to distribute our products, including due to severe weather;

•

operating an office in China;

•

continuing and potential future impacts of the COVID-19 pandemic and related public health issues;

•

managing third-party installers and product delivery companies;

•

renewing store, warehouse, or other corporate leases;

•

maintaining optimal inventory for consumer demand;

•

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

•

having an overreliance on limited or sole-source suppliers;

•

damage to our assets;

•

availability of suitable hardwood, including disruptions from the impacts of severe weather and supply chain constraints;

•

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

●

~~inability to staff stores due to the COVID-19 pandemic and the overall pressures in the labor market;~~•

●

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

●

~~the impact of the war in Ukraine on transportation costs and the Company’s European suppliers;~~

●

~~reputational harm;~~

●

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

●

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

●

~~managing growth;~~

●

~~damage to our assets;~~

●

~~disruption to our ability to distribute our products, including due to severe weather;~~

●

~~operating an office in China;~~

●

~~managing third-party installers and product delivery companies;~~

●

~~renewing store, warehouse, or other corporate leases;~~

●

~~having sufficient suppliers;~~

●

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

●

~~having sufficient inventory for consumer demand;~~

●

~~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;~~

●

~~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 related to Environmental, Social, and Governance (“ESG”) matters;~~

●

~~internal controls;~~

●

~~stock price volatility; and~~

●

~~anti-takeover provisions.~~

sufficient insurance coverage, including cybersecurity insurance;

•

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

•

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

•

management information systems disruptions;

•

obtaining products domestically and from abroad, including tariffs and delays in shipping and transportation, as well as the effects of antidumping and countervailing duties;

•

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

•

internal controls; and

•

anti-takeover provisions.

~~Table of Contents~~

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 (Loss) Income; (vi) Adjusted Operating Margin; (vii) Adjusted Other Expense; (viii) Adjusted Other Expense as a Percentage of Net Sales; (ix) Adjusted (Loss) Earnings; and (x) Adjusted (Loss) 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~~we believe the non-GAAP financial measures provide useful information to ~~evaluate~~management and investors regarding certain financial and business trends related to our financial condition and results of operations, These measures provide an additional tool for investors to use in evaluating our ongoing operating performance, and management, in certain cases, uses them 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~~incremental costs of sales and associated legal costs related to disruptions to supply chain and ~~operating costs,~~other trade regulations and changes in antidumping and countervailing duties, as such items are outside of our control or due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature.

~~Second Quarter Financial Highlights~~

●

Net sales of $299.0 million decreased 0.8% compared to the same period last year, as record growth in sales to Pro customers partially offset a decrease in consumer sales and a 1.1% decrease in net service sales.

●

~~Total comparable store sales decreased 3.1% versus the same period last year~~ Reconciliations of these non-GAAP financial measures are provided on the pages that follow (certain numbers may not sum due to rounding).~~. The decrease in comparable store sales primarily reflected the same drivers as the change in net sales.~~

●

Gross margin of 35.7% decreased 170 basis points as a percentage of sales compared to the same period last year, adjusted gross margin (a non-GAAP measure) of 36.1% decreased 130 basis points compared to the same period last year, primarily reflecting significantly higher material and transportation costs (collectively up more than 1,000 basis points) that the Company was able to partially mitigate through pricing, promotion and alternative country/vendor sourcing strategies.

●

SG&A expense as a percentage of sales of 34.1% increased 220 basis points compared to the second quarter of last year. Adjusted SG&A expense (a non-GAAP measure) as a percentage of sales of 34.1% increased 230 basis points compared to the second quarter of last year, primarily driven by investments to support the Company’s long-term growth, higher advertising expense due to the timing of promotions, and continued investment in customer facing and distribution center personnel.

●

~~Operating margin of 1.6% decreased 390 basis points compared to the second quarter of last year. Adjusted operating margin (a non-GAAP measure) of2.0% decreased 360 basis points compared to the second quarter of last year.~~

●

Diluted EPS of $0.09 per diluted share decreased $0.32 per diluted share compared to the second quarter of last year. Adjusted earnings per diluted share (a non-GAAP measure) of $0.13 decreased $0.28 compared to the second quarter of last year.

●

~~During the second quarter, the Company opened six new stores, bringing total stores to 437 as of June 30, 2022.~~

~~Other Items~~15

~~Liquidity and Credit Agreement~~

As of June 30, 2022, we had liquidity of $187 million, consisting of excess availability under our Credit Agreement of $182 million, and cash and cash equivalents of $5 million. This represents a decrease in liquidity of $40 million from December 31, 2021. During the first half of the year, the Company rebuilt its inventory by more than $104 million.

In February 2022, the Company’s board of directors raised its authorization for the repurchase of up to $50 million of the Company’s common stock from the previous $14 million authorized. In April 2022, the Company

Table of Contents

~~resumed its share repurchase program.~~ Executive Summary

LL Flooring's first quarter was very challenging and our performance primarily reflected the impact the difficult macro backdrop had on discretionary home improvement spending. In addition, we continue to experience pressure from brand awareness and operational challenges that impacted first quarter results. Despite the near-term volatility, we remain focused on areas of improvement that will help stabilize our results and drive long-term growth opportunities. These include further broadening and growing our brand awareness among consumers to drive traffic; ensuring a consistent customer experience across our omnichannel network to improve conversion; and improving operating efficiencies by actively working to reduce costs while focusing investments on our top growth priorities. Importantly, we continued to execute on these areas during the quarter.

As we look to the remainder of 2023, we expect the macro backdrop to remain challenging as elevated inflation and higher interest rates drive a more cautious consumer and pressure higher ticket discretionary purchases. In the near term, these factors have limited our sales visibility. Looking beyond 2023, we remain confident the long-term fundamentals of our business are strong. As we continue to work on each of our strategic priorities, we remain focused on delivering long-term sustainable growth as a leading specialty flooring retailer.

Recent Development: Vinyl Update

In February 2023, U.S. Customs and Border Protection (“CBP”) added aluminum and polyvinyl chloride ("PVC") to a list of categories including cotton, tomatoes and polysilicon for which CBP has the ability to request additional documentation from importers under the Uyghur Forced Labor Prevention Act ("UFLPA"). During the first quarter, CBP began to request additional documentation with respect to the UFLPA for some shipments of vinyl flooring originating from Vietnam.

We require our vendors to follow our strict guidelines on responsible sourcing, we obtain periodic certifications from them concerning compliance with these standards and we perform audit procedures of their supply chain documentation. While CBP is continuing to detain shipments within the vinyl product category, and we are diligently working to provide additional documentation that they are requesting, we do not know how long their review of the documentation will take or when these delays will be resolved.

During the first quarter of 2023, we experienced continued delays resulting in $2.4 million of incremental expenses.

We're continuing to work to mitigate the disruptions by featuring alternative products in our current assortment and leveraging our sourcing capabilities to look at alternative flooring categories and sourcing geographies. Despite our mitigation efforts, we believe that this issue could have further material impacts on sales and margins as we progress throughout the year. See “Risk Factor – The Company ~~has repurchased $7 million under that program, underscoring its confidence~~and third-party suppliers on whom we rely source a significant portion of the merchandise we sell from Asia, which exposes us to the risk of supply chain disruptions" in ~~its long-term~~the Company’s annual report filed on Form 10‑K for the year ended December 31, 2022.

Table of Contents

Results of Operations

We believe the selected sales data, the percentage relationship between net sales and ~~profitability growth.~~

~~We believe that cash flows from~~major categories in the consolidated statements of operations ~~together with cash on hand,~~ and the ~~availability~~percentage change in the dollar amounts of each of the items presented below are important in evaluating the performance of our business operations.


							% Increase (Decrease)
	% of Net Sales						in Dollar Amounts
	Three Months Ended March 31,						2023
	2023			2022			vs. 2022
Net Sales
Net Merchandise Sales		87.5	%		87.5	%		(13.8	)%
Net Services Sales		12.5	%		12.5	%		(13.1	)%
Total Net Sales		100.0	%		100.0	%		(13.7	)%
Gross Profit		36.6	%		37.3	%		(15.4	)%
Selling, General and Administrative Expenses		42.0	%		35.5	%		2.2	%
Operating (Loss) Income		(5.5	)%		1.8	%		(360.9	)%
Other Expense (Income)		0.5	%		—	%		(7826.7	)%
(Loss) Income Before Income Taxes		(6.0	)%		1.8	%		(383.0	)%
Income Tax (Benefit) Expense		(1.6	)%		0.4	%		(464.2	)%
Net (Loss) Income and Comprehensive (Loss) Income		(4.4	)%		1.4	%		(362.2	)%




	Three Months Ended March 31,
	2023			2022
SELECTED SALES DATA
Average Sale1	$	1,767		$	1,695
Comparable Store Net Sales (Decrease) Increase2		(15.4	)%		(3.6	)%
Transaction Count Decrease3		(19.6	)%		(23.3	)%
Average Retail Price per Unit Sold Increase4		8.7	%		10.3	%

Number of Stores Open, end of period		443			431
Number of Stores Opened in Period, net of closures		1			7

Average sale is defined as the average invoiced sales order, measured quarterly, excluding returns as well as transactions under ~~our Credit Agreement will be sufficient~~$100 (which are generally sample orders or add-on/accessories to ~~meet our obligations, fund our settlements, operations, anticipated capital expenditures,~~existing orders).

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

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

Average retail price per unit (square feet for flooring and ~~potential share repurchases~~other units of measures for ~~the next 12 months. We prepare our forecasted cash flow~~moldings and ~~liquidity estimates based~~accessories) sold is calculated on ~~assumptions that we believe to be reasonable but are also inherently uncertain. Actual future cash flows could differ from these estimates.~~

a total company basis and excludes non-merchandise revenue.

~~Impact of Macroeconomic Environment~~Net Sales

Net sales of $240.7 million decreased 13.7% compared to the same period last year, driven by lower spending by consumers versus last year combined with a decline in Pro sales. Total comparable store sales decreased 15.4% versus the same period last year. During the first quarter, the Company opened one new store, bringing total stores to 443 as of March 31, 2023.~~We continue~~

Average sale increased 4.2% and average retail price per unit sold increased 8.7%, primarily due to the Company's pricing and promotion strategies to offset higher material and transportation costs as well as favorable product mix. This was more than offset by the 19.6% decrease in transaction count, reflecting continued pressures on consumer discretionary spending due to consumer confidence, inflation, volatile mortgage rates impacting housing affordability and lower existing home sales. As the Company continues to navigate uncertainty in the macroeconomic environment, it will continue to monitor the competitive pricing environment to inform its pricing and promotion strategies.

Table of Contents

Gross Profit

Gross profit of $88.0 million decreased $16.1 million compared to the first quarter of 2022, and gross margin of 36.6% decreased 70 basis points compared to the same period last year, driven by $2.1 million in incremental costs related to ~~inflation, consumer spending, global supply chain disruptions, COVID-19,~~customs delays on flooring products that contain PVC as a consequence of the UFLPA. Gross profit for the first quarter of 2022 was impacted by the net of antidumping and ~~a challenging labor market. We anticipate~~countervailing duty rate changes. Excluding these 2023 and 2022 unusual items, adjusted gross margin (a non-GAAP measure) of 37.4% increased 20 basis points compared to the same period last year, primarily reflecting the Company's ability to offset higher material and transportation costs (collectively up more than 500 basis points) through pricing, promotion and alternative country/vendor sourcing strategies.

In order to ~~remain inflated, exacerbated by~~further reduce transportation costs and optimize our supply chain network, the ~~war~~Company will be opening a third distribution center in ~~Ukraine, throughout 2022. We are also monitoring~~ the ~~impact~~third quarter of ~~inflation on consumer purchasing trends as it could affect~~2023. In March 2023, the Company entered into a ten-year lease agreement for a 457,363 square foot distribution center in Dallas, Texas, which will enable us to more efficiently serve our ~~prices, demand~~stores located in the Central United States. See Item 1, Note 8 to the consolidated financial statements for ~~our products, our sales and our profit margins.~~further detail regarding the lease.

~~Section 301 Tariffs~~

~~The~~Additionally, the Company’s financial statements have been impacted by Section 301 tariffs on certain products imported from China in recent years. 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. ~~During the second quarter of 2022,~~Through its sourcing strategy, the Company ~~reduced~~held the ~~percent~~percentage of merchandise receipts subject to Section 301 tariffs to ~~12% from 22%~~16% during the ~~second quarter of 2021.~~three months ended March 31, 2023 and 2022.

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.~~CAFC. If these appeals are successful, the Company should qualify for refunds on these Section 301 tariffs.


	Three Months Ended March 31,
	2023					2022
	$		% of Sales			$			% of Sales
	(in thousands, except percentage data)
Gross Profit/Margin, as reported (GAAP)	$	88,000		36.6	%	$	104,079			37.3	%

Vinyl Charges1		2,138		0.9	%		—			—	%
Antidumping and Countervailing Adjustments2		—		—	%		(241	)		(0.1	)%
Adjustment Items Subtotal		2,138		0.9	%		(241	)		(0.1	)%

Adjusted Gross Profit/Margin (non-GAAP measures)	$	90,138		37.4	%	$	103,838			37.2	%

This amount represents costs related to customs delays on flooring products that contain PVC as a consequence of the UFLPA.

This amount represents net antidumping and countervailing income associated with applicable prior-year shipments of engineered hardwood from China.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses of $101.2 million increased $2.2 million, and SG&A as a percentage of net sales of 42.0% increased 650 basis points versus the first quarter of last year. SG&A expenses in the first quarter of 2023 included a $0.3 million charge for legal fees charged to earnings related to CBP requests for additional documentation on imports of flooring products that contain PVC as a consequence of the UFLPA. Excluding the impact of the legal fees, adjusted SG&A expense (a non-GAAP measure) increased $1.9 million year-over-year, and adjusted SG&A as a percentage of net sales (a non-GAAP measure) of 41.9% increased 640 basis points compared to the first quarter of last year.

The increases in both SG&A and adjusted SG&A as a percentage of net sales were due primarily to expense deleverage from lower sales volumes. In addition, operating expenses were higher due to the planned investments in our growth strategies including: costs associated with new stores, investments in technology and digital enhancements to improve the customer experience, and consulting fees related to realigning our cost structure, as well as inflationary cost increases. The increase was partially offset by restructuring cost savings and lower variable costs due to lower sales volume.

Table of Contents

~~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.

% Improvement

% of Net Sales

(Decline) in

Three Months Ended June 30,

Dollar Amounts

2022

2021

2022 VS 2021

Net Sales

Net Merchandise Sales

86.2
%

86.1
%

(0.8)
%
Net Services Sales

13.8
%

13.9
%

(1.1)
%
Total Net Sales

100.0
%

100.0
%

(0.8)
%
Gross Profit

35.7
%

37.4
%

(5.3)
%
Selling, General, and Administrative Expenses

34.1
%

31.9
%

6.2
%
Operating Income

1.6
%

5.5
%

(71.9)
%
Other Expense

0.1
%

0.2
%

(60.2)
%
Income Before Income Taxes

1.5
%

5.3
%

(72.3)
%
Income Tax Expense

0.6
%

1.3
%

(58.1)
%
Net Income

0.9
%

4.0
%

(77.2)
%

% Improvement

% of Net Sales

(Decline) in

Six Months Ended June 30,

Dollar Amounts

2022

2021

2022 VS 2021

Net Sales

Net Merchandise Sales

86.8
%

87.1
%

(1.5)
%
Net Services Sales

13.2
%

12.9
%

1.2
%
Total Net Sales

100.0
%

100.0
%

(1.2)
%
Gross Profit

36.5
%

39.0
%

(7.7)
%
Selling, General, and Administrative Expenses

34.8
%

34.0
%

1.3
%
Operating Income

1.7
%

5.1
%

(67.3)
%
Other Expense

0.0
%

(0.0)
%

(167.9)
%
Income Before Income Taxes

1.6
%

5.1
%

(68.2)
%
Income Tax Expense

0.5
%

1.2
%

(62.6)
%
Net Income

1.2
%

3.9
%

(70.0)
%

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021


2022

2021

SELECTED SALES DATA

Average Sale¹

$
1,860

$
1,564

$
1,777

$
1,488

Comparable Stores (Decrease) Increase²

(3.1)
%

31.3
%

(3.3)
%

18.2
%
Transaction Count (Decrease) Increase³

(22.0)
%

2.0
%

(16.7)
%

2.3
%
Average Retail Price per Unit Sold Increase⁴

14.7
%

9.9
%

12.5
%

6.8
%

Number of Stores Open, end of period

437

416

437

416

Number of Stores Opened in Period, net

6

4

13

6

Number of Stores Relocated in Period⁵

1

—

1

—

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).

~~Table of Contents~~

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.~~

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

~~Net Sales~~

~~Second quarter 2022 net sales of $299.0 million decreased $2.4 million, or 0.8%, versus the second quarter of 2021. Net merchandise sales and net service sales decreased 0.8% and 1.1%, respectively.~~

Average ticket increased 18.9%, primarily reflecting higher merchandise average ticket. The higher merchandise average ticket was driven primarily by pricing and promotion strategies as well as favorable product mix, reflecting the launch of our new Duravana performance flooring brand.

Comparable store sales for the second quarter of 2022 decreased 3.1% from the second quarter of 2021. The Company reported record sales to Pro customers, which partially offset a decrease in sales to consumers and a 1.1% decrease in net service sales. The year-over-year decrease in comparable store sales reflected continued lower spending by consumers versus last year, which we believe reflected pressure from inflation and higher interest rates, and their preference to spend more on travel and entertainment.

During the ~~second quarter of 2022,~~three months ended March 31, 2023, the Company ~~opened six new stores bringing the total store count to 437 as of June 30, 2022.~~

Net sales for the six months ended June 30, 2022 decreased 1.2% from the six months ended June 30, 2021. Net merchandise sales decreased 1.5%, partially offset by an increase in net service sales of 1.2% over the same period in 2021. Comparable store sales for the six months ended June 30, 2022 decreased 3.3% from the same period in 2021.

~~Gross Profit~~

Gross profit decreased 5.3% in the second quarter of 2022 to $106.8 million from $112.7 million in the comparable period in 2021, and gross margin decreased 170 basis points to 35.7% in the second quarter of 2022 from 37.4% in the second quarter of 2021. For the second quarter of 2022, the Company reported an unfavorable $1.2 million impact from anti-dumping duty rate changes compared to the prior-year period. Excluding these items as shown on the table that follows, adjusted gross margin (a non-GAAP measure) of 36.1% decreased 130 basis points compared to the same period last year, primarily reflecting significantly higher material and transportation costs (collectively up more than 1,000 basis points) that the Company was able to partially mitigate through pricing, promotion and alternative country/vendor sourcing strategies.

Gross profit decreased 7.7% in the first six months of 2022 to $210.8 million from $228.3 million in the comparable period in 2021 and gross margin decreased 250 basis points to 36.5% in the first six months of 2022 from 39.0% in the first six months of 2021. For the first six months of 2022, the Company reported an unfavorable $1.0 million impact from anti-dumping duty rate changes, compared to income of $6.6 million in the prior-year period. Excluding these items as shown on the table that follows, adjusted gross margin (a non-GAAP measure) of 36.7% decreased 120 basis points compared to the same period last year, primarily reflecting significantly higher material and transportation costs (collectively up more than 1,000 basis points) that the Company was able to partially mitigate by pricing, promotion and alternative country/vendor sourcing strategies.

~~Table of Contents~~

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.

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

~~Selling, General and Administrative Expenses~~

SG&A expense for the second quarter of 2022 increased $6.0 million to $102.1 million, or 34.1% of sales, compared to $96.1 million, or 31.9% of sales, in the second quarter of 2021. Adjusted SG&A (a non-GAAP measure) for the second quarter of 2022 was $102.1 million, compared to $95.8 million in the second quarter of 2021. As a percentage of sales, adjusted SG&A increased 230 basis points, to 34.1% of sales, compared to 31.8% for the second quarter in 2021, which is primarily driven by investments to support the Company’s long-term growth, higher advertising expense due to the timing of promotions, and continued investment in customer facing and distribution center personnel.

SG&A expense for the first six months of 2022 increased $2.5 million to $201.1 million, or 34.8% of sales, compared to $198.6 million, or 34.0% of sales, in the first six months of 2021. SG&A in the first six months of 2021 included certain costs related to legal matters and settlements. Excluding these items as shown in the table that follows, adjusted SG&A (a non-GAAP measure) for the first six months of 2022 was $201.1 million, compared to $190.5 million in the first six months of 2021. As a percentage of sales, adjusted SG&A increased 220 basis points, to 34.8% of sales, compared to 32.6% for the first six months in 2021, reflecting the same drivers as the quarter. The Company redeemed ~~$2.0 million and $2.3~~$0.7 million of MDL and Gold vouchers ~~during the first six months of 2022~~ and ~~2021, respectively, and relieved~~reduced 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 ~~$0.7~~$0.3 million ~~in 2022 and $0.8 million in 2021 --~~ was recorded as a reduction in SG&A expense. During the comparable prior period, the Company redeemed $1.1 million of MDL and Gold vouchers with a gross margin for the items sold of $0.4 million.


	Three Months Ended March 31,
	2023					2022
	$		% of Sales			$		% of Sales
	(in thousands, except percentage data)
SG&A, as reported (GAAP)	$	101,185		42.0	%	$	99,025		35.5	%

Legal and Professional Fees3		280		0.1	%		—		—	%

Adjusted SG&A (a non-GAAP measure)	$	100,905		41.9	%	$	99,025		35.5	%

This amount represents incremental legal fees charged to earnings related to CBP requests for additional documentation on imports of flooring products that contain PVC as a consequence of the UFLPA. This does not include all legal costs incurred by the Company.

~~Table of Contents~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

(dollars in thousands)

(dollars in thousands)

SG&A, as reported (GAAP)

$
102,087

34.1
%
$
96,116

31.9
%

$
201,112

34.8
%
$
198,602

34.0
%

Accrual for Legal Matters and Settlements²

—

—
%

—

—
%

—

—
%

7,675

1.3
%
Legal and Professional Fees³

—

—
%

279

0.1
%

—

—
%

427

0.1
%
Sub-Total Items above

—

—
%

279

0.1
%

—

—
%

8,102

1.4
%

Adjusted SG&A (a non-GAAP measure)

$
102,087

34.1
%
$
95,837

31.8
%

$
201,112

34.8
%
$
190,500

32.6
%

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

3	~~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 (Loss) Income and Operating Margin

Operating ~~income~~loss was ~~$4.7~~$13.2 million ~~for~~in the ~~second~~first quarter of ~~2022~~2023, compared to ~~$16.6~~operating income of $5.1 million ~~for~~in the ~~second quarter~~first three months of ~~2021.~~2022. Adjusted operating loss (a non-GAAP measure) of $10.8 million decreased $15.6 million from $4.8 million adjusted operating income (a non-GAAP measure) in the ~~second~~first quarter of ~~2022 was $5.9 million, down $11.0 million from~~2022. Operating margin of (5.5)% decreased 730 basis points compared to the ~~$16.9 million for the prior-year period. As a percentage~~first quarter of ~~net sales, adjusted~~last year. Adjusted operating margin (a non-GAAP measure) ~~for~~of (4.5)% decreased 620 basis points compared to the ~~second~~first quarter of ~~2022 was 2.0%, down 360 basis points from 5.6% in the second quarter of 2021,~~last year, which ~~reflected~~reflects the increased selling, general and administrative expenses and decreased gross margin as described in the above sections.


	Three Months Ended March 31,
	2023						2022
	$			% of Sales			$			% of Sales
	(in thousands, except percentage data)
Operating (Loss) Income, as reported (GAAP)	$	(13,185	)		(5.5	)%	$	5,054			1.8	%

Gross Margin Adjustment Items:
Vinyl Charges1		2,138			0.9	%		—			—	%
Antidumping and Countervailing Adjustments2		—			—	%		(241	)		(0.1	)%
Gross Margin Adjustment Items Subtotal		2,138			0.9	%		(241	)		(0.1	)%

SG&A Adjustment Items:
Legal and Professional Fees3		280			0.1	%		—			—	%
SG&A Adjustment Items Subtotal		280			0.1	%		—			—	%

Adjusted Operating (Loss) Income/ Margin (a non-GAAP measure)	$	(10,767	)		(4.5	)%	$	4,813			1.7	%

Operating income was $9.7 million for the first six months of 2022 compared to $29.7 million for the first six months of 2021. Adjusted operating income (a non-GAAP measure) in the first six months of 2022 was $10.7 million, down $20.6 million from the $31.3 million for the prior-year period. As a percentage of net sales, adjusted operating margin (a non-GAAP measure) for the first six months of 2022 was 1.9%, down 340 basis points from 5.3% in the first six months of 2021, which reflected the increased selling, general and administrative expenses and decreased gross margin as described in the above sections.

1,2,3

~~Table of Contents~~

Three Months Ended

Six Months Ended

June 30,

June 30,


2022

2021


2022

2021

$

% of Sales

$


% of Sales

$

% of Sales

$


% of Sales

(dollars in thousands)

(dollars in thousands)

Operating Income, as reported (GAAP)

$
4,663

1.6
%
$
16,614

5.5
%

$
9,717

1.7
%
$
29,720

5.1
%

Gross Margin Items:

Antidumping Adjustments¹

1,218

0.4
%

—

—
%

977

0.2
%

(6,566)

(1.1)
%
Gross Margin Subtotal

1,218

0.4
%

—

—
%

977

0.2
%

(6,566)

(1.1)
%

SG&A Items:







Accrual for Legal Matters and Settlements²

—

—
%

—

—
%

—

—
%

7,675

1.3
%
Legal and Professional Fees³

—

—
%

279

0.1
%

—

—
%

427

0.1
%
SG&A Subtotal

—

—
%

279

0.1
%

—

—
%

8,102

1.4
%

Adjusted Operating Income/Margin (a non-GAAP measure)

$
5,881

2.0
%
$
16,893

5.6
%

$
10,694

1.9
%
$
31,256

5.3
%

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

Table of Contents

Other Expense (Income)

In the second quarter of 2022, we had other expense of $0.2 million compared to other expense of $0.5 million for the second quarter of 2021. Adjusted other expense (a non-GAAP measure) was $0.1 million for the second quarter of 2022, which is a decrease of $0.4 million compared to the second quarter of 2021 driven by the decrease in outstanding debt during the quarter compared to prior year.

The Company had other expense of ~~$0.2~~$1.2 million for the first ~~six months~~quarter of ~~2022~~2023 compared to other income of ~~$0.3 million for the comparable period~~$15.2 thousand in ~~2021. Both years included interest on borrowings on our Credit Agreement. Adjusted other expense (a non-GAAP measure) was $0.2 million for~~ the first ~~six months~~quarter of ~~2022, which is a decrease of $1.4 million compared to the first six months of 2021 driven~~2022. The prior year income was favorably impacted by ~~a favorable adjustment in 2021 of $1.8 million for~~ the reversal of interest expense associated with ~~an anti-dumping~~antidumping and countervailing duty rate ~~refund.~~

~~We believe that~~changes. Excluding the ~~following item set forth~~antidumping and countervailing adjustment in the ~~table below can distort~~first quarter of 2022, adjusted other expense (a non-GAAP measure) of $1.2 million in the ~~visibility~~first quarter of 2023 decreased $1.1 million from the first quarter of last year. The increase in other expense and adjusted other expense in the first quarter of 2023 is due to the interest on borrowings on our ~~ongoing performance and that~~Credit Agreement, compared to no borrowings on the ~~evaluation~~Credit Agreement in the first quarter of ~~our financial performance can be enhanced by use of supplemental presentation of our results that exclude~~2022.


	Three Months Ended March 31,
	2023					2022
	$		% of Sales			$			% of Sales
	(in thousands, except percentage data)
Other Expense (Income), as reported (GAAP)	$	1,159		0.5	%	$	(15	)		—	%

Interest Impact Related to Antidumping and Countervailing Adjustments4		—		—	%		(84	)		—	%

Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure)	$	1,159		0.5	%	$	69			—	%

This amount represents the interest income impact of ~~these items.~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

$

% of Sales

$

% of Sales

$

% of Sales

$

% of Sales

(dollars in thousands)

(dollars in thousands)
Other Expense (Income), as reported (GAAP)

$
199

0.1
%
$
498

0.2
%

$
184

0.0
%
$
(270)

(0.0)
%

Interest impact related to antidumping adjustment⁴

83

0.0
%

—

—
%

(2)

(0.0)
%

(1,841)

(0.3)
%
Sub-Total Items above

83

0.0
%

—

—
%

(2)

(0.0)
%

(1,841)

(0.3)
%

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

$
116

0.0
%
$
498

0.2
%

$
186

0.0
%
$
1,571

0.3
%

certain antidumping and countervailing adjustments related to applicable prior-year shipments of engineered hardwood from China.

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

~~Table of Contents~~

Provision for Income Taxes

For the three months ended ~~June 30,~~March 31, 2023, the Company recognized income tax benefit of $3.8 million, which represented an effective tax rate of 26.2%. For the three months ended March 31, 2022, the Company recognized income tax expense of ~~$1.7~~$1.0 million, which represented an effective tax rate of ~~38.7%. For the three months ended June 30, 2021, the Company recognized income tax expense of $4.1 million, which represented an effective tax rate of 25.6%~~20.4%. The higher effective tax rate in the current period primarily reflects the ~~greater~~ impact of permanent items on the ~~lower~~ pretax ordinary ~~income.~~

For the six months ended June 30, 2022, the Company recognized income tax expense of $2.8 million, which represented an effective tax rate of 29.0%. For the six months ended June 30, 2021, the Company recognized income tax expense of $7.4 million, which represented an effective tax rate of 24.6%. The higher effective tax rate is caused by the same drivers of the increase in effective tax rate for the quarter.loss.

~~The Company has a valuation allowance recorded against certain~~

Table of its net deferred tax assets of $2.4 million as of June 30, 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.Contents

Net (Loss) Income per Diluted Share

Net ~~income~~loss per diluted share was ~~$0.09~~$0.37 for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$0.41~~net income per diluted share of $0.14 for the three months ended ~~June 30, 2021.~~March 31, 2022. Adjusted ~~earnings~~loss per diluted share was $0.31 for the three months ended March 31, 2023, compared to net income per diluted share of $0.13 for the three months ended ~~June 30, 2022, compared to $0.41 for the three months ended June 30, 2021.~~March 31, 2022.


	Three Months Ended March 31,
	2023			2022
	(in thousands, except per share data)
Net (Loss) Income, as reported (GAAP)	$	(10,585	)	$	4,037
Net (Loss) Income per Diluted Share (GAAP)	$	(0.37	)	$	0.14

Gross Margin Adjustment Items:
Vinyl Charges1		2,138			—
Antidumping and Countervailing Adjustments2		—			(241	)
Gross Margin Adjustment Items Subtotal		2,138			(241	)

SG&A Adjustment Items:
Legal and Professional Fees3		280			—
SG&A Adjustment Items Subtotal		280			—

Other Expense (Income) Adjustment Items:
Interest Impact Related to Antidumping and Countervailing Adjustments4		—			(84	)
Other Expense (Income) Adjustment Items Subtotal		—			(84	)

Income Tax Adjustment5		(636	)		85

Adjusted (Loss) Earnings	$	(8,803	)	$	3,797
Adjusted (Loss) Earnings per Diluted Share (a non-GAAP measure)	$	(0.31	)	$	0.13

Net income per diluted share was $0.23 for the six months ended June 30, 2022, compared to $0.77 for the six months ended June 30, 2021. Adjusted earnings per diluted share was $0.26 for the six months ended June 30, 2022, compared to $0.76 for the six months ended June 30, 2021.

1,2,3,4

~~Table of Contents~~

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

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

(in thousands)

(in thousands)
Net Income, as reported (GAAP)

$
2,736

$
11,989

$
6,773

$
22,611
Net Income per Diluted Share (GAAP)

$
0.09

$
0.41

$
0.23

$
0.77

Gross Margin Items:








Antidumping Adjustments¹

896

—

719

(4,852)
Gross Margin Subtotal

896

—

719

(4,852)

SG&A Items:








Accrual for Legal Matters and Settlements²

—

—

—

5,672
Legal and Professional Fees³

—

206

—

316
SG&A Subtotal

—

206

—

5,988

Other Expense (Income) Items:

Antidumping Adjustments Interest⁴

61

—

(1)

(1,360)
Other (Expense) Income Subtotal

61

—

(1)

(1,360)

Adjusted Earnings

$
3,693

$
12,195

$
7,491

$
22,387
Adjusted Earnings per Diluted Share (a non-GAAP measure)

$
0.13

$
0.41

$
0.26

$
0.76

^1,2,3,4,5,6See the Gross Profit, SG&A and Other Expense (Income) sections above for more detailed explanations of these individual items. ~~These~~

Income tax adjustment is defined as the sum of gross margin, SG&A, and other expense (income) adjustment items ~~have been tax affected at~~multiplied by the Company’s federal incremental rate, which was ~~26.4%~~26.3% for the ~~2022 period~~periods ended March 31, 2023 and ~~26.1% for the 2021 period.~~

2022.

~~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.

Liquidity, Capital Resources and Cash Flows

~~Our strong balance sheet~~Sources of Liquidity

Cash flows from operations supplemented with our short-term and ~~liquidity provide~~long-term borrowings remain sufficient to fund our operations while allowing us ~~with the financial flexibility~~ to fund our growth initiatives and position LL Flooring for long-term success. ~~Our principal sources~~As of March 31, 2023, we had liquidity ~~at June 30, 2022 were $5.0~~of $156.8 million, consisting of excess availability under our Credit Agreement of $149.8 million and cash and cash equivalents ~~on our balance sheet and $181.9~~of $7.0 million. This represents an increase in liquidity of $21.2 million from December 31, 2022, primarily reflecting repayments of ~~availability~~outstanding debt under ~~our Revolving Loan. As of June 30, 2022, there was a $15.0 million outstanding balance on our Revolving Loan.~~

Our net cash flows used in operating activities were $76.0 million during the six months ended June 30, 2022, which was primarily the result of purchases of inventory ($106.0 million), redemption of customer deposits and store credits ($8.6 million), and payments for legal matters and settlements ($8.0 million), partially offset by increased accounts payable ($25.0 million) and net income ($6.8 million).

Through the six months ended June 30, 2022, net cash flows used in investing activities included $11.6 million in capital expenditures for store rebranding, opening six new stores and investments in digital. For 2022 w~~e currently expect capital expenditure investments of $23 million to $25 million, including the opening of 20 to 22 new stores and the continuation of the investing activities described above.~~

~~Table of Contents~~

~~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.

The Company continues to navigate uncertainty in the macroeconomic environment related to inflation, consumer spending, global supply chain disruptions, COVID-19, and a challenging labor market. As of June 30, 2022, we have rebuilt inventory by more than $104 million after an extended period of supply chain constraints.Agreement. 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 and fund our settlements, operations, anticipated capital expenditures, and potential share repurchases for the next 12 months.

The Company continues to navigate uncertainty in the macroeconomic environment due to consumer confidence, inflation, volatile mortgage rates impacting housing affordability and lower existing home sales. 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.

Table of Contents

Capital Resources

As of March 31, 2023, our material contractual obligations consist of long-term debt and letters of credit under our Credit Agreement and leases. See Note 5 to the consolidated financial statements for further detail related to our Credit Agreement. See Note 8 to the consolidated financial statements for further detail related to leases to be read in conjunction with the Form 10‑K for the year ended December 31, 2022.

Cash Flows Summary


	Three Months Ended March 31,
	2023			2022
	(in thousands)
Net Cash Provided by (Used in) Operating Activities	$	26,149		$	(23,401	)
Net Cash Used in Investing Activities		(4,741	)		(5,189	)
Net Cash Used in Financing Activities		(25,231	)		(528	)
Net Decrease in Cash and Cash Equivalents	$	(3,823	)	$	(29,118	)

During the three months ended March 31, 2023, the Company generated $26.1 million of cash flows from operating activities primarily driven by sell throughs of merchandise inventories rebuilt from the prior year end and reduced inventory purchases.

During the three months ended March 31, 2022, the Company used $23.4 million of cash flows for operating activities, which was primarily the result of purchases of inventory ($64.8 million), partially offset by increased accounts payable ($26.0 million), and net income ($4.0 million).

Net cash flows used in investing activities included $4.7 million and $5.2 million in capital expenditures in the three months ended March 31, 2023 and 2022, respectively. Capital expenditures in both years were used primarily for opening new stores and investments in digital, with additional investments related to store rebranding in the first quarter of 2022. The Company opened one new store in the first quarter of 2023 versus seven new stores in the same quarter prior year.

Net cash flows used in financing activities was $25.2 million during the three months ended March 31, 2023, compared to $0.5 million during the three months ended March 31, 2022. The activity in the current year was primarily attributable to $25.0 million of net repayments of outstanding debt under the Credit Agreement. Additionally, financing activities in the first quarter of both 2023 and 2022 included repurchases of common stock.

Merchandise Inventories

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 buildup of merchandise inventories. Generally, we experience higher-than-average net sales in the spring and fall, when more home remodeling activities typically take place, and lower-than-average net sales in the winter months and during the hottest summer months.

Merchandise inventories ~~at June 30, 2022 increased $104.4~~on March 31, 2023 decreased $24.6 million from December 31, ~~2021 primarily due~~2022 as the Company began to ~~increased purchases to replenish~~sell through inventory ~~as well as, to a lesser extent, inflation.~~rebuilt from the prior year and reduced inventory purchases. We consider merchandise inventories either “available for sale” or ~~“inbound in-transit,~~“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.

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

��


As of June 30,

As of December 31,

As of June 30,

2022

2021

2021

(in thousands)
Inventory – Available for Sale

$
314,124

$
197,927

$
190,916
Inventory – Inbound In-Transit

44,680

56,458

32,991
Total Merchandise Inventories

$
358,804

$
254,385

$
223,907

Available Inventory Per Store

$
719

$
467

$
459

~~Available inventory per store at June 30, 2022 was higher than at December 31, 2021 and June 30, 2021 as a result of rebuilding our inventory levels.~~

~~Inbound in-transit~~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~~

Table of Contents

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


	As of		As of		As of
	March 31, 2023		December 31, 2022		March 31, 2022
	(in thousands)
Inventory – Available for Sale	$	284,462	$	307,730	$	266,228
Inventory – In-Transit		23,276		24,566		52,346
Total Merchandise Inventories	$	307,738	$	332,296	$	318,574

Inventory Available for Sale Per Store	$	642	$	696	$	618

Inventory available for sale per store as of March 31, 2023 decreased compared to ~~supply chain difficulties, international shipment times have lengthened.~~December 31, 2022 due to the same drivers as merchandise inventories as well as the opening of a new store in the first quarter of 2023. Inventory available for sale per store increased compared to March 31, 2022 reflecting the Company's strategy to utilize the merchandise inventories rebuilt in 2022 to offer a compelling assortment of trend-right products close to its customers, as well as, to a lesser extent, inflation.

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~~10‑K for the year ended December 31, ~~2021.~~

2022.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures ~~About~~about Market Risk.

Interest Rate Risk.

The Company can be exposed to interest rate risk because of variable rate borrowings under ~~the credit facility.~~our Credit Agreement. To the extent the Company borrows at ~~LIBOR,~~Term SOFR, financial results are subject to changes in the market rate of ~~interest as well as the expected transition from the LIBOR reference rate in 2022.~~interest. As of ~~June 30, 2022,~~March 31, 2023, we had ~~$15~~$47.0 million outstanding under our Revolving Credit ~~Agreement,~~Facility, which carried a weighted average interest rate of ~~4.7%~~6.1% repayable at any time. A hypothetical 1% increase in interest rates would cause an increase of ~~$150 thousand~~$0.5 million of annual interest if outstanding for the full year.

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 ~~June 30, 2022.~~March 31, 2023. 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 ~~June 30, 2022.~~March 31, 2023.

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.

Table of Contents

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, ~~2021,~~2022, which could materially affect our business, financial condition or future results.

~~Table of Contents~~

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

The following table presents our share repurchase activity for the quarter ended ~~June 30, 2022~~March 31, 2023 (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

Purchased^1,2

per Share^1,2

Programs¹

Programs¹
April 1, 2022 to April 30, 2022

106
$
14.13

106
$
48,506
May 1, 2022 to May 31, 2022

465

11.83

571

43,000
June 1, 2022 to June 30, 2022

—

—

571

43,000
Total

571
$
12.25

571
$
43,000


					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	Purchased2		Per Share2		Programs		Programs1
January 1, 2023 to January 31, 2023		—	$	-		—	$	43,000
February 1, 2023 to February 28, 2023		13		5.05		—		43,000
March 1, 2023 to March 31, 2023		42		3.96		—		43,000
Total		55	$	4.22		—	$	43,000

In January 2012, the Company’s board of directors adopted an authorization for the repurchase of up to a total of $50.0 million of the Company’s common stock, which it increased by $50.0 million in each of November 2012 and January 2014. In February 2022, the board of directors further increased this authority by an additional $35.3 million for a total authorization to repurchase up to $50.0 million of the Company’s common stock on the open market or in private transactions. As of March 31, 2023, there remains $43.0 million outstanding under the share repurchase authorization, which does not have an expiration date. The Company did not repurchase any shares under the previous authorization during the three months ended March 31, 2023.

In February 2022, the Company’s board of directors raised its authorization for the repurchase of up to $50 million of the Company’s common stock. In April 2022, the Company resumed its share repurchase program. The Company made cash payments of $7 million to repurchase 571,332 shares under the share repurchase authorization during the three months ended June 30, 2022. There remains $43.0 million outstanding under the share repurchase authorization.

2	We also repurchased 8,314 shares of our common stock, at an average price of $11.63, in connection with the net settlement of shares issued as a result of the vesting of restricted shares during the quarter ended June 30, 2022.

The table above reflects repurchases of 54.7 thousand shares of our common stock, at an average price of $$4.22, in connection with the net settlement of shares issued as a result of the vesting of restricted shares during the three months ended March 31, 2023.

Item 3. Defaults Upon Senior Securities.

~~None.~~

None.

Item 4. Mine Safety Disclosures.

~~None.~~

None.

Item 5. Other Information.

None.~~None.~~

Table of Contents

Item 6. Exhibits.

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

~~Table of Contents~~

EXHIBIT INDEX


~~Exhibit~~
~~Number~~Exhibit		~~Exhibit Description~~
~~10.1~~Number		~~Form of Restricted Stock Unit Agreement (Non-Employee Director), effective May 18, 2022 (filed herewith).~~Exhibit Description
~~10.2~~10.1*		~~Form~~Tatum Services Agreement, dated as of ~~Restricted Stock Award Agreement (Non-Employee Director), effective May 18, 2022~~March 6, 2023 between Randstad Professional US, LLC d/b/a Tatum and LL Flooring Holdings, Inc. (filed herewith).
~~31.1~~10.2*		Form of Performance-Based Stock Unit Award Agreement, effective March 14, 2023 (filed herewith).
31.1		Certification of Principal Executive Officer of LL Flooring Holdings, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer of 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 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~~10‑Q for the quarter ended ~~June 30, 2022,~~March 31, 2023, formatted in Inline XBRL: (i) ~~Condensed~~ Consolidated Balance Sheets, (ii) ~~Condensed~~ Consolidated Statements of Operations ~~(iii) Condensed Consolidated Statements of~~and Comprehensive ~~Loss, (iv) Condensed~~(Loss) Income, (iii) Consolidated Statements of Stockholders’ Equity, ~~(v) Condensed~~(iv) Consolidated Statements of Cash Flows, and ~~(vi)~~(v) Notes to ~~Condensed~~ Consolidated Financial Statements
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

Table of Contents

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.


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

~~Date: August 2, 2022~~	~~By:~~	~~/s/ Nancy A. Walsh~~
		~~Nancy A. Walsh~~
		~~Chief Financial Officer~~ ~~(Principal Financial Officer)~~
		LL FLOORING HOLDINGS, INC.
		(Registrant)

Date: May 8, 2023	By:	/s/ F. Terrence Blanchard
		F. Terrence Blanchard
		Interim Chief Financial Officer (Principal Financial Officer)


		Restricted Stock
	Stock Options	Awards
Options Outstanding/Nonvested RSAs, December 31, 2021	625	631
Granted	175	400
Options Exercised/RSAs Released	(21)	(158)
Forfeited	(39)	(48)
Options Outstanding/Nonvested RSAs, June 30, 2022	740	825


	Stock Options			Restricted Stock Awards
	(in thousands)
Options Outstanding/Nonvested RSAs, December 31, 2022		724			637
Granted		—			1,416
Options Exercised/RSAs Released		—			(159	)
Forfeited		(156	)		(61	)
Options Outstanding/Nonvested RSAs, March 31, 2023		568			1,833


		~~Page~~
		Page
	~~PART I – FINANCIAL INFORMATION~~	2
	PART I - FINANCIAL INFORMATION		2

Item 1.	~~Condensed~~ Consolidated Financial Statements and Supplementary Data	2
		2
Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	16
		14
Item 3.	Quantitative and Qualitative Disclosures ~~About~~about Market Risk	28
		23
Item 4.	Controls and Procedures	28
		23
	~~PART II – OTHER INFORMATION~~	28
	PART II - OTHER INFORMATION		24

Item 1.	Legal Proceedings	28
		24
Item 1A.	Risk Factors	28
		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
		24
Item 3.	Defaults Upon Senior Securities	29
		24
Item 4.	Mine Safety Disclosures	29
		24
Item 5.	Other Information	29
		24
Item 6.	Exhibits	29
		25
	Signatures	31	26


	June 30,		December 31,
	2022		2021
Assets
Current Assets:
Cash and Cash Equivalents	$	5,032	$	85,189
Merchandise Inventories		358,804		254,385
Prepaid Expenses		10,959		9,160
Other Current Assets		14,995		11,094
Total Current Assets		389,790		359,828
Property and Equipment, net		100,148		96,926
Operating Lease Right-of-Use Assets		123,756		119,510
Goodwill		9,693		9,693
Net Deferred Tax Assets		11,469		11,336
Other Assets		6,404		8,599
Total Assets	$	641,260	$	605,892

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable	$	88,954	$	63,464
Customer Deposits and Store Credits		58,427		67,063
Accrued Compensation		8,042		10,128
Sales and Income Tax Liabilities		5,560		4,297
Accrual for Legal Matters and Settlements		23,799		33,611
Operating Lease Liabilities - Current		34,064		33,060
Other Current Liabilities		27,093		20,717
Total Current Liabilities		245,939		232,340
Other Long-Term Liabilities		6,979		4,268
Operating Lease Liabilities - Long-Term		100,073		97,163
Credit Agreement		15,000		—
Total Liabilities		367,991		333,771

Commitments and Contingencies

Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 30,733 and 30,536 shares issued and 28,680 and 29,113 shares outstanding, respectively)		31		31
Treasury Stock, at cost (2,053 and 1,423 shares, respectively)		(153,244)		(145,337)
Additional Capital		230,086		227,804
Retained Earnings		196,396		189,623
Total Stockholders’ Equity		273,269		272,121
Total Liabilities and Stockholders’ Equity	$	641,260	$	605,892


	March 31,			December 31,
	2023			2022
Assets
Current Assets:
Cash and Cash Equivalents	$	6,977		$	10,800
Merchandise Inventories		307,738			332,296
Prepaid Expenses		10,443			9,054
Other Current Assets		14,441			17,598
Total Current Assets		339,599			369,748
Property and Equipment, net		100,421			101,758
Operating Lease Right-of-Use Assets		125,096			123,172
Net Deferred Tax Assets		17,533			13,697
Other Assets		5,628			5,578
Total Assets	$	588,277		$	613,953

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable	$	54,361		$	47,733
Customer Deposits and Store Credits		46,560			43,767
Accrued Compensation		6,429			9,070
Sales and Income Tax Liabilities		3,462			3,574
Accrual for Legal Matters and Settlements		21,494			22,159
Operating Lease Liabilities - Current		30,564			34,509
Other Current Liabilities		24,680			19,712
Total Current Liabilities		187,550			180,524
Other Long-Term Liabilities		6,192			6,162
Operating Lease Liabilities - Long-Term		101,219			99,186
Credit Agreement		47,000			72,000
Total Liabilities		341,961			357,872

Commitments and Contingencies

Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 30,916 and 30,758 shares issued and 28,798 and 28,695 shares outstanding at March 31, 2023, and December 31, 2022, respectively)		31			31
Treasury Stock, at cost (2,118 and 2,063 shares, respectively)		(153,562	)		(153,331	)
Additional Capital		232,890			231,839
Retained Earnings		166,957			177,542
Total Stockholders’ Equity		246,316			256,081
Total Liabilities and Stockholders’ Equity	$	588,277		$	613,953


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

March 31, 2021	29,025	$	30	1,373	$	(144,352)	$	223,899	$	158,547	$	238,124
Stock-Based Compensation Expense	—		—	—		—		1,365		—		1,365
Exercise of Stock Options	3		—	—		—		23		—		23
Release of Restricted Shares	35		—	—		—		—		—		—
Common Stock Repurchased	—		—	19		(436)		—		—		(436)
Net Income	—		—	—		—		—		11,989		11,989
June 30, 2021	29,063	$	30	1,392	$	(144,788)	$	225,287	$	170,536	$	251,065

March 31, 2022	29,228	$	31	1,474	$	(146,147)	$	228,959	$	193,660	$	276,503
Stock-Based Compensation Expense	—		—	—		—		1,113		—		1,113
Exercise of Stock Options	1		—	—		—		14		—		14
Release of Restricted Shares	22		—	—		—		—		—		—
Common Stock Repurchased	(571)		—	579		(7,097)		—		—		(7,097)
Net Income	—		—	—		—		—		2,736		2,736
June 30, 2022	28,680	$	31	2,053	$	(153,244)	$	230,086	$	196,396	$	273,269



															Total
	Common Stock				Treasury Stock					Additional		Retained			Stockholders’
	Shares		Par Value		Shares		Value			Capital		Earnings			Equity
December 31, 2021		29,113	$	31		1,423	$	(145,337	)	$	227,804	$	189,623		$	272,121
Stock-Based Compensation Expense		—		—		—		—			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

December 31, 2022		28,695	$	31		2,063	$	(153,331	)	$	231,839	$	177,542		$	256,081
Stock-Based Compensation Expense		—		—		—		—			1,051		—			1,051
Exercise of Stock Options		—		—		—		—			—		—			—
Release of Restricted Shares		103		—		—		—			—		—			—
Common Stock Repurchased		—		—		55		(231	)		—		—			(231	)
Net Loss		—		—		—		—			—		(10,585	)		(10,585	)
March 31, 2023		28,798	$	31		2,118	$	(153,562	)	$	232,890	$	166,957		$	246,316


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net Income	$	2,736	$	11,989	$	6,773	$	22,611
Weighted Average Common Shares Outstanding—Basic		28,927		29,042		28,856		28,993
Effect of Dilutive Securities:
Common Stock Equivalents		138		446		223		550
Weighted Average Common Shares Outstanding—Diluted		29,065		29,488		29,079		29,543
Net Income per Common Share—Basic	$	0.09	$	0.41	$	0.23	$	0.78
Net Income per Common Share—Diluted	$	0.09	$	0.41	$	0.23	$	0.77


Review Period¹	Period Covered	Rates at which Company Deposited	Final Rate	June 30, 2022 Receivable/Liability Balance
Antidumping
1	May 2011 through November 2012	6.78% and 3.3%	0.0%²	$1.53 million receivable²
2	December 2012 through November 2013	3.30%	3.92% ³	$0.21 million liability³
3	December 2013 through November 2014	3.3% and 5.92%	0.0%⁴	$1.82 million receivable⁴
6	December 2016 through November 2017	17.37% and 0.00%	42.57% and 0.0%⁵	$0.50 million receivable $1.46 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%	39.27%⁸	$1.14 million liability⁸
			Included on the Consolidated Balance Sheet in Other Current Assets	$3.85 million
			Included on the Consolidated Balance Sheet in Other Current Liabilities	$0.21 million
			Included on the Consolidated Balance Sheet in Other Long-Term Liabilities	$2.60 million
Countervailing
1&2	April 2011 through December 2012	1.50%	0.83% / 0.99%	$0.24 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	$1.65 million liability¹¹
8	January 2018 through December 2018	1.06%	6.13%¹²	$0.29 million liability¹²
9	January 2019 through December 2019	0.00%, 0.85%, 2.96%	3.36% / 9.85%¹³	$0.08 million liability¹³
			Included on the Consolidated Balance Sheet in Other Current Assets	$0.07 million
			Included on the Consolidated Balance Sheet in Other Assets	$0.30 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	$2.02 million


							% Improvement
	% of Net Sales						(Decline) in
	Three Months Ended June 30,						Dollar Amounts
	2022			2021			2022 VS 2021
Net Sales
Net Merchandise Sales		86.2	%		86.1	%		(0.8)	%
Net Services Sales		13.8	%		13.9	%		(1.1)	%
Total Net Sales		100.0	%		100.0	%		(0.8)	%
Gross Profit		35.7	%		37.4	%		(5.3)	%
Selling, General, and Administrative Expenses		34.1	%		31.9	%		6.2	%
Operating Income		1.6	%		5.5	%		(71.9)	%
Other Expense		0.1	%		0.2	%		(60.2)	%
Income Before Income Taxes		1.5	%		5.3	%		(72.3)	%
Income Tax Expense		0.6	%		1.3	%		(58.1)	%
Net Income		0.9	%		4.0	%		(77.2)	%

							% Improvement
	% of Net Sales						(Decline) in
	Six Months Ended June 30,						Dollar Amounts
	2022			2021			2022 VS 2021
Net Sales
Net Merchandise Sales		86.8	%		87.1	%		(1.5)	%
Net Services Sales		13.2	%		12.9	%		1.2	%
Total Net Sales		100.0	%		100.0	%		(1.2)	%
Gross Profit		36.5	%		39.0	%		(7.7)	%
Selling, General, and Administrative Expenses		34.8	%		34.0	%		1.3	%
Operating Income		1.7	%		5.1	%		(67.3)	%
Other Expense		0.0	%		(0.0)	%		(167.9)	%
Income Before Income Taxes		1.6	%		5.1	%		(68.2)	%
Income Tax Expense		0.5	%		1.2	%		(62.6)	%
Net Income		1.2	%		3.9	%		(70.0)	%

			��
	As of June 30,		As of December 31,		As of June 30,
	2022		2021		2021

	(in thousands)
Inventory – Available for Sale	$	314,124	$	197,927	$	190,916
Inventory – Inbound In-Transit		44,680		56,458		32,991
Total Merchandise Inventories	$	358,804	$	254,385	$	223,907

Available Inventory Per Store	$	719	$	467	$	459


				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	Purchased^1,2		per Share^1,2	Programs¹		Programs¹
April 1, 2022 to April 30, 2022	106	$	14.13	106	$	48,506
May 1, 2022 to May 31, 2022	465		11.83	571		43,000
June 1, 2022 to June 30, 2022	—		—	571		43,000
Total	571	$	12.25	571	$	43,000