TOANO, Va., Nov. 6 /PRNewswire-FirstCall/ -- Lumber Liquidators, Inc., (NYSE: LL) the largest specialty retailer of hardwood flooring in the U.S., today announced financial results for the third quarter ended September 30, 2008.

Third Quarter Results

Net sales increased 20.6% to $123.1 million in the third quarter of 2008 from $102.1 million in the third quarter of 2007. Comparable store net sales increased 2.0% for the quarter on top of an increase of 8.4% for the third quarter of the prior year. Non-comparable store net sales increased $19.0 million from the third quarter of 2007, and represented 90.2% of the total increase in the Company's net sales. The Company opened eight new stores during the third quarter.

Gross margin increased to 35.3% in the third quarter of 2008 from 33.8% in the same period of 2007. The expansion in gross margin reflects the continued increase in sales of higher-margin, premium products as well as a retroactive rebate of a portion of the tariff on certain bamboo products. In addition, gross margin benefited from the continuing implementation of merchandising, store operations and logistics initiatives designed to enhance operational efficiency.

Selling, general and administrative (SG&A) expenses were $34.6 million, or 28.1% of net sales, for the third quarter of 2008 compared to $28.3 million, or 27.7% of net sales, for the third quarter of 2007 as the leverage of total payroll, advertising and occupancy costs was more than offset by increases in legal and professional fees and stock-based compensation expense.

Net income increased 47.6% to $5.5 million, or $0.20 per diluted share, in the third quarter of 2008 compared to $3.7 million, or $0.16 per diluted share, in the third quarter of 2007.

Jeffrey W. Griffiths, President and Chief Executive Officer, commented, "Our third quarter results demonstrate the benefits we are achieving from increased operational efficiencies and a stronger infrastructure. We performed well despite the challenging economy and are encouraged by the strong results generated by both our new and mature stores. In line with the first half of the year, we continued to generate operating margin expansion through more disciplined store operations and effective inventory management, as well as an improved merchandise assortment. Importantly, we built on our strong cash position during the quarter and continued our store expansion while remaining debt free. Overall, our performance to date this year reflects the solid foundation we have established that will enable us to both grow in a difficult market and succeed in the long-term."

First Nine Months Results

Net sales increased 22.0% to $365.6 million in the first nine months of 2008 from $299.8 million in the first nine months of 2007. Comparable store net sales increased 3.8% for the first nine months of 2008, on top of an increase of 8.6% for the prior year period. Non-comparable store net sales increased $54.5 million, and represented 82.8% of the total increase in the Company's net sales. The Company opened 27 new stores during the first nine months of 2008.

Gross margin increased to 34.9% in the first nine months of 2008 compared to 33.2% in the same period of 2007. SG&A expenses were $101.9 million, or 27.9% of net sales, for the first nine months of 2008 compared to $85.5 million, or 28.5% of net sales, for the 2007 period.

Net income increased to $15.7 million, or $0.58 per diluted share, in the first nine months of 2008 compared to $8.3 million, or $0.36 per diluted share, in the prior year period.

Net income for the first nine months of 2008 reflects an effective tax rate of 41.0% compared to 38.5% in the 2007 period.

Extends Partnership with The Home Service Store, Inc. Across the U.S.

The Company also announced today that is has expanded its installation partnership with The Home Service Store, Inc. ("HSS") across the U.S. The national HSS partnership allows Lumber Liquidators to provide a full product and service offering that is consistent across all store locations and is more attractive to customers. In addition, the Company minimizes risk associated with installation services and is able to reduce time spent by store managers on service issues.

HSS manages fully insured and licensed providers of professional installation services that measure, deliver, and install flooring at competitive prices. Through the expanded arrangement, the Company now offers HSS installation services in virtually every store in its chain. The Company will continue to expand the offering of HSS installation services in new locations as Lumber Liquidators opens additional stores.

Company Outlook

Based upon year-to-date results and current trends, the Company has narrowed its expectations for net sales for 2008 to a range of $482 million to $486 million, as compared to the previously expected range of $480 million to $490 million. Additionally, the Company has narrowed its expectations for full year 2008 earnings per diluted share to a range of $0.74 to $0.77. This compares to its previously expected range of $0.73 to $0.78 per diluted share. The Company now expects comparable store net sales to increase in the low single digit range for the year 2008. Actual results may vary significantly from current expectations.

To date in the fourth quarter of 2008, Lumber Liquidators has opened 7 new stores and has opened a total of 34 new stores for the year, in line with the 34 to 36 anticipated store openings in 2008.

Mr. Griffiths concluded, "We are encouraged by our performance through the first nine months of 2008, and remain optimistic, yet cautious, as we draw closer to the end of the year. Our new stores continue to perform ahead of our expectations and we are pleased with the positive reception that we are receiving in new markets. Additionally, we continued to enhance our value proposition to the customer by expanding our installation partnership with HSS across the chain. While we expect the economy to continue to present challenges into 2009, a debt-free balance sheet, a cash-positive and flexible store model, and a strong infrastructure will enable us to navigate the current macroeconomic environment and generate long-term growth."

Conference Call and Webcast Information

The Company plans to host a conference call and audio webcast on November 6, 2008 at 10:00 a.m. Eastern Time. The conference may be accessed by dialing (800) 762-8908 or (480) 248-5081. A replay will be available approximately one hour after the call through November 20, 2008 and may be accessed by dialing (800) 406-7325 or (303) 590-3030 and referencing PIN code 3933465. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company's website, www.lumberliquidators.com.

About Lumber Liquidators, Inc.

Lumber Liquidators is the largest specialty retailer of hardwood flooring in the United States. With more than 140 stores and 150 varieties of flooring, including solid and engineered hardwood, bamboo, cork and laminate, and featuring premier brands such as Bellawood (which features a 50-year warranty), Dream Home, Schon, Virginia Mill Works, and Morning Star, Lumber Liquidators has one of the most extensive selections of prefinished and unfinished hardwood flooring in the industry. Its hardwood line is made up of more than 25 domestic and exotic wood species in both prefinished and unfinished brands of various lengths and widths.

While keeping costs down is part of the Company's philosophy, Lumber Liquidators is also committed to offering high-quality, name-brand products that it stands behind with confidence.

Forward-Looking Statements

This press release and accompanying financial tables may contain "forward- looking statements" as defined in the Private Securities Litigation Reform Act. These statements are based on currently available information as of the date of such statements and are subject to risks and uncertainties that may cause actual results to differ. The Company specifically disclaims any obligation to update these statements which speak only as of their respective dates, except as may be required under the federal securities laws. Information regarding these additional risks and uncertainties is contained in the Company's most recent periodic filings with the Securities and Exchange Commission.

    For further information contact:

    Lumber Liquidators, Inc.
    Daniel Terrell
    Tel: 757.566.7512

    Financial Dynamics
    Leigh Parrish/Caren Villarreal
    Tel. 212.850.5600



                           Lumber Liquidators, Inc.
                 Condensed Consolidated Statements of Income
           (in thousands, except share data and per share amounts)
                                 (unaudited)

                            Three Months Ended         Nine Months Ended
                               September 30,              September 30,
                             2008         2007         2008         2007

    Net Sales             $123,063     $102,050     $365,649     $299,797
    Cost of Sales           79,646       67,603      237,855      200,404
        Gross Profit        43,417       34,447      127,794       99,393

    Selling, General and
     Administrative
     Expenses               34,607       28,260      101,855       85,491
        Operating Income     8,810        6,187       25,939       13,902

    Interest Expense             1          252           27          607
    Other (Income) Expense    (221)         (68)        (619)        (168)
        Income Before
         Income Taxes        9,030        6,003       26,531       13,463

    Provision for
     Income Taxes            3,567        2,302       10,880        5,185
    Net Income              $5,463       $3,701      $15,651       $8,278
    Net Income per
     Common Share-Basic      $0.20        $0.25        $0.58        $0.55
    Net Income per Common
     Share-Diluted           $0.20        $0.16        $0.58        $0.36
    Weighted Average
     Common Shares
     Outstanding:
        Basic           26,784,712   15,000,100   26,764,593   15,000,100
        Diluted         27,302,549   23,233,770   27,123,548   23,096,460



                           Lumber Liquidators, Inc.
                    Condensed Consolidated Balance Sheets
                      (in thousands, except share data)

                                                 September 30,   December 31,
                                                      2008           2007
                                                   (unaudited)
    Assets
    Current Assets:
        Cash and Cash Equivalents                    $24,813        $33,168
        Merchandise Inventories                       96,463         72,024
        Prepaid Expenses                               3,290          4,011
        Other Current Assets                           4,598          3,862
            Total Current Assets                     129,164        113,065
    Property and Equipment, net                       13,497         11,580
    Deferred Income Taxes                              2,058          1,220
    Other Assets                                       3,287          2,559

    Total Assets                                    $148,006       $128,424

    Liabilities and Stockholders' Equity
    Current Liabilities:
        Accounts Payable                             $12,990        $15,654
        Customer Deposits and Store Credits           10,732          9,609
        Other Current Liabilities                     14,104         10,973
            Total Current Liabilities                 37,826         36,236

    Stockholders' Equity:
        Common Stock ($0.001 par value;
         35,000,000 authorized; 26,788,919
         and 26,752,118 issued and
         outstanding, respectively)                       27             27
        Additional Capital                            89,894         87,553
        Retained Earnings                             20,259          4,608
        Total Stockholders' Equity                   110,180         92,188

    Total Liabilities and Stockholders' Equity      $148,006       $128,424



                           Lumber Liquidators, Inc.
               Condensed Consolidated Statements of Cash Flows
                                (in thousands)
                                 (unaudited)

                                                       Nine Months Ended
                                                          September 30,
                                                      2008           2007

    Cash Flows from Operating Activities:
      Net Income                                     $15,651         $8,278
      Adjustments to Reconcile Net Income
       to Net Cash Provided by Operating Activities:
        Depreciation and Amortization                  3,238          2,605
        Stock-Based Compensation Expense               2,188          4,200
        Deferred Income Taxes                         (1,357)        (1,600)
        Accretion of Redeemable Preferred Stock            -              3
        Changes in Operating Assets
         and Liabilities:
          Merchandise Inventories                    (24,439)       (23,186)
          Accounts Payable                            (2,664)         4,444
          Customer Deposits and Store Credits          1,123          3,380
          Prepaid Expenses and Other Current Assets      504          2,053
          Other Assets and Liabilities                 3,276          3,210


        Net Cash (Used in) Provided by
         Operating Activities                         (2,480)         3,423

    Cash Flows from Investing Activities:
      Purchases of Property and Equipment             (5,167)        (4,756)
      Purchase of Intangible Asset                      (800)              -
        Net Cash Used in Investing Activities         (5,967)        (4,756)

    Cash Flows from Financing Activities:
      Proceeds from Exercise of Stock Options            204              -
      Excess Tax Benefits on Stock Option Exercises       40              -
      Payments of Long-Term Debt and Capital
       Lease Obligations                                (101)        (1,753)
      Common Stock Purchased Pursuant to 2006
       Regional Manager Plan                             (51)              -
      Proceeds from Revolving Line                         -          6,425
      Payments of IPO Costs                                -         (1,638)
        Net Cash Provided by Financing Activities         92          3,034

    Net (Decrease) Increase in Cash and
     Cash Equivalents                                 (8,355)         1,701
    Cash and Cash Equivalents,
     Beginning of Period                              33,168          3,965
    Cash and Cash Equivalents, End of Period         $24,813         $5,666

SOURCE Lumber Liquidators, Inc.