Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today announced financial results for the fourth quarter and full year ended December 31, 2017.

Fourth Quarter Results

Net sales in the fourth quarter of 2017 were $260 million, an increase of 6.1% from the fourth quarter of 2016. This includes a comparable store net sales increase of 4.5%, which reflected a 3.4% increase in average sale and a 1.1% increase in customers invoiced. Non-comparable store net sales increased $4.1 million over the comparable prior-year period. The Company opened six new stores during the fourth quarter of 2017.

Gross margin was 35.4% in the fourth quarter of 2017, compared with 32.9% in the prior-year period. This increase was driven by a shift in mix toward vinyl and engineered products, lower transportation costs, as well as improved margins within engineered, vinyl, laminate, and tile categories due to sourcing and pricing initiatives.

Selling, general and administrative ("SG&A") expenses in the fourth quarter of 2017 were $92 millioncompared to $90 million in the prior-year quarter. The increase was attributable to incremental legal and professional fees and the absence of a credit related to the stock-based element of the Company's 2016 settlement of the securities class action lawsuit, partially offset by decreases in payroll and advertising. Certain items affecting the change in SG&A expenses are also highlighted in the attached supporting schedule. When excluding those items, Adjusted SG&A as a percentage of sales (a non-GAAP measure) decreased to 33.3% from 36.4% during the prior-year period.

Operating profit in the fourth quarter of 2017 was $0.6 million compared to an operating loss of $9.2 million in the fourth quarter of 2016. The Company also recognized a $2.6 million income tax benefit primarily due to the Tax Cuts and Jobs Act which was enacted on December 22, 2017. One of the tax law changes enabled the Company to recognize certain deferred tax assets previously offset by a valuation allowance. As a result, net income for the fourth quarter of 2017 was $3.0 million, or $0.10 per diluted share, compared to a net loss of $5.5 million, or $(0.20) per diluted share, during the prior-year period.

At December 31, 2017, the Company had $145.9 million in liquidity, comprised of $19.9 million of cash and $126 million of availability under its revolving credit facility. The Company had $15 millionoutstanding on its revolving credit facility at December 31, 2017. This compares to $101 million in liquidity at December 31, 2016, which was comprised of $10.3 million in cash and $90.7 million of availability under the revolving credit facility. The Company had $40.0 million outstanding on its revolving credit facility at December 31, 2016.

Dennis Knowles, Chief Executive Officer, commented, "We believe that 2017 was an important year for Lumber Liquidators as we established a solid foundation for our long-term success. We greatly improved the assortment in our stores with style and trend-right products and focused our marketing spend, which we believe contributed to better overall customer traffic in our stores. We rebuilt our vendor relationships and rolled out a comprehensive, nationwide installation services program. In turn, we saw continued growth in sales, comp store growth and gross margin expansion as well as improvement in operating results on an adjusted basis. While we still have work to do, I'm very proud of what we accomplished in 2017."

Full Year Results

Net sales increased 7.1% to $1,029 million in 2017 from $961 million in 2016, which includes a comparable store net sales increase of $52 million, or 5.4% and a non-comparable store net sales increase of $16 million. The Company opened eleven new stores in 2017, closed one, and as of December 31, 2017, operated 393 stores in the United States and Canada.

Gross margin increased to 35.9% from 31.6% in 2016. SG&A expenses decreased as a percentage of net sales to 39.5% in 2017, compared to 41.4% in 2016, and when excluding items in the attached supporting schedule, Adjusted SG&A (a non-GAAP measure) decreased to 34.5% from 36.1% in 2016. Operating loss was $37.0 million in 2017 and $93.6 million in 2016. The $57 million improvement consisted of a 7.1% increase in sales that combined with an expanded gross margin to drive an additional $65 million in Gross Profit (including $14 million of favorable unusual items as shown in the table below). These items were offset by an $8 million increase in SG&A.

Net loss was $37.8 million, or $1.33 per diluted share, in 2017 compared to a net loss of $68.6 million, or $2.51 per diluted share. While both periods were adversely affected by legal and other matters, the improvement was primarily due to higher sales and margins in the current year, as shown in the schedules that follow.

Mr. Knowles concluded, "As we look ahead to 2018 and beyond, our goal is to build upon what we accomplished in 2017 and drive meaningful refinement in key areas. We launched a clear and compelling mission statement: "From inspiration to installation, our passion is to make beautiful flooring possible and easy for all." and refocused the Company toward four core components to successfully drive this mission. These core components are operational excellence, enhancing the customer experience, expanding the business, and improving profitability. As we continue to work toward putting legacy legal matters behind us, we believe that we have the right plan in place and the right people to execute on that plan."

2018 Outlook

The Company introduced 2018 full-year expectations as follows:

• Total revenue growth percentage in the mid-to-upper single digits;
• Comparable store sales growth percentage in the mid-single digits for the year, with the first quarter in the low single digits;
• Operating profit margin excluding legacy legal and unusual items (a non-GAAP measure) in the low- to mid-single digits;
• Opening 20 to 25 new stores during the year; and
• Capital spending of $15 to $20 million.

About Lumber Liquidators

With more than 390 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. The Company features more than 400 top quality flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate, resilient vinyl and wood-look tile. Additionally, Lumber Liquidators provides a wide selection of flooring enhancements and accessories to complement, install and maintain your new floor. Every location is staffed with flooring experts who can provide advice and useful information about Lumber Liquidators' low priced product, much of which is in stock and ready for delivery.

With premier brands including Bellawood and Morning Star Bamboo, Lumber Liquidators' flooring is often featured on popular television shows such as HGTV's Dream Home and This Old House. For more information, please visit www.LumberLiquidators.com or call 1.800.HARDWOOD.

Lumber Liquidators aims to be the industry leader in sustainability. For more information, please visit www.LumberLiquidators.com/Sustainability. Learn more about our corporate giving program at LayItForward.LumberLiquidators.com. You can also follow the Company on Facebook and Twitter.