Lumber Liquidators 2008 Annual Report Download - page 33

As of December 31,
2008 2007 2006 2005 2004
(in thousands)
Balance Sheet Data
Cash and cash equivalents ........................ $ 35,139 $ 33,168 $ 3,965 $ 6,031 $ 3,031
Merchandise inventories ......................... 88,731 72,024 51,758 30,009 22,507
Total assets ................................... 152,405 128,424 78,020 55,162 39,753
Total debt and capital lease obligations, including
current maturities ............................. — 122 9,603 10,360 12,364
Stock compensation liability ...................... — — 9,132 8,092 4,958
Redeemable preferred stock ...................... — — 34,795 34,744 34,693
Total stockholders’ equity (deficit) ................. 114,397 92,188 (5,468) (18,775) (30,242)
Working capital(1) .............................. 96,245 77,875 30,297 17,059 8,091
(1) Working capital is defined as current assets minus current liabilities.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Lumber Liquidators is the largest specialty retailer of hardwood flooring in the United States, based on
industry sources and our experience. We believe we have achieved a reputation for offering great value, superior
service and a broad selection of high-quality hardwood flooring products.
We offer an extensive selection of premium hardwood flooring products under multiple proprietary brands
at everyday low prices designed to appeal to a diverse customer base. Substantially all of our products are
purchased directly from mills or associated brokers with whom we have cultivated long-standing relationships to
ensure a consistent supply of high-quality product at the lowest prices. We believe that our vertically integrated
business model enables us to offer a broad assortment of high-quality products to our customers at a lower cost
than our competitors.
We offer our products through multiple, complementary channels, including 150 Lumber Liquidators stores
in 44 states at December 31, 2008, a full-service call center in Toano, Virginia, our website and catalogs. We
seek to appeal to customers who desire a high-quality product at an attractive value and are willing to travel to
less convenient locations to get it. We sell our products principally to existing homeowners, who represent over
90% of our customer count. Historically, these homeowners are in their mid-30’s or older, are well-educated and
have been living in their homes for at least several years.
We believe that our brands, value proposition and integrated multi-channel approach are important
competitive advantages in a hardwood flooring market that is highly fragmented. We compete on the basis of
price, quality, selection and availability of the hardwood flooring that we offer our customers, as well as the level
of customer service we can provide. We position ourselves as hardwood flooring experts and believe our high
level of customer service reflects this positioning.
We have recently completed a significant investment in our store support infrastructure which we believe
will support our continued growth for multiple years. From late 2005 through 2007, we assembled an
experienced executive team, increased the number of regional store managers and strengthened the key areas of
merchandising and logistics. In 2006 and 2007, we increased our emphasis on moldings and accessories and
expanded our product offerings to include a broader assortment of key product lines, including the introduction
of a number of premium products such as handscraped solid and engineered hardwoods, stained and strand
bamboos, and laminates with a heavier wear layer and foam backing.
27