Lumber Liquidators 2008 Annual Report Download - page 43

Download and view the complete annual report

Please find page 43 of the 2008 Lumber Liquidators annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 80

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80

programs, including direct mail, certain radio and newspaper advertisements, and trade shows. In
addition, the weakening economy in fourth quarter of 2008 resulted in reduced marketing costs,
including internet search.
• Occupancy costs increased $2.3 million to $15.1 million, or 3.1% of net sales for 2008, from $12.7
million, or 3.1% of net sales for 2007. Overall increases in 2008 were primarily due to store base
growth, but also reflected the enhanced visibility of our newer locations, which have generally resulted
in an increase in the per-location occupancy costs relative to the typical historic store. These increases
were generally offset by the sales growth of maturing stores.
• Stock-based compensation expense was $0.01 million in 2008, as compared to $6.2 million in 2007.
Stock-based compensation expense included:
•Stock Options and Restricted Stock: expense of $3.0 million in 2008 and $3.0 million in 2007. The
2007 amount included $1.2 million of accelerated vesting of certain stock options and initial
recognition of certain stock units triggered by the IPO.
•Variable Plan: expense reduction of $2.96 million in the fourth quarter 2008 as a reserve was
reversed upon the receipt of a final arbitration ruling. There were no other Variable Plan stock-
based compensation expenses in 2008. Expense of $3.2 million in 2007, which included the fourth
quarter accrual of the $2.96 million reserve.
• Depreciation and amortization increased $0.7 million but remained a constant 0.9% of net sales.
• Certain other expenses, including legal and professional fees, increased $4.9 million in 2008, and as a
percentage of net sales increased to 3.5% for 2008, from 3.0% for 2007. This increase as a percentage
of net sales was primarily due to expenses related to operating as a public company, including certain
insurance costs. In addition, legal and professional fees related to the Variable Plan were approximately
$0.7 million, net of insurance proceeds.
Provision for Income Taxes.
For the year ended
December 31,
2008 2007
(dollars in thousands)
Provision for Income Taxes .......................................... $15,643 $7,171
Effective Tax Rate .............................................. 41.4% 38.8%
The effective tax rate increased to 41.4% for 2008 and includes a first quarter charge of $0.7 million for
nondeductible deferred taxes related to the Variable Plan, and an increase in state income taxes, partially offset
by increases in tax-exempt interest income and excess tax benefits on stock option exercises.
Net Income.
For the year ended
December 31,
2008 2007
(dollars in thousands)
Net Income ...................................................... $22,149 $11,326
As a percentage of net sales ..................................... 4.6% 2.8%
Net income increased 95.6% for the year ended December 31, 2008 in comparison to the year ended
December 31, 2007.
37