Document and Entity Information
| Document and Entity Information - shares | 3 Months Ended | |
| Mar. 31, 2016 | May. 06, 2016 | |
| Document And Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Mar. 31, 2016 | |
| Document Fiscal Year Focus | 2,016 | |
| Document Fiscal Period Focus | Q1 | |
| Entity Registrant Name | Lumber Liquidators Holdings, Inc. | |
| Entity Central Index Key | 1,396,033 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 27,101,481 |
Condensed Consolidated Balance
| Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
| Current Assets: | ||
| Cash and Cash Equivalents | $ 21,973 | $ 26,703 |
| Merchandise Inventories | 240,006 | 244,402 |
| Insurance Receivable | 28,500 | |
| Prepaid Expenses | 7,017 | 5,931 |
| Other Current Assets | 50,874 | 45,752 |
| Total Current Assets | 348,370 | 322,788 |
| Property and Equipment, net | 119,168 | 121,997 |
| Goodwill | 9,693 | 9,693 |
| Other Assets | 1,741 | 1,724 |
| Total Assets | 478,972 | 456,202 |
| Current Liabilities: | ||
| Accounts Payable | 52,168 | 55,247 |
| Customer Deposits and Store Credits | 33,695 | 33,771 |
| Accrued Compensation | 9,221 | 6,057 |
| Accrued Securities Class Action | 42,020 | |
| Sales and Income Tax Liabilities | 4,584 | 3,914 |
| Other Current Liabilities | 36,372 | 28,755 |
| Total Current Liabilities | 178,060 | 127,744 |
| Other Long-Term Liabilities | 16,880 | 20,252 |
| Deferred Tax Liability | 12,394 | 10,638 |
| Revolving Credit Facility | 25,000 | 20,000 |
| Total Liabilities | 232,334 | 178,634 |
| Stockholders' Equity: | ||
| Common Stock ($0.001 par value; 35,000,000 shares authorized; 27,101,481 and 27,088,460 shares outstanding, respectively) | 30 | 30 |
| Treasury Stock, at cost (2,831,524 and 2,824,814 shares, respectively) | (139,067) | (138,987) |
| Additional Capital | 181,825 | 180,590 |
| Retained Earnings | 205,198 | 237,600 |
| Accumulated Other Comprehensive Loss | (1,348) | (1,665) |
| Total Stockholders' Equity | 246,638 | 277,568 |
| Total Liabilities and Stockholders' Equity | $ 478,972 | $ 456,202 |
Condensed Consolidated Balance3
| Condensed Consolidated Balance Sheets (Parenthetical) - shares | Mar. 31, 2016 | Dec. 31, 2015 |
| Statement Of Financial Position [Abstract] | ||
| Common Stock, shares authorized | 35,000,000 | 35,000,000 |
| Common Stock, shares outstanding | 27,101,481 | 27,088,460 |
| Treasury Stock, shares | 2,831,524 | 2,824,814 |
Condensed Consolidated Statemen
| Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Income Statement [Abstract] | ||
| Net Sales | $ 233,513 | $ 259,961 |
| Cost of Sales | 157,404 | 168,349 |
| Gross Profit | 76,109 | 91,612 |
| Selling, General and Administrative Expenses | 117,236 | 97,680 |
| Operating Income (Loss) | (41,127) | (6,068) |
| Other Expense | 151 | 16 |
| Income (Loss) Before Income Taxes | (41,278) | (6,084) |
| Income Tax Expense (Benefit) | (8,876) | 1,696 |
| Net Income (Loss) | $ (32,402) | $ (7,780) |
| Net Income (Loss) per Common Share-Basic | $ (1.20) | $ (0.29) |
| Net Income (Loss) per Common Share-Diluted | $ (1.20) | $ (0.29) |
| Weighted Average Common Shares Outstanding: | ||
| Basic | 27,090,575 | 27,071,684 |
| Diluted | 27,090,575 | 27,071,684 |
Condensed Consolidated Stateme5
| Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Statement of Comprehensive Income [Abstract] | ||
| Net Income (Loss) | $ (32,402) | $ (7,780) |
| Foreign Currency Translation Adjustments | 317 | (345) |
| Total Other Comprehensive Income (Loss) | 317 | (345) |
| Comprehensive Income (Loss) | $ (32,085) | $ (8,125) |
Condensed Consolidated Stateme6
| Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Cash Flows from Operating Activities: | ||
| Net Income (Loss) | $ (32,402) | $ (7,780) |
| Adjustments to Reconcile Net Income (Loss) to Net Cash (Used in) Provided by Operating Activities: | ||
| Depreciation and Amortization | 4,524 | 4,170 |
| Stock-Based Compensation Expense | 1,671 | 1,326 |
| Loss on Accrued Securities Class Action | 16,020 | |
| Changes in Operating Assets and Liabilities: | ||
| Merchandise Inventories | 3,578 | 12,662 |
| Accounts Payable | (2,925) | (15,464) |
| Customer Deposits and Store Credits | 23 | (671) |
| Prepaid Expenses and Other Current Assets | (34,115) | 2,454 |
| Other Assets and Liabilities | 35,427 | 16,382 |
| Net Cash (Used in) Provided by Operating Activities | (8,199) | 13,079 |
| Cash Flows from Investing Activities: | ||
| Purchases of Property and Equipment | (2,409) | (8,980) |
| Net Cash Used in Investing Activities | (2,409) | (8,980) |
| Cash Flows from Financing Activities: | ||
| Borrowings on Revolving Credit Facility | 10,000 | 39,000 |
| Payments on Revolving Credit Facility | (5,000) | (19,000) |
| Other Financing Activities | (80) | (261) |
| Net Cash Provided by Financing Activities | 4,920 | 19,739 |
| Effect of Exchange Rates on Cash and Cash Equivalents | 958 | (236) |
| Net (Decrease) Increase in Cash and Cash Equivalents | (4,730) | 23,602 |
| Cash and Cash Equivalents, Beginning of Period | 26,703 | 20,287 |
| Cash and Cash Equivalents, End of Period | $ 21,973 | $ 43,889 |
Basis of Presentation
| Basis of Presentation | 3 Months Ended |
| Mar. 31, 2016 | |
| Basis of Presentation [Abstract] | |
| Basis of Presentation | Note 1. Basis of Presentation Lumber Liquidators Holdings, Inc. and its direct and indirect subsidiaries (collectively and, where applicable, individually, the “Company”) engage in business as a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories, operating as a single business segment. The Company offers an extensive assortment of exotic and domestic hardwood species, engineered hardwood, laminate and resilient vinyl flooring direct to the consumer. The Company also features the renewable flooring products, bamboo and cork, and provides a wide selection of flooring enhancements and accessories, including moldings, noise-reducing underlay, adhesives and flooring tools. These products are primarily sold under the Company’s private label brands, including the premium Bellawood brand floors. The Company also provides in-home delivery and installation services to certain of its customers. The Company sells primarily to homeowners or to contractors on behalf of homeowners through a network of 367 store locations in primary or secondary metropolitan areas in 46 states and eight store locations in Canada at March 31, 2016. In addition to the store locations, the Company’s products may be ordered, and customer questions/concerns addressed, through both its call center in Toano, Virginia, and its website, www.lumberliquidators.com . The Company finishes the majority of the Bellawood products on its finishing lines in Toano, Virginia, which along with the call center and corporate offices, represent the “Corporate Headquarters.” The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission. 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 United States (“U.S.”) generally accepted accounting principles 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 for the year ended December 31, 2015 . The condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. Certain amounts have been reclassified to conform to the current presentation. Results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year. |
Summary of Significant Accounti
| Summary of Significant Accounting Policies | 3 Months Ended |
| Mar. 31, 2016 | |
| Summary of Significant Accounting Policies [Abstract] | |
| Summary of Significant Accounting Policies | 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 approximate fair value because of the short-term nature of these items and the carrying amount of obligations under our revolving credit facility approximate fair value due to the variable rate of interest. Of these financial instruments, the cash equivalents are classified as Level 1 as defined in the Financial Accounting Standards Board (“FASB”) ASC 820 fair value hierarchy. Merchandise Inventories The Company values merchandise inventories at the lower of cost or market value. The Company periodically reviews the carrying value of items in inventory and records a lower of cost or market adjustment when there is evidence that the utility of inventory will be less than its cost. In determining market value, the Company makes judgments and estimates as to the market value of its products, based on factors such as historical results and current sales trends. Although the Company believes its products are appropriately valued as of the balance sheet date, there can be no assurance that future events or changes in key assumptions would not significantly impact their value. Recognition of Net Sales The Company recognizes net sales for products purchased at the time the customer takes possession of the merchandise. Service revenue, primarily installation revenue and freight charges for in-home delivery, is included in net sales and recognized when the service has been rendered. The Company reports sales exclusive of sales taxes collected from customers and remitted to governmental taxing authorities, and net of an allowance for anticipated sales returns based on historical and current sales trends and experience. The sales returns allowance and related charges were not significant for the thre e month periods ended March 31, 2016 and 2015. Cost of Sales Cost of sales includes the cost of the product sold, cost of installation services, transportation costs from vendor to the Company’s distribution centers or store locations, any applicable finishing costs related to production of the Company’s proprietary brands, 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 shrinkage, and costs to produce samples, reduced by vendor allowances. In early March 2015, the Company began voluntarily offering free indoor air quality screening to certain of its flooring customers, predominately those who had purchased laminate flooring sourced from China, to address customer questions about the air quality in their homes. In the first quarter of 2016, approximately 21,600 testing kits were sent to Lumber Liquidators customers through the program, for a total of approximately 69,600 testing kits sent since the program’s inception. In total, approximately 35,900 testing kits have been returned. Of those returned, over 90% indicated indoor air concentrations of formaldehyde within the guidelines set by the World Health Organization (“WHO”) as protective against sensory irritation and long-term health effects. The Company has been and continues to directly contact the customers whose test results indicate an indoor formaldehyde level in excess of the WHO guideline for additional investigation and next steps. These “Phase 2” steps primarily consist of independent third-party laboratory testing of flooring samples from these customers. If the results of this testing indicates that the flooring is contributing to formaldehyde levels in a customer’s home at elevated rates, the Company will work with the customer, at the Company’s discretion, to replace the customer’s floor or compensate the customer for the cost of the floor as part of “Phase 3”. Throughout the third and fourth quarters of 2015 and the first quarter of 2016, the Company facilitated customers with elevated Phase 1 testing results to complete Phase 2. To date, the Company has not recorded a reserve for Phase 3 based on the results it has received to date from the testing of customer flooring samples. The Company believes the test results and number of tests obtained to date provided a reasonable basis to support its assertion that a material reserve related to the replacement of customer floors was not warranted. The Company will, however, continue to evaluate the results of each phase of the indoor air quality testing program. Should its results differ from current trends, the Company could record a material charge in future periods. The Company incurred $2,895 of direct costs primarily related to purchases of testing kits and professional fees in the three months ended March 31, 2016. Direct costs related to this testing program were $12,340 since the program’s inception. At March 31, 2016, the Company had a reserve of $779 for estimated future costs to evaluate whether the laminate flooring purchased from the Company was the primary driver of the air quality testing results being above WHO standards. The reserve was based on actual experience to date, estimated using information through the filing date of the financial statements and was included in other current liabilities. Should the Company’s actual experience related to results of its indoor air quality testing program and subsequent follow-up with customers differ from these estimates, additional reserves for customer satisfaction costs may be recorded in the future. A rollforward of the reserve for the Company’s air quality testing program was as follows: 2016 2015 Balance at January 1 $ 809 $ - Provision 2,895 2,355 Reversal - - Payments (2,925) (1,855) Balance at March 31 $ 779 $ 500 Recent Accounting Pronouncemen ts In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (“ASU 2016-09”), “Improvements to Employee Share-Based Payment Accounting”. The new guidance will change how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled. ASU 2016-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), which creates ASC Topic 842, Leases, and supersedes the lease accounting requirements in Topic 840, Leases. In summary, Topic 842 requires organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Therefore, the amendments in ASU 2016-02 will become effective for the Company at the beginning of its 2019 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements. When implemented, the standard is expected to have a material impact as its operating leases will be recognized on the consolidated balance sheet. In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (“ASU 2015-17”), which amends ASC Topic 740, Balance Sheet Classification of Deferred Taxes. In summary, the core principle of Topic 740 is that an entity classify both current and noncurrent deferred income tax assets and liabilities in the noncurrent section of the statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by this amendment. The amendments in ASU 2015-17 are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. Early application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements and has not yet selected a method of adoption. When implemented, the standard may have a material impact as its consolidated balance sheet. In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), which creates ASC Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs — Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. Therefore, the amendments in ASU 2014-09 will become effective for the Company at the beginning of its 2017 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements and has not yet selected a method of adoption. |
Stockholders' Equity
| Stockholders' Equity | 3 Months Ended |
| Mar. 31, 2016 | |
| Stockholders' Equity [Abstract] | |
| Stockholders' Equity | 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 March 31, 2016 2015 Net Income (Loss) $ (32,402) $ (7,780) Weighted Average Common Shares Outstanding—Basic 27,090,575 27,071,684 Effect of Dilutive Securities: Common Stock Equivalents — — Weighted Average Common Shares Outstanding—Diluted 27,090,575 27,071,684 Net Income (Loss) per Common Share—Basic $ (1.20) $ (0.29) Net Income (Loss) per Common Share—Diluted $ (1.20) $ (0.29) The following have been excluded from the computation of Weighted Average Common Shares Outstanding—Diluted because the effect would be anti-dilutive: Three Months Ended March 31, 2016 2015 Stock Options 795,480 692,430 Restricted Shares 449,869 102,966 Stock Repurchase Program The Company’s board of directors has authorized the repurchase of up to $150,000 of the Company’s common stock. At March 31, 2016, the Company had $14,728 remaining under this authorization. The Company did not repurchase any shares of its common stock under this program during the three months ended March 31, 2016 and 2015, respectively. |
Stock-Based Compensation
| Stock-Based Compensation | 3 Months Ended |
| Mar. 31, 2016 | |
| Stock-Based Compensation [Abstract] | |
| Stock-Based Compensation | Note 4. Stock-Based Compensation The following table summarizes share activity related to stock options and restricted stock awards (“RSAs”): Stock Options Restricted Stock Awards Options Outstanding/Nonvested RSAs, December 31, 2015 692,776 461,671 Granted 251,586 229,201 Options Exercised/RSAs Released — (19,905) Forfeited (16,243) (20,023) Options Outstanding/Nonvested RSAs, March 31, 2016 928,119 650,944 |
Related Party Transactions
| Related Party Transactions | 3 Months Ended |
| Mar. 31, 2016 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Note 5. Related Party Transactions As of March 31, 2016, the Company leased 30 of its store locations, a warehouse and the Corporate Headquarters, which includes a store location, representing 8.3% of the total number of store leases in operation, from entities controlled by the Company’s founder (“Controlled Companies”). As of March 31, 2015, the Company leased 30 of its store locations and the Corporate Headquarters, which included a store location, representing 8.7% of the total number of store leases in operation at that time, from Controlled Companies. Rental expense related to Controlled Companies was as follows: Three Months Ended March 31, 2016 2015 Rental expense related to Controlled Companies $ 851 $ 754 |
Income Taxes
| Income Taxes | 3 Months Ended |
| Mar. 31, 2016 | |
| Income Taxes [Abstract] | |
| Income Taxes | Note 6. Income Taxes The effective tax rate of 21.5% for the three months ended March 31, 2016 was driven principally by the recognition of a valuation allowance against certain of the Company’s deferred tax assets coupled with a limitation on the recognition of tax benefits on an interim basis in which the quarterly tax benefit exceeds the estimated tax benefit for the full year. The effective tax rate of (27.9)% for the three months ended March 31, 2015 was driven principally by the recognition of a reserve for an uncertain tax position associated with the deductibility of a pre-tax charge for the Lacey Act settlement. At the end of the first quarter of 2016, refundable income taxes and the deferred tax asset were $34,505 and $12,335 , respectfully. At the end of the first quarter of 2015, refundable income taxes and the deferred tax asset were $285 and $8,901 , respectfully |
Commitments and Contingencies
| Commitments and Contingencies | 3 Months Ended |
| Mar. 31, 2016 | |
| Commitments and Contingencies [Abstract] | |
| Commitments and Contingencies | Note 7. Commitments and Contingencies Califo r nia Air Resou r ces Board As previously disclosed, the Cali f o r nia Air Resou r ces Board (“CARB”) conducted insp e ctions and testing of certain of the Co m p any’s laminate prod u cts sourced from China and sold in the Company’s stores prior to May 2015. In March 2016, the Company entered into a settlement agreement with CARB, which did not constitute an admission of wrongdoing by the Company and provided that CARB release the Company from any and all claims that CARB may have had related to these products. Under the terms of the settlement agreement, the Company agreed to pay a total of $2,500 upon execution of the settlement agreement. As a result, the Company recorded an additional $1,000 in other current liabilities and selling, general and administrative expenses during the first quarter of 2016. Additionally, the Company agreed to implement certain voluntary measures, including a risk based supplier audit program and testing research program. Prop 65 M a tter On or ab o u t July 2 3 , 2 0 14, Gl o b al Community Monitor and Sun s h ine Park LLC (t o g ether, the “Prop 65 Plaintiffs”) filed a lawsuit, which was s ubse q uently amende d , in the Superior C o urt of the State of Califo r nia, C o unty of A lameda, a g ainst the Company. I n the amended c o mplai n t, the Prop 65 P lain t iffs allege that the Company v iolated California’s Safe Drinking W a ter and Toxic E n f o rcement Act of 19 8 6, Health a n d Safety Code se c tion 2 5 24 9 . 5 , et se q . (“Prop o sit i on 65”). In particular, the Prop 65 Plaintiffs allege that the Company failed to warn c o nsu m ers in Calif o r n ia that certain of t h e Co m p any’s prod u cts ( c olle c tiv e ly, the “Product s ” ) emit form a ld e hyde in excess of the applicable sa f e h a rbor limits. T h e Prop 65 Plaintiffs d id not q u antify any alleged dam a g es in t h eir amended complaint but, in addition to attorneys’ fees a n d c o sts, t h e Prop 65 Plaintiffs s eek (i) equitable relief i n volvi n g the ref o r m ulation of the Products, add i tional w arnings relat e d to the Produ c ts, the i s suance of noti c es to certain of the p u r c h asers of t h e Prod u cts (the “ C usto m e rs”) and t h e waiver of restoc k i n g fees f o r Cu s tomers who r e turn the Produ c ts and (ii) ci v il penalties i n the amount of t wo thousand five hundr e d dollars p e r day for e a ch violation of Propo s ition 65. Trial began on March 7, 2016 and the Prop 65 Plaintiffs presented evidence in support of their contention that the Company failed to provide clear and reasonable warnings. After the Prop 65 Plaintiffs completed the warnings portion of their case, the Company moved for judgment and, on April 4, 2016, the court issued a ruling granting the Company’s motion for judgment. The Company is preparing a statement of decision and expects the court to enter judgment for the Company by June 30, 2016. Although t h e Com p a n y accrued $900 in the fourth quarter of 2015 as its b est estimate of the proba b le loss t h at may r e s u lt from this action at such time , given the court’s ruling, the Company has subsequently reversed this accrual during the first quarter of 2016 . In light of the court’s ruling, the likelihood of a material loss in connection with this matter is now remote. Securities Litigation Matter O n o r ab o u t N o vem b e r 26 , 2013 , G r e g g Ki k e n ( “Kike n ” ) f ile d a securit i es class a ction l a wsuit (the “Kiken La w sui t ”), which was s ubseq u ently amende d , in the U n it e d States D i s t rict C ourt for the Easte r n D i stri c t of V irgin i a against the Company, its founde r , f o rm er Chief Exe c utive O f f icer a n d President, former C h ief Financial Officer a n d f o r m er Chi e f M er c h a n d ising Of f icer ( c olle c tiv e ly, the “ K ik e n Def e ndant s ”). On or about S e ptember 17, 2014, the City of Hall a ndale Beach Police Of f ice r s’ and Firefigh t ers’ Personn e l Retir e m ent Trust ( “ Hall a ndal e ”) filed a s e curities cl a ss action lawsuit (the “ H a llandale La w suit”) in t he United Sta t es Distr i ct Cou r t fo r the E astern D i s t r ict of Vi rg i n ia ag a inst the Company, its fo rme r Chief Executive O ffi c er and Pr e sident an d its former Chi e f Financial O f ficer ( c olle c tiv e ly, the “ H alland a le D e fendants,” and with the Kiken Defendants, the “Defenda n ts”). On M a rch 23, 20 1 5, t h e co ur t cons o lidated t h e Kiken La w suit with the H a llandale L a wsuit, appointed l e ad plaintiffs and lead counsel for the consolid a ted action, and c a ptioned the con s olidated acti o n as In re L u m b er Liq u idat o rs Holdings, Inc. Se c u rities Litigatio n . The lead plaintiffs filed a consolidated amended com p laint on April 22, 2015. T h e consolidated amend e d c o mplaint all e ges that the D efendants made mate r ial f alse and/or misleading s t a tem en ts that caused los s e s to inves t ors. In pa r ticular, the lead plaintiffs allege that the De f endants made mate r ial misstateme n ts or omissions related to their compliance with the La c ey Act, the chemical content of ce r tain of their wood products, and their supply chain and inv e nto r y position. The l e ad plaint i ffs do n ot quantify any alleged dam a ges in th e ir c o nsol id at e d am e n ded comp l aint but, in addit i on to at t o r n eys’ fe e s and costs, they seek t o r e c o ver dama g e s o n b ehalf of themselves and ot h e r pers o n s who p u r c hased or other w i s e acquired the C o mpa n y ’s st o ck during the putative class period a t allegedly inflated p r ices and p u rp o r tedly s u ffered financial h arm as a result. T h e Defendants m oved to dismiss the consolid a ted ame n d ed c o mplaint b u t, on Decem b er 2 1 , 2 0 15, the c o ur t d eni e d this m o ti o n. On April 27, 2016, the Defendants entered into an agreement in principle, a M emorandum of U nderstanding (“MOU”), with the lead plaintiffs in the consolidated securities class action. Under the terms of the MOU , the Company, through its insurers, will contribute $26,000 to a settlement fund that will be used to compensate individuals who purchased the Company’s shares during the period from February 22, 2012 to February 27, 2015 . In addition , under the terms of the MOU , the Company will issue 1 million shares of its common stock to the settlement fund with a value of approximately $16,020 based on the $16.02 closing price of the Company’s common stock on April 27, 2016. The MOU , which is expected to be formalized into a definitive settlement agreement, is subject to several contingencies including court approval. There can be no assurance that a settlement will be finalized and approved or as to the ultimate outcome of the litigation. The ultimate resolution of these actions could have a material adverse effect on the Company’s financial condition and results of operations. However, a s a result of these developments, the Company has determined that a probable loss has been incurred and has recognized a net charge to earnings of approximately $16,020 with in selling general and administrative expense , which is comprised of the loss contingency of approximately $42,020 , net of expected insurance proceeds of approximately $26,000. However, the ultimate resolution of these actions could have a material adverse effect on the Company’s financial condition and results of operations. The amount of loss associated with an issuance of shares of common stock will be determined based on the trading value of the shares on the date of issuance, which could increase the recognized loss if the trading value increases or result in a gain if the trading value decreases, The Company has classified the loss contingency of $42,020 as accrued securities class action and the expected insurance proceeds of $26,000 as insurance receivable on the accompanying balance sheet. While it is reasonably possible that the Company may incur a loss greater than the amounts recognized in the accompanying interim financial statements, the Company is unable to determine a range of possible losses greater than the amount recognized. Derivative Litigation M a tters Consolidated Cases On o r a b o u t M ar c h 1 1 , 2 01 5 , R. A n d r e Kl e in ( “ K lein”) f iled a s h a r eholder derivative suit in the Un i ted States D istrict Court f o r the E a s t ern Dist r ict o f Vir g i n ia a g ai ns t the Compan y ’s di r ectors at that time, as w ell as its Senior V ice President, Supply Chai n , f o r m er Chief Merchan d ising Officer and f o r m er Chief Fin a n c ial Offic e r (collectively, t h e “Klein Defendants”). On or ab o u t A p ril 1, 2 01 5 , Phuc Doan (“Doan”) filed a shareholder derivative suit in the United States District Court for the E a s t e rn District of Virginia against the Comp a n y’s di r ectors a t that time, as w e ll as its Seni o r Vi c e P r esi d e n t, S u p pl y Ch ai n , f o r m er C h ief M e r ch a n d isi n g Of f icer a n d f o r m er Chi e f F inanci a l Officer (coll e ctively, t h e “Do a n De f en d a n ts ” ). On o r a b o u t April 1 5 , 2 01 5 , Amalgamated Bank, as trustee f o r the L o n gview 6 00 Small Cap In d ex F u nd, filed a share h older d e rivative suit in the United S tates Dist r ict Court f o r the E aste r n District of V i rginia again s t the Company’s dire c tors at that time, a s well as its f o r m er Chief Mercha n d ising Officer, f o rmer C h ief Financial Officer, Senior Vice Pre s ident, Supply C h ain a n d its f o r m er C h ief Executive O ffi c er and P resident ( c oll e ctiv e ly, the “ A m a lgamat e d Def e ndants,” and, with the Kl ein and Doan De f end a n ts, the “I ndividual Def e ndant s ”). The C o mpany w as named as a nominal def e ndant on l y in these three suits. On May 2 7 , 2 0 15, the c o urt co n solidated the K lein, D o an, and Amalgam a ted Bank s u its, appointed lead plaintif f s and lead counsel for the con s oli d ated action, a n d ca p tioned the con s olidated acti o n as In r e L u m b e r Liq u idat o r s H o ldin g s, I nc. Shareholder D erivative L itigation . I n the complaints, K lein ’ s, Doan’s and A m algamated Bank’s (coll e ctively, “Pl a intiffs”) allegations include (i) breach of fiducia r y duties, (ii) abuse of control, (iii) gross mismanageme n t, ( iv) unjust e n r ichment, (v) insider trading, (vi) c o rpor a te w a s t e, (v i i) common-l a w c onspiracy, a n d (viii) statutory conspiracy. P laintiffs did not qu a n ti f y a n y alleged damages in their complaints but, in addition to attorneys’ fees and costs, Pl a intiffs s ee k (1) a decla r ation th a t the Indi v idual Defendants ha v e breac h ed a n d/or a ided and a b ett e d the b rea c h of t h eir fid u ciary duties to the Com p a n y, ( 2 ) a determination and awa r d to t h e Co m p any of the d amages sustained by t h e C o m p any as a r esult of the violations of e ach of the Individual D efendants, jointly and s e verall y , (3 ) a directive to the Company and the Indi v idual Defendants to take all n e cessa r y actions to r e f o rm and im p r o v e t h e Co m p any’s corporate g o ver n ance and inte rn al procedures to c o m p ly with applicable l a ws and to protect the Company and i ts s h areholders from a r e pe a t of t h e events that led to the filing of this action, (4) a d e termina t ion and award to the Co m p any of e x emplary d amages in an amou n t n ecessary to pu n i s h the I n d ividual Defen d a n ts a n d to make an example of the Individu a l De f end a n ts t o the community accordi n g to p r oof of t r ial, (5) the awa r ding of restitution to the C o m p a n y f r om t h e I n di v i d u a l De f e n d a n ts, (6) a requirem e n t th a t the Co m p any establish corpora t e p o licies a n d p r o c ed u r e s pro h ibiting the use of C h inese manufact u r ers of its prod u cts, ( 7 ) a prohi b i ti o n against the Com p a n y using wo o d or wo o d pro d ucts from the Russian Far East, ( 8 ) a requirement that the Comp a n y establish corporate p o licies and p r ocedu r es to ensure com p liance with CARB standar d s f o r all o f its flo o ri n g products, and ( 9 ) dis g orgem e nt and payment to t h e C o mpany o f all com p ensation and p r o f its made by the I n divi d u al Def e n d ants, a n d each of them, at any time during which such Indi v idual De f end a n ts w ere b r eaching fiduciary duties owed to t h e Compa n y and/or committing, or a iding and abetting the commitment of, corporate waste. Additionally, in May 2015, the Company re c eived a shar e h older demand from Timothy Horton (“Horton”). The allegations and d e m a n d s made by Horton o v erlap su b stanti a lly w ith those raised in t h e c o nsoli d ated action. On J une 11, 20 1 5, t h e Special Committee of the Boa r d of Di r ectors ( the “Speci a l Committee”) e x e r cised its authority to c r eate a three - person Demand Review Co m m ittee, which is c o mprised of t h ree independent directors and tasked with investigating the claims made in the consolidated action and the Horton demand letter and making a recommendation to the board of directors as to whether it would be in the best interests of the Company to pursue any of those claims. Thereafter, the members of the Demand Review Committee filed a motion to stay the consolidated action pending completion by the Demand Review Committee of its investigation and recommendation to the boa r d of directo r s . Further, in the c o nso l idat e d action, the Company filed a motion to dismiss based on the failure to make a demand upon the Company’s board of directors, and the Individual Defendants filed a motion to dismiss based on the failure to state a claim. These motions are fully briefed and p e nding b e f o re the court. Cos t e llo Matt e r On or ab o u t Mar c h 6 , 2 0 15, James Costello ( “Costell o ”) f i led a shar e h older de r iv a tive suit in the Court of Chance r y of the State of D elawa r e against the C o mp a n y ’s di r ectors a t that time (the “Costello D e rivative D e fend a n ts” ) . Th e Company was named as a n o mi n a l defendant o n ly. On April 1 , 20 1 5, t h e case w a s voluntarily s t a y e d . On June 19, 2015, the s t a y was lifted at Cos t ello’s r e quest and Costello subsequ e ntly f iled an amend e d complaint. The a m e n ded complaint added the C o mpan y ’s Senior Vice Pr e sident, Supply C h ai n , f o r m er Chief M e rchan d ising Officer and f o r m er Chief Finan c ial Offi c er a s defendants (along with the D e rivative D e fendants, the “Costello D e fendants” ) . C o stello ’ s allegations include ( i) b r each of fidu c iary duties, ( ii) g r o s s mismanagement, (iii) unj u st enrichment, a n d (iv) insid e r sell i ng and the m i sappropriation of certain of our information in conne c tion therewith. Costello did n o t q u antify a n y alle g e d d amages in the ame n d e d comp l aint but, in add it i o n to at t o r n e ys ’ fe e s and cost s , Costello seeks (i) a g ainst the Costello Defend a n ts and in the Compan y ’s favor t h e am o unt of damages sustained b y the Company as a result of the Costello De f endants’ b r eaches of fiduciary duties, g r oss mismanag e m e n t and unju s t enrichmen t , (ii) extr a o rdinary e q uit a ble and/or in j u nctive relief, including att a chi n g, impo u ndi n g , im p o si n g a con s tructi v e trust on or oth e rwise restr i cting the pro c eeds of the C o stello D efendants’ trad i n g a c tiviti e s or t h eir assets, (iii) awarding to the C o mp a ny r e s titution from t h e Costello D efendants, and ea c h of them, a n d ordering disgorg e ment of all profits, benefi t s and other compensation obtained by the Costello Defend a n ts; a n d (iv) additional equit a ble and/or injunctive relief that would require the Company to in s titute cer t ain compliance policies and proc e d ur e s . T h e C o mpa n y filed a m o tion to d i s m iss the amended com p lai n t b ased on the failure to m a k e a demand u pon the Co m p any’s b o ard of dir e ctors and the Costello Defen d a n ts filed a m o tion to di s m iss based on the failure to state a claim and the exculpat o r y pro v ision in the Com p any’s Certifi c ate of Incorporati o n . O n Se p t e m be r 1 4 , 2 0 15 , th e pa rties e n tered into a stipulation voluntarily staying the case until the Demand Review Commi t tee has an opportunity to investig at e Co s t ello’s allegations and make a recomme n dation to the Co m p any’s board of d irectors, a n d t h e b o ard of dir e ctors has the op p ort u nity to act on t h at r e c o mmen d ati o n. T h e court h as app r oved the stipulation. M c Bride M atter On o r a b o u t M ar c h 2 7 , 2 01 5 , Ja m es M ic h ael M cBride ( “M cBride”) fil e d a shareholder deriv a tive suit in the Cir c uit Court of the City of Willi a msburg and County of James City, Virginia a g ainst the Compan y ’s directors at that time, as w ell as its former C h ief M e r ch a n d isi n g Of f icer a n d f o r m er Chi e f F inanci a l Officer (coll e ctively, the “McB r ide De f endants ”) . T h e Company was named as a nomin a l defendant only. In the complaint , M cBrid e ’s allegations in c lude ( i) b r each of fiduciary duties, (ii) g r o s s mismanagement, (iii) abuse of control, (iv) insider t r ading, and (v) u n just enrichment. M cBride d i d not qu a n tify any alleged damag e s in h i s complaint but, in a d dition to attorneys’ fees and costs, M cBride s e eks ( i ) the a w arding, against the M cBride Defen d a n ts, and in favor of the Co m p any, of d a m ages susta i ned by t h e C o mpany as a result of cert a in of the McBride Defendants’ breaches of their fidu c iary duties and (ii) a di r ecti v e to t h e Company to (a) take a ll necessary a ctions to re f o r m and imp r ove its corporate governance and inte r n a l procedu r es, (b) c omply with its e x isting governa n ce obligations a n d all applicab l e laws and (c) protect the C o mpany a n d its investors from a recurre n ce of the events that led to t h e filing of this a c tion. On J ul y 6 , 2 0 15, McBride filed an ame n ded com p lai n t. T h e ame n ded com p l aint add e d claims for statu t o r y conspira c y and c o mmon l a w co n spir a cy an d , in con n ecti o n with the statutory co n spir a cy claim, seeks d a m a ges in the a m ount of th r ee times the actual dama g e s i n c u rred by the Com p any as t h e result of t h e alleged w r o n g f u l acts . Pur s uan t t o a v o luntary ag r eement between the parties, the def e n d ants have not yet r esponded to the amended c o mplaint. In connection with the Consolidated Cases, the Costello Matter and the McBride Matter (collectively, the “Derivative Litigation Matters”), the parties conducted a mediation to resolve the matter in March and April of 2016. As a result of the mediation process, which continues, the Company has determined that a probable loss has been incurred related to the Derivative Litigation Matters and recognized a net charge to earnings of $2,500 within selling general and administrative expense in the accompanying statement of operations. The Company has classified the loss contingency of $5,000 within other current liabilities and the expected insurance proceeds of $2,500 within insurance receivable on the accompanying balance sheet. The ultimate resolution of these actions could have a material adverse effect on the Company’s financial condition and results of operations. Litigation Relating to P r oducts L iability Begi n n ing o n or ab o u t March 3, 20 1 5, n u merous p u r p orted class a c tion ca s e s were filed in various U.S. fe d e ral d istrict courts and state c o urts involving cl a ims of excessive f o r m aldehy d e emissi o n s from t h e C o mp a ny’s flooring pro d ucts (collectively, t h e “Products L iabil i ty C a ses”). The plaintiffs in these vari o u s acti o ns sou g ht reco v e ry u n der a variety of theorie s , which alt h ou g h not id e n tic a l a r e general l y s imila r , i n cluding negligence, b r each of wa r ranty, state consumer p r ot e ction act violations, state un f air competition a c t viol a tions, st a te deceptive t r ade pra c tices a c t viola t ions, f alse a d ve r ti s i n g, fr a udulent con c ealment, neglige n t misrepresentation, failure to wa r n , unjust en r ichment a n d similar claims. The purpo r ted classes c o nsisted either or both of all U.S. c o ns u m ers or state con s umers t h at p u rc h a s e d t h e s u bject pro d ucts in certain time p e rio d s. T h e p lai n tiffs al s o sou g ht vari o us forms of d e clar a tory and injun c tive relief and v a rious damages, in c luding restit u tion, actual, compensatory, consequenti a l, a n d , in certain cases, punitive damages, a n d int e rest, c o sts, and attorney s ’ f e es incurr e d by the plai n tiffs and oth e r purported cl a ss members in conne c tion w ith the alleged cl a ims, and orders c ertifying the a c ti o ns as class actions. Plai n tiffs h ad not q u a n tifi e d damag e s sought f r om the Comp a n y in these class actions. On June 12, 2015, U n it e d States Judicial P a nel on Multi D i s tr i ct L itigation (the “ M DL Pane l ” ) issued an order transferring a n d c o ns o li d ati n g ten o f the r e lated f e deral c lass actions to the United St a tes Dist r ict Cou r t f o r the E astern D istrict of Vi r g i nia (the “Virginia Court ” ). In a series of s ubsequent c o nditional transfer order s , the M DL Panel has transferred the other cases to t h e Vir g inia C ourt. T h e C o mpa n y c o ntin u e s to seek to have any new l y filed cases transferred and con s olidated in the Virginia Court and u l timatel y , the Com p any expects all federal class actio n s i n vol v i n g f o r m al d ehyde allegations, includi n g any newly filed cases, to be tr a n s f er r ed and consolid a ted in the Vi rg inia Court. T h e consolidated ca s e in the Virginia Court is caption e d In re: L u m b er Liquidato r s C h ines e -Manufac t u red F loor i ng Products Marketing, Sales, Pract i ces and Products L iability Litigatio n . Pursuant to a co u r t order, plaintiffs f il e d a Repr e s e n ta t ive Class Action Complaint in the Virginia Court on September 11, 2015. T h e complaint ch a llenged the C o mpan y ’s labeling o f its fl o o ring prod u cts and as s e rted claims u nder C a lifornia, New York, Illinoi s , Florida and T exas law for f r audulent concealment, violation of consumer protection statutes, negligent misrepresentation and decla r atory r e lief, as w ell as a claim fo r breach of implied warr a n ty un d er Calif o r nia law. T h ereafter, o n September 18, 201 5 , plai n t iffs filed the First A m ended Representative C la s s Action C o mplaint (“FARC”) in which they added impli e d war r anty claims under N e w Yo r k , Illinois, Flo r ida and Texas l a w, as well as a fede r al w a rr a nty cl a im. T h e Company fil e d a motion to dismiss and ans w ered the FARC. Th e Virginia Court granted the motion a s to claims for negl i g ent misrepresentation filed o n behalf of cer t ain plainti f fs, de f er r ed as to c lass act i on allegation s , and ot h e rwise d e n ied t h e m o t i on. T h e C o mpa n y al s o filed a m o tion to strike nationwide cl a s s allegations, on which the V ir g inia C ourt has not yet r u le d . The Company also filed a motion to strike all personal injury claims made in class action complaints. Plaintiffs subsequently agreed and the Virginia Court has ordered that no Chinese formaldehyde class action pending in this lawsuit will seek damages for personal injury on a class-wide basis. The order does not affect any claims for personal injury brought solely on an individual basis. Fact discovery has closed and expert discovery is now proceeding in this matter. In a d dition, on or about April 1, 2015, S a rah St e ele (“Steel e ”) filed a purport e d c lass action la w s uit in the Ontario, Can a da Sup e rior Court of Justi c e against the Com p any. I n the compl a int, Ste e le ’ s a lleg a tions include ( i ) st r ict liability, (ii) b r each of impli e d warranty of fitn e s s for a parti c ular purpose, (ii i ) breach of implied warranty of m e rchantability, ( i v) fraud by con c ealment, ( v ) civil negligence, (vi) ne g ligent misrepr e s e n tation, a n d (vii) breach of implied cove n a n t o f go o d faith and fa i r dealin g . Steele did n o t q u antify any alle g ed damages in her complaint but, in addition to attorneys’ f ees a n d c o sts, Steele see ks (i) comp e n satory damages, (ii) punitive, e x e m plary and a g gr a v at e d d a mages, and (iii) statutory remedies related to the Company’s brea c h of various laws in c ludi n g the Sales of Goods Act, the Consum e r Protection Act, the Competition A c t, the Co n su m er Packa g ing and L a b elli n g Act and the Canada Con s umer Prod u ct Safety Act. T h e C o mpa n y disp u tes t h e plaintiff s ’ claims in these various actions a n d intends to d e fend these matters vi g o rou s ly. Given the uncertainty of litigation, the pr e liminary s t age of these cases and the l e g a l standards th a t must be m e t for, among other things , c lass certific a tion a n d success on the merit s , the Comp a n y c a nnot estimate the re a s onably possib l e l o ss or r an g e of l o ss t h at m ay r e s ult f r om t h ese action s . In c o nnection with the P r oducts L iability Cases, on April 2 2 , 2015, five of the C o mpan y ’s g e neral a n d umbrella l iabil i ty ins u rers broug h t an action in the United States District Court f o r the Eastern District o f Vir g i n ia, (t h e “Vir g inia Action”). T h rough t h e Vir g inia Actio n , these ins u rers s o ug h t a declaratory jud g ment that they were n o t obligated to defend or i n demnify the Company in conne c tion w ith t h e lawsuits asse r ted against the Company a r i s i n g out of its s a le of lami n ate flooring so u r ced f r om China. One insu r er also asserted a claim s e eking r eformation of one policy to incl u d e a “total pollution ex c lusion” endor s e m ent, cont e n ding th a t it w as omit t ed from that policy as t h e result of a mutu a l mistak e . On April 2 7 , 2 0 15, the C o mpa n y filed a si m ilar but m o re c o m p rehensi v e action against ni n e o f its general, u m brella and excess insurers (including the five Plaintiffs in the V irgin i a Ac t ion) in the Circuit C ourt for D ane County, Wiscon s in (where four of the insure r s a r e domici l ed) ( the “Wisconsin A c tion ” ). In the Wisconsin Ac t ion, the Company asserted br e ach of c o ntr a ct claims against its general liability insurer s , alleging that t h ese insurers had wrongfully fail e d t o defend the Company in conne c tion w ith the Chines e -m a nuf a ctured lam i nate f loo r ing c laim s . T h e Company also asserted breach of c o ntr a ct and bad f a ith claims against t w o of its gener a l liability insurers, arising out of the manner in whi c h those insurers computed retrosp e ctive premiums under their policies in conn e ction with the Chin e s e- m a n u factured laminate flooring lawsuits. F i nally, the Company s o ught declarato r y rel i ef from the court as to its ri g h ts and the insurers’ res p onsi b iliti e s u n der their policies. The Company moved to dismiss the Virginia Action, contending that the federal court should abstain from deciding the case in favor of the more comprehensive state-court Wisconsin Action. Thereafter, the four insurers who were not plaintiffs in the Virginia Action have filed motions to intervene as plaintiffs in the Virginia Action, in an effort to make the Virginia Action “as comprehensive” as the Wisconsin Action. The Company has opposed the motions to intervene. By order dated September 4, 2015, the court largely denied the Company’s motion to dismiss, allowing the Virginia Action to proceed. While the court dismissed the reformation claim without prejudice, as pled with insufficient specificity, the court granted leave to amend, and an amended complaint was filed on September 15, 2015. On October 2, 2015, the Company stipulated to entry of judgment on the reformation claim, and moved to dismiss the remaining claims in favor of proceeding in Wisconsin. The defend a n t -insur e rs in the Wiscon s i n A c ti o n filed mo ti o ns t o dis m iss o r stay t h e Wis c o n sin Acti o n in f a v o r of t h e Virginia Action. On Fe b r u ary 1, 20 1 6, t h e Wisc o n sin court stayed the W isconsin Action in f a vor of the proce e d i ngs in Virginia. On March 3 , 20 1 6 , t h e court denied the C o mpan y’s ensuing motion f o r re c o nside r ation. O n Fe b r u a r y 9 , 20 1 6 , t h e Vir g ini a c o u rt de n i e d the Company’s m o tio n t o d i smiss. The V irginia court a l s o grant e d the r e maining in s u rers’ motion to intervene, but s t a y e d p r o c eedings on their ex c ess and umbrella in s ur an c e po l icies pending r e solution of the primary i n su r er s ’ clai m s. Discovery is now underway, and the Virginia court has set the matter for trial commencing November 1, 2016. Securities Laws In M ar c h 2015, the Company r eceived a g r and ju r y subpoena i s sued in conn e ction with a c ri m inal inv e stigation being conducted by the U . S. Attorney’s Office for the E astern District of Virginia (the “ U .S. Attorney”). In a ddition, on May 19, 20 1 5, J u ly 13, 20 1 5 and March 11, 2016, the Co m p any r e ceived s u bp o e n as fr o m the N e w Y o r k Regional O f f ice of the S E C in connection wi t h an in q u iry by the SEC staff. Based on t h e s u bp o e n as, the Co m p any b e lieves the focus of both the U . S. Attorney investigation a n d S E C investigation primarily relate to compliance with disclosur e , fin a nci a l r e p o r tin g an d t r a d in g r e q ui r e m e n t s un d e r the securiti e s laws since 2011. T h e Company is fully cooper a ting with the inv e s tigations by the U. S . A ttorn e y and S EC staff and continues to produce documents responsive to the subpoenas and pursuant to other requests received from the U.S. Attorney’s Office. Given that the investigation by the U.S. Attorney and S E C staff a r e still on g oin g , the Com p any cannot estimate the reasonably p o ssi b le lo s s o r r a n g e o f loss t h a t may r e s u lt from this matter. Litigation Relating to Ab r a sion Claims On M ay 20, 2015, a pur p ort e d class ac t ion titl e d A b ad v . L u m b er L i q u i d at o rs, I n c . w as fil e d in the United Sta t es Distr i ct C o u r t f o r t h e Ce n tral Distri c t o f Ca l if o rnia and two a m e n ded compl a ints were s u bsequ e ntly filed. In the Se c o nd Amend e d Complaint (“SA C ”), the plaintiffs ( collectively, the “Abrasion Plaintif f s”) s e ek to ce r tify a nat i onal c lass composed of “ A ll Pe r sons in the U n it e d States w h o purchased Defenda n t ’s Dream Home bra n d laminate fl o o rin g p r o du c t s f r o m De f e n d a n t f o r person a l use in their homes , ” o r , i n the alte r n a t ive, 32 state w ide classes f r om C a lifornia, North Ca r o lina, T e xas, New Jers e y , Florida, Nevada, C onnecticut, I o wa, Minn e sot a , N eb r as k a, G e o r g ia, Ma r y l a n d , Massac hu setts, N ew Y o r k , W est V ir g ini a , Ka n sas, Ke n tu c k y , Mississip p i, Pe n n s y l v a n ia, S o u th Car o li n a, Te nn essee, Vir g i n ia, W a shi ng to n , Mai n e, M i chi g a n , Miss o u r i, Ohio, O k lahoma, Wiscon s in, India n a, Illinois a n d L o uisiana. The S AC alleges vio l ations of e a ch of t h ese sta t es’ consumer protections statu t es and the f e de r al M agnuson-Moss War r anty A c t, as w ell as b r each of implied w ar r anty and f raudul e nt con c ealment. T h e Abr a s ion Plaintiffs did not quantify a n y al l eg e d damages in the SAC but, in a d dition to a ttorneys’ fees and costs, seek a n o r d e r c erti f ying the a c tion a s a cl a ss action, an o r de r ado p tin g th e A b rasi o n P l ai n tiff s ’ class defi n itions and findi n g that the A b r asion Plaintiffs are their p r oper rep r esent a tiv e s , an ord e r appointing th e ir c o un s e l as c lass counsel, injunctive r elief pro h ibiting the Co m p any f r o m c o ntinu i ng to advertise and/or sell laminate flooring products with false a b rasion class r a tings, r e s titution of a ll monies it re c eiv e d from the A b rasion Plai n tiffs and class memb e rs, damages (actual, compensatory, and cons e q uential) and punitive damag e s . |
Summary of Significant Accoun14
| Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
| Mar. 31, 2016 | |
| Summary of Significant Accounting Policies [Abstract] | |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of financial instruments such as cash and cash equivalents, accounts payable and other liabilities approximate fair value because of the short-term nature of these items and the carrying amount of obligations under our revolving credit facility approximate fair value due to the variable rate of interest. Of these financial instruments, the cash equivalents are classified as Level 1 as defined in the Financial Accounting Standards Board (“FASB”) ASC 820 fair value hierarchy. |
| Merchandise Inventories | Merchandise Inventories The Company values merchandise inventories at the lower of cost or market value. The Company periodically reviews the carrying value of items in inventory and records a lower of cost or market adjustment when there is evidence that the utility of inventory will be less than its cost. In determining market value, the Company makes judgments and estimates as to the market value of its products, based on factors such as historical results and current sales trends. Although the Company believes its products are appropriately valued as of the balance sheet date, there can be no assurance that future events or changes in key assumptions would not significantly impact their value. |
| Recognition of Net Sales | Recognition of Net Sales The Company recognizes net sales for products purchased at the time the customer takes possession of the merchandise. Service revenue, primarily installation revenue and freight charges for in-home delivery, is included in net sales and recognized when the service has been rendered. The Company reports sales exclusive of sales taxes collected from customers and remitted to governmental taxing authorities, and net of an allowance for anticipated sales returns based on historical and current sales trends and experience. The sales returns allowance and related charges were not significant for the thre e month periods ended March 31, 2016 and 2015. |
| Cost of Sales | Cost of Sales Cost of sales includes the cost of the product sold, cost of installation services, transportation costs from vendor to the Company’s distribution centers or store locations, any applicable finishing costs related to production of the Company’s proprietary brands, 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 shrinkage, and costs to produce samples, reduced by vendor allowances. In early March 2015, the Company began voluntarily offering free indoor air quality screening to certain of its flooring customers, predominately those who had purchased laminate flooring sourced from China, to address customer questions about the air quality in their homes. In the first quarter of 2016, approximately 21,600 testing kits were sent to Lumber Liquidators customers through the program, for a total of approximately 69,600 testing kits sent since the program’s inception. In total, approximately 35,900 testing kits have been returned. Of those returned, over 90% indicated indoor air concentrations of formaldehyde within the guidelines set by the World Health Organization (“WHO”) as protective against sensory irritation and long-term health effects. The Company has been and continues to directly contact the customers whose test results indicate an indoor formaldehyde level in excess of the WHO guideline for additional investigation and next steps. These “Phase 2” steps primarily consist of independent third-party laboratory testing of flooring samples from these customers. If the results of this testing indicates that the flooring is contributing to formaldehyde levels in a customer’s home at elevated rates, the Company will work with the customer, at the Company’s discretion, to replace the customer’s floor or compensate the customer for the cost of the floor as part of “Phase 3”. Throughout the third and fourth quarters of 2015 and the first quarter of 2016, the Company facilitated customers with elevated Phase 1 testing results to complete Phase 2. To date, the Company has not recorded a reserve for Phase 3 based on the results it has received to date from the testing of customer flooring samples. The Company believes the test results and number of tests obtained to date provided a reasonable basis to support its assertion that a material reserve related to the replacement of customer floors was not warranted. The Company will, however, continue to evaluate the results of each phase of the indoor air quality testing program. Should its results differ from current trends, the Company could record a material charge in future periods. The Company incurred $2,895 of direct costs primarily related to purchases of testing kits and professional fees in the three months ended March 31, 2016. Direct costs related to this testing program were $12,340 since the program’s inception. At March 31, 2016, the Company had a reserve of $779 for estimated future costs to evaluate whether the laminate flooring purchased from the Company was the primary driver of the air quality testing results being above WHO standards. The reserve was based on actual experience to date, estimated using information through the filing date of the financial statements and was included in other current liabilities. Should the Company’s actual experience related to results of its indoor air quality testing program and subsequent follow-up with customers differ from these estimates, additional reserves for customer satisfaction costs may be recorded in the future. A rollforward of the reserve for the Company’s air quality testing program was as follows: 2016 2015 Balance at January 1 $ 809 $ - Provision 2,895 2,355 Reversal - - Payments (2,925) (1,855) Balance at March 31 $ 779 $ 500 |
| Recent Accounting Pronouncements | Recent Accounting Pronouncemen ts In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (“ASU 2016-09”), “Improvements to Employee Share-Based Payment Accounting”. The new guidance will change how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled. ASU 2016-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), which creates ASC Topic 842, Leases, and supersedes the lease accounting requirements in Topic 840, Leases. In summary, Topic 842 requires organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Therefore, the amendments in ASU 2016-02 will become effective for the Company at the beginning of its 2019 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements. When implemented, the standard is expected to have a material impact as its operating leases will be recognized on the consolidated balance sheet. In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (“ASU 2015-17”), which amends ASC Topic 740, Balance Sheet Classification of Deferred Taxes. In summary, the core principle of Topic 740 is that an entity classify both current and noncurrent deferred income tax assets and liabilities in the noncurrent section of the statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by this amendment. The amendments in ASU 2015-17 are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. Early application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements and has not yet selected a method of adoption. When implemented, the standard may have a material impact as its consolidated balance sheet. In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), which creates ASC Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs — Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. Therefore, the amendments in ASU 2014-09 will become effective for the Company at the beginning of its 2017 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements and has not yet selected a method of adoption. |
Summary of Significant Accoun15
| Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
| Mar. 31, 2016 | |
| Summary of Significant Accounting Policies [Abstract] | |
| Rollforward of the Reserve for Air Quality Testing Program | A rollforward of the reserve for the Company’s air quality testing program was as follows: 2016 2015 Balance at January 1 $ 809 $ - Provision 2,895 2,355 Reversal - - Payments (2,925) (1,855) Balance at March 31 $ 779 $ 500 |
Stockholders' Equity (Tables)
| Stockholders' Equity (Tables) | 3 Months Ended |
| Mar. 31, 2016 | |
| Stockholders' Equity [Abstract] | |
| Computation of Basic and Diluted Net Income Per Common Share | The following table sets forth the computation of basic and diluted net (loss) income per common share: Three Months Ended March 31, 2016 2015 Net Income (Loss) $ (32,402) $ (7,780) Weighted Average Common Shares Outstanding—Basic 27,090,575 27,071,684 Effect of Dilutive Securities: Common Stock Equivalents — — Weighted Average Common Shares Outstanding—Diluted 27,090,575 27,071,684 Net Income (Loss) per Common Share—Basic $ (1.20) $ (0.29) Net Income (Loss) per Common Share—Diluted $ (1.20) $ (0.29) |
| Anti-Dilutive Securities Excluded from Computation of Weighted Average Common Shares Outstanding Diluted | The following have been excluded from the computation of Weighted Average Common Shares Outstanding—Diluted because the effect would be anti-dilutive: Three Months Ended March 31, 2016 2015 Stock Options 795,480 692,430 Restricted Shares 449,869 102,966 |
Stock-Based Compensation (Table
| Stock-Based Compensation (Tables) | 3 Months Ended |
| Mar. 31, 2016 | |
| Stock-Based Compensation [Abstract] | |
| Summary of Activity Related to Stock Options and Restricted Stock Awards | The following table summarizes share activity related to stock options and restricted stock awards (“RSAs”): Stock Options Restricted Stock Awards Options Outstanding/Nonvested RSAs, December 31, 2015 692,776 461,671 Granted 251,586 229,201 Options Exercised/RSAs Released — (19,905) Forfeited (16,243) (20,023) Options Outstanding/Nonvested RSAs, March 31, 2016 928,119 650,944 |
Related Party Transactions (Tab
| Related Party Transactions (Tables) | 3 Months Ended |
| Mar. 31, 2016 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Rental expense related to Controlled Companies was as follows: Three Months Ended March 31, 2016 2015 Rental expense related to Controlled Companies $ 851 $ 754 |
Basis of Presentation (Narrativ
| Basis of Presentation (Narrative) (Detail) | Mar. 31, 2016statestoreterritory |
| Basis of Presentation [Abstract] | |
| Number of States in which Stores Operates | state | 46 |
| Number of Domestic Stores | store | 367 |
| Number of Canadian Stores | territory | 8 |
Summary of Significant Accoun20
| Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands | 3 Months Ended | 13 Months Ended |
| Mar. 31, 2016USD ($)item | Mar. 31, 2016USD ($)item | |
| Summary of Significant Accounting Policies [Abstract] | ||
| Testing kits sent to customers | item | 21,600 | 69,600 |
| Testing kits returned by customers | item | 35,900 | 35,900 |
| Percentage of returned indoor air quality screening test kits within guidelines set by the World Health Organization | 90.00% | 90.00% |
| Description of air quality testing kits | In early March 2015, the Company began voluntarily offering free indoor air quality screening to certain of its flooring customers, predominately those who had purchased laminate flooring sourced from China, to address customer questions about the air quality in their homes. In the first quarter of 2016, approximately 21,600 testing kits were sent to Lumber Liquidators customers through the program, for a total of approximately 69,600 testing kits sent since the program's inception. In total, approximately 35,900 testing kits have been returned. Of those returned, over 90% indicated indoor air concentrations of formaldehyde within the guidelines set by the World Health Organization ("WHO") as protective against sensory irritation and long-term health effects. | |
| Costs incurred for air quality testing | $ | $ 2,895 | $ 12,340 |
| Warranty and customer satisfaction reserve | $ | $ 779 | $ 779 |
Summary of Significant Accoun21
| Summary of Significant Accounting Policies (Rollforward of the Reserve for Air Quality Testing Program) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Summary of Significant Accounting Policies [Abstract] | ||
| Air quality testing program accrual, Beginning balance | $ 809 | |
| Provision | $ 2,895 | $ 2,355 |
| Reversal | ||
| Payments | $ (2,925) | $ (1,855) |
| Air quality testing program accrual, Ending balance | $ 779 | $ 500 |
Stockholders' Equity (Narrative
| Stockholders' Equity (Narrative) (Details) $ in Thousands | 3 Months Ended |
| Mar. 31, 2016USD ($)shares | |
| Stockholders' Equity [Abstract] | |
| Stock Repurchase Program, Authorized Amount | $ 150,000 |
| Common Stock Repurchased, Remaining Authorized Amount | $ 14,728 |
| Treasury Stock, Shares, Acquired | shares | 0 |
Stockholders' Equity (Computati
| Stockholders' Equity (Computation of Basic and Diluted Net Income Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Stockholders' Equity [Abstract] | ||
| Net Income (Loss) | $ (32,402) | $ (7,780) |
| Weighted Average Common Shares Outstanding Basic | 27,090,575 | 27,071,684 |
| Effect of Dilutive Securities: | ||
| Common Stock Equivalents | ||
| Weighted Average Common Shares Outstanding Diluted | 27,090,575 | 27,071,684 |
| Net Income (Loss) per Common Share-Basic | $ (1.20) | $ (0.29) |
| Net Income (Loss) per Common Share-Diluted | $ (1.20) | $ (0.29) |
Stockholders' Equity (Anti-Dilu
| Stockholders' Equity (Anti-Dilutive Securities Excluded from Computation of Weighted Average Common Shares Outstanding-Diluted) (Details) - shares | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Stock Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities excluded from computation of earning per share | 795,480 | 692,430 |
| Restricted Shares [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities excluded from computation of earning per share | 449,869 | 102,966 |
Stock-Based Compensation (Summa
| Stock-Based Compensation (Summarizes Share Activity Related to Stock Options and Restricted Stock Awards) (Details) | 3 Months Ended |
| Mar. 31, 2016shares | |
| Stock Option [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Beginning Balance | 692,776 |
| Granted | 251,586 |
| Options Exercised/RSAs Released | |
| Forfeited | (16,243) |
| Ending Balance | 928,119 |
| Restricted Shares [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Beginning Balance | 461,671 |
| Granted | 229,201 |
| Options Exercised/RSAs Released | (19,905) |
| Forfeited | (20,023) |
| Ending Balance | 650,944 |
Related Party Transactions (Nar
| Related Party Transactions (Narrative) (Details) - store | Mar. 31, 2016 | Mar. 31, 2015 |
| Related Party Transactions [Abstract] | ||
| Related Party Leased Stores | 30 | 30 |
| Percentage Aggregate Number Store Lease in Operation | 8.30% | 8.70% |
Related Party Transactions (Ren
| Related Party Transactions (Rental Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Related Party Transactions [Abstract] | ||
| Rental expense related to Controlled Companies | $ 851 | $ 754 |
Income Taxes (Narrative) (Detai
| Income Taxes (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
| Mar. 31, 2016 | Mar. 31, 2015 | |
| Income Taxes [Abstract] | ||
| Effective tax rate | 21.50% | (27.90%) |
| Refundable income taxes | $ 34,505 | $ 285 |
| Deferred tax assets | $ 12,335 | $ 8,901 |
Commitments and Contingencies (
| Commitments and Contingencies (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions | Apr. 27, 2016 | Apr. 30, 2016 | Mar. 31, 2016 | Feb. 29, 2016 | Jan. 31, 2016 | Jul. 31, 2015 | Nov. 30, 2012 | Dec. 31, 2011 | Dec. 31, 2015 | Dec. 31, 2014 | Nov. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Jun. 30, 2015 |
| Antidumping Duties [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Damages Sought, Value | $ 5,300 | |||||||||||||
| Loss Contingency Multilayered Handwood Products Purchase Percentage | 6.00% | 10.00% | ||||||||||||
| Loss Contingency Purchase Price Of Antidumping Duty Rate | 3.30% | |||||||||||||
| Loss Contingency Purchase Price Of Countervailing Duties Rate | 1.50% | |||||||||||||
| Loss Contingency, Range of Possible Loss, Minimum | $ 0 | |||||||||||||
| Loss Contingency, Range of Possible Loss, Maximum | 5,300 | |||||||||||||
| Antidumping Duties [Member] | First Annual Review [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Estimate of Possible Loss | $ 833 | |||||||||||||
| Loss Contingency Modified Purchase Price Of Antidumping Duty Rate | 5.92% | |||||||||||||
| Loss Contingency Modified Purchase Price Of Countervailing Duties Rate | 0.83% | |||||||||||||
| Antidumping Duties [Member] | Second Annual Review [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Estimate of Possible Loss | $ 4,089 | |||||||||||||
| Loss Contingency Modified Purchase Price Of Antidumping Duty Rate | 13.74% | 18.27% | ||||||||||||
| Loss Contingency Modified Purchase Price Of Countervailing Duties Rate | 0.99% | 0.97% | ||||||||||||
| Antidumping Duties [Member] | Third Annual Review [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency Modified Purchase Price Of Antidumping Duty Rate | 13.34% | |||||||||||||
| Loss Contingency Modified Purchase Price Of Countervailing Duties Rate | 1.43% | |||||||||||||
| Securities Litigation Matter [Member] | Subsequent Event [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Receivable, Current | $ 26,000 | |||||||||||||
| Stock Issued for Settlement, Shares | 1 | |||||||||||||
| Stock Issued for Settlement, Value | $ 16,020 | |||||||||||||
| Share Price | $ 16.02 | |||||||||||||
| Loss Contingency, Loss in Period | $ 16,020 | |||||||||||||
| Loss Contingency, Estimate of Possible Loss | 42,020 | |||||||||||||
| Securities Litigation Matter [Member] | Other Current Liabilities [Member] | Subsequent Event [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Estimate of Possible Loss | 42,020 | |||||||||||||
| Securities Litigation Matter [Member] | Other Current Assets [Member] | Subsequent Event [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Receivable, Current | $ 26,000 | |||||||||||||
| Derivative Litigation Matters [Member] | Subsequent Event [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Receivable, Current | $ 2,500 | |||||||||||||
| Loss Contingency, Loss in Period | 2,500 | |||||||||||||
| Settlement Liability, Current | $ 5,000 | |||||||||||||
| Prop 65 Matter | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Estimate of Possible Loss | 0 | $ 900 | ||||||||||||
| California Air Resources Board [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Litigation Settlement, Amount | 2,500 | |||||||||||||
| Settlement Liability, Noncurrent | $ 1,000 | |||||||||||||
| Ross Matter [Member] | ||||||||||||||
| Loss Contingencies [Line Items] | ||||||||||||||
| Loss Contingency, Damages Sought, Value | $ 50,000 |