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The Company specifically disclaims any obligation to update these statements, which speak only as of the dates on which such statements are made, except as may be required under the federal securities laws. These risks and other factors include those listed in this Item 1A. “Risk Factors” and elsewhere in this report.

References to “we,” “our,” “us,”“we”, “our”, “us”, “the Company”, “Lumber Liquidators”, and “Lumber Liquidators”“LL Flooring” generally refers to Lumber LiquidatorsLL Flooring Holdings, Inc. and its consolidated subsidiaries collectively and, where applicable, individually.

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PART I

Item 1. Business.

Overview

Lumber LiquidatorsLL Flooring Holdings, Inc. (“LL Flooring” or “Company”) is one of North America’s leading specialty retailers of flooring, with 437 stores as of December 31, 2023. Our Company seeks to offer the largest specialty retailerbest customer experience online via LLFlooring.com and in stores, with more than 500 varieties of hardwood flooring in North America, offeringhard-surface floors featuring a complete purchasingrange of quality styles and on-trend designs. Our online tools such as our Picture It! Floor Visualizer also help empower customers to find the right solution across anfor the space they’ve envisioned. Our extensive assortment of domesticselection includes waterproof hybrid resilient, waterproof vinyl plank, solid and exotic hardwood species, engineered hardwood, laminate, resilient vinyl, engineered vinyl plank, bamboo, engineered bamboo,tile, and cork, with a wide range of flooring enhancements and wood-look ceramic tile.accessories to complement. In addition, the Company also began offering carpet during 2023. The Company also provides in-home delivery and installation services to its customers. The Company primarily sells to consumers or to flooring focused pros such as flooring installers, remodelers, and small to medium home builders ("Pros") on behalf of consumers through a network of store locations in metropolitan areas. Our stores are staffed with flooring experts who provide advice, Pro partnership services and installation options for all our products, the majority of which is in stock and ready for delivery. Our vision is to be the customer’s first choice in hard and soft surface flooring by providing the best experience, from inspiration to installation. We operate asoffer the accessible flooring expertise and high-touch service of a single business segment,local store, combined with our call center, websitethe value, omnichannel convenience and customer service network supporting our retail store operations.

product availability of a national chain. We believe we have achieved a reputation for offering great value, superior service and a broad selection of high-quality hard-surface flooring products. With a balance of selection, quality, availability, service and price, we believe our value proposition isplan to leverage this advantage to differentiate ourselves in the most complete within a highly fragmented hard-surface flooring market. The foundation for our value proposition is strengthened by our unique store model, the industry expertise of our people, and our singular focus on hard-surface flooring.

Lumber LiquidatorsLL Flooring is a Delaware corporation with its headquarters in Toano,Richmond, Virginia. We were founded in 1994 and our initial public offering was in November 2007. Our common stock trades on the New York Stock Exchange under the symbol “LL.” Effective January 1, 2022 we completed our corporate entity name change from Lumber Liquidators Holdings, Inc. to LL Flooring Holdings, Inc. We operate in a holding company structure with Lumber LiquidatorsLL Flooring Holdings, Inc. serving as our parent company and certain direct and indirect subsidiaries, including Lumber Liquidators,LL Flooring, Inc., Lumber Liquidators and LL Flooring Services, LLC, Lumber Liquidators Production, LLC, and Lumber Liquidators Canada ULC, conducting our operations.

Our Business

Market

According toWe operate in a large, highly fragmented hard and soft surface flooring market in the July 2017U.S. Based on internal estimates as well as external reports such as the December 2023 Issue of Floor Covering Weekly,Quarterly and Catalina Research, Inc.’s Report on Floor Coverings, Industry Trends 2022, we estimate total U.S. installed floor covering productflooring retail sales (including soft and hard surface flooring and excluding installation labor and non-flooring accessory products) were $36 billion in 20162022. Total hard surface flooring retail sales were $38.5approximately $23 billion in 2022, not including labor. Within this market, U.S. hardwood, laminateinstallation labor and vinylnon-flooring accessory products. Total soft surface flooring retail sales accounted for 37.7%were approximately $13 billion in 2022.

Flooring sales are driven by a number of factors including discretionary income and trends in the housing market. Including installation,Based on Company estimates and our review of external economic data including existing home sales, the overall flooring industry has grown at a compound annual growth rate of 5.6% from 2011 through 2016. OverNAHB remodeling index, new housing starts and the same period, hardwood, laminate and vinylU.S. Census, we expect flooring sales includingover the costlong term to continue to benefit from aging and insufficient housing availability, rising home values and new household formations, among other factors. From 2018 through 2021, we estimate installed sales of installationhard surface flooring grew at a compound annual growth rate (CAGR) of 8.5%. We believe improvements in the quality and construction of certain products, ease of installation,9.7% compared to a broad range of retail price points, and movement away from soft surfaces will drive continued hard surface flooring share gain versus soft surface flooring in the future.0.6% CAGR for soft-surface flooring.

Competition

We compete for customers in a highly fragmented marketplace, where we believe no onesingle retailer has captured more than a 16%15% share of the consumer market for hardwood flooring. Althoughflooring (including carpet and area rugs) based on internal estimates as well as Catalina Research, Inc.’s Report on Floor Coverings, Annual Market Report 2022 and Floor Coverings Industry Quarterly Update, December 2023.The largest segment of the market includes the national home improvement warehouse chains, warehouse clubs and onlineis represented by independent specialty retailers we believe the majority of the industry consistscomprised of local one-store flooring retailers, small chains of stores that may specialize in one or two flooring categories, and a limited number of regional chains. We also compete against national home improvement warehouse chains, national specialty retailers, warehouse clubs and online retailers. We believe we offer a compelling value proposition to customers as we provide a wide selection of high-quality, stocked products and the accessible flooring expertise and service of a local store, with the scale, omnichannel convenience and value of a national chain.

Customers

We target several distinct customer groups who each have varied needs with respect to their flooring purchases, including do-it-yourself (“DIY”) customers, do-it-for-me (“DIFM”) customers, and commercial customers.consumers or Pros on behalf of consumers. We believe that each of the customer groups we serve is passionate about their flooring purchase and valuevalues our wide assortment of flooring products, availability, and the quality of those products. While our offering to each of these groups begins with the same broad assortment convenient stores, and knowledgeable store associates, each of these customer groups requirerequires unique service components based on the ability of our associates to share detailed product knowledge and preferred installation methods. We offer DIFM customers installation services while our DIY and commercial customers receive more personal attention when completing their purchase, includingalso provide dedicated call center resources.resources through our customer contact center for consumers and Pros. All customer groups are offered delivery services.

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Products and Services

Product Selection

We offer an extensive assortment of hard surface flooring under more than 20multiple proprietary brand names, led by our flagship,flagships, Bellawood®., Coreluxe®, ReNature by Coreluxe® and Duravana® brands. Duravana® is hybrid resilient flooring, which combines the best characteristics of traditional flooring and the latest technology for waterproofing. Duravana® is also eco-friendly, 100% PVC free and the MDF core is manufactured from responsibly managed forests as certified by the Forest Stewardship Council. We have invested significant resources developing these national brand names, as well as the Lumber Liquidators name.names. Our hard surface flooring products are available in various widthsfeature a range of quality styles and lengthson-trend designs and are generally differentiated in terms of quality and price based on wood versus manufactured materials, the wood species, wood grade, and durability of finish. Prefinished floors are the dominant choice for residential customers over unfinished wood planks that have a finish applied after installation. We also offer an assortment of flooring enhancements, installation services and accessories, including moldings, underlaysunderlayment, adhesives and tools. In addition to our hard surface flooring product assortment, we recently expanded into soft surface flooring and began offering carpet products. We offer an extensive selection of carpet products with a variety of features, benefits, and technologies across a wide range of price points.

Direct Sourcing

We source our hard surface products directly from millsflooring and other vendors, which enables us to offer a broad assortment of high-quality proprietary products to our customers at a consistently lowcompetitive cost. We seek to establish strong, long-term relationships with our vendor partnersvendors around the world. In doing so, we look for vendors that have demonstrated an ability to meet our demanding specifications, our rigorous compliance standards and the capability to provide sustainable and growing supplies of high-quality, innovative, trend-right products. We source from both domestic and international vendors, withand in 2023, approximately half47% of our merchandise beingproduct was sourced in North America, 22% was sourced from overseas.Asian countries other than China, 16% was sourced from Europe, 11% was sourced from China, and 4% was sourced from South America. In order to reduce our costs, we have been actively moving our products subject to Section 301 tariffs from China into other countries, including North America. Our soft surface flooring products are sourced directly from one of the largest manufacturers and distributors of carpet in the United States, which allows us to leverage their extensive supply chain network to deliver cut carpet directly to installers without the burden of having to maintain our own distribution network for carpet.

Supply Chain

Our supply chain is wholly focused on delivering a complete assortment of products to our customers in an efficient manner. InWe own a one million square foot distribution center on approximately 100 acres of land in Henrico County, Virginia, which serves the first quarter of 2014, we began operatingstores located in the eastern United States. We operate a 500,000 square foot leased distribution center in Pomona, California as

the primary distribution center for ourthe stores located in the western stores.United States. In 2014, we completed construction ofaddition, in September 2023 the Company opened a million square foot distribution center onin Dallas, Texas, with approximately 100 acres450,000 square feet of land we ownleased space. The Company is positioned to service many of its regional stores in Henrico County, Virginiathe central United States and is expected to consolidatereduce transportation costs over time because of the distribution facilities. This facility was fully operational in 2015.shorter distances to the stores. A number of our vendors maintain certain inventory levels for shipment directly to our stores or our customers. Our product is generally transported boxed and palletized, and the weight of our product is a key driver of our supply chain costs.

Compliance and Quality Control

Our compliance programs are designed to ensure the products we sell are safe and responsibly sourced, and meet all regulatory and statutory requirements, including, without limitation, requirements associated with the Lacey Act, EPAUnited States Environment Protection Agency ("EPA") and the California Air Resources Board (“CARB”). LL Flooring and its parents, subsidiaries, affiliates and related parties are committed to conducting business in accordance with the highest ethical standards, in compliance with all applicable laws, and in a manner that helps ensure that the Company is environmentally and socially responsible. LL Flooring expects its vendor partners to adhere to the same high ethical standards and share the same commitment. Our vendor code of conduct, which maintains standards that must be followed by all vendors, sub-tier suppliers, subcontractors and their agents, prohibits vendors from engaging in child labor, forced labor or other human rights issues.

We utilize a variety of due diligence processes and controls, including supplier audits, periodic on-site visits, and product testing.testing to ensure such compliance. We utilize a risk-based approach to implement and operate the various aspects of our compliance program. Our compliance program considers, among other things, product risk, the level of vertical integration at our suppliers’ mills, legality concerns noted by both private and government parties, and the results of on-site audits performed by us.that we perform. Our evaluation of sourcing risk is a key component in our allocation of resources to ensure we meet our standards for product compliance and safety. Compliance and Quality Control teams located in the United States and in China are supplemented with externalindependent third-party resources that provide independent analysesaudits and inspections, which are incorporated into our review processes and monitor our sourcing efforts across all areas from which we source product. Compliance programs and functions are continually under review, updated and enhanced as appropriate to stay current with industry, statutory and regulatory requirements. Our complianceCompliance and regulatory affairs committeeRegulatory Affairs Committee of the boardBoard of directorsDirectors provides oversight of our compliance programs.

Additionally, we maintain and operate a 1,500 square foot lab within our East Coast distribution facility.center on the east coast. The lab features two temperature and humidity controlled conditioning rooms and two emission chambers correlated to a CARB-approved Third PartyCARB- and EPA-approved Third-Party Certifier standard. We believe this equipment mirrors the capabilitiesrequirements of CARB, EPA, and capabilities of other state-of-the-art emission testing facilities. This lab, along with our third-party providers, supports our process to ensure compliance with CARB and EPA requirements.

Installation

Approximately one We also maintain a lab in 10 ofShanghai which is used by our sourcing, compliance and quality assurance team to work with vendors in Asia to ensure compliance with regulatory requirements and Company quality standards.

Installation

Our customers opt to utilize thepurchase professional installation services which we make available at virtually all of our storesthrough us to measure and install our flooring at competitive prices. As of

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December 31, 2017, we utilizedWe offer these services at all our stores. We utilize a network of associates to perform certain customer-facing, consultative services and coordinatedcoordinate the installation of our flooring products by third-party professional independent contractors in 391 of our stores.contractors. Service revenue for installation transactions that we control along with freight is included in net services sales, with the corresponding costs in cost of sales.services sold. We believe our greater interaction with the customer and betterstrong relationships with the third-party professional independent contractors on services provided will ultimately resultresults in a better customer experience and higher utilization by the customer.experience.

Store Model

As of December 31, 2017,2023, we operated 393437 retail stores. We opened 3 new stores with 385 locatedand closed 8 stores in 46 states in the United States and eight in Ontario, Canada. We historically2023. Although we have sought locations with lower rent than retailers requiring high traffic or impulse purchases andcertain criteria that we require for every store, we are able to adapt a range of existing buildings to our format, from free-standingincluding freestanding buildings, to strip centers, toor small shopping centers. Generally, ourOur stores are approximatelytypically 6,500 to 7,500 square feet, which includes a showroom format designed to emphasize our products, and a small warehouse.feet. We enter into short leases, generally for a base term of five to seven years with renewal options, to maximize our real estate flexibility.

We routinely evaluate our store site selection criteria and are currently targeting retail corridors within aan existing market over the more industrial locations we historically sought. We consistently monitor performance of current stores as well as the market opportunity for new locations, adjusting as needed to optimize the profitability and growth potential of our network.store portfolio.

Sales Approach

We strive to have an integrated multi-channelomnichannel sales model that enables our stores, callcustomer contact center, websitedigital platform, and catalogs to work together in a coordinated manner. We believe that due to the average size of the sale and the general infrequency of a flooring purchase, many of our customers conduct extensive research using multiple channels before making a purchase decision. Though our customers utilize a range of these channels in the decision-making process, the final sale is most often completed in the

store, working with our flooring experts. Our customersConsumers typically plan well in advance for the inconvenience of removing old flooring and installing new flooring. InPros often have larger, more complex projects, and greater lead time and preparation is often required. Our research indicates that the length of a hardwoodhard-surface flooring purchase can vary significantly from initial interest to final sale.

Our objective is to help the customer through the entire purchase cycle from inspiration to installation, whether in our store or in their home. Our goal is to provide our customers with everything needed to consider, and complete, their flooring project —– to remove the existing floor, install the new floor with complementary moldings and accessories, and finally, maintain the floor for its lifetime.floor.

Our sales strategy emphasizes customer service by providing superior, convenient, educational tools for our customers to learn about our products and the installation process. We invest heavily in training our store associatesteam and virtual sales team members on all of our products and install techniques. Flooring samples offor most of the products we offer are available in our stores or can be ordered through our call center and website. Once andigital platform or contact center. When placing a hard surface flooring order, is placed, customers may choose to either have their purchases delivered to their home or job site or pick them up at a nearby store location. When placing a carpet order, the carpet is shipped directly to our installer warehouse and the installer delivers the carpet directly to the customer or Pro job site.

We are committed to responding to our potential and existing customers in a timely manner. Our callcustomer contact center is staffed by flooring experts cross-trained in sales, customer service and product support. In addition to receiving telephone calls, our callcontact center associates chat online with visitors to our website,digital platform, respond to emails from our customers and engage in telemarketing activities.virtual selling. Customers can contact our callcustomer contact center to place an order, to make an inquiry, or to order a catalog.

Knowledgeable Salespeople

Our goal is for a customer to walk into an LL Flooring store and immediately be greeted by a knowledgeable associate who can help make buying flooring easy. We believe a large segment of residential homeowners are in need, ofand value, a trusted expert, whether as a guide through a range of flooring alternatives and services or as a resource throughout the installation process. We utilize extensive training programs to both DIY and DIFM customers. We train and positionenable our store management and associates to establish these individual customer relationships,serve our customers at the highest level. We continue to devote significant resources to product and sales training, which often last beyond the current purchase to subsequent purchases of additional flooring.

We place an emphasis on identifying, hiring and empowering employees who share a passion for our business philosophy. Many of our store managers have previous experience with the home improvement, retail

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flooring or flooring installation industries. We provide continuous training focusedfocuses on selling techniques and in-depth product knowledge for our store associates, who, we believe, are a key driver in a customer’s purchasing decision.

Digital/Omni-Channel

In a small store environment, our store managers are critical in ensuring the success of delivering against our customer experience. We place an emphasis on identifying, hiring, and empowering associates who share a passion for our business philosophy where possible. Many of our store managers have previous experience with the home improvement, retail flooring or flooring installation industries. We continue to invest in our regional managers and store managers in training, with a focus on strengthening promotion-from-within and certification programs to build our future store leadership.

Digital / OmniChannel

LLFlooring.com is our online and mobile-friendly website that features inspirational and educational content, highlights our digital tools like the Picture It! Floor Visualizer and Floor Finder and promotes our services such as the ability to schedule a free installation estimate and order free flooring samples. Our website containsweb experience showcases a broad range of information on our products and services, including room scenes, hi-res flooring swatches, and a comprehensive knowledge base on all aspects of tools on wood flooring, product reviews, beforeaccessories, and after photos from previous customers, product information and how-to installation videos.installation. A customer can also has the ability to chat live with a flooring expert, either online or over the phone, regarding questions about a flooring purchase or installation. We continue to develop several new features and responsive mobile, tablet and website functionality to assist customers, with their flooring choice,such as our Customer Relationship Management ("CRM") system we implemented in 2023 to help improve functionality, capability and to ensure these tools are effectiveinformation flow as the customer moves across channels.well as increase automation in servicing our customers. We also haveoffer an active presenceenhanced e-commerce experience for our Pro customers, including online ordering with exclusive Pro pricing and delivery rates on Facebook, Pinterest, YouTubeour full assortment of flooring and Twitter.

Advertisingaccessories and Financing

Advertising:

We continue to utilize a mix of digital and traditional and online media, ecommerce,email and direct mail, socialto balance product, service and value messaging. We also leverage our investments in paid, owned and earned media to build brand consideration and financing offers to emphasize product credibility, value, brand awareness, customer education and direct selling. We increase brand awareness in a variety of ways, including through sports, celebrity endorsements and product placement opportunities.educate customers on the flooring category. Overall, we activelyproactively manage the mix of our media to ensure we efficiently drive sales while effectively building brand awareness of our brand value proposition.

We continue to progress on our journey to build awareness for the LL Flooring brand since completing our physical store rebranding. The new LL Flooring brand positions us to serve consumers and Pros who are looking for an unmatched combination of expertise and guidance, including installation services, combined with a curated assortment of beautiful floors at a great value.

Financing:

We offer our residential customers a financing alternative through a proprietary credit card, the Lumber LiquidatorsLL Flooring credit card, underwritten by a third-party financial institution, generally with no recourse to us. This program serves the dual function of providing financial flexibility to our customers and offering us promotional opportunities featuring deferred interest, which we often combine with product promotions. Our customers may also use their Lumber LiquidatorsLL Flooring credit card for installation services. We also offer our commercial Pro

customers a financing alternative,commercial credit line, which is also underwritten by a third-party financial institution, generally atwith no recourse to us. The commercial credit program provides our professionalPro customers a range of additional services that we believe add efficiencyflexibility to their businesses.

Employees

Human Capital

Our people are the core of our business, and we are committed to being a company that fosters an inclusive, diverse culture and workforce, which understands, values, and adapts to the needs of our associates and customers. We seek to provide a safe, engaging work experience that excites and motivates our team members to deliver their best every day.

As of December 31, 2017,2023, we had approximately 2,100 employees, 96%associates, 99% of whom were full-time and none of whom were represented by a union. Of these employees,associates, 71% work in our stores, 18%22% work in corporate store support infrastructure or similar functions (including our call center employees)associates) and 11%7% work either on our finishing line or in one of our distribution centers. We believevalue the strong relationships that we have good relationscreated with our employees.associates and remain committed to helping them achieve both their professional and personal goals while working at the Company.

Developing our people and culture is a critical driving force behind our vision is to be the customer’s first choice in flooring by providing the best experience, subject matter expertise and commitment to excellence from inspiration to installation.

We have identified the following six guiding values as the foundation of our culture:

•

Be customer obsessed

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Embrace diversity

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Arrive with integrity

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Seize opportunities

•

Be resilient

•

Own our outcomes

We aim to provide opportunities for learning and growth, to ensure our team is always the best in the business. In recent years, we added more regional managers to provide more localized and focused leadership by market, as well as additional store managers and store-managers-in-training to enhance our leadership structure for the present and the future, in both the field and in the store. Our field leadership has also focused on developing a more robust store and regional manager training program that promotes both diverse and inclusive leadership as well as driving greater internal career advancement. In 2023, we promoted more than 600 associates and invested substantial hours of training across the organization including launching in-person training for new store managers and store-managers-in-training to provide a richer and more rigorous experience committed to their success.

Our commitment to embracing diversity is supported by training and awareness programs as well as focused efforts to recruit, retain, develop and promote a diverse workforce. In 2021, we trained our top 100 leaders on how to create a diverse workplace and how to respect each other's differences, and in 2022, we provided our associates with professional development workshops to support our Diversity, Equity Inclusion and Belonging ("DEIB") efforts through LL Academy, our online learning platform, and in person. These efforts continue in to 2023. Additionally, all associates learn the value of DEIB through in-depth online training within their first 90 days of employment.

Starting in January 2023, the Company added a Reflection & Service paid holiday. Through this new paid holiday, we are providing associates with time off for specific purposes: to observe a faith-based or cultural event that is important to them or their family, or to volunteer in service with a non-profit or community resource group on behalf of an at-risk population. Additionally, in January 2024, the Company launched a paid parental leave program to support new mothers and fathers in the workforce.

The Company also has a commitment to increase diverse representation by 8% at all levels within the organization. In the past year, we have increased our women’s leadership in VP-and-above roles by 4%, Director level roles by 12% and Supervisory roles by 6%. BIPOC leadership has also risen in the past year with a 13% increase in VP-and-above roles.

Our Diversity, Equity & Inclusion Committee, comprised of a diverse group of associates, is helping to ensure associates can thrive and grow professionally. They continue to connect our work with best practices and insights to drive what diversity, equity and inclusion should look like in our Company.

Seasonality and Quarterly Results

Our quarterly results of operations can fluctuate depending on the timing of our advertising expenses and the timing of, and income contributed by, our new stores. Our net sales fluctuate slightly as a result of seasonal factors, and we adjust merchandise inventories in anticipation of those factors, causing variations in our buildbuildup of merchandise inventories. Generally, we experience higher than averagehigher-than-average net sales in the spring and fall, when more home remodeling activities typically are taking place, and lower than averagelower-than-average net

sales in the colder winter months and during the hottest summer months. In 2023 and to date in 2024, the Company continues to navigate uncertainty in the macroeconomic environment due to low consumer confidence, inflation, volatile mortgage rates impacting housing affordability and lower existing home sales.

Intellectual Property and Trademarks

We have a number of marks registered in the United States, including LLFlooring®, Floor Love™, Lumber Liquidators®, Hardwood Floors For Less!®Floor Finder®, Duravana™, Bellawood®, 1-800-HARDWOOD®1‑800‑HARDWOOD®, Quickclic®, Virginia Mill Works Co. Hand Scraped and Distressed Floors®, Morning Star Bamboo Flooring®, Dream Home Laminate Floors®, Builder’s Pride®, Schön Engineered Floors®, Casa de Colour Collection®, Avella®, Coreluxe®, Tranquility Resilient Flooring®, Lisbon Cork Co. Ltd. ®, R.L. Colston & Sons Hardwood Flooring ®, ReNature™, AquaSeal ™, Dual Defense™ and other product line names. We have also registered certain marks in jurisdictions outside the United States, including the European Union, Canada, China, Australia and Japan. We regard our intellectual property as having significant value and these names are an important factor in the marketing of our brands. Accordingly, we take steps intended to protect our intellectual property including, where necessary, the filing of lawsuits and administrative actions to enforce our rights. Depending on the country, trademarks remain valid for as long as they are in use or their registration status is maintained. Trademark registrations generally are renewable for fixed terms.

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Government Regulation

We are subject to extensive and varied federal, provincial, state and local government regulations in the jurisdictions in which we operate, including laws and regulations relating to our relationships with our employeesassociates and customers, independent third-party installers, public health and safety, zoning, accommodations for persons with disabilities, and fire codes. We are also subject to a number of compliance obligations pursuant to various settlement agreements we have entered into over the past few years. We operate each of our stores, offices finishing facility and distribution centers in accordance with standards and procedures designed to comply with all applicable laws, codes, licensing requirements and regulations. Certain of our operations and properties are also subject to federal, provincial, state and local laws and regulations relating to the use, storage, handling, generation, transportation, treatment, emission, release, discharge and disposal of hazardous materials, substances and wastes and relating to the investigation and cleanup of contaminated properties, including off-site disposal locations. We do not currently incur significant costs complying with the laws and regulations related to hazardous materials. However, we could be subject to material costs, liabilities or claims relating to compliance in the future, especially in the event of changes in existing laws and regulations or in their interpretation, as well as the passage of new laws and regulations.

Our suppliers are subject to the laws and regulations of their home countries, as well as those relative to the import of their products into the United States, including, in particular, laws regulating labor, forestry and the environment. Our suppliers are subject to periodic compliance audits, onsite visits and other reviews, as appropriate, in efforts to ensure that they are in compliance with all laws and regulations. We also support social and environmental responsibility among our supplier community and our suppliers agree to comply with our expectations concerning environmental, labor and health and safety matters. Those expectations include representations and warranties that our suppliers comply with the laws, rules and regulations of the countries in which they operate.

Products that we import into the United States and Canada are subject to laws and regulations imposed in conjunction with such importation, including those issued and/or enforced by U.S.United States Customs and Border Protection and the Canadian Border Services Agency.Protection. In addition, certain of our products are subject to laws and regulations relating to the importation, acquisition or sale of illegally harvested plants and plant products and the emissions of hazardous materials. We work closely with our suppliers to address theunderstand their compliance applicable laws and regulations in these areas.

Available Information

We maintain a website atwww.lumberliquidators.com.LLFlooring.com. The information on or available through our website is not, and should not be considered, a part of this annual report on Form 10-K.10‑K. You may access our annual reports on Form 10-K,10‑K, quarterly reports on Form 10-Q,10‑Q, current reports on Form 8-K8‑K and amendments to those reports, as well as other reports relating to us that are filed with, or furnished to, the United States Securities and Exchange Commission (“SEC”) free of charge on our websitedigital platform https//investors.llflooring.com/overview/default.aspx as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. In addition, you may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site,www.sec.gov, which contains reports, proxy and information statements, and other information that we file electronically with the SEC. The information contained on or connected to our website is not incorporated by reference in this report and should not be considered part of this or any other report that we file with or furnish to the SEC.

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Item 1A. Risk Factors.

The risks described below could materially and adversely affect our business, results of operations, financial condition and cash flows. These risks are not the only risks that we face. Our business operations could also be affected by additional factors that apply

generally to companies operating in the U.S.United States and globally, as well as other risks that are not presently known to us or that we currently consider to be immaterial.

Risks Related to Our Business Operations

Reduced consumer spending due to slower economic growth, economic recession, inflation, higher interest rates, and consumer sentiment could adversely affect demand for our products, our sales and our profit margins.

We face a volatile retail environment and changing economic conditions, including but not limited to slower economic growth, inflation, a volatile interest and mortgage rate environment and lower existing home sales, which may further adversely affect consumer demand and spending. General economic conditions may result in continued inflation, which may increase our exposure to higher costs and may decrease consumer demand. If we are unable to offset these cost increases by price increases, growth, and/or cost reductions in our operations, these inflationary and other general cost increases could have a material adverse effect on our operating cash flows, profitability, and liquidity. The impact of price increases resulting from current economic conditions has resulted in a decrease in our transactions. Should current economic conditions continue to weaken, consumer sentiment and demand for our products could deteriorate which could adversely affect our sales and our profit margins.

Our success dependsupon the ability to attract, develop and retain highly qualified associates.

We believe that our success has depended and continues to depend on the efforts and capabilities of our associates. If we fail to hire, train, manage, and retain qualified associates with expanded skill sets or the capabilities of delivering on strategic objectives, we could lose sales to our competitors, and our labor costs, results of operations, or the execution of growth strategies could be negatively affected. Our ability to meet our labor needs while controlling labor costs is subject to many external factors including market pressure on wage rates, the size and health of the labor market and our reputation within the labor market. Many associates are in entry-level roles supporting the store warehouse with historically high turnover rates, which has led to increased training and retention costs, particularly in a competitive labor market. Further, our ability to successfully execute organizational changes, including management transitions within the Company's senior leadership, is critical to our business success. We may not be able to achieve our operational goals if we are unable to attract, develop and retain qualified associates by providing competitive compensation and benefits and an engaging work experience for an inclusive, diverse team and culture. In order to deliver on our vision is to be the customer’s first choice in hard and soft surface flooring by providing the best experience, from inspiration to installation, our distributed operations are reliant upon different store managers and regional managers to motivate people. Our store associates must have expanded skill sets, and if we are unable to hire, train, manage, and retain qualified associates, it may result in inconsistent execution among different stores/different regions based on available labor force.

Increased transportation costs could harm our results of operations.

The efficient transportation of our products through our supply chain is a critical component of our operations. If the cost of fuel or other costs, such as duties and international container rates rise, it would result in increases in our inventory and cost of sales due to additional transportation charges and fees. Additionally, there are a limited number of delivery companies capable of efficiently transporting our products from our suppliers. Consolidation within this industry could result in increased transportation costs. A reduction in the availability of qualified drivers and/or an increase in driver regulations could continue to increase our costs. International events in any region could impact our ability to transport goods or increase our costs. We may be unable to increase the price of our products to offset increased transportation charges, which could cause our operating results to deteriorate. Even as transportation costs moderate, the trailing costs are included in our inventory values, which may result in elevated inventory and costs of goods sold as inventory turns.

Failure to achieve key elements of our growth strategy could prevent us from increasing revenues or returning to profitability.

Our growth strategy is based primarily upon increased utilization of our new Customer Relationship Management ("CRM") system to generate more sales opportunities, expanding our carpet offering across our store portfolio, and growing sales service to the Pro customer:

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We completed the implementation of our CRM system during fiscal year 2023 and began using the capabilities that it provides to generate more sales opportunities with both Pros and consumers. This system is intended to improve functionality, capability and information flow as well as increase automation in servicing our customers. The failure to successfully realize these benefits or to drive higher sales as a result of these benefits could materially disrupt our operations, adversely impact customer satisfaction or prevent us from closing potential sales opportunities.

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We began offering carpet in a select number of stores in 2023. We anticipate offering carpet in the majority of our stores by the end of 2024. Costs related to expanding carpet offerings require significant capital investment which affects the speed with which we can expand this offering and may limit our profitability and ability to invest in other initiatives. Additionally, the level of customer interest in our carpet options at each of our locations may vary from location to

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location. If customer acceptance of this new product offering fails to align with our targets, we may be unable to reach our operating targets, and our financial position, liquidity, and results of operations may be adversely affected.

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We generate significant business from our sales to Pros. Our operating results vary according to the amount and type of products we are able to sell to Pros, by the amount of repeat transactions we have with existing Pro customers and by our ability to attract new Pro customers. If changes in our customer mix emerge, or we are unable to provide the products, services and experience that our Pros demand, we may be unable to achieve our target customer mix, expand sales to Pros or realize anticipated margins and growth from this initiative.

Our future results and ability to implement our growth strategy will depend on the factors above. Our growth strategy and the investment associated with these initiatives may continue to cause our operating results to fluctuate and be unpredictable and may adversely affect our financial position, liquidity, and results of operations.

Failure to manage our growth effectively could harm our business and operating results.

We have made and continue to make technology investments, including in our new CRM system, designed to increase orders from our digital platform, customer contact center and dedicated Pro sales team. Our existing management information systems, including our store management systems, enterprise reporting platform, compliance procedures and financial and reporting controls, may be unable to support our expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain regional and store managers and personnel for our compliance, IT, human resources and financial and reporting departments. We may not respond quickly enough to the changing demands that our expansion will impose on us. Any failure to manage our growth effectively could harm our business and operating results.

Our growth initiative to expand carpet to the product assortment in our stores may not generate the projected revenues or may not deliver the desired level of profitability.

Part of our growth strategy is dependent upon our ability to attract and retain customers through the offering of an expanded product assortment. Adding carpet as a new flooring option in our stores was intended to enhance our overall product assortment, complement our existing product offerings and ultimately reach new areas of consumer demand and preference. If customer acceptance of this new product offering fails to align with our expectations, we may be unable to realize the added revenues or profitability we projected from the investment in this diversified product offering. In addition, carpeting options may decrease sales of our hard surface products, and our financial position, liquidity, and results of operations may be adversely affected.

Damage, destruction or disruption of our distribution centers could significantly impact our operations and impede our ability to distribute certain of our products.

We have three distribution centers that house products for the direct shipment of flooring to our stores. If any of our distribution centers or our inventory held in those locations were damaged or destroyed by fire, tornado, flooding, wood infestation or other causes, our distribution processes would be disrupted. If the major highways or railways leading to and from our distribution centers were shut down due to weather or infrastructure conditions, our distribution processes would also be disrupted. Competition for premium warehousing space could affect our operating costs and distribution strategy. Any of these disruptions to the distribution centers could cause significant delays in delivery. This could impede our ability to stock our stores and deliver products to our customers and cause our net sales and operating results to deteriorate.

Our representative office in China may present increased legal and operational risks.

We have a representative office in Shanghai, China to facilitate our product sourcing in Asia. We may incur increased costs in complying with applicable local-country laws and regulations as they pertain to our products, operations and related activities. Further, if we fail to comply with applicable Chinese laws and regulations, we could be subject to, among other things, litigation and government and agency investigations. Our operational results and sourcing strategy could be adversely affected by a worsening of relations between the U.S. and China, increasing political tensions related to Taiwan, or changes in Chinese law related to our ability to operate a representative office.

We cannot predict the extent to which the U.S. or other countries will impose new or additional quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. Tariffs and the possibility of an escalation or further developments of current trade conflicts, particularly between the U.S. and China, could continue to negatively impact global trade and economic conditions in many of the regions where we do business. This could result in continued significant increases in our product costs. In addition, it may adversely impact demand for our products.

Failure to effectively manage our third-party installers may present increased legal and operational risks.

We manage third-party professional independent contractors who provide installation services to some of our customers. In some jurisdictions, we are subject to regulatory requirements and risks applicable to general contractors, which include management of licensing, permitting and quality of our third-party installers. We have established procedures designed to manage these

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requirements and ensure customer satisfaction with the services provided by our third-party installers. If we fail to manage these procedures effectively or provide proper oversight of these services, we may be subject to regulatory enforcement and litigation, and our net sales, our profitability and our reputation could be harmed.

Unfavorable allegations, government investigations and legal actions surrounding our products or us could harm our reputation and impair our ability to grow or sustain our business.

We rely on our reputation for offering great value, superior service and a broad selection of high-quality, safe flooring products. We are currentlyhistorically were involved in a number of government investigations and legal actions, many of which have resulted from unfavorable allegations regarding our products and us. Negative publicity surrounding these government investigations and legal actions could continue to harm our reputation and the demand for our products. Additional unfavorable allegations, government investigations and legal actions involving our products and us could also affect our perception in the market and our brands and negatively impact our business and financial condition. For instance, unfavorable allegations with certain regulators surrounding the product qualitycompliance of our laminates that had previously been sourced from China has negatively affected and could continue to negatively affect our operations. If this negative impact is significant, our ability to maintain our liquidity and grow or sustain our business could be jeopardized.

We are involved in a number of legal proceedings and, while we cannot predict the outcomes of these proceedings and other contingencies with certainty, some of the outcomes of these

Future litigation or governmental proceedings could adversely affectresult in material adverse consequences, including judgments or settlements, negatively affecting our business, financial condition and financial condition.

We are, orhave been in the past, and in the future may become, involved in legal proceedings, government and agency investigations, andlawsuits, including consumer, commercial, employment, tort and other litigation, (see discussionregulatory inquiries, and governmental and other legal proceedings arising out of Legal Proceedings in Item 3the ordinary course of this Annual Report). We cannot predict with certaintyour business. Some of these proceedings may raise difficult and complicated factual and legal issues and can be subject to uncertainties and complexities. The timing of the final resolutions to lawsuits, regulatory inquiries and governmental and other legal proceedings is typically uncertain. Additionally, the possible outcomes of, or resolutions to, these legal proceedings. The outcome of some of these legal proceedings could require us to take actionsinclude adverse judgments or settlements, either of which could be costly to implement or otherwise negatively affect our operations or could require us to pay substantial amounts of money that could have a material adverse effect on our liquidity, financial condition and results of operations and could affect our ability to obtain capital or access our revolving line of credit and continue as a going concern. Additionally, defending against lawsuits and legal proceedings may involve significant expense and diversion of management’s attention and resources.payments.

Our overall compliance program, including the Lacey Compliance Plan, is complex and costly to maintain. A failure

Failure to manage theseour compliance programs could adversely affect our ability to conduct business, result in significant fines and other penalties, damage our brand and reputation, and consequently negatively impact our financial position and results of operations.

As disclosed on October 7, 2015,The nature of our products and business is such that we reachedhave to comply with a settlementcomplex set of compliance standards, including but not limited to the Lacey Act, consumer and product safety, environmental regulations. We operate our business in accordance with standards and procedures designed to comply with the United States Departmentapplicable laws and regulations in these areas and work closely with our suppliers in order to comply with such laws and regulations. Compliance can require timely and costly procedures including but not limited to tracing raw materials, testing against emission standards, and maintaining vigorous quality assurance standards. If we violate or are alleged to have violated these laws, we could incur significant costs, be liable for damages, experience delays in shipments of Justice (“DOJ”) regarding our compliance with the Lacey Act. In connection with that settlement, we agreed to implement the Lacey Compliance Plan and we areproducts, be subject to a probation periodfines, penalties, criminal charges or other legal risks, or suffer reputational harm, any of five years. Our implementation of the Lacey Compliance Plan, together with requirements resulting from other settlement agreements we have entered into over the past few years, is costlywhich could reduce demand for our products and if the implementation costs are more than we anticipate, could adversely affect our business, financial condition and operating results. In addition, there can be no assurance that such laws or regulations will not become more stringent in the eventfuture or that we failwill not incur additional costs in the future in order to fully implementcomply with such laws or regulations.

Our insurance coverage and self-insurance reserves may not cover existing or future claims.

In the Lacey Compliance Planordinary course of business, we may incur property, casualty or other losses not covered by our insurance. We maintain various insurance policies, including directors' and officers' insurance, as requiredwell as the following:

For policies under which we are responsible for losses, we record a liability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Unanticipated changes may require us to cease the importationproduce materially different amounts of hardwood flooring from China until the DOJ determines that the Lacey Compliance Plan has been satisfactorily implemented. If we have to cease the importation of hardwood flooring,expense than those recorded, which could adversely impact our operating results. Additionally, our experience could limit our ability to operate would be substantially harmedobtain satisfactory insurance coverage, subjecting us to further loss, or could require significantly increased premiums.

The cost of our employee health care benefit program may increase in the future.

We maintain an employee benefits program that provides self-insured and our business, including our resultsinsured coverage to employees that meet the applicable requirements under the program. Employees can elect to enroll dependents that meet eligibility criteria. Coverage includes health, dental, vision, short- and long-term disability, life insurance and other voluntary ancillary benefits. Employees share in the cost of operations, would be adversely affected. Further, the failure to properly manage our overall compliance program and fully comply with the obligations imposed upon us by these various settlement agreements or implement anyother coverage at varying levels. The Company has historically funded a majority of the compliance requirements arising from these obligations could adversely affectcost of health benefits.

The Company routinely reviews its health benefit plans to assure conformity with government regulations and competitiveness within our abilityindustry. Approximately 75% of eligible employees elect to conduct business, resultparticipate in significant fines and other penalties, damage our brand and reputation and negatively impacthealth benefit plans. In the future,

proportionately more employees may elect to participate in our health benefit plans. We are unable to reliably predict to what extent, if any, the percentage of eligible employees who elect health care coverage will increase in the future. Because we fund a majority of the cost of health benefits, our financial position and resultsaccounting expense will increase to the extent that additional employees elect to participate in the Company’s health benefit plans.

Also, medical inflation has historically tended to outpace general inflation. We are unable to reliably predict the extent to which future medical inflation will outpace general inflation. Additionally, because our medical benefit program is self-insured, an unusual incidence of operations.large claims may cause our costs to unexpectedly increase.

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Federal, provincial, state or local laws and regulations, including tariffs, or our failure to comply with such laws and regulations and our obligations under certain settlement agreements related to our products could increase our expenses, restrict our ability to conduct our business and expose us to legal risks.

We are subject to a wide range of general and industry-specific laws and regulations imposed by federal, provincial, state and local authorities in the countries in which we operate, including those related to tariffs, customs, foreign operations (such as the Foreign Corrupt Practices Act), truth-in-advertising, consumer protection, privacy, zoning and occupancy matters as well as the operation of retail stores and warehouse,warehouses, production and distribution facilities and provision of installation services. In addition, various federal, provincial and state laws govern our relationship with and other matters pertaining to our employees,associates, including wage and hour-related laws. If we fail to comply with these laws and regulations, we could be subject to legal risk, our operations could be impacted negatively, and our reputation could be damaged. Likewise, if such laws and regulations should change, our costs of compliance may increase, thereby impacting our results and hurting our profitability.

Certain portions of our operations are subject to laws and regulations governing hazardous materials and wastes, the remediation of contaminated soil and groundwater, and the health and safety of employees.associates. If we are unable to comply with, extend or renew a material approval, license or permit required by such laws, or if there is a delay in renewing any material approval, license or permit, our net sales and operating results could deteriorate or otherwise cause harm to our business.

With regard to our products, we spend significant resources in order to comply with applicable advertising, importation, exportation, environmental and health and safety laws and regulations. If we should violateViolations of these laws and regulations, we could experiencehave in the past and may in the future result in delays in receipt of shipments of our goods, be subject to fines, penalties, criminal charges, or other legal risks, be liableliability for costs and damages, or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations. Further, if such laws, regulations, and regulationstariffs should change, including those relating to antidumping and countervailing duties, we may experience increased costs in order to adhere to the new standards. We are also subject to a number

Actions of settlement agreements that impose certain obligations on us with respect toactivist or dissident shareholders could impact the operationpursuit of our business. If we fail to comply with these obligations, we may experience additional costsbusiness strategies and expenses and could be subject to additional legal risks.

The effect of comprehensive U.S. tax reform legislation on us, whether adverse or favorable, is uncertain.

In December of 2017, President Trump signed into law the Tax Act. Among a number of significant changes to the U.S. federal income tax rules, the Tax Act reduces the marginal U.S. corporate income tax rate from 35% to 21%, limits the deduction for net interest expense, shifts the United States toward a more territorial tax system, and imposes new rules to combat erosion of the U.S. federal income tax base. We are still evaluating the effects of the Tax Act on us and there are a number of uncertainties and ambiguities as to the interpretation and application of many of the provisions in the Tax Act. In the absence of guidance on these issues, we will use what we believe are reasonable interpretations and assumptions in interpreting and applying the Tax Act for purposes of determiningadversely affect our cash tax liabilities and results of operations, whichfinancial condition, or share price.

We value constructive input from investors and regularly engage in dialogue with our shareholders regarding strategy and performance. Our board of directors and management team are committed to acting in the best interests of all shareholders. The actions taken by our board of directors and management in seeking to maintain constructive engagement with certain shareholders, however, may not be successful.

We strive to maintain constructive, ongoing communications with all shareholders and we welcome constructive input from all shareholders toward the shared goal of enhancing stakeholder value. Nonetheless, we may not be successful in engaging constructively with one or more shareholders, and any resulting activist campaign that contests, or seeks to change, as we receive additional clarification and implementation guidance and as the interpretation of the Tax Act evolves over time. It is possible that the Internal Revenue Service could issue subsequent guidanceour strategic direction or take positions on audit that differ from the interpretations and assumptions that we previously made, whichbusiness mix could have an adverse effect on us because: (i) responding to a proxy contest or other actions by activist or dissident shareholders could disrupt our cash tax liabilities,business and operations, be costly or time-consuming, or divert the attention of our board of directors or senior management from the pursuit of business strategies, which could adversely affect our results of operations andor financial condition. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the IRS or other standard-setting bodies, wecondition; (ii) perceived uncertainties as to our future direction may make adjustmentslead to the provisional amounts that could materially affect our financial position and resultsperception of operations as well as our effective tax ratea change in the perioddirection of the business, instability, or lack of continuity, any of which may be exploited by our competitors, cause concern to our current or potential customers, cause concern in which the adjustments are made.

Our growth strategy depends in part on our ability to open new stores and is subject to many unpredictable factors.

As of December 31, 2017, we had 393 stores throughout the United States and Canada. Assuming the continued successminds of our store modelemployees and satisfaction of our internal criteria, we plan to continue our selective approach to future openings over the next several years. This growth strategy and the investment associated

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with the development of each new store may cause our operating results to fluctuate and be unpredictable or decrease our profits. Our future results and ability to implement our growth strategy will depend on various factors, including the following:

Failure to manage our growth effectively could harm our business and operating results.

Our plans call for our selective approach in the addition of new stores over the next several years, and increased orders from our website, call center and catalogs. Our existing management information systems, including our store management systems, compliance procedures and financial and reporting controls, may be unable to support our expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, trainattract and retain regionalqualified personnel and store managersbusiness partners; and personnel for our compliance and financial and reporting departments. We may not respond quickly enough to the changing demands that our expansion will impose on us. Any failure to manage our growth effectively could harm our business and operating results.

Increased transportation costs could harm our results(iii) these types of operations.

The efficient transportation of our products through our supply chain is a critical component of our operations. If the cost of fuel or other costs, such as import tariffs, duties and international container rates, rise, it could result in increases in our cost of sales due to additional transportation charges and fees. Additionally, there are a limited number of delivery companies capable of efficiently transporting our products from our suppliers. Consolidation within this industry could result in increased transportation costs. The number of qualified drivers may also be an issue. We may be unable to increase the price of our products to offset increased transportation charges, which could cause our operating results to deteriorate.

Damage, destruction or disruption of our Toano, Virginia facility or distribution centers could significantly impact our operations and impede our ability to finish and distribute certain of our products.

Our Toano, Virginia facility serves as our corporate headquarters and, among other things, houses our primary computer systems, which control our management information and inventory management systems. In addition, in 2017, we finished approximately 85% of all Bellawood products, as well as small quantities of certain other products, there. In 2017, Bellawood flooring accounted for approximately 10% of our net sales. If the Toano, Virginia facility or equipment were damaged or destroyed, it could harm our operations, cause significant lost production and impact our ability to fulfill customer demand.

Further, if either of our distribution centers or our inventory held in those locations were damaged or destroyed by fire, wood infestation or other causes, our distribution processes would be disrupted, whichactions could cause significant delaysfluctuations in delivery. This could impede our ability to stock our storesshare price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and deliver products to our customers, and cause our net sales and operating results to deteriorate.

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The operation of stores in Canada and our representative office in China may present increased legal and operational risks.

We currently operate eight store locations in Canada. As a resultprospects of our limited penetration in the Canadian market, these stores may continue to be less successful than we expect. Additionally, investments in advertising and promotional activity may be required to continue to build brand awareness in that market.business.

We also have established a representative office in Shanghai, China to facilitate our product sourcing in Asia. We have limited experience with the legal and regulatory environments and market practices outside

We manage third-party installers who provide installation services to some of our customers. In some of these jurisdictions, we are subject to regulatory requirements and risks applicable to general contractors, which include management of licensing, permitting and quality of our third-party installers. We have established procedures designed to manage these requirements and ensure customer satisfaction with the services provided by our third-party installers. If we fail to manage these procedures effectively or provide proper oversight of these services, we may be subject to regulatory enforcement and litigation and our net sales and our profitability and reputation could be harmed.

Our founder is the lessor on a significant number of our leases and the satisfactory renewal of these as each comes due is a risk to our occupancy costs and store count.

As of December 31, 2017, we lease our Toano facility, which includes a store location, a warehouse and 29 of our other store locations from entities owned, in whole or in part, by Tom Sullivan, our founder. Although our percentage of total stores leased from such entities has decreased, this concentration of leases subjects us to the risk of increased costs or reduction of store count in the event of an adverse action or inaction by Mr. Sullivan or such entities. Mr. Sullivan no longer serves as an employee or as a director of the Company.

Risks Related to Our Suppliers, Products and Product Sourcing

Our ability and cost to obtain cost-effective products, especially from Asia and other international suppliers, and the operations of many of our international suppliers are subject to risks that may be beyond our control and that could harm our operations and profitability.

We rely on a select group of international suppliers to provide us with imported flooring products that meet our specifications. In 2023, our imported product was sourced from Asia, Europe, and South America. As a result, we are subject to risks associated with obtaining products from abroad, including:

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the imposition of duties (including antidumping and countervailing duties), tariffs, taxes and/or other charges on exports or imports;

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political unrest, terrorism and economic instability resulting in the disruption of trade from foreign countries where our products originate;

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currency exchange fluctuations;

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the imposition of new laws and regulations, including those relating to environmental matters and climate change issues, labor conditions, forced labor, including UFLPA holds, quality and safety standards, trade restrictions, supply chain traceability, and restrictions on funds transfers;

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disruptions or delays in production, shipments, delivery or processing through ports of entry; and

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differences in product standards, acceptable business practices and legal environments of the country of origin.

During 2023, approximately 11% of our product was sourced from China down from 14% a year ago. Included in merchandise inventories are tariff-related costs, including Section 301 tariffs on certain products imported from China in recent years. In November 2019, a subset of these imports for certain click vinyl and other engineered products (the “Subset Products”) received an exemption that was made retroactive to the initial levying of the Section 301 Tariffs. However, as of August 7, 2020, the exclusions on subset products expired and certain flooring products imported from China were again subject to a 25% Section 301 tariff. Potential costs and any attendant impact on pricing arising from these tariffs could have a material adverse effect on our results of operations, financial condition, and liquidity.

These and other factors beyond our control could disrupt the ability of our suppliers to ship certain products to us cost-effectively or at all, which could harm our operations. If our product costs and consumer demand are adversely affected by foreign trade issues (including import tariffs and other trade restrictions with China), our sales and profitability may suffer.

Failure to identify and develop relationships with a sufficient number of qualified suppliers could affect our ability to obtain products that meet our high quality standards.

We purchase hard surface flooring directly from mills located around the world. We believe that these direct supplier relationships are important to our business. In order to retain the competitive advantage that we believe results from these relationships, we need to continue to identify, develop and maintain relationships with qualified suppliers that can satisfy our high standards for quality and our requirements for the delivery of hardwoodhard-surface materials in a timely and efficient manner. We expect the need to develop new relationships to be particularly important as we seek to expand our operations, enhance our product offerings, and expand our product assortment and geographic source of origin in the future.future and to mitigate reliance on existing key relationships. Any inability to do so could reduce our competitiveness, slow our plans for further expansion and cause our net sales and operating results to deteriorate.

We rely on a concentrated number of suppliers for a significant portion of our supply needs. We generally do not have long-term contracts with our suppliers. In the future, our suppliers may be unable to supply us, or supply us on acceptable terms, due to various factors, which could include political instability in the supplier’s country, insufficient production capacity, product line failures, collusion, a supplier’s financial instability, inability or refusal to comply with applicable laws, trade restrictions, tariffs or our standards, duties, insufficient transport capacity and other factors beyond our control. In these circumstances, we could experience deterioration in our net sales and operating results. In addition, several of our suppliers have accounts receivable financing arrangements under which they hold credit insurance to cover payments due from us. If they are unable to maintain this insurance at a favorable rate, then they may require faster payment terms with us which could negatively affect our cash flow, ability to maintain appropriate inventory levels and ability to achieve our sales goals.

For our carpet offerings, we currently rely on one domestic-based supplier. The unanticipated termination or interruption of our sole supplier of carpet, including failure by the supplier to meet our product specifications, could have a material adverse effect on us because we do not have the capability to manufacture our own carpet products or the warehouse capacity to store rolled carpet. Our supplier may not be able to meet our demand for a variety of reasons, including our inability to forecast our future needs accurately or a shortfall in production by the supplier for reasons unrelated to us, such as work stoppages, acts of war, terrorism, pandemics, fire,

earthquake, energy shortages, flooding or other natural disasters. If our supply arrangements with our sole supplier of carpet are terminated or interrupted, we likely would incur increased costs and experience delays in our product deliveries (thus resulting in decreased sales and profitability) associated with developing new supply chain sources for carpet. A prolonged inability on our part to source carpet on a cost-effective basis could adversely impact our ability to deliver products on a timely basis, which could harm our customer relationships, financial position, liquidity, and results of operations.

The failureCompany and third-party suppliers on whom we rely source a significant portion of the merchandise we sell from Asia, which exposes us to the risk of supply chain disruptions.

Beginning in 2020, the United States Government took significant steps to address the forced labor concerns in the Xinjiang Uyghur Autonomous Region of China ("Xinjiang Region"), including withhold release orders (“WROs") issued by United States Customs and Border Protection (“CBP”). The WROs allow CBP to detain and deny entry of imports suspected of containing raw materials from Xinjiang, regardless of the origin of the finished products. This affected global supply chains, including those industries whose products are reliant upon polysilicon, tomatoes and cotton. In June 2022, the Uyghur Forced Labor Prevention Act (“UFLPA”) went into effect, which presumes goods produced in the Xinjiang Region, or with labor linked to specified Chinese government-sponsored labor programs, were produced using forced labor and prohibits importation of such goods into the United States absent clear and convincing evidence proving otherwise. In February 2023, CBP expanded its enforcement focus beyond the high priority sectors identified in the UFLPLA (i.e., cotton, tomatoes and polysilicon) to include additional sectors including aluminum products and polyvinyl chloride (PVC) products.

In February 2023, the Company began to receive detention notices from CBP related to flooring products that contain PVC. The Company worked with our affected vendors to provide the requested documentation to CBP to attempt to show that the affected products do not contain any inputs from the Xinjiang Region, in compliance with the Company’s Standards for Vendor Partner Conduct and in compliance with certifications the Company has required of vendors related to the UFLPA. During the document collection process, the Company incurred costs related to storage, transportation and extra handling. This process also adversely impacted our ability to obtain adequate inventory in the vinyl product category on a timely basis, which resulted in lost sales, increased costs and an overall decrease in our profits. We mitigated the impact of these customs delays by recommending to customers alternative products in our current assortment and leveraged our sourcing capabilities to look at alternative flooring categories and sourcing geographies. While we continue to require our vendors to comply with the UFLPA and we invest in automated tools and processes to trace our supply chain, we cannot predict when, or the extent to which, CBP will issue new detention notices for additional vendors or products.

Failure of our suppliers to comply with applicable laws, use ethical practices, and meet our quality standards could result in our suspending purchasing from them, negatively impacting net sales, and could expose us to reputational and legal risks.

While our suppliers agree to operate in compliance with applicable laws and regulations and our vendor code of conduct, we do not control our suppliers. Accordingly, despite our continued investment in compliance and quality control, we cannot guarantee that they comply with such laws and regulations or operate in a legal, ethical and responsible manner. While we monitor our suppliers’ adherence to our compliance and quality standards, there is no guarantee that we will be able to identify non-compliance.non-compliance, and it may be costly and complex to comply. Moreover, the failure of our suppliers to adhere to applicable legal requirements and the quality standards that we set for our products could lead to government investigations, litigation, write-offs and recalls, any of which could damage our reputation and our brands, increase our costs, and otherwise hurt our business.

Product liability claims could adversely affect our reputation, which could adversely affect our net sales and profitability.

We have faced and continue to face the risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in economic loss, personal injury, or property damage, or violated environmental or other laws. In the event that any of our products proves to be defective or otherwise in violation of applicable law,laws, we may be required to recall or redesign such products. Further, in such instances, we may be subject to legal action. We maintain insurance against some forms of product liability claims, but such coverage may not be available or adequate for the liabilities actually incurred. A successful claim brought against us in excess of available insurance coverage, or any claim or product recall that results in significant adverse publicity against us, may have a material adverse effect on our net sales and operating results.

Our ability and cost to obtain products from abroad and the operations of many of our international suppliers are subject to risks that are beyond our control and that could harm our operations and profitability.

We rely on a select group of international suppliers to provide us with imported flooring products that meet our specifications. In 2017, our imported product was sourced from Asia, Europe, Australia and South America. As a result, we are subject to risks associated with obtaining products from abroad, including:

These and other factors beyond our control could disrupt the ability of our suppliers to ship certain products to us cost-effectively or at all, which could harm our operations.

Our ability to offer hardwood flooring, particularly products made of more exoticcertain species of hardwood, depends on the continued availability of sufficient suitable hardwood at reasonable cost.

Our business strategy depends on offering a wide assortment of hardwood flooring to our customers. We sell flooring made from species ranging from domestic maple, oak and pine to imported acacia, cherry, koa, mahogany and teak. Some of these species are scarce,difficult to source, and we cannot be assured of their continued availability. Our ability to obtain an adequate volume and quality of hard-to-find species depends on our

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suppliers’ ability to furnish those species, which, in turn, could be affected by many things including events such as forest fires, insect infestation, tree diseases, prolonged drought and other adverse weather and climate conditions. Government regulations relating to forest management practices also affect our suppliers’ ability to harvest or export timber, and changes to regulations and forest management policies, or the implementation of new laws or regulations, could impede

their ability to do so. If our suppliers cannot deliver sufficient hardwood and we cannot find replacement suppliers, our net sales and operating results may be negatively impacted.

The cost of the various species of hardwood that are used in our products is important to our profitability. Hardwood lumber costs fluctuate as a result of a number of factors including changes in domestic and international supply and demand, labor costs, competition, market speculation, product availability, environmental restrictions, government regulation and trade policies, duties, weather conditions, processing and freight costs, and delivery delays and disruptions. We generally do not have long-term supply contracts or guaranteed purchase amounts. As a result, we may not be able to anticipate or react to changing hardwood costs by adjusting our purchasing practices, and we may not always be able to increase the selling prices of our products in response to increases in supply costs. If we cannot address changing hardwood costs appropriately, it could cause our operating results to deteriorate.

Risks Relating to Our Competitive Positioning

Ineffectiveness of our advertising strategy or inability to build sufficient awareness of the LL Flooring brand could result in reduced customer traffic, thereby impacting net sales and profitability.

Historically, we have used extensive advertising to encourage customers to drive to our stores, which were, at times, located some distance from population centers in areas that have lower rents than traditional retail locations. Initially, a significant portion of our advertising was directed only to consumers, whose needs with respect to their flooring purchases vary from Pros such as flooring installers, remodelers, and small to medium home builders. As our brand and marketing strategies continue to evolve, we have broadened the content of our advertising to increase the awareness of our great value, superior service and broad selection of high-quality, hard and soft surface flooring products. We have completed the physical rebranding of our stores, however, low brand awareness following the rebranding from Lumber Liquidators to LL Flooring has been a limiting factor in driving sales. If awareness does not increase with customers, we may not achieve desired return on investment resulting in declines in our net sales and operating results both in-store and through our digital platform.

Competition could cause price declines, decrease demand for our products and decrease our market share.

We operate primarily in the hard and soft surface flooring industry, which is highly fragmented and competitive. We face significant competition from national and regional home improvement chains, national and regional specialty flooring chains, Internet-based companies and privately owned single-site enterprises. We compete on the basis of price, customer service, store location and the range, quality and availability of the hard and soft surface flooring that we offer our customers. If our positioning with regard to one or more of these factors should erode, deteriorate, fail to resonate with consumers or misalign with demand or expectations, our business and results may be negatively impacted.

Our competitive position is also influenced by the availability, quality and cost of merchandise, labor costs, distribution and sales efficiencies and our productivity compared to that of our competitors. Further, as we expand into new and unfamiliar markets, we may face different competitive environments than in the past. Likewise, as we continue to enhance and develop our product offerings, we may experience new competitive conditions.

Some of our competitors are larger organizations, have existed longer, are more diversified in the products they offer and have a more established market presence with substantially greater financial, marketing, personnel and other resources than we have. In addition, our competitors may forecast market developments more accurately than we do, develop products that are superior to ours, produce similar products at a lower cost or adapt more quickly to new technologies or evolving customer requirements than we do. Intense competitive pressures from one or more of our competitors could cause price declines, decrease demand for our products and decrease our market share.

Our flooring offerings may become less popular as compared to other types of floor coverings in the future. For example, most of our products are made using various hardwood species, and concern over the environmental impact of tree harvesting could shift consumer preferences towards synthetic or inorganic flooring. In addition, hardwood flooring competes against carpet, vinyl sheet, vinyl tile, ceramic tile, natural stone and other types of floor coverings. Our attempted mitigation of this risk with the expansion into carpeted flooring may not be successful. If consumer preferences shift toward types of floor coverings that we do not sell, we may experience decreased demand for our products.

All of these competitive factors may harm us and reduce our net sales and operating results.

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Risks Related to Economic Factors and Our Access to Capital

Cyclicality in the home flooring industry, coupled with our lack of diversity in our linesline of business, could cause volatility and risk to our business.

The hardwoodhard and soft surface flooring industry is highly dependent on the remodeling of existing homes and new home construction. Remodeling and new home construction are cyclical and depend on a number of factors which are beyond our control, including interest and inflation rates, tax policy, real estate prices, employment levels, consumer confidence, credit availability, real estate prices, demographic trends, weather conditions, natural disasters and general economic conditions. For example, discretionary consumer spending could be limited, spending on remodeling of existing homes could be reduced and purchases of new homes could decline if:

In the event of a decrease in discretionary spending, home remodeling activity or new home construction, any of which could be due to slower growth or recession, increasing interest rates, increasing unemployment or inflation, demand for our products, including hardwoodhard and soft surface flooring, could be impacted negatively and our business and operating results could be harmed.

Our insurance coverage and self-insurance reserves may not cover existing or future claims.

We maintain various insurance policies, including directors and officers insurance:

With the large number of pending cases and government investigations, we may be required to defend ourself, our officers, directors and former employees and we may be subject to financial harm in the event such cases or investigations are adversely determined and insurance coverage will not, or is not sufficient to, cover any related losses.

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For policies under which we are responsible for losses, we record a liability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Unanticipated changes may produce materially different amounts of expense than those recorded, which could adversely impact our operating results. Additionally, our recent experience could limit our ability to obtain satisfactory insurance coverage, subjecting us to further loss, or could require significantly increased premiums.

The inability to access our credit facilityRevolving Credit Facility or other sources of capital, could cause our financial position, liquidity, and results of operations to suffer.

We have relied on and expect to continue to rely on a bank credit facilityagreement to fund seasonalour needs for working capital. Information with respect to our Revolving Credit Facility may be found in Note 4, “Credit Agreement”, to the consolidated financial statements in Item 8 of Part II, which is incorporated herein by reference. Our access to this facilitythe Revolving Credit Facility depends on our ability to meet the conditions for borrowing, including that all representations are true and correct at the time of the borrowing. Our failure to meet these requirements or obtain additional or alternative sources of capital could impact:

Any non-compliance with any restrictive or financial covenants in our Revolving Credit Facility could result in a default and could result in our lenders declaring our senior debt immediately due and payable, which would have a material adverse effect on our financial position, consolidated results of operations and liquidity. If we are required to seek other sources of capital, additional capital may or may not be available. Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our current and potential future earnings. If we are unable to access sufficient capital or enter into financing arrangements on favorable terms in the future, our financial condition and results of operations may be materially adversely affected.

Tax assessments or unclaimed property audits by governmental authorities could adversely impact our operating results.

We remit a variety of taxes and fees to various governmental authorities, including federal and state income taxes, excise taxes, property taxes, sales and use taxes, and payroll taxes. The taxes and fees remitted by us are subject to review and audit by the applicable governmental authorities, which could result in liability for additional assessments. In addition, we are subject to unclaimed or abandoned property (escheat) laws which require us to turn over to certain government authorities the property of others held by us that has been unclaimed for a specified period. We are subject to audits by individual U.S. states regarding our escheatment practices. The legislation and regulations related to tax and unclaimed property matters tend to be complex and subject to varying interpretations by both government authorities and taxpayers. Although management believes that the positions are reasonable, various taxing authorities may challenge certain of the positions we have taken, which may also potentially result in additional liabilities for taxes, unclaimed property and interest in excess of accrued liabilities. Our positions are reviewed as events occur such as the availability of new information, the lapsing of applicable statutes of limitations, the conclusion of tax audits, the measurement of additional estimated liability based on current calculations, the identification of new tax contingencies, or the rendering of relevant court decisions. An unfavorable resolution of assessments by a governmental authority could negatively impact our results of operations and cash flows in future periods.

Risks Related to Our Information Technology

If our management information systems, including our digital platform, CRM System or customer contact center, experience disruptions, it could disrupt our business and reduce our net sales.

We depend on our management information systems to integrate the activities of our stores, digital platform and customer contact center, to process orders, make outgoing calls to customers, to respond to customer inquiries, to manage inventory, to purchase merchandise and to sell and ship goods on a timely basis. Part of our growth strategy depends on increased utilization of our new CRM system to generate more sales opportunities. We may experience operational problems with our information systems as a result of system failures, viruses, computer “hackers” or other causes. We may incur significant expenses in order to repair any such operational problems. Any significant disruption or slowdown of our systems could cause information, including data related to customer orders, to be lost or delayed, which could result in delays in the delivery of products to our stores and customers or lost sales.

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For example, as we previously disclosed in August 2019, we experienced a malicious network security incident during that year for approximately a week that prevented access to several of our information technology systems and data within our networks. Based on the nature of the network security incident, the impact on our information technology systems and the results of the forensic IT analysis, we do not believe confidential customer, employee or company data was lost or disclosed. Moreover, our entire corporate network, including our telephone lines, is on an Internet-based network, which is vulnerable to certain risks and uncertainties, including changes in the required technology interfaces, digital platform downtime and other technical failures, security breaches and customer privacy concerns. Accordingly, if our network is disrupted or if we cannot successfully maintain our digital platform and customer contact center in good working order, we may experience delayed communications within our operations and between our customers and ourselves and may not be able to communicate at all via our network, including via telephones connected to our network, or may not see increased utilization of our CRM system that we expected, all of which may result in lost sales, reputational harm, or impacts to operating results.

In addition, we are currently making, and expect to continue to make, investments in our management information systems, infrastructure and personnel, in certain cases with the assistance of strategic partners and other third-party service providers. These investments involve replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems; outsourcing certain technology and business processes to third-party service providers; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or designing or cost-effectively acquiring new systems with new functionality. These efforts can result in significant potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, changes in security processes and internal controls, cost overruns, implementation delays or errors, disruption of operations, and the potential inability to meet business and reporting requirements. Any system implementation and transition difficulty may result in operational challenges, security failures, reputational harm, and increased costs that could adversely affect our business operations and results of operations.

We may incur costs and losses resulting from security risks we face in connection with our electronic processing, transmission and storage of confidential customer information.

We accept electronic payment cards for payment in our stores and through our callcustomer contact center. In addition, our online operations depend upon the secure transmission of confidential information over public networks, including information permitting cashless payments. As a result, we may become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we may also be subject to lawsuits or other proceedings relating to these types of incidents. Further, a compromise of our security systems that results in our customers’ personal information being obtained by unauthorized persons could adversely affect our reputation with our customers and others, as well as our operations, results of operations and financial condition, and could result in litigation against us or the imposition of penalties. A security breach could also require that we expend significant additional resources related to the security of information systems and could result in a disruption of our operations, particularly our online sales operations.

Additionally, privacy and information security laws and regulations change, and compliance with them may result in cost increases due to necessary systems changes and the development of new administrative processes. If we fail to comply with these laws and regulations or experience a data security breach, our reputation could be damaged, possibly resulting in lost future business, and we could be subjected to additional legal risk as a result of non-compliance.

If our management information systems, including our website

Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may subject us to substantial negative financial consequences and civil or our call center, experience disruptions, it could disrupt our businesscriminal penalties.

Complex local, state, national, foreign and reduce our net sales.

We depend on our management information systemsinternational laws and regulations apply to integrate the activitiescollection, use, retention, protection, disclosure, transfer and other processing of our stores, websitepersonal data. These privacy and call center,data protection laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to process orders,new or different interpretations and enforcement. For example, California enacted legislation, the California Consumer Privacy Act (“CCPA”). The CCPA requires, among other things, covered companies to respondprovide new disclosures to customer inquiries,California consumers and allows such consumers new abilities to manage inventory, to purchase merchandise and to sell and ship goods on a timely basis. We may experience operational problems with our information systemsopt-out of certain sales of personal data. The CCPA also provides for civil penalties for violations as well as a resultprivate right of system failures, viruses, computer “hackers”action for data breaches that may increase data breach litigation. Further, the California Privacy Rights Act, which took effect in January 2023, significantly modifies the CCPA. Colorado, Connecticut, Utah and Virginia enacted similar data privacy legislation that also took effect in 2023, and several other states and countries are considering expanding or passing privacy laws in the near term. These modifications and new laws will require us to incur additional costs and expenses in our efforts to comply. Our failure to comply with applicable laws and regulations or other causes. Weobligations to which we may incur significant expenses in orderbe subject relating to repair any such operational problems. Any significant disruptionpersonal data, or slowdown of our systems could cause information, includingto protect personal data related to customer orders, to be lostfrom unauthorized access, use or delayed, whichother processing, could result in delays in the delivery of productsenforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage to our stores and customers or lost sales. Moreover, our entire corporate network, including our telephone lines, isbrand reputation, any of which could have a material adverse effect on an Internet-based network, which is vulnerable to certain risks and uncertainties, including changes in required technology interfaces, website downtime and other technical failures, security breaches and customer privacy concerns. Accordingly, if our network is disrupted or if we cannot successfully maintain our website and call center in good working order, we may experience delayed communications within our operations, financial performance and between our customers and ourselves, and may not be able to communicate at all via our network, including via telephones connected to our network.business.

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Alternative e-commerce and online shopping offerings may erode our customer base and adversely affect our business.

Our long-term future depends heavily upon the general public’s willingness to use our stores as a means to purchase goods. In recent years, e-commerce has become more widely accepted as a means of purchasing consumer goods and services, which could

adversely impact customer traffic in our stores. Additionally, certain of our competitors offer alternative e-commerce and online shopping. If consumers use alternative e-commerce and online shopping offerings to conduct business as opposed to our store locations, it could materially adversely impact our net sales and operating results.

Risks Relating to Our Competitive Positioning

A tarnished brand or ineffectiveness of our advertising strategy could result in reduced customer traffic, thereby impacting net sales and profitability.

We believe that our growth thus far was achieved in part through our successful investment in local and national advertising. Historically, we have used extensive advertising to encourage customers to drive to our stores, which were generally located some distance from population centers in areas that have lower rents than traditional retail locations. Further, a significant portion of our advertising was directed at the DIY and DIFM customers. While our marketing strategy continues to support these strategies, we have broadened the reach and frequency of our advertising to increase the awareness of our value proposition and the number of customers served. If there is are negative perceptions about our brand to our customers, our advertisements fail to draw customers in the future, or if the cost of advertising or other marketing materials increases significantly, we could experience declines in our net sales and operating results.

We may not be able to successfully anticipate consumer trends and our failure to do so may adversely impact our net sales and profitability.

As part of our business proposition, it is important for us to anticipate and respond to changing preferences and consumer demands in a timely manner. If we fail to identify and respond to emerging trends, consumer acceptance of the merchandise in our stores and our image with our customers may be harmed, which could reduce customer traffic in our stores and adversely affect our net sales. Moreover, consumer demand within our mix of products may shift and such change may negatively impact our inventory, net sales and operating results.

Competition could cause price declines, decrease demand for our products and decrease our market share.

We operate in the wood flooring industry, which is highly fragmented and competitive. We face significant competition from national and regional home improvement chains, national and regional specialty flooring chains, Internet-based companies and privately owned single-site enterprises. We compete on the basis of price, customer service, store location and the range, quality and availability of the hardwood flooring that we offer our customers. If our positioning with regard to one or more of these factors should erode, deteriorate, fail to resonate with consumers or misalign with demand or expectations, our business and results may be impacted negatively.

Our competitive position is also influenced by the availability, quality and cost of merchandise, labor costs, finishing, distribution and sales efficiencies and our productivity compared to that of our competitors. Further, as we expand into new and unfamiliar markets, we may face different competitive environments than in the past. Likewise, as we continue to enhance and develop our product offerings, we may experience new competitive conditions.

Some of our competitors are larger organizations, have existed longer, are more diversified in the products they offer and have a more established market presence with substantially greater financial, marketing, personnel and other resources than we have. In addition, our competitors may forecast market developments more accurately than we do, develop products that are superior to ours or produce similar products at a lower cost, or adapt more quickly to new technologies or evolving customer requirements than we do. Intense competitive pressures from one or more of our competitors could cause price declines, decrease demand for our products and decrease our market share.

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Hardwood flooring may become less popular as compared to other types of floor coverings in the future. For example, our products are made using various hardwood species, including rare exotic hardwood species, and concern over the environmental impact of tree harvesting could shift consumer preference towards synthetic or inorganic flooring. In addition, hardwood flooring competes against carpet, vinyl sheet, vinyl tile, ceramic tile, natural stone and other types of floor coverings. If consumer preferences shift toward types of floor coverings that we do not sell, we may experience decreased demand for our products.

All of these competitive factors may harm us and reduce our net sales and operating results.

Risks Related to Internal Controls

Failure to maintain effective systems of internal and disclosure control could have a material adverse effect on our results of operation and financial condition.

Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud, and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. As part of our ongoing monitoring of internal control, we may discover material weaknesses or significant deficiencies in internal control that require remediation.

We have in the past discovered, and may in the future discover, areas of internal controls that need improvement. Regardless, we continue to work to improve our internal controls. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to maintain effective controls or to timely implement any necessary improvement of our internal and disclosure controls could, among other things, result in losses from fraud or error, harm our reputation, or cause investors to lose confidence in the reported financial information, all of which could have a material adverse effect on our results of operation and financial condition.

Risks Relating to Our Common Stock

Our common stock price may be volatile and all or part of any investment in our common stock may be lost.

The market price of our common stock could fluctuate significantly based on various factors, including, but not limited to:

In addition, the stock market may experience significant price and volume fluctuations. These fluctuations may be unrelated to the operating performance of particular companies but may cause declines in the market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or nothing to do with us or our performance.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of research analysts and investors due to various factors.

Research analysts and investors develop expectations on how we may perform using a variety of metrics, including sales, comparable store sales, gross profit, etc. However, in any given quarter, actual performance may vary from these expectations, causing significant fluctuations in our stock price.

Our anti-takeover defense provisions may cause our common stock to trade at market prices lower than it might absent such provisions.

Our certificate of incorporation and bylaws contain provisions that may make it more difficult or expensive for a third party to acquire control of us without the approval of our board of directors. These

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provisions include a staggered board, the availability of “blank check” preferred stock, provisions restricting stockholders from calling a special meeting of stockholders or from taking action by written consent and provisions that set forth advance notice procedures for stockholders’ nominations of directors and proposals of topics for consideration at meetings of stockholders. Our certificate of incorporation also provides that Section 203 of the Delaware General Corporation Law, which relates to business combinations with interested stockholders, applies to us. These provisions may delay, prevent or deter a merger, or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock. In addition, these provisions may cause our common stock to trade at a market price lower than it might absent such provisions.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Cybersecurity Risk Management and Strategy

Due to the prevalence of cyberattacks and other cyber incidents directed at public companies, cybersecurity is a principal element of our overall enterprise risk management program. We have a multilayered approach for assessing, identifying and managing cybersecurity risks, which is designed to help protect the Company’s information assets and operations from internal and external cyber threats by understanding and seeking to manage risk while protecting employee and customer information from unauthorized access or attack, as well as secure our networks, systems and devices. Cybersecurity is one of the top enterprise risks that we have identified. As part of our quarterly enterprise risk management meetings, we discuss efforts to manage this risk and we assess the degree of risk and whether it is increasing or decreasing.

We devote significant resources to protecting and evolving the security of our computer systems, software, networks and other technology assets. Our cybersecurity risk management processes include physical, procedural and technical safeguards. Our cybersecurity policies, standards and procedures include cyber and data breach response plans, which are benchmarked against the National Institute of Standards and Technology Cybersecurity Framework. The Company’s incident response plan is designed to help coordinate our response to, and recovery from, cybersecurity incidents, and includes processes to triage, assess the severity of, escalate, contain, investigate, and remediate incidents, as well as to comply with applicable legal obligations. The Company seeks to

continually improve its policies and practices to identify potential and emerging security risks and develop mitigations for those risks. For example, the Company regularly conducts phishing tests, penetration tests and tabletop simulations to help discover potential vulnerabilities, which enable improved decision-making and prioritization and promote monitoring and reporting across compliance functions. As part of its overall risk mitigation strategy, the Company also maintains cyber insurance coverage.

We engage external parties, including consultants, computer security firms, forensic firms, public relations professionals and attorneys, to advise us on our preparedness and risk management activities. We also regularly consult with industry groups and law enforcement on emerging industry trends.

In order to oversee and identify risks from cybersecurity threats associated with the Company’s use of third-party service providers, we conduct a security risk assessment on all proposed new third party vendors who will have access to our information and data. We have standard contractual language that we require for vendors who will have access to sensitive data.

We do not believe that there are currently any risks from cybersecurity threats of which we are aware that are reasonably likely to materially affect the Company or its business strategy, results of operations or financial condition. We did experience a network security incident in 2019, which was disclosed previously, from which we have incorporated lessons learned and improved our risk management program. Despite our security measures, however, there is no assurance that we, or the third parties with which we interact, will not experience a cybersecurity incident in the future that will materially affect us. For additional information regarding the risks to the Company associated with cybersecurity incidents, see "If our management information systems, including our digital platform or our customer contact center, experience disruptions, it could disrupt our business and reduce our net sales" included in Part I, Item 1A (Risk Factors) of this Annual Report.

Cybersecurity Governance and Oversight

The Audit Committee of the Company’s Board of Directors provides direct oversight over cybersecurity risk. The Audit Committee receives and provides feedback on quarterly updates from management regarding cybersecurity and is notified between such updates regarding new cybersecurity threats or incidents. Information presented at the quarterly updates includes any emerging risks or key topics and includes training initiatives, the status of projects to strengthen cybersecurity, cyber readiness, incident tracking, mitigation efforts and response plans. The full Board of Directors receives regular reports from the Audit Committee, as well as an annual report from management highlighting key aspects of our cybersecurity risk management activities and the emerging threat landscape.

The Company has a Chief Information Security Officer (the “CISO”) whose team (the “IT Security Team”) is responsible for leading company-wide cybersecurity strategy, policy, standards and processes and works across all areas of the Company to protect the Company and its employees and customers against cybersecurity risks, perform investigations and respond to cybersecurity incidents. The CISO reports to the Chief Technology Officer ("CTO") who is also actively involved with assessing and managing cybersecurity risks. The CISO and the CTO are responsible for the quarterly updates to the Audit Committee regarding cybersecurity. The CISO has 28 years of experience in the IT field, with ten of those years in cybersecurity. The IT Security Team has a combined experience of 42 years and two members of the IT Security Team have obtained their Certified Ethical Hacker certifications. The CTO has over 34 years of experience in the IT field with a broad understanding of e-commerce and customer facing technologies.

In an effort to prevent and detect cyber threats, the Company provides all employees with cybersecurity prevention training, which covers timely and relevant topics, including social engineering, phishing, password protection, confidential data protection, asset use and mobile security, and educates employees on the importance of reporting all incidents immediately.

Item 2. Properties.

As of February 15, 2018,26, 2024, we operated 395437 stores located in 4647 states, and Canada, with two additionalno new store openings or closings since December 31, 2017. In addition to our eight stores in Ontario, Canada, the2023. The table below sets forth the locations (alphabetically by state) of our 387 U.S. stores in operation as of February 15, 2018.:

State		Stores		State		Stores		State		Stores		State		Stores	Stores		State	Stores		State	Stores		State	Stores
Alabama		5		Iowa		3		Nevada		3		Rhode Island		1	7		Iowa	3		Nebraska	2		Rhode Island	1
Arizona		6		Kansas		3		New Hampshire		5		South Carolina		9	7		Kansas	2		Nevada	3		South Carolina	10
Arkansas		2		Kentucky		5		New Jersey		13		South Dakota		1	3		Kentucky	5		New Hampshire	6		South Dakota	1
California		44		Louisiana		5		New Mexico		1		Tennessee		6	41		Louisiana	6		New Jersey	15		Tennessee	9
Colorado		8		Maine		3		New York		20		Texas		29	10		Maine	3		New Mexico	1		Texas	31
Connecticut		8		Maryland		10		North Carolina		13		Utah		3	7		Maryland	9		New York	22		Utah	3
Delaware		4		Massachusetts		10		North Dakota		1		Vermont		1	4		Massachusetts	12		North Carolina	18		Vermont	1
Florida		29		Michigan		10		Ohio		13		Virginia		13	33		Michigan	13		North Dakota	1		Virginia	17
Georgia		11		Minnesota		6		Oklahoma		3		Washington		9	13		Minnesota	7		Ohio	15		Washington	11
Idaho		2		Mississippi		3		Oregon		7		West Virginia		3	2		Mississippi	4		Oklahoma	3		West Virginia	5
Illinois		16		Missouri		5		Pennsylvania		20		Wisconsin		5	15		Missouri	8		Oregon	9		Wisconsin	8
Indiana		8		Nebraska		2					9		Montana	1		Pennsylvania	21

We lease all of our stores andas well as our corporate headquarters, which is located in Toano, Virginia, which includes our call center, corporate offices, and distribution and finishing facility. OurRichmond, Virginia. The corporate headquarters has 307,784location is approximately 53,000 square feet, of which approximately 32,000feet.

In addition, we own a one million square feet are office space, and is locatedfoot distribution center on a 74-acre plot. We own approximately 100 acres of land in Henrico County, Virginia, where we constructed a one million square foot distribution center that became fully operational in January 2015.near Richmond. We lease a 504,016approximately 950,000 square foot facilityfeet at facilities located in Pomona, California and Dallas, Texas, which, along with our facility in Virginia, serve as our primary distribution facilities.

TABLE OF CONTENTSWe believe that our existing properties are in good condition and are sufficient and suitable for the conduct of our business. In the event we need to expand our operations, or upon expiration of our current leases, we believe that suitable space will be available on commercially reasonable terms.

Item 3. Legal Proceedings.

Governmental Investigations

In March 2015, the Company received a grand jury subpoena issued in connection with a criminal investigation being conducted by the U.S. Attorney’s Office for the Eastern District of Virginia (the “U.S. Attorney”). In addition, on May 19, 2015, July 13, 2015 and March 11, 2016, the Company received subpoenas from the New York Regional Office of the U.S. Securities and Exchange Commission (the “SEC”) in connection with an inquiry by the SEC staff. Based on the subpoenas and the Company’s discussions to date, the Company believes the focus of both investigations primarily relates to compliance with disclosure, financial reporting and trading requirements under the federal securities laws since 2011. The Company is fully cooperating with the investigations and continues to produce documents and other information responsive to the subpoenas and other requests received from the parties. Given that the investigations are still ongoing and that no civil or criminal claims have been brought to date, the Company cannot predict the outcome of the investigations, the timing of the ultimate resolution of these matters, or reasonably estimate the possible range of loss, if any, that may result from these matters. Accordingly, no accruals have been madeInformation with respect to these matters. Any action by the U.S. Attorney or the SEC with respect to these matters could include civil or criminal proceedingsthis item may be found in Note 10, “Commitments and could involve fines, damage awards, regulatory consequences or other sanctions which could have a material adverse effect, individually or collectively, on the Company’s liquidity, financial condition or results of operations.

Litigation Relating to Chinese Laminates

Formaldehyde-Related Cases

Beginning on or about March 3, 2015, numerous purported class action cases were filed in various U.S. federal district courts and state courts involving claims of excessive formaldehyde emissions from the Company’s flooring products (collectively, the “Products Liability Cases”). The plaintiffs in these various actions sought recovery under a variety of theories, which although not identical are generally similar, including negligence, breach of warranty, state consumer protection act violations, state unfair competition act violations, state deceptive trade practices act violations, false advertising, fraudulent concealment, negligent misrepresentation, failure to warn, unjust enrichment and similar claims. The purported classes consisted either or both of all U.S. consumers or state consumers that purchased the subject products in certain time periods. The plaintiffs also sought various forms of declaratory and injunctive relief and various damages, including restitution, actual, compensatory, consequential, and, in certain cases, punitive damages, and interest, costs, and attorneys’ fees incurred by the plaintiffs and other purported class members in connection with the alleged claims, and orders certifying the actions as class actions. Plaintiffs did not quantify damages sought from the Company in these class actions.

On June 12, 2015, the United States Judicial Panel on Multidistrict Litigation (the “MDL Panel”) issued an order transferring and consolidating ten of the related federal class actionsContingencies”, to the United States District Court for the Eastern Districtconsolidated financial statements in Item 8 of Virginia (the “Virginia Court”). In a series of subsequent conditional transfer orders, the MDL Panel has transferred the other cases to the Virginia Court. The Company continues to seek to have any newly filed cases transferred and consolidated in the Virginia Court and, ultimately, it expects all federal class actions involving formaldehyde allegations, including any newly filed cases, to be transferred and consolidated in the Virginia Court. The consolidated case in the Virginia Court is captionedIn re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales, Practices and Products Liability Litigation (the “MDL”).

Pursuant to a court order, plaintiffs filed a Representative Class Action Complaint in the Virginia Court on September 11, 2015. The complaint challenged the Company’s labeling of its flooring products and asserted claims under California, New York, Illinois, Florida and Texas law for fraudulent concealment, violation of consumer protection statutes, negligent misrepresentation and declaratory relief, as well as a claim for breach of implied warranty under California law. Thereafter, on September 18, 2015, plaintiffs filed the First Amended Representative Class Action Complaint (“FARC”) in which they added implied warranty claims under New York, Illinois, Florida and Texas law, as well as a federal warranty claim. The Company filed a motion to dismiss and answered the FARC. The Virginia Court granted the motion as to claims for negligent misrepresentation filed on behalf of certain plaintiffs, deferred as to class action allegations, and

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otherwise denied the motion. The Company also filed a motion to strike nationwide class allegations, on which the Virginia Court has not yet ruled. 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. The Company’s motion for summary judgment on plaintiffs’ First Amended Representative Complaint in the MDL was granted in part and denied in part, and its motion to exclude expert reports and testimony by plaintiffs’ experts related to deconstructive testing was denied.

Abrasion-Related Cases

On May 20, 2015, a purported class action titled Abad v. Lumber Liquidators, Inc. was filed in the United States District Court for the Central District of California and two amended complaints were subsequently filed. In the Second Amended Complaint (“SAC”), the plaintiffs (collectively, the “Abad Abrasion Plaintiffs”) sought to certify a national class composed of “All Persons in the United States who purchased Defendant’s Dream Home brand laminate flooring products (the “Dream Home Product”) from Defendant for personal use in their homes,” or, in the alternative, 32 statewide classes from California, North Carolina, Texas, New Jersey, Florida, Nevada, Connecticut, Iowa, Minnesota, Nebraska, Georgia, Maryland, Massachusetts, New York, West Virginia, Kansas, Kentucky, Mississippi, Pennsylvania, South Carolina, Tennessee, Virginia, Washington, Maine, Michigan, Missouri, Ohio, Oklahoma, Wisconsin, Indiana, Illinois and Louisiana. The products that are the subject of these complaints are part of the same products at issue in the MDL. The SAC alleges violations of each of these states’ consumer protections statutes and the federal Magnuson-Moss Warranty Act, as well as breach of implied warranty and fraudulent concealment. The Abad Abrasion Plaintiffs did not quantify any alleged damages in the SAC but, in addition to attorneys’ fees and costs, sought an order certifying the action as a class action, an order adopting the Abad Abrasion Plaintiffs’ class definitions and finding that the Abad Abrasion Plaintiffs are their proper representatives, an order appointing their counsel as class counsel, injunctive relief prohibiting the Company from continuing to advertise and/or sell laminate flooring products with false abrasion class ratings, restitution of all monies it received from the Abad Abrasion Plaintiffs and class members, damages (actual, compensatory, and consequential) and punitive damages.

The Abad Abrasion Plaintiffs filed a Third Amended Complaint and the Company moved to dismiss the Third Amended Complaint. The court decided that it would decide the motion only as to the California plaintiffs (hereinafter referred to as the Abad Abrasion Plaintiffs) and ordered that all the non-California plaintiffs (collectively, the “Non-California Abrasion Plaintiffs”) be dropped from the action with leave to re-file. Many of the Non-California Abrasion Plaintiffs re-filed separate complaints in the Central District of California within the required 60-day period, which were then transferred to the district court located in the place of residence of each Non-California Abrasion Plaintiff. These complaints included similar causes of action and sought similar relief as those of the Abad Abrasion Plaintiffs.

On October 3, 2016, the MDL Panel issued an order transferring and consolidating sixteen of the federal abrasion class actions to the Virginia Court. In subsequent conditional transfer orders, the MDL Panel transferred other cases to the Virginia Court. The Company will seek to have any additional related cases transferred and consolidated in the Virginia Court. The consolidated case in the Virginia Court is captionedIn re: Lumber Liquidators Chinese-Manufactured Laminate Flooring Durability Marketing and Sales Practices Litigation (the “Abrasion MDL”).

The Virginia Court issued an initial pretrial order instructing all parties to undertake certain discovery and planning tasks and scheduled certain preliminary conferences. Pursuant to a court order, on February 27, 2017, the plaintiffs filed a Representative Class Action Complaint in the Virginia Court. The complaint challenged the durability of the Dream Home Product and asserted claims under Alabama, California, Nevada, New York and Virginia law for breach of warranty, fraudulent concealment, violation of the Magnuson-Moss Warranty Act, and violation of consumer protection statutes. The Company filed a motion to dismiss the representative complaint, which the Virginia Court granted in part. The Company also filed a motion to strike irrelevant and prejudicial allegations from the representative complaint,Part II, which is currently pending.

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Steele Matter

In addition, on or about April 1, 2015, Sarah Steele (“Steele”) filed a purported class action lawsuit in the Ontario, Canada Superior Court of Justice against the Company. In the complaint, Steele’s allegations include (i) strict liability, (ii) breach of implied warranty of fitness for a particular purpose, (iii) breach of implied warranty of merchantability, (iv) fraudincorporated herein by concealment, (v) civil negligence, (vi) negligent misrepresentation, and (vii) breach of implied covenant of good faith and fair dealing. Steele did not quantify any alleged damages in her complaint but, in addition to attorneys’ fees and costs, Steele seeks (a) compensatory damages, (b) punitive, exemplary and aggravated damages, and (c) statutory remedies related to the Company’s breach of various laws including the Sales of Goods Act, the Consumer Protection Act, the Competition Act, the Consumer Packaging and Labelling Act and the Canada Consumer Product Safety Act.reference.

Estimated Liability Associated with Formaldehyde and Abrasion MDLs and the Steele Matter

In April 2017, the Company initiated settlement discussions to jointly settle the MDL and the Abrasion MDL. In July 2017, the Virginia Court appointed lead settlement counsel for the plaintiffs in each of the MDL and Abrasion MDL, and directed the parties to mediate before another federal judge of the Eastern District of Virginia for purposes of settlement discussions, with such mediation being held in September 2017. Subsequent to the mediation, on October 23, 2017, the Company entered into a Memorandum of Understanding (“MOU”) with the lead plaintiffs in the MDL and the Abrasion MDL. Under the terms of the MOU, the Company will contribute $22 million in cash and provide $14 million in store-credit vouchers for an aggregate settlement of $36 million to settle all claims brought on behalf of purchasers of Chinese-made laminate flooring sold by the Company between January 1, 2009 and May 31, 2015. The Company may fund the $22 million through a combination of cash and/or common stock. The MOU is subject to certain contingencies, including the execution of a definitive settlement agreement, board approval of the definitive settlement agreement, and court approvals of the definitive settlement agreement. There can be no assurance that a settlement will be finalized and approved or as to the ultimate outcome of the litigation. If a final, court-approved settlement is not reached, the Company will defend the matter vigorously and believes there are meritorious defenses and legal standards that must be met for, among other things, class certification and success on the merits. The Company does not believe it has insurance coverage with respect to the MDL, the Abrasion MDL and Steele matters.

In addition to those purchasers who opt out of the above settlement (the “Opt Outs”) and the Steele matter, there are a number of individual claims and lawsuits alleging (i) damages due to excessive formaldehyde emissions, including personal injury claims, and (ii) damages similar to those in the Abrasion MDL (collectively, the “Other Matters”). Certain of these Other Matters are in advanced stages of settlement negotiations, and the Company recognized a further $1 million charge during the fourth quarter of 2017. For the remaining Other Matters, while the Company believes that a further loss associated with the Opt Outs, Other Matters and the Steele matter is reasonably possible, the Company is unable to reasonably estimate the amount or range of possible loss. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition, and liquidity.

As a result of these developments, the Company has determined that a probable loss has been incurred and has recognized cumulative charges to earnings cumulatively of $37 million within selling general and administrative expense during 2017. If the Company does not execute a definitive settlement agreement consistent with the MOU or incurs losses with the respect to the Opt Outs, Steele and Other Matters, the ultimate resolution of these actions could still have a material adverse effect on the Company’s results of operations, financial condition, and liquidity.

Gold Matter

On or about December 8, 2014, Dana Gold (“Gold”) filed a purported class action lawsuit in the United States District Court for the Northern District of California alleging that the Morning Star bamboo flooring that the Company sells is defective. On February 13, 2015, Gold filed an amended complaint that added three additional plaintiffs (collectively with Gold, “Gold Plaintiffs”). The Company moved to dismiss the amended complaint. The court dismissed most of Gold Plaintiffs’ claims but allowed certain omission-based claims to proceed. Gold Plaintiffs filed a Second Amended Complaint on December 16, 2015,

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then a Third Amended Complaint on January 20, 2016, and then a Fourth Amended Complaint on June 26, 2017. In the Fourth Amended Complaint, Gold Plaintiffs limited the complaint to the Company’s Morning Star Strand Bamboo flooring that the Company sells (the “Strand Bamboo Product”) and allege that the Company has engaged in unfair business practices and unfair competition by falsely representing the quality and characteristics of the Strand Bamboo Product and by concealing the Strand Bamboo Product’s defective nature. In the Fourth Amended Complaint, Gold Plaintiffs limited the purported class of individuals to those who are residents of California, Florida, Illinois, Minnesota, Pennsylvania, and West Virginia, respectively, and purchased the Strand Bamboo Product for personal, family, or household use. On February 2, 2018, Plaintiffs filed their Fifth Amended Complaint substituting a new proposed Illinois class representative for the class representative previously dismissed by the Court. Gold Plaintiffs did not quantify any alleged damages in their complaint but, in addition to attorneys’ fees and costs, Gold Plaintiffs seek (i) a declaration that the Company’s actions violate the law and that it is financially responsible for notifying all purported class members, (ii) injunctive relief requiring the Company to replace and/or repair all of the Strand Bamboo Product installed in structures owned by the purported class members, and (iii) a declaration that the Company must disgorge, for the benefit of the purported classes, all or part of the profits received from the sale of the allegedly defective Strand Bamboo Product and/or to make full restitution to Gold Plaintiffs and the purported class members.

Fact discovery in the matter is now complete. The Gold Plaintiffs filed a motion for class certification seeking to certify state-wide classes for purchases of the Strand Bamboo Product in California, Florida, Illinois, Minnesota, Pennsylvania, and West Virginia. The Company filed an opposition to class certification and a motion to exclude the opinions of the Gold Plaintiffs’ experts. In November 2017, the court granted Gold Plaintiffs’ motion for class certification with respect to the six states, and granted in part and denied in part the Company’s motion to exclude Gold Plaintiffs’ expert witnesses. The Company has appealed the class certification decision to the United States Court of Appeals for the Ninth Circuit. The Company’s previously filed motion to dismiss the non-California plaintiffs on jurisdictional grounds was denied.

In addition, there are a number of other claims and lawsuits alleging damages similar to those in the Gold matter. The Company disputes these and the Gold Plaintiffs’ claims and intends to defend such matters vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company is unable to estimate the amount of loss, or range of possible loss, at this time that may result from this action. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition, and liquidity.

Employment Cases

Mason Lawsuit

On or about August 15, 2017, Ashleigh Mason, Dan Morse, Ryan Carroll and Osagie Ehigie (collectively, the “SM Plaintiffs”) filed a purported class action lawsuit in the United States District Court for the Eastern District of New York on behalf of all current and former store managers, store managers in training and similarly situated current and former employees holding comparable positions but different titles (collectively, the “SM Employees”) alleging that the Company violated the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”) by classifying the SM Employees as exempt. The alleged violations include failure to pay for overtime work. The SM Plaintiffs seek certification of the SM Employees for (i) a collective action covering the period beginning three years and 115 days prior to the filing of the complaint through the disposition of this action for the SM Employees nationwide (the “Nationwide Collective Class”) in connection with FLSA and (ii) a class action covering the period beginning six years and 115 days prior to the filing of the complaint through the disposition of this action for members of the SM Employees who currently are or were employed in New York (the “NY SM Class”) in connection with NYLL. The SM Plaintiffs did not quantify any alleged damages but, in addition to attorneys’ fees and costs, the SM Plaintiffs seek class certification, unspecified amount for unpaid wages and overtime wages, liquidated and/or punitive damages, declaratory relief, restitution, statutory penalties, injunctive relief and other damages. The Company disputes the SM Plaintiffs’ claims and intends to defend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case and the legal standards that must be met for, among other things,

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class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss, if any, that may result from this action and therefore no accrual has been made related to this.

Kramer Lawsuit

On or about November 17, 2017, Robert J. Kramer, on behalf of himself and all others similarly situated (collectively, the “Kramer Plaintiffs”) filed a purported class action lawsuit in the Superior Court of California, County of Sacramento on behalf of all current and former store managers, all others with similar job functions and/or titles and all current and former employees classified as non-exempt or incorrectly classified as exempt and who worked for the Company in the State of California (collectively, the “CSM Employees”) alleging violation of the California Labor Code (“CLC”) including, among other items, failure to pay wages and overtime and engaging in unfair business practices. The Kramer Plaintiffs seek certification of the CSM Employees for (i) a class action covering the prior four-year period prior to the filing of the complaint through the disposition of this action for the CSM Employees who currently are or were employed in California (the “California SM Class”) in connection with the CLC. The Kramer Plaintiffs did not quantify any alleged damages but, in addition to attorneys’ fees and costs, the Kramer Plaintiffs seek class certification for the California SM Class, unspecified amount for unpaid wages and overtime wages, liquidated and/or punitive damages, declaratory relief, restitution, statutory penalties, injunctive relief and other damages. The Company disputes the Kramer Plaintiffs’ claims and intends to defend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss, if any, that may result from this action and therefore no accrual has been made related to this.

Antidumping and Countervailing Duties Investigation

In October 2010, a conglomeration of domestic manufacturers of multilayered wood flooring filed a petition seeking the imposition of antidumping (“AD”) and countervailing duties (“CVD”) with the United States Department of Commerce (“DOC”) and the United States International Trade Commission (“ITC”) against imports of multilayered wood flooring from China. This ruling applies to companies importing multilayered wood flooring from Chinese suppliers subject to the AD and CVD orders. The Company’s multilayered wood flooring imports from China accounted for approximately 8%, 7% and 6% of its flooring purchases in 2017, 2016 and 2015, respectively. The Company’s consistent view through the course of this matter has been, and remains, that its imports are neither dumped nor subsidized.

As part of its processes in these proceedings, following the original investigation, the DOC conducts annual administrative reviews of the CVD and AD rates. In such cases, the DOC will issue preliminary rates that are not binding and are subject to comment by interested parties. After consideration of the comments received, the DOC will issue final rates for the applicable period, which may lag by a year or more. As rates are adjusted through the administrative reviews, the Company adjusts its payments prospectively based on the final rate. The Company will begin to pay the finalized rates on each applicable future purchase when recognized by U.S. Customs and Border Protection.

The DOC made its initial determinations in the original investigation regarding CVD and AD rates on April 6, 2011 and May 26, 2011, respectively. On December 8, 2011, orders were issued setting final AD and CVD rates at a maximum of 3.3% and 1.5%, respectively. These rates became effective in the form of additional duty deposits, which the Company has paid, and applied retroactively to the DOC initial determinations.

Following the issuance of the orders on December 8, 2011, a number of appeals were filed by several parties, including the Company, with the Court of International Trade (“CIT”) challenging, among other things, certain facts and methodologies that may impact the validity of the AD and CVD orders and the applicable rates. The Company participated in appeals of both the AD order and CVD order. The appeal of the CVD order was dismissed in June 2015. On January 23, 2015, the CIT issued a decision rejecting the challenge of the AD rate for all but one Chinese exporter. This decision was finalized on July 6, 2015, and appealed to the Court of Appeals for the Federal Circuit (“CAFC”) on July 31, 2015. On February 15, 2017, the CAFC vacated the CIT’s prior decision and remanded with instructions to the DOC to recalculate its AD rate. The DOC’s recalculation of rates was submitted to the CIT in July 2017 for a subsequent ruling by the

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court. The CIT is currently evaluating the DOC’s recalculated rates and is expected to issue a decision in early 2018. The Company is unable to determine the impact of the CAFC’s decision to vacate the initial determination of AD rates; however, the DOC’s recalculation could materially impact the Company’s previously recorded expense related to the AD rates in the original investigation and subsequent annual reviews discussed below. Because of the length of time for finalization of rates as well as appeals, any subsequent adjustment of CVD and AD rates typically flows through a period different from those in which the inventory was originally purchased and/or sold.

In the first DOC annual review in this matter, AD rates for the period from May 26, 2011 through November 30, 2012, and CVD rates from April 6, 2011 through December 31, 2011, were modified to a maximum of 5.92% and a maximum of 0.83%, respectively, which resulted in an additional payment obligation for the Company, based on best estimates and shipments during the applicable window, of $833 thousand. The Company recorded this as a long-term liability on its accompanying consolidated balance sheet and in cost of sales in its second quarter 2015 financial statements. These AD rates have been appealed to the CIT by several parties, including the Company. On remand from the CIT, the DOC has reduced the AD rate to 0.73%. A final ruling from the CIT is still pending and is expected in early 2018. If the CIT accepts the reduced final AD rate, while such decision would be subject to appeal, the Company intends to reverse the $833 thousand accrual and record a receivable of approximately $1.3 million.

The second annual review of the AD and CVD rates was initiated in February 2014. Pursuant to the second annual review, in early July 2015, the DOC finalized the AD rate for the period from December 1, 2012 through November 30, 2013 at a maximum of 13.74% and the CVD rate for the period from January 1, 2012 through December 31, 2012 at a maximum of 0.99%. The Company believes the best estimate of the probable additional amounts owed was $4.1 million for shipments during the applicable time periods, which was recorded as a long-term liability on its accompanying consolidated balance sheet and included in cost of sales in its second quarter 2015 financial statements. Beginning in July 2015, the Company began paying these rates on each applicable purchase. The Company and other parties appealed the AD rates relating to this second annual review to the CIT and the court is expected to issue a decision in 2018.

The third annual review of the AD and CVD rates was initiated in February 2015. The third AD review covered shipments from December 1, 2013 through November 30, 2014. The third CVD review covered shipments from January 1, 2013 through December 31, 2013. In May 2016, the DOC issued the final CVD rate in the third review, which was a maximum of 1.38%. On July 13, 2016, the DOC set the final AD rate at a maximum of 17.37%. The Company has appealed the AD rates to the CIT, and the appeal is currently pending with oral arguments held in January 2018. The Company’s best estimate of the probable additional amounts owed associated with AD and CVD is approximately $5.5 million for shipments during the applicable time periods. During the quarter ended June 30, 2016, the Company recorded this amount in other long-term liabilities in its balance sheet and as a charge to earnings in cost of sales on its statement of operations.

In February 2016, the DOC initiated the fourth annual review of AD and CVD rates, which followed a similar schedule as the preceding review. The AD review covered shipments from December 1, 2014 through November 30, 2015. The CVD review covered shipments from January 1, 2014 through December 31, 2014. In May 2017, the DOC issued the final CVD rate in the fourth review, which was a maximum of 1.45%, and, in June 2017, the final AD rate in the fourth review, which was a maximum of 0.00%. In October 2017, petitioners withdrew their CIT appeal of the AD rates. As a result, the CIT dismissed the case and the Company believes these rates are now final. The Company paid AD rates in excess of the final rates during the periods impacted by the fourth annual review in the amount of $2.5 million and recorded a benefit in cost of sales with a corresponding receivable. After collecting part of that receivable, as of December 31, 2017, the Company has a receivable in the amount of $2.1 million in Other Short-Term assets in its balance sheet.

The DOC initiated the fifth annual review of AD and CVD rates in February 2017, which is expected to follow the same schedule as preceding reviews. The AD review covers shipments from December 1, 2015 through November 30, 2016. The CVD review covers shipments from January 1, 2015 through December 31, 2015. In December 2017 and January 2018, the DOC issued non-binding preliminary results in the fifth annual review for CVD rates and AD rates, respectively. The preliminary AD rate was a maximum of 0.00%

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and the preliminary CVD rate was a maximum of 0.89%. The final CVD and AD rates in the fifth annual review are currently expected to be issued in April 2018 and May 2018, respectively.

The first 5-year Sunset Review of the antidumping and countervailing duty orders on multilayered wood flooring (the “Sunset Review”) began in November 2016 at the ITC to determine whether to terminate the orders. The Company participated fully in this Sunset Review. In December 2017, the ITC determined that the AD and CVD orders will remain in place. This determination has been appealed by certain importers, and the Company currently anticipates participating in this appeal.

The DOC initiated the sixth annual review of AD and CVD rates in February 2018, which is expected to follow the same schedule as preceding reviews. The AD review covers shipments from December 1, 2016 through November 30, 2017. The CVD review covers shipments from January 1, 2016 through December 31, 2016.

Other Matters

The Company is also, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, while the outcome of any such claims and disputes cannot be predicted with certainty, its ultimate liability in connection with these matters is not expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.

Item 4. Mine Safety Disclosures.

None.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock trades on the New York Stock Exchange (“NYSE”) under the trading symbol “LL.” We are authorized to issue up to 35,000,000 shares of common stock, par value $0.001. Total shares of common stock outstanding aton February 15, 201828, 2024 were 28,490,229,30,839,051, and we had sixfive stockholders of record.

		Price Range
		High				Low
2017:
Fourth Quarter		$	39.25			$	27.27
Third Quarter			41.33				24.16
Second Quarter			30.65				19.46
First Quarter			21.06				14.99
2016:
Fourth Quarter		$	20.10			$	14.02
Third Quarter			20.09				14.26
Second Quarter			16.49				11.07
First Quarter			17.42				10.01

Issuer PurchasesUnregistered Sales of Equity Securities,

The following table presents our share repurchase activity for the quarter ended December 31, 20172023 (dollars in thousands, except per share amounts):

Period

Total Number of Shares Purchased(1)

Average Price Paid per Share(1)

Total Number of Shares Purchased as Part of Publicly Announced Programs(2)

Maximum Dollar Value of Shares That May Yet Be Purchased as Part of Publicly Announced Programs(2)

October 1, 2017 to October 31, 2017

—

—

—

—

November 1, 2017 to November 30, 2017

—

—

—

—

December 1, 2017 to December 31, 2017

—

—

—

—

Total

—

—

—

—

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1 In February 2012, the Company’s board of directors adopted an authorization for the repurchase of up to a total of $50.0 million of the Company’s common stock, which it increased by $50.0 million in each of November 2012 and January 2014. As of February 2022, the Company had purchased approximately $135.3 million common stock with $14.7 million remaining under this authorization, and the board of directors further increased this authority by an additional $35.3 million for a total authorization to repurchase up to $50.0 million of the Company’s common stock on the open market or in private transactions. As of December 31, 2023, there remains $43.0 million outstanding under the share repurchase authorization, which does not have an expiration date. The Company did not repurchase any shares under the authorization during the three and twelve months ended December 31, 2023.

2 The table above reflects repurchases of 2,799 shares of our common stock, at an average price of $3.46, in connection with the net settlement of shares issued as a result of the vesting of restricted shares during the quarter ended December 31, 2023.

Dividend Policy

We have never paid any dividends on our common stock. Any future decisionstock and do not expect to pay cash dividends will be atthem in the discretion of our board of directors and will be dependent on our results of operations, financial condition, contractual restrictions and other factors that the board of directors considers relevant.near future.

Securities Authorized for Issuance Underunder Equity Compensation Plans

See Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information regarding securities authorized for issuance under our equity compensation plans.

22

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Performance Graph

The following graph compares the performance of our common stock during the period beginning December 31, 20122018 through December 31, 2017,2023, to that of the total return index for the NYSE Composite the Dow Jones US Furnishingsand S&P Retail Select Industry Index and a Custom Peer Group whose members are listed below assuming an investment of $100 on December 31, 2012. In calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purpose only. They do not necessarily reflect management’s opinion that such indices are an appropriate measure2018.

1

Effective December 31, 2022, LL Flooring has elected to use the S&P Retail Select Industry Index as its Published Industry Index in lieu of the relative performance of our common stock.

		12/31/2012				12/31/2013				12/31/2014				12/31/2015				12/31/2016				12/31/2017
Lumber Liquidators Holdings, Inc.		$	100.00			$	194.76			$	125.52			$	32.86			$	29.79			$	59.42
Dow Jones US Furnishings Index		$	100.00			$	147.42			$	168.54			$	187.07			$	209.06			$	241.76
NYSE Composite		$	100.00			$	126.40			$	135.09			$	129.70			$	145.33			$	172.78
Peer Group(1)		$	100.00			$	135.27			$	179.10			$	213.45			$	217.35			$	307.50

Peer Group utilized in prior years.

(1)

The Peer Group consists of The Home Depot, Inc., Lowe’s Companies, Inc., Floor & Décor Holdings, Inc., Tile Shop Holdings, Inc., The Sherwin-Williams Company, Pier 1 Imports, Inc., Vitamin Shoppe, Inc., Hibbett Sports, Inc., Mattress Firm Holding Corp., and Haverty Furniture Companies, Inc. These companies represent industry competitors and other retailers of a similar size to the Company.

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Item 6. Selected Financial Data.

The selected statements of income data for the years ended December 31, 2017, 2016 and 2015 and the balance sheet data as of December 31, 2017 and 2016 have been derived from our audited consolidated financial statements included in Item 8. “Consolidated Financial Statements and Supplementary Data” of this report. This information should be read in conjunction with those audited financial statements, the notes thereto, and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report.[Reserved].

The selected balance sheet data set forth below as of December 31, 2015, 2014 and 2013, and income data for the years ended December 31, 2014 and 2013 are derived from our audited consolidated financial statements contained in reports previously filed with the SEC, which are not included herein. Our historical results are not necessarily indicative of our results for any future period.None.

		Year Ended December 31,
		2017(1)				2016(2)				2015(3)				2014				2013
		(dollars in thousands, except per share amounts)
Statement of Income Data
Net Sales		$	1,028,933			$	960,588			$	978,776			$	1,047,419			$	1,000,240
Comparable Store Net Sales increase (decrease)(4)			5.4	%			(4.6	)%			(11.1	)%			(4.3	)%			15.8	%
Cost of Sales			659,872				656,719				699,918				629,252				589,257
Gross Profit			369,061				303,869				278,858				418,167				410,983
Selling, General and Administrative Expenses			406,027				397,504				362,051				314,094				284,960
Operating (Loss) Income			(36,966	)			(93,635	)			(83,193	)			104,073				126,023
Other Expense (Income)			1,591				638				234				490				(442	)
(Loss) Income Before Income Taxes			(38,557	)			(94,273	)			(83,427	)			103,583				126,465
Income Tax (Benefit) Expense			(734	)			(25,710	)			(26,994	)			40,212				49,070
Net (Loss) Income		$	(37,823	)		$	(68,563	)		$	(56,433	)		$	63,371			$	77,395
Net (Loss) Income per Common Share:
Basic		$	(1.33	)		$	(2.51	)		$	(2.08	)		$	2.32			$	2.82
Diluted		$	(1.33	)		$	(2.51	)		$	(2.08	)		$	2.31			$	2.77
Weighted Average Common Shares Outstanding:
Basic			28,407				27,284				27,082				27,265				27,485
Diluted			28,407				27,284				27,082				27,486				27,914

(1)

Results for the year ended December 31, 2017 include; (i) the favorable adjustment of antidumping costs and countervailing duties of $2.8 million associated with applicable shipments of engineered hardwood from China in a prior period, (ii) reduced reserves for estimated costs to be incurred related to our indoor air quality testing program by approximately $1 million, (iii) incremental legal and professional fees and settlement expenses, related to our defense of various legal matters of approximately $48.3 million and (iv) other expenses primarily related to costs to dispose of certain Chinese laminate products whose sales were discontinued in 2015 and an impairment of certain assets related to a vertical integration initiative totaling approximately $3.1 million.

(2)

Results for the year ended December 31, 2016 include; (i) the unfavorable adjustment of antidumping costs and countervailing duties of $5.5 million associated with applicable shipments of engineered hardwood from China in a prior period, (ii) pre-tax expenses of $6.2 million related to the purchase of testing kits and professional fees in connection with our indoor air quality testing program, (iii) incremental legal and professional fees and settlement expenses, related to our defense of various

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legal matters of approximately $47.7 million and (iv) other expenses primarily related to employee retention initiatives totaling approximately $2.8 million.

(3)

Results for the year ended December 31, 2015 include; (i) the write down of our laminates and associated moldings sourced from China totaling approximately $22.5 million and other inventory adjustments of $6.6 million, (ii) the adjustment of antidumping costs and countervailing duties of $4.9 million associated with applicable shipments of engineered hardwood from China in a prior period, (iii) pre-tax expenses of $9.4 million related to the purchase of testing kits and professional fees in connection with our indoor air quality testing program, (iv) incremental legal and professional fees and settlement expenses, related to our defense of various legal matters of approximately $34.2 million, and (v) other expenses related to the simplification of our business and employee retention totaling approximately $11.1 million.

(4)

A store is generally considered comparable on the first day of the thirteenth full calendar month after opening.

		Year Ended December 31,
		2017				2016				2015				2014				2013
		(dollars in thousands, except per share amounts)
Balance Sheet Data
Cash and Cash Equivalents		$	19,938			$	10,271			$	26,703			$	20,287			$	80,634
Merchandise Inventories			262,280				301,892				244,402				314,371				252,428
Total Assets			410,795				482,544				445,564				482,904				420,498
Customer Deposits and Store Credits			38,546				32,639				33,771				34,943				22,377
Total Debt and Capital Lease Obligations, including current maturities			15,000				40,351				20,000				—				—
Total Stockholders’ Equity			197,847				230,892				277,568				332,054				309,329
Working Capital(1)			119,835				173,683				195,044				213,030				245,207
Other Data
Total Stores in Operation			393				383				374				352				318
Average Sale(2)		$	1,700			$	1,640			$	1,625			$	1,675			$	1,705

(1)

Working capital is defined as current assets minus current liabilities.

(2)

Average sale, calculated on a total company basis, is defined as the average invoiced sale per customer, measured on a monthly basis and excluding transactions of less than $250 (which are generally sample orders, or add-ons or fill-ins to previous orders) and of more than $30,000 (which are usually contractor orders).

TABLE OF CONTENTS

Results of Operations

We believe the selected sales data, the percentage relationship between Net Sales and major categories in the Consolidated Statements of Operations and the percentage change in the dollar amounts of each of the items presented below are important in evaluating the performance of our business operations.

										% (Decrease) Increase
		% of Net Sales								in Dollar Amounts
		Year Ended December 31,								2023
		2023				2022				vs. 2022
Net Sales
Net Merchandise Sales			86.1	%			86.2	%			(18.6	)%
Net Services Sales			13.9	%			13.8	%			(17.9	)%
Total Net Sales			100.0	%			100.0	%			(18.5	)%
Gross Profit			35.7	%			36.1	%			(19.6	)%
Selling, General and Administrative Expenses			44.6	%			37.2	%			(2.3	)%
Operating Loss			(8.9	)%			(1.1	)%			589.2	%
Other Expense			1.0	%			0.1	%			412.5	%
Loss Before Income Taxes			(9.9	)%			(1.2	)%			565.5	%
Income Tax (Benefit) Expense			1.5	%			(0.1	)%			(1019.8	)%
Net Loss and Comprehensive Loss			(11.4	)%			(1.1	)%			756.7	%

		% of Net Sales												% Increase (Decrease) in Dollar Amounts
		Year Ended December 31,
		2017				2016				2015				2017 vs. 2016				2016 vs. 2015
Net Sales			100.0	%			100.0	%			100.0	%			7.1	%			-1.9	%
Gross Profit			35.9	%			31.6	%			28.5	%			21.5	%			9.0	%
Selling, General, and Administrative Expenses			39.5	%			41.4	%			37.0	%			2.1	%			9.8	%
Operating Loss			(3.6	)%			(9.8	)%			(8.5	)%			-60.5	%			12.6	%
Other Expense			(0.1	)%			0.0	%			0.0	%			149.5	%			171.9	%
Loss Before Income Taxes			(3.7	)%			(9.8	)%			(8.5	)%			-59.1	%			13.1	%
Income Tax Benefit			(0.1	)%			(2.7	)%			(2.8	)%			-97.1	%			-4.7	%
Net Loss			(3.7	)%			(7.1	)%			(5.8	)%			-44.8	%			21.6	%
SELECTED SALES DATA
Average Sale(1)		$	1,700			$	1,640			$	1,625				3.6	%			1.1	%
Average Retail Price per Unit Sold(2)			0.4	%			(4.0	)%			(6.0	)%
Comparable Store Sales Increase (Decrease) (%)			5.4	%			(4.6	)%			(11.1	)%
Number of Stores Open, end of period			393				383				374
Number of Stores Opened in Period, net			10				9				22
Number of Stores Relocated in Period(3)			—				3				11
Comparable Stores(4) (% change to prior year):
Customers Invoiced(5)			1.8	%			(5.7	)%			(8.0	)%
Net Sales of Stores Operating for 13 to 36 months			14.2	%			0.4	%			(6.2	)%
Net Sales of Stores Operating for more than 36 months			5.0	%			(5.2	)%			(11.8	)%
Net Sales in Markets with all Stores Comparable (no cannibalization)			6.1	%			(2.8	)%			(9.5	)%

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Table of Contents

(1)

Average sale, calculated on a total company basis, is defined as the average invoiced sale per customer, measured on a monthly basis and excluding transactions of less than $250 (which are generally sample orders, or add-ons or fill-ins to previous orders) and of more than $30,000 (which are usually contractor orders).

(2)

Average retail price per unit (square feet for flooring and other units of measures for moldings and accessories) sold is calculated on a total company basis and excludes non-merchandise revenue.

(3)

A relocated store remains a comparable store as long as it is relocated within the primary trade area.

(4)

% Increase (Decrease)             in Dollar Amounts       Year Ended December 31,     2023       2023     2022     vs. 2022   SELECTED SALES DATA                   Average Sale1   $ 1,809     $ 1,806       0.2 % Comparable Store Net Sales Decrease2     (19.6 )%     (5.8 )%       Transaction Count Decrease3     (19.8 )%     (21.1 )%       Average Retail Price per Unit Sold Increase4     2.5 %     11.9 %                         Number of Stores Open, end of period     437       442         Number of Stores Opened (Closed) in Period, net     (5 )     18         Number of Stores Relocated in Period5     —       4         1 Average sale is defined as the average invoiced sales order, measured quarterly, excluding returns as well as transactions under $100 (which are generally sample orders or add-on/accessories to existing orders). 2 A store is generally considered comparable on the first day of the thirteenth full calendar month after opening.

(5)

Change in number of customers invoiced is calculated by applying the average sale to total net sales at comparable stores.

For an understanding of the significant factors that influenced our performance duringthirteenth full calendar month after opening.