TOANO, VA - Lumber Liquidators says it will provide for indoor air testing, and even floor replacements, for buyers of its laminate floors made in China. The wood flooring firm faces a Senate probe and class action lawsuits after 60 Minutes reported it sells flooring made with with formaldehyde-based adhesive.
Lumber Liquidators (NYSE: LL) has seen its stock price take a drubbing and a dip in sales since a March 1 report on CBS 60 Minutes news program showed managers at three of its Chinese factories state they are manufacturing and labeling MDF laminate flooring marked as CARB compliant - even though it is not.
Rob Lynch, president and CEO, took the lead in presenting a highly detail recount of Lumber Liquidator's laminate flooring sourcing, and its testing procedures.
"All of our products are safe, and none of our products pose health issues," Lynch said.
The presentation was aimed at the investment community. Consequently, Lynch had to acknowledge the impact that the 60 Minutes news report had on public perceptions, and sales. A chart showed that while 4% of the general public did not have a favorable opinion of Lumber Liquidators prior to the broadcast, 8 percent had an unfavorable opinion after the broadcast.
In an effort to win back the trust of homeowners, who make up 90 percent of Lumber Liquidators 600,000 customers each year, Lynch offered to provide air quality testing and, if results dictate, to replace flooring in homes that saw an increase in formaldehyde above normal levels. Lynch estimated that would cost $3,000 to $4,000 per location.
The likelihood of replacements would be relatively low, based on Lynch's explanations of California Air Resources Board (CARB) rules and the science of laminate flooring manufacture and testing.Much of the presentation was a tutorial on CARB testing, and the manufacture of the laminate flooring "sandwich."
"Fur our purposes, MDF cores MDF cores must test below 1 ppm or below 3 ppm in a thin product," Lynch said. CARB requirements for selling laminate flooring in California requires that sellers of laminate wood products for the home must maintain records of its supplier's processes, and document steps taken to comply with the rules, and take reasonable precautions to make them comply.
"We believe we do more than just take reasonable precautions," Lynch said. "We make announced and unannounced visits to our mills to check. We also test finished goods as sold."
A typical consumer installation of Lumber Liquidators MDF-based laminate flooring would add 5 parts per billion of formaldehyde to the air when installed, gradually declining to 2 ppb during the first two years. That compares with ambient formaldehyde levels of 20 to 200 ppb in indoor air. Lynch said the laminating process seals the underlying MDF in the flooring, containing gas emissions from formaldehyde used to make the core product.
Lynch also revealed much about Lumber Liquidators sourcing of floor products over the past few years, which showed large swings in percentages sourced from China. Currently 49% of its flooring is sourced in North America, and 40% in Asia. With more than 350 locations and 1,250 employees, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. Last year it did more than $1 billion in sales of hardwood and laminate flooring.
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