TOANO, VA - Lumber Liquidators' (NYSE: LL) says due to "mounting industry concerns relating to laminate products sourced from China, the Company this week decided to suspend sales of all laminate flooring sourced from China." The company issued a release announcing the decision:
Lumber Liquidators' (NYSE: LL) is today providing updates on several topics and planned actions related to laminate flooring sourced from China.
Initial results of the indoor air quality testing program for certain laminate flooring customers – conducted by independent, accredited laboratories – indicate that over 97% of customers' homes were within the protective guidelines established by the World Health Organization for formaldehyde levels in indoor air.
In early March 2015, Lumber Liquidators began voluntarily offering free indoor air quality screening to certain of its flooring customers, predominately those who had purchased laminate flooring sourced from China. Home air test kits were selected as a quick, effective way to measure the total level of formaldehyde in indoor air from all sources, not just from the flooring. Formaldehyde is a common compound found in many household products including laminate flooring, furniture, permanent press clothing, floor coverings and certain personal care products. Other sources of formaldehyde in the air include cigarette smoke and emissions from wood-burning fireplaces, kerosene heaters and natural gas stoves.
The Company retained Building Health Check, LLC ("BHC") to coordinate the home air testing program. The customer receives the home test kit from BHC and controls the sampling process, with clear instructions on how to conduct the sampling. The samples are then sent by the customer to EDLab at Pure Air Control Services, Inc. ("EDLab") where EDLab then forwards them to one of EDLab's partner laboratories, which are all accredited for formaldehyde analysis by the American Industrial Hygiene Association's Laboratory Accreditation Programs, LLC. EDLab's testing laboratory partners for formaldehyde analysis currently include: AT Labs, Advanced Chemical Sensors, Inc., Sensors Safety Products, Inc. and SGS Galson Laboratories, Inc.
The Company has also engaged independent monitoring resources to review the work flow process in connection with the testing program and perform quality review services relating to the compilation and dissemination of testing results.
Lumber Liquidators' air testing program was reviewed by Dr. John McCarthy, the president of the consulting firm Environmental Health & Engineering, Inc. Dr. McCarthy, who was engaged by the Company, has served as a consultant to numerous federal health and safety regulatory agencies. Dr. McCarthy commented, "Indoor air quality screening, through home testing, is a useful tool to obtain reliable information that can be used by both consumers and regulators."
From early March through May 1, 2015, BHC sent approximately 26,000 testing kits to nearly 15,000 Lumber Liquidators customers and approximately 11,000 of those testing kits were returned. As of May 1, 2015, over 3,400 testing kits from approximately 2,600 households with laminate flooring sourced from China had been reviewed and analyzed. Of those households, over 97% had indicated indoor air concentrations of formaldehyde that were within the guidelines set by the World Health Organization as protective against sensory irritation and long-term health effects. While various groups have recommended higher or lower levels, there is currently no national standard for recommended indoor home air concentrations in the United States. The Company has used the guideline established by the World Health Organization, which is an international consensus standard that draws on recent research and the expertise of the many governments, academic institutions and researchers that have studied formaldehyde emissions.
Lumber Liquidators is contacting directly its customers whose test results indicate an indoor formaldehyde level in excess of the World Health Organization guideline for additional investigation and review. Those customers are being asked to complete a validation survey to identify any issues with their usage of the testing kit as well as potential sources of formaldehyde in their home and will be provided information on methods to improve indoor air quality. Based upon information gathered from the validation survey, the Company will take additional steps that may include further in-home air testing and testing of floor samples from the customer.
Robert M. Lynch, President and Chief Executive Officer, commented, "We developed this testing program to address questions raised by customers about the air quality in their homes. Although these tests do not identify the specific source of any formaldehyde emissions, we believe this testing provides valuable information for our customers."
Suspension of Sales of Laminates Sourced From China and Independent Compliance Advisor
As previously announced, a Special Committee composed of independent directors, with the assistance of third party advisors, has been conducting a review of allegations regarding laminate flooring sourced from China. This review includes a comprehensive review of the Company's sourcing compliance program and related policies. The review is ongoing and any findings are preliminary.
Based on the review to date, it appears that the Company's Chinese laminate flooring suppliers have sold product to the Company that the suppliers have certified and labeled as compliant with California formaldehyde standards. However, the Company is further reviewing the underlying certification and labeling processes and practices of its suppliers. In light of this and mounting industry concerns relating to laminate products sourced from China, the Company this week decided to suspend sales of all laminate flooring sourced from China pending completion of the Special Committee's review.
"Despite the initial positive air quality testing results we have received, we believe it is the right decision to suspend the sale of these products." said Mr. Lynch. "We will work diligently to meet the needs of our customers and to ensure their satisfaction."
The Special Committee engaged Freeh Group International Solutions, LLC (the "Freeh Group") in March 2015 to assist with its review of the Company's compliance program and related policies. The Freeh Group was founded by Louis J. Freeh, former director of the Federal Bureau of Investigation and former federal judge, and has extensive experience assessing compliance programs and helping companies ensure their operations remain compliant. Based on its preliminary review and in the ongoing effort to improve the compliance function at the Company, the Special Committee has engaged the Freeh Group to serve as an independent compliance advisor to the Company.
About Lumber Liquidators
With more than 355 locations, Lumber Liquidators is North America's largest specialty retailer of hardwood flooring. The Company features more than 400 top quality flooring varieties, including solid and engineered hardwood, bamboo, cork, laminate and resilient vinyl. Additionally, Lumber Liquidators provides a wide selection of flooring enhancements and accessories to complement, install and maintain your new floor. Every location is staffed with flooring experts who can provide advice and useful information about Lumber Liquidators' low priced product, much of which is in stock and ready for delivery.
With premier brands including Bellawood and Morning Star Bamboo, Lumber Liquidators' flooring is often featured on popular television shows such as HGTV's Dream Home and This Old House. For more information, please visit www.LumberLiquidators.com or call 1.800.HARDWOOD.
Lumber Liquidators aims to be the industry leader in sustainability. For more information, please visit www.LumberLiquidators.com/Sustainability. Learn more about our corporate giving program at LayItForward.LumberLiquidators.com.
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