10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-33767

Lumber Liquidators Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	27-1310817
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3000 John Deere Road Toano, Virginia	23168
(Address of Principal Executive Offices)	(Zip Code)

(757) 259-4280

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x   Yes    ¨   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes   ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

¨  Large accelerated filer x  Accelerated filer ¨  Non-accelerated filer ¨  Smaller reporting company  ¨  Emerging Growth Company

(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of April 26, 2018, there are 28,542,202 shares of the registrant’s common stock, par value of $0.001 per share, outstanding.

LUMBER LIQUIDATORS HOLDINGS, INC.

Quarterly Report on Form 10-Q

For the quarter ended March 31, 2018

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
	PART II – OTHER INFORMATION	22
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
	Signatures	28

2

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

Lumber Liquidators Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

	March 31,			December 31,
	2018			2017
Assets
Current Assets:
Cash and Cash Equivalents	$	12,606		$	19,938
Merchandise Inventories		273,411			262,280
Prepaid Expenses		10,028			9,108
Other Current Assets		9,459			6,670
Total Current Assets		305,504			297,996
Property and Equipment, net		98,894			100,491
Goodwill		9,693			9,693
Other Assets		2,566			2,615
Total Assets	$	416,657		$	410,795
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable	$	60,701		$	67,676
Customer Deposits and Store Credits		43,493			38,546
Accrued Compensation		7,710			12,101
Sales and Income Tax Liabilities		5,499			4,273
Accrual for Multidistrict Litigation ("MDL") and Related Other Matters		37,193			36,960
Other Current Liabilities		20,061			18,605
Total Current Liabilities		174,657			178,161
Other Long-Term Liabilities		19,674			19,787
Revolving Credit Facility		26,000			15,000
Total Liabilities		220,331			212,948
Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 31,470 and 31,397 shares issued and 28,540 and 28,490 shares outstanding, respectively)		31			31
Treasury Stock, at cost (2,930 and 2,907 shares, respectively)		(141,439	)		(140,875	)
Additional Paid-in Capital		209,676			208,629
Retained Earnings		129,242			131,214
Accumulated Other Comprehensive Loss		(1,184	)		(1,152	)
Total Stockholders’ Equity		196,326			197,847
Total Liabilities and Stockholders’ Equity	$	416,657		$	410,795

See accompanying notes to condensed consolidated financial statements

3

Lumber Liquidators Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts)

	Three Months Ended
	March 31,
	2018			2017
Net Sales	$	261,772		$	248,389
Cost of Sales		166,800			161,590
Gross Profit		94,972			86,799
Selling, General and Administrative Expenses		96,418			112,214
Operating Loss		(1,446	)		(25,415	)
Other Expense		321			512
Loss Before Income Taxes		(1,767	)		(25,927	)
Income Tax Expense		205			445
Net Loss	$	(1,972	)	$	(26,372	)
Net Loss per Common Share—Basic	$	(0.07	)	$	(0.93	)
Net Loss per Common Share—Diluted	$	(0.07	)	$	(0.93	)
Weighted Average Common Shares Outstanding:
Basic		28,508			28,292
Diluted		28,508			28,292

See accompanying notes to condensed consolidated financial statements

4

Lumber Liquidators Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)

	Three Months Ended
	March 31,
	2018			2017
Net Loss	$	(1,972	)	$	(26,372	)
Other Comprehensive (Loss) Income
Foreign Currency Translation Adjustments		(32	)		32
Total Other Comprehensive (Loss) Income		(32	)		32
Comprehensive Loss	$	(2,004	)	$	(26,340	)

See accompanying notes to condensed consolidated financial statements

5

Lumber Liquidators Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	Three Months Ended
	March 31,
	2018			2017
Cash Flows from Operating Activities:
Net Loss	$	(1,972	)	$	(26,372	)
Adjustments to Reconcile Net Loss:
Depreciation and Amortization		4,723			4,335
Stock-based Compensation Expense		858			1,259
Loss on Disposal of Fixed Assets		7			—
Changes in Operating Assets and Liabilities:
Merchandise Inventories		(14,483	)		(298	)
Accounts Payable		(7,079	)		(32,032	)
Customer Deposits and Store Credits		5,062			9,587
Prepaid Expenses and Other Current Assets		(1,090	)		733
Accrual for MDL and Related Other Matters		250			18,000
Other Assets and Liabilities		(1,157	)		(4,971	)
Net Cash Used in Operating Activities		(14,881	)		(29,759	)
Cash Flows from Investing Activities:
Purchases of Property and Equipment		(3,048	)		(2,502	)
Other Investing Activities		6			—
Net Cash Used in Investing Activities		(3,042	)		(2,502	)
Cash Flows from Financing Activities:
Borrowings on Revolving Credit Facility		15,000			35,000
Payments on Revolving Credit Facility		(4,000	)		(3,000	)
Payments on Capital Lease Obligations		—			(114	)
Payments on Financed Insurance Obligations		(367	)		—
Other Financing Activities		(524	)		444
Net Cash Provided by Financing Activities		10,109			32,330
Effect of Exchange Rates on Cash and Cash Equivalents		482			631
Net (Decrease) Increase in Cash and Cash Equivalents		(7,332	)		700
Cash and Cash Equivalents, Beginning of Period		19,938			10,271
Cash and Cash Equivalents, End of Period	$	12,606		$	10,971

See accompanying notes to condensed consolidated financial statements

6

Lumber Liquidators Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Amounts in thousands, except per share amounts)

Note 1. Basis of Presentation

Lumber Liquidators Holdings, Inc. and its direct and indirect subsidiaries (collectively and, where applicable, individually, the “Company”) engage in business as a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories, operating as a single operating segment. The Company offers an extensive assortment of exotic and domestic hardwood species, engineered hardwood, laminate, resilient vinyl and wood-look ceramic tile flooring direct to the consumer. The Company also features the renewable flooring products, bamboo and cork, and provides a wide selection of flooring enhancements and accessories, including moldings, noise-reducing underlayment, adhesives and flooring tools. The Company also provides in-home delivery and installation services to certain of its customers. The Company sells primarily to homeowners or to contractors on behalf of homeowners through a network of store locations in primary or secondary metropolitan areas. As of March 31, 2018, the Company’s 398 stores spanned 46 states in the United States (“U.S.”) and included eight stores in Canada. In addition to the store locations, the Company’s products may be ordered, and customer questions/concerns addressed, through its call center in Toano, Virginia, its website, www.lumberliquidators.com, and catalogs published from time-to-time. The Company finishes the majority of the Bellawood products on its finishing lines in Toano, Virginia, which along with the call center, corporate offices, and a distribution center, represent the “Corporate Headquarters.”

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting of normal and recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. However, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s annual report filed on Form 10-K for the year ended December 31, 2017.

The condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

Results of operations for the three months ended March 31, 2018 are not necessarily indicative of future results to be expected for the full year due to a number of factors, including seasonality.

Note 2. Summary of Significant Accounting Policies

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash and cash equivalents, accounts payable and other liabilities approximates fair value because of the short-term nature of these items. The carrying amount of obligations under the revolving credit facility approximates fair value due to the variable rate of interest.

Merchandise Inventories

The Company values merchandise inventories at the lower of merchandise cost or net realizable value. The Company periodically reviews the carrying value of items in inventory and records a lower of cost or net realizable value adjustment when there is evidence that the utility of inventory will be less than its cost. In determining market value, the Company makes judgments and estimates as to the market value of its products, based on factors such as historical results and current sales trends. Although the Company believes its products are appropriately valued as of the balance sheet date, there can be no assurance that future events or changes in key assumptions would not significantly impact their value.

Recognition of Net Sales

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“Topic 606”), Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and when control of those goods and services has passed to the customer. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method. However, because adoption of the standard did not change the timing or amount of the Company’s recognition of revenue and because the Company does not recognize revenues for partial contracts, there was no adjustment to retained earnings needed as part of the adoption of the new standard.

7

The Company generates revenues primarily by retailing merchandise in the form of hardwood and wood-look flooring and accessories. Additionally, the Company expands its revenues by offering services to deliver and/or install this merchandise for its customers; it considers these services to be separate performance obligations. The separate performance obligations are detailed on the customer’s invoice(s) and the customer often purchases flooring merchandise without purchasing installation or delivery services. Sales occur through a network of 398 stores spanning 46 states including eight stores in Canada. In addition, both the merchandise and services can be ordered through a call center and from the Company’s website, www.lumberliquidators.com. The Company’s agreements with its customers are of short duration (less than a year) and as such the Company has elected not to disclose revenue for partially satisfied contracts that will be completed in the days following the end of a period as permitted by GAAP. The Company reports its revenues exclusive of sales taxes collected from customers and remitted to governmental taxing authorities, consistent with past practice.

Revenue is based on consideration specified in a contract with a customer, and excludes any sales incentives from vendors and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or performing service for a customer. Revenues from installation and freight services are recognized when the delivery is made or the installation is complete, which approximates the recognition of revenue over time due to the short duration of service provided. The price of the Company’s merchandise and services are specified in the contract and detailed on the invoice agreed to with the customer including any discounts. The Company generally requires customers to pay a deposit, equal to approximately half of the retail sales value, when ordering merchandise not regularly carried in a given location or not currently in stock. In addition, the Company generally does not extend credit to its customers with payment due in full at the time the customer takes possession of merchandise or when the service is provided. Customer payments and deposits received in advance of the customer taking possession of the merchandise or receiving the services are recorded as deferred revenues in the accompanying condensed consolidated balance sheet caption Customer Deposits and Store Credits. The following table shows the activity in this account during the period:

	Three Months Ended March 31, 2018			Three Months Ended March 31, 2017
Customer Deposits and Store Credits, Beginning Balance	$	(38,546	)	$	(32,639	)
New Deposits		(285,522	)		(277,279	)
Recognition of Revenue		261,772			248,389
Sales Tax included in Customer Deposits		16,605			16,199
Other		2,198			3,203
Customer Deposits and Store Credits, Ending Balance	$	(43,493	)	$	(42,127	)

Subject to limitations under the Company’s policy, return of unopened merchandise is accepted for 30 days. The amount of revenue recognized for flooring merchandise is adjusted for expected returns, which are estimated based on the Company’s historical data, current sales levels, and forecasted economic trends. The Company uses the expected value method to estimate returns because it has a large number of contracts with similar characteristics. The Company previously recognized revenue in full, recorded an allowance for expected returns (contra-revenue), and recorded a separate refund liability for expected returns. The Company reduces revenue by the amount of expected returns and records it within accrued expenses and other on the condensed consolidated balance sheet. The Company continues to estimate the amount of returns based on the historical data. In addition, the Company recognizes a related asset for the right to recover returned merchandise and records it in the Other Current Assets caption of the accompanying condensed consolidated balance sheet. This amount was $1.2 million at March 31, 2018. The Company recognizes sales commissions as incurred since the amortization period is less than one year. The Company offers a range of limited warranties for the durability of the finish on its prefinished products. These limited warranties range from one to 100 years, with lifetime warranties for certain of the Company’s products. Warranty reserves are based primarily on claims experience, sales history and other considerations. Warranty costs are recorded in cost of sales. These costs are included in Selling, General, and Administrative Expenses on the condensed consolidated statements of operations.

8

In total, we offer hundreds of different flooring products; however, no single flooring product represented a significant portion of our sales mix. By major product category, our sales mix was as follows:

	Three Months Ended March 31, 2018				Three Months Ended March 31, 2017
Solid and Engineered Hardwood, Bamboo and Cork	$	96,684	37	%	$	109,054	44	%
Manufactured Products1		90,929	35	%		72,901	29	%
Moldings and Accessories and Other		48,896	19	%		49,043	20	%
Installation and Delivery Services		25,263	9	%		17,391	7	%
Total	$	261,772	100	%	$	248,389	100	%

¹ Includes laminate, vinyl, engineered vinyl plank and wood-look ceramic tile.

Cost of Sales

Cost of sales includes the cost of the product sold, cost of installation services, transportation costs from vendor to the Company’s distribution centers or store locations, any applicable finishing costs related to production of the Company’s proprietary brands, transportation costs from distribution centers to store locations, transportation costs for the delivery of products from store locations to customers, certain costs of quality control procedures, warranty and customer satisfaction costs, inventory adjustments including shrinkage, and costs to produce samples, reduced by vendor allowances.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), which creates ASC Topic 842, Leases, and supersedes the lease accounting requirements in Topic 840, Leases. In summary, Topic 842 requires organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Therefore, the new standard will become effective for the Company at the beginning of its 2019 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements including educating employees of the breadth of the new standard, evaluating software solutions to track leases, identifying all leases including reviewing contracts for potential embedded leases. The Company is monitoring the FASB’s recent deliberations surrounding a simplified transition approach and is evaluating the practical expedients provided by that approach as well as those already included the standard. When implemented, the standard is expected to have a material impact as operating leases will be recognized on the Company’s consolidated balance sheet.

Note 3. Stockholders’ Equity

Net Loss per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

	Three Months Ended
	March 31,
	2018			2017
Net Loss	$	(1,972	)	$	(26,372	)
Weighted Average Common Shares Outstanding—Basic		28,508			28,292
Effect of Dilutive Securities:
Common Stock Equivalents		—			—
Weighted Average Common Shares Outstanding—Diluted		28,508			28,292
Net Loss per Common Share—Basic	$	(0.07	)	$	(0.93	)
Net Loss per Common Share—Diluted	$	(0.07	)	$	(0.93	)

9

The following shares have been excluded from the computation of Weighted Average Common Shares Outstanding—Diluted because the effect would be anti-dilutive:

	Three Months Ended March 31,
	2018		2017
Stock Options		688		769
Restricted Shares		347		469

Stock Repurchase Program

The Company’s board of directors has authorized the repurchase of up to $150 million of the Company’s common stock. At March 31, 2018, the Company had approximately $14.7 million remaining under this authorization. The Company has not repurchased any shares of its common stock under this program in more than three years.

Note 4. Stock-Based Compensation

The following table summarizes share activity related to stock options and restricted stock awards (“RSAs”):

	Stock Options			Restricted Stock Awards
Options Outstanding/Nonvested RSAs, December 31, 2017		690			480
Granted		77			174
Options Exercised/RSAs Released		(3	)		(70	)
Forfeited		(25	)		(21	)
Options Outstanding/Nonvested RSAs, March 31, 2018		739			563

During the three months ended March 31, 2018, the Company granted 30,887 shares of performance-based restricted stock awards, vesting over three-year period, with a grant date fair value of approximately $0.7 million to certain members of senior management in connection with the achievement of specific key financial metrics. The number of awards that will ultimately vest is contingent upon the achievement of these key financial metrics by the end of year two. Once these amounts have been determined, half of the shares will vest at the end of year two and the remaining half will vest at the end of year three. These awards are included above in Restricted Stock Awards Granted.

Note 5. Income Taxes

The Company has a full valuation allowance recorded against its net deferred tax assets which effectively offsets its federal taxes at the statutory rate of 21%. However, it does record tax expense each period for income taxes incurred in certain state and foreign jurisdictions. For the three months ended March 31, 2018 and 2017, the resulting effective tax rate was (11.6)% and (1.7)%, respectively.

The Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”) was enacted on December 22, 2017, which reduced the U.S. federal corporate tax rate from 35% to 21% and eliminated the 20-year limit on the carryforward of losses, and resulted in the Company remeasuring its existing deferred tax balances in 2017. In addition, generally beginning in 2018, the Tax Act alters the deductibility of certain items (e.g., certain compensation, interest, entertainment expenses), and allows qualifying capital expenditures to be deducted fully in the year of purchase. As of March 31, 2018, the Company has completed an initial analysis of the tax effects of the Tax Act but continues to monitor developments by federal and state rulemaking authorities regarding implementation of the Act. The Company has made reasonable estimates of the effects of the Tax Act on its deferred tax balances based on current information, but may need to adjust as new guidance becomes available.

The Company intends to maintain a valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.  A reduction in the valuation allowance could result in a significant decrease in income tax expense in the period that the release is recorded. However, the exact timing and amount of any reduction in the Company’s valuation allowance are unknown at this time and will be subject to the earnings level it achieves in future periods.

10

The Company files income tax returns with the U.S. federal government and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. During 2017, the Internal Revenue Service completed audits of the Company’s income tax returns through 2016.

Note 6. Commitments and Contingencies

Governmental Investigations

In 2015 and early 2016, the Company received subpoenas issued in connection with a criminal investigation being conducted by the U.S. Department of Justice (the “DOJ”) and the SEC. 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 made with respect to these matters. Any action by the DOJ or SEC with respect to these matters could include civil or criminal proceedings 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

On March 15, 2018, the Company entered into a settlement agreement with the lead plaintiffs in the MDL (as defined in Part II – Item 1) and Abrasion MDL(as defined in Part II – Item 1), cases more fully described in the Company’s 2017 Annual Report on Form 10-K. Under the terms of the settlement agreement, which are consistent with the terms set forth in a previously disclosed memorandum of understanding, the Company has agreed to 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 settlement agreement is subject to certain contingencies, including court approvals. There can be no assurance that the settlement agreement will be 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 or the Abrasion MDL. The $36 million aggregate settlement amount was accrued in 2017.

In addition to those purchasers who elect to opt out of the above settlement (the “Opt Outs”) and the Steele class action lawsuit, more fully described in the Company’s 2017 Annual Report on Form 10-K, which is a similar case to the MDL in Canada, 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 were settled in the first quarter of 2018, while some are in advanced stages of settlement negotiations. The Company recognized a $1 million charge during the fourth quarter of 2017 and a $250 thousand charge in the first quarter of 2018 for these matters. For the remaining Other Matters, while the Company believes that a further loss associated with the Opt Outs, Other Matters and the Steele class action lawsuit 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.

The Company has determined that probable losses have been incurred and has recognized charges to earnings within selling general and administrative expense during 2017 and the first quarter of 2018. If the court does not approve the settlement agreement or if the Company 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

Beginning in 2014, Dana Gold (“Gold”) filed a purported class action lawsuit alleging that certain bamboo flooring that the Company sells (the “Strand Bamboo Product”) is defective (the “Gold matter”). On February 13, 2015, Gold filed an amended complaint that added three additional plaintiffs (collectively with Gold, “Gold Plaintiffs”). Gold Plaintiffs did not quantify any alleged damages in their complaint but, in addition to attorneys’ fees and costs, Gold Plaintiffs seek a declaration that the Company’s actions violate the law and that it is financially responsible for notifying all purported class members, 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 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. The trial is currently scheduled to begin in February 2019.

11

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 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 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.

Employee Classification Matters

In the second half of 2017, certain former and current store managers, store managers in training, and similarly situated current and former employees holding comparable positions but different titles (collectively, the “SM Plaintiffs”) filed purported class action lawsuits in New York and California 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”), in both cases alleging that the Company violated the Fair Labor Standards Act and certain state laws by classifying the SM Employees as exempt. In both cases 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 both 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 these actions and therefore no accrual has been made related to either of them. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition, and liquidity.

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% and 7% of its flooring purchases in 2017 and 2016, 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 such, it has appealed the original imposition of AD and CVD fees.

As part of its processes in these proceedings, the DOC conducts annual 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. At the time of import, the Company makes deposits at the then prevailing rate, even while the annual review is in process. When rates are declared final by the DOC, the Company accrues a receivable or payable depending on where that final rate compares to the deposits it has made. The Company and or the domestic manufacturers can appeal the final rate for any period and can place a hold on final settlement by U.S. Customs and Border Protection while the appeals are pending.

In addition to its overall appeal of the imposition of AD and CVD, which is still pending, the Company as well as other involved parties have appealed many of the final rate determinations. Those appeals are pending and, at times, have resulted in delays in settling the shortfalls and refunds in the table that follows. 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.

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.

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Results by period for the Company are shown below. The column labeled ‘March 31, 2018 Receivable/Liability Balance’ represents the amount the Company would receive or pay as the result of subsequent adjustment to rates whether due to finalization by DOC or because of action of a court based on appeals by various parties. It does not include any amounts paid for AD or CVD in the current period at the in-effect rate at that time.

Review Period	Period Covered	Rates at which Company Deposited	Final Rate	March 31, 2018 Receivable/Liability Balance
		Antidumping
1	May 2011 through November 2012	6.78% and 3.3%	5.92%	$0.8 million liability1
2	December 2012 through November 2013	3.30%	13.74%	$4.1 million liability
3	December 2013 through November 2014	3.3% and 5.92%	17.37%	$5.5 million liability
4	December 2014 through November 2015	5.92% and 13.74%	0.0%	$2.1 million receivable
5	December 2015 through November 2016	5.92%, 13.74%, and 17.37%	Pending but preliminary determination was 0.0%	NA
6	December 2016 through November 2017	17.37% and 0.0%	Pending	NA
7	December 2017 through November 2018	0.0%	Pending	NA
		Countervailing
1&2	April 2011 through December 2012	1.50%	0.83% / 0.99%	$0.2 million receivable
3	January 2013 through December 2013	1.50%	1.38%	$.05 million receivable
4	January 2014 through December 2014	1.50% and 0.83%	1.06%	$.02 million receivable
5	January 2015 through December 2015	0.83% and 0.99%	Pending but preliminary determination was 0.89%	NA
6	January 2016 through December 2016	0.99% and 1.38%	Pending	NA
7	January 2017 through December 2017	1.38% and 1.06%	Pending	NA
8	January 2018 through December 2018	1.06%	Pending	NA

¹ DOC has recommended reducing the rate for the first annual review period to 0.73% (from 5.92%) through remand. The court had not yet accepted this recommendation as of March 31, 2018. Should this rate hold through the appeal process, Lumber Liquidators would reverse the $0.8 million liability and record a receivable.

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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

This report includes statements of the Company’s expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by words such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “thinks,” “estimates,” “seeks,” “predicts,” “could,” “projects,” “potential” and other similar terms and phrases, are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, the Company’s management as of the date of such statements. These statements are subject to risks and uncertainties, all of which are difficult to predict and many of which are beyond the Company’s control. These risks include, without limitation, the impact on us of any of the following:

· government investigations and related legal proceedings;

· other current and former legal proceedings;

· obligations under various settlement agreements and other compliance matters;

· impact of liquidity in the settlement of legal proceedings;

· new laws and regulations;

· impact of the Tax Act;

· the inability to open new stores;

· capital expenditures;

· managing growth;

· increased transportation costs;

· damage to our assets;

· operating stores in Canada and an office in China;

· managing third-party installers;

· renewing leases;

· having sufficient suppliers;

· our, and our suppliers’, compliance with complex and evolving rules, regulations, and laws at the federal, state, and local level;

· product liability claims;

· obtaining products from abroad, including effects of antidumping and countervailing duties, as well as other governmental measures aimed at balancing trade;

· availability of suitable hardwood;

· changes in economic conditions, both domestic and abroad;

· sufficient insurance coverage;

· access to capital;

· handling of confidential customer information;

· management information systems disruptions;

· alternative e-commerce offerings;

· our advertising strategy;

· anticipating consumer trends;

· competition;

· internal controls;

· impact of changes in accounting guidance;

· stock price volatility; and

· anti-takeover provisions.

Information regarding these and other additional risks and uncertainties is contained in the Company’s other reports filed with the SEC, including the Item 1A, “Risk Factors,” section of the Form 10-K for the year ended December 31, 2017.

This management discussion should be read in conjunction with the financial statements and notes included in Part I, Item 1. “Financial Statements” of this quarterly report and the audited financial statements and notes and management discussion included in the Company’s annual report filed on Form 10-K for the year ended December 31, 2017.

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Overview

Lumber Liquidators is the largest specialty retailer of hardwood flooring in North America, offering a complete purchasing solution across an extensive assortment of domestic and exotic hardwood species, engineered hardwood, laminate, resilient vinyl, engineered vinyl plank, bamboo, engineered bamboo, cork and wood-look tile. At March 31, 2018, we sold our products through 398 Lumber Liquidators stores in 46 states in the United States and in Canada, a call center, websites and catalogs.

We believe we have achieved a reputation for offering great value, superior service and a broad selection of high-quality flooring products. With a balance of price, selection, quality, availability and service, we believe our value proposition is the most complete within a highly fragmented hardwood flooring market. The foundation for our value proposition is strengthened by our unique store model, the industry expertise of our people, our singular focus on hard-surface flooring, and our expansion of our advertising reach and frequency.

To supplement the financial measures prepared in accordance with GAAP, we use the following non-GAAP financial measures: (i) Adjusted SG&A; (ii) Adjusted SG&A as a percentage of sales; and (iii) Adjusted Operating Income (Loss). The non-GAAP financial measures should be viewed in addition to, and not in lieu of, financial measures calculated in accordance with GAAP. These supplemental measures may vary from, and may not be comparable to, similarly titled measures by other companies.

The non-GAAP financial measures are presented because management uses these non-GAAP financial measures to evaluate our operating performance and to determine incentive compensation. Therefore, we believe that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors. The presented non-GAAP financial measures exclude items that management does not believe reflect our core operating performance, which include regulatory and legal settlements and associated legal and operating costs, and changes in antidumping and countervailing duties, as such items are outside of our control or due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature.

Executive Summary

We continue to focus on several key initiatives related to our core business that we believe will strengthen our sales and operating margin and provide an improved shopping experience to our customers. These are:

· Improve operational effectiveness: We have a series of initiatives across each function of the Company aimed at continuous improvement in service, assortment, and value. In merchandising, we are focusing on price point adjacencies to ensure easier, more relevant step-up choices for our customers, along with life-cycle management to reduce obsolescence. In marketing, we are fine tuning our advertising and web messages to drive leverage. In logistics, we are integrating our freight forwarder with our purchase order system to ensure compliance and improve visibility to inventory.

· Enhance the customer experience: We continue to believe our store model provides a competitive advantage by allowing our associates to assist customers throughout the buying process, from product selection to installation. We implemented a series of initiatives to improve how the customer interacts with our brand at various touch points. It includes improved integration of our online and in-store environments, with greater envisioning functionality and other project management tools. It also includes the expansion of our store stocking strategy.

· Responsible, compliant sourcing activities: We are committed to ensuring our compliance programs are operationalized, including our commitment to meeting certain industry certifications on our products. We are also strengthening our vendor relationships and improving the ways we interface with them. These programs enable us to confidently source products on a global basis and support our ability to innovate and improve margins.

· Expand our business to better serve our customers: We serve three key segments – our established do-it-yourself customer, the growing do-it-for-me customer, and the professional installer. This initiative includes additional enhancements of our installation program through further integration into the sales process and tactical support by dedicated customer care representatives. With installation services now available in virtually all our stores, we can advertise nationally and scale the people and systems infrastructure. This initiative also includes further enhancements to our value proposition for the Pro, including opportunities to introduce Pro-requested assortment items, and service and convenience upgrades. We are also expanding our store network and intend to open 20-25 new stores in 2018.

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Net sales for the first quarter of 2018 increased $13.4 million, or 5.4%, to $261.8 million from $248.4 million in the first quarter of 2017. Net sales in comparable stores increased $7.3 million, or 2.9%, that consisted of merchandise sales growth of 0.2% and installation services sales growth of 47%. Net sales in non-comparable stores increased $6.1 million. We opened five new stores in the first quarter.

Gross profit increased $8.2 million in the first quarter of 2018 to $95 million from $86.8 million in the comparable period in 2017. Gross margin increased to 36.3% in the first quarter of 2018 from 34.9% in the first quarter of 2017, primarily driven by improved mix of higher-margin manufactured products, partially offset by higher transportation costs.

SG&A expenses decreased 14.1% in the first quarter of 2018 to $96.4 million from $112.2 million in the comparable period in 2017, due to the absence of the prior year’s $18 million accrual in connection with the MDL and Abrasion MDL. Excluding that and other legacy legal expenses from both periods, Adjusted SG&A (a non-GAAP measure) increased $1.3 million, or 1.4%, primarily as a result of modest increases in occupancy, depreciation and legal and professional fees, while advertising was essentially flat to last year.

Operating loss for the three months ended March 31, 2018 was $1.4 million compared to an operating loss of $25.4 million in the comparable period in 2017. Operating loss as a percent of net sales was (0.5)% and (10.2)% for the three months ended March 31, 2018 and 2017, respectively. Net loss for the three months ended March 31, 2018 was $2 million, or $0.07 per diluted share, compared to a net loss of $26.4 million, or $0.93 per diluted share, for the three months ended March 31, 2017. Net loss for the three months ended March 31, 2018 was reduced from the same period in the prior year due to revenue growth, gross margin expansion and decreases in SG&A expenses, primarily due to the to the absence of the prior year’s $18 million accrual in connection with the MDL and Abrasion MDL.

At March 31, 2018, we had $129.4 million in liquidity, comprised of $12.6 million of cash and cash equivalents and availability under our revolving credit facility (including certain limitations) of $116.8 million. We had $26 million outstanding on our revolving credit facility at March 31, 2018, which increased from the $15 million that was outstanding at December 31, 2017 but is down from the $72 million that was outstanding as March 31, 2017. We opened five new stores in the first quarter of 2018, bringing our total store count to 398 as of March 31, 2018.

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.

							% Improvement
	% of Net Sales						(Decline) in
	Three Months Ended March 31,						Dollar Amounts
	2018			2017			2018 vs. 2017
Net Sales		100.0	%		100.0	%		5.4	%
Gross Profit		36.3	%		34.9	%		9.4	%
Selling, General, and Administrative Expenses		36.8	%		45.1	%		14.1	%
Operating Loss		(0.5	)%		(10.2	)%		94.3	%
Other Expense		0.1	%		0.2	%		37.3	%
Loss Before Income Taxes		(0.6	)%		(10.4	)%		93.2	%
Provision (Benefit) for Income Taxes		0.1	%		0.2	%		-53.8	%
Net Loss		(0.7	)%		(10.6	)%		92.5	%

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	Three Months Ended
	March 31,
Other Selected Data	2018			2017
Average Sale1		4.7	%		4.8	%
Average Retail Price per Unit Sold2		(0.8	)%		(0.4	)%
Comparable Store Sales Increase (Decrease) (%)
Number of Stores Open, end of period		398			385
Number of Stores Opened in Period		5			2
Number of Stores Relocated in Period3		—			—
Comparable Stores4:
Net Sales		2.9	%		4.7	%
Customers Invoiced5		(1.8	)%		(0.1	)%
Net Sales of Stores Operating for 13 to 36 months		6.5	%		7.1	%
Net Sales of Stores Operating for more than 36 months		2.7	%		4.5	%
Net Sales in Markets with all Stores Comparable (no cannibalization)		3.3	%		5.5	%

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 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 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.

Net Sales

Net sales for the first quarter of 2018 increased $13.4 million, or 5.4%, from the comparable period in 2017 as net sales in comparable stores increased $7.3 million, or 2.9%, and the net sales in non-comparable stores increased $6.1 million. The growth in comparable store sales consisted of a 0.2% growth in merchandise sales, and 47% growth in installation sales within our comparable stores which accounted for roughly 8% of total sales in the first quarter of 2018 compared to approximately 6% of total sales in the first quarter 2017. Installation services revenue growth is expected to be less pronounced each quarter of 2018 as the nationwide rollout was completed by the end of 2017.

Comparable store net sales growth reflected a combination of an increase in average sale of 4.7%, which was partially offset by a decrease of 1.8% in the number of customers invoiced. The 4.7% increase in overall average sale was driven by the increased attachment of installation services, including the nationwide rollout of our installation program after market penetration into California and Florida in the fourth quarter of 2017, and growth in our product categories, particularly as it relates to our sales of our engineered vinyl plank products. We believe the 1.8% decline in the number of customers invoiced was primarily attributable to harsh winter weather, as traffic in our northern stores declined by mid-single digits while stores in the rest of the country were comparable year over year.

Gross Profit

Gross profit increased $8.2 million in the first quarter of 2018 to $95 million from $86.8 million in the comparable period in 2017. Gross margin increased to 36.3% in the first quarter of 2018 from 34.9% in the first quarter of 2017. This improvement was primarily driven by increased sales and the higher mix of manufactured products, specifically, engineered vinyl plank, that carry higher gross margins than some of our other product categories. These factors were partially offset by transportation costs primarily related to rising fuel prices. There were no unusual items impacting gross margin with comparisons to the prior-year periods for the three months ended March 31, 2018 and 2017, respectively.

Selling, General and Administrative Expenses

SG&A expenses decreased 14.1% in the first quarter of 2018 to $96.4 million from $112.2 million in the comparable period in 2017. The $15.8 million decrease in SG&A was primarily attributable to the absence of the prior year’s $18 million accrual in connection with the MDL and Abrasion MDL that was recorded in the three months ended March 31, 2017 and incremental legal and professional fees of approximately $3.1 million and $2.4 million for the three months ended March 31, 2018 and 2017, respectively. These items are shown in the table below. Excluding these items from both periods, Adjusted SG&A (a non-GAAP measure) increased by $1.3 million in the three months ended March 31, 2018 as compared to the year ago period, primarily driven by modest increases in occupancy, depreciation and legal and professional fees while advertising was essentially flat to last year.

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We believe that each of these items can distort the visibility of our ongoing performance and that the evaluation of our financial performance can be enhanced by use of supplemental presentation of our results that exclude the impact of these items.

	Three Months Ended March 31,
	2018					2017
	$		% of Sales			$		% of Sales
	(dollars in thousands)
SG&A, as reported (GAAP)	$	96,418		36.8	%	$	112,214		45.1	%
Accrual for MDL and Related Other Matters 1		250		0.1	%		18,000		7.2	%
Legal and Professional Fees 2		3,067		1.2	%		2,408		1.0	%
Sub-Total Items above		3,317		1.3	%		20,408		8.2	%
Adjusted SG&A, (a non-GAAP measure)	$	93,101		35.5	%	$	91,806		36.9	%

¹ This amount represents the charge to earnings in 2017 related to the MDL and Abrasion MDL settlements and charges for certain cases related to the MDL in 2018, which is described more fully in Note 6 to the condensed consolidated financial statements.

² Represents charges to earnings related to our defense of certain significant legal actions during the period. This does not include all legal costs incurred by the Company.

Operating Loss and Operating Margin

Operating loss for the three months ended March 31, 2018 was $1.4 million compared to an operating loss of $25.4 million in the comparable period in 2017. Operating loss as a percent of net sales was (0.5)% for the three months ended March 31, 2018 compared to (10.2)% for the three months ended March 31, 2017. Excluding the items shown below, Adjusted Operating Income (a non-GAAP measure) was $1.9 million for the three months ended March 31, 2018 compared to an Adjusted Operating Loss (a non-GAAP measure) of $5 million for the three months ended March 31, 2017. The improvement was driven by revenue growth and improved gross margin.

We believe that each of these items can distort the visibility of our ongoing performance and that the evaluation of our financial performance can be enhanced by use of supplemental presentation of our results that exclude the impact of these items.

	Three Months Ended March 31,
	2018			2017
	(in thousands)
Operating Loss, as reported (GAAP)	$	(1,446	)	$	(25,415	)
SG&A Items:
Accrual for MDL and Related Other Matters 1		250			18,000
Legal and Professional Fees 2		3,067			2,408
SG&A Subtotal		3,317			20,408
Adjusted Operating Income (Loss) (a non-GAAP measure)	$	1,871		$	(5,007	)

^1,2, See the SG&A section above for more detailed explanations of these individual items.

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Provision for Income Taxes

We have a full valuation allowance recorded against our net deferred tax assets which effectively offsets our federal taxes at the statutory rate of 21%. However, we record as tax expense each period for income taxes incurred in certain state and foreign jurisdictions. For the three months ended March 31, 2018 and 2017, the resulting effective tax rate was (11.6)% and (1.7)%, respectively.

The Tax Act was enacted on December 22, 2017, which reduced the U.S. federal corporate tax rate from 35% to 21% and eliminated the 20-year limit on the carryforward of losses, and resulted in the Company remeasuring our existing deferred tax balances in 2017. In addition, generally beginning in 2018, the Tax Act alters the deductibility of certain items (e.g., certain compensation, interest, entertainment expenses), and allows qualifying capital expenditures to be deducted fully in the year of purchase. As of March 31, 2018, we have completed an initial analysis of the tax effects of the Tax Act but continue to monitor developments by federal and state rulemaking authorities regarding implementation of the Act. We have made reasonable estimates of the effects of the Tax Act on our deferred tax balances based on current information, but may need to adjust as new guidance becomes available.

We intend to maintain a valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.  A reduction in the valuation allowance could result in a significant decrease in income tax expense in the period that the release is recorded. However, the exact timing and amount of any reduction in our valuation allowance are unknown at this time and will be subject to the earnings level we achieve in future periods.

We file income tax returns with the U.S. federal government and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. During 2017, the Internal Revenue Service completed audits of our income tax returns through 2016.

Diluted Earnings per Share

Net loss for the three months ended March 31, 2018 was $2 million, or $0.07 per diluted share, compared to a net loss of $26.4 million, or $0.93 per diluted share, for the three months ended March 31, 2017.

Seasonality

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 build of merchandise inventories. Generally, we experience higher-than-average net sales in the spring and fall, when more home remodeling activities are taking place, and lower-than-average net sales in the winter months and during the hottest summer months. These seasonal fluctuations, however, are minimized to some extent by our national presence, as markets experience different seasonal characteristics.

Liquidity and Capital Resources

Our principal liquidity and capital requirements are for capital expenditures to maintain and grow our business, working capital and general corporate purposes. We periodically use excess cash flow to repurchase shares of our common stock under our stock repurchase program, however, our share repurchase plan is indefinitely suspended until we are better able to evaluate the long-term customer demand and assess our estimates of operations and cash flow. Our principal sources of liquidity at March 31, 2018 were cash and cash equivalents of $12.6 million and availability under our revolving credit facility. The outstanding balance of our revolving credit facility was $26 million at March 31, 2018, which left availability under the facility of $116.8 million (including certain limitations). As of March 31, 2018, our revolving credit facility carried an interest rate of 3.375%. We believe that cash flow from operations, together with existing liquidity sources, will be sufficient to fund our operations and anticipated capital expenditures for the next 12 months.

In 2018, we expect capital expenditures to total between $15 million and $20 million, but we will continue to assess and adjust our level of capital expenditures based on changing circumstances. Included in our capital expenditures estimate, is the funding to open 20 to 25 stores in 2018 and to remodel and/or relocate some existing stores while continuing to focus on our current store base. We currently expect to fund the cash portion of the MDL obligation of $22 million in the fourth quarter of 2018.

Cash and Cash Equivalents

During the first three months of 2018, cash and cash equivalents decreased $7.3 million to $12.6 million. The decrease of cash and cash equivalents was primarily due to $14.9 million of net cash used in operating activities, mainly reflecting the increase in inventory and reductions in accounts payable offset by increases in customer deposits. We also used $3 million for capital expenditures and generated $11 million in net borrowings under our revolving credit facility.

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During the first three months of 2017, cash and cash equivalents increased $0.7 million to $11 million. The increase of cash and cash equivalents was primarily due to $32 million of net borrowings under the revolving credit facility, partially offset by $29.8 million of net cash used in operating activities, primarily reflecting the repayment of elevated accounts payables following the build in inventory during the fourth quarter of 2016, and $2.5 million used for capital expenditures.

Merchandise Inventories

Merchandise inventories at March 31, 2018 increased $11.1 million from December 31, 2017, as we built inventory heading into our key spring selling season. We consider merchandise inventories either “available for sale” or “inbound in-transit,” based on whether we have physically received and inspected the products at an individual store location, in our distribution centers or in another facility where we control and monitor inspection.

Merchandise inventories and available inventory per store in operation were as follows:

	As of		As of		As of
	March 31, 2018		December 31, 2017		March 31, 2017
	(in thousands)
Inventory – Available for Sale	$	243,173	$	226,750	$	277,645
Inventory – Inbound In-Transit		30,238		35,530		23,687
Total Merchandise Inventories	$	273,411	$	262,280	$	301,332
Available Inventory Per Store	$	611	$	577	$	721

Available inventory per store at March 31, 2018 was higher than December 31, 2017 primarily due to planning for the spring selling season. Available inventory per store was lower than at March 31, 2017 primarily as a result of our efforts to simplify our assortment, better manage working capital and ensure each store has the right mix of products available to meet customer demand. We expect inventory to be in the range of $275 million to $290 million through the balance of the year.

Inbound in-transit inventory generally varies due to the timing of certain international shipments and certain seasonal factors, including international holidays, rainy seasons and specific merchandise category planning.

Cash Flows

The following table summarizes our cash flow activities for the nine months ended March 31, 2018 and 2017:

	Three Months Ended March 31,
	2018			2017
	(in thousands)
Net Cash (used in) provided by:
Operating Activities	$	(14,881	)	$	(29,759	)
Investing Activities		(3,042	)		(2,502	)
Financing Activities		10,109			32,330
Effect of Exchange Rates		482			631
Total	$	(7,332	)	$	700

Operating Activities. Net cash used in operating activities was $14.9 million and $29.8 million for the three months ended March 31, 2018 and 2017, respectively. Net cash in operating activities in the first three months of 2018 was negative primarily due to a $14.5 million increase in inventory purchases and a reduction in accounts payable of $7.1 million, which was the result of the build in inventory ahead of the spring selling season. These expenses were partially offset by increases in customer deposits and depreciation and amortization expenses. Net cash in operating activities in the first three months of 2017 decreased primarily due to a $32 million reduction in accounts payable which was the result of the build in inventory during the fourth quarter of 2016 ahead of the spring selling season.

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Investing Activities. Net cash used in investing activities, primarily for capital expenditures, was $3 million and $2.5 million for the three months ended March 31, 2018 and 2017, respectively. Net cash used in capital expenditures in both the three month periods ended March 31, 2018 and 2017 were primarily related to new store openings and our information technology initiatives.

Financing Activities. Net cash provided by financing activities was $10.1 million and $32.3 million for the three months ended March 31, 2018 and 2017, respectively. Net cash provided by financial activities was primarily due to $11 million and $32 million of net borrowings on our revolving credit facility during the first quarter ended March 31, 2018 and 2017, respectively.

Critical Accounting Policies and Estimates

Critical accounting policies are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. We have had no significant changes in our Critical Accounting Policies and Estimates since our annual report on Form 10-K for the year ended December 31, 2017.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk.

We are exposed to interest rate risk through the investment of our cash and cash equivalents. We invest our cash in short-term investments with maturities of three months or less. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations. In addition, borrowings under our revolving credit facility are exposed to interest rate risk due to the variable rate of the facility. As of March 31, 2018, we had $26 million outstanding under our revolving credit facility.

We currently do not engage in any interest rate hedging activity. However, in the future, in an effort to mitigate losses associated with interest rate risks, we may at times enter into derivative financial instruments, although we have not historically done so. We do not, and do not intend to, engage in the practice of trading derivative securities for profit.

Exchange Rate Risk.

Less than one percent of our revenue, expense and capital purchasing activities are transacted in currencies other than the U.S. dollar, including the Euro, Canadian dollar, Chinese yuan and Brazilian real.

We currently do not engage in any exchange rate hedging activity. However, in the future, in an effort to mitigate losses associated with these risks, we may at times engage in transactions involving various derivative instruments to hedge revenues, inventory purchases, assets and liabilities denominated in foreign currencies.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures.

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in internal control over financial reporting.

There has been no change in our internal control over financial reporting that occurred during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. 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 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 made 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 proceedings 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 sought various forms of declaratory and injunctive relief and 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.

In a series of orders, the United States Judicial Panel on Multidistrict Litigation (the “MDL Panel”) transferred and consolidated the related federal class actions to the United States District Court for the Eastern District of Virginia (the “Virginia Court”). The Company continues to seek to have any newly filed cases transferred and consolidated in the Virginia Court. The consolidated case in the Virginia Court is captioned In 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 an amended complaint in which they added implied warranty claims under New York, Illinois, Florida and Texas law, as well as a federal warranty claim. The Company has filed various motions and answers in response to the complaint, some of which are still pending in the Virginia Court.

Abrasion-Related Cases

On May 20, 2015, a purported class action 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.

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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.

In a series of orders, the MDL Panel transferred and consolidated sixteen of the federal abrasion class actions 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 captioned In 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 has filed various motions in response to the complaint, some of which are currently pending in the Virginia Court.

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 strict liability, breach of implied warranty of fitness for a particular purpose, breach of implied warranty of merchantability, fraud by concealment, civil negligence, negligent misrepresentation, and 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 compensatory damages, punitive, exemplary and aggravated damages, and 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.

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. Subsequent to the mediation, on March 15, 2018, the Company entered into a settlement agreement with the lead plaintiffs in the MDL and the Abrasion MDL. Under the terms of the settlement agreement, which are consistent with the terms set forth in the previously disclosed memorandum of understanding, the Company has agreed to contribute $22 million in cash and provide $14 million in store-credit vouchers for an aggregate settlement amount 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 settlement agreement is subject to certain contingencies, including court approvals. There can be no assurance that the settlement agreement will be 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. The $36 million aggregate settlement amount was accrued in 2017.

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In addition to those purchasers who elect to 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 were settled in the first quarter of 2018, while some are in advanced stages of settlement negotiations. The Company recognized a $1 million charge during the fourth quarter of 2017 and a $250 thousand charge in the first quarter of 2018 for these matters. 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.

The Company has determined that probable losses have been incurred and has recognized charges to earnings within selling general and administrative expense during 2017 and the first quarter of 2018. If the Virginia Court does not approve the settlement agreement or if the Company 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”). Gold Plaintiffs have filed amended complaints, which 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 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, Gold Plaintiffs filed another 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 a declaration that the Company’s actions violate the law and that it is financially responsible for notifying all purported class members, 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 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, but the request to appeal was denied. The Company’s previously filed motion to dismiss the non-California plaintiffs on jurisdictional grounds was denied. Trial is currently scheduled for February 25, 2019.

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, 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. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition, and liquidity.

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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. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition, and liquidity.

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% and 7% of its flooring purchases in 2017 and 2016, 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. On February 15, 2017, the Court of Appeals for the Federal Circuit (“CAFC”) vacated the CIT’s prior decision and remanded with instructions to the DOC to recalculate its AD rate. The CIT is currently evaluating the DOC’s recalculated rates and is expected to issue a decision in 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.

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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 current 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% 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 June 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. The appeal of this determination by certain importers was filed but not subsequently pursued.

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.

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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 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” in our annual report on Form 10-K for the year ended December 31, 2017, which could materially affect our business, financial condition or future results. There have been no material changes to those risk factors since we filed our annual report on Form 10-K for the year ended December 31, 2017. The risks described in our annual report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents our share repurchase activity for the quarter ended March 31, 2018 (in thousands, except per share amounts):

Period	Total Number of Shares Purchased1		Average Price Paid per Share1		Total Number of Shares Purchased as Part of Publicly Announced Programs2		Maximum Dollar Value of Shares That May Yet Be Purchased as Part of Publicly Announced Programs2
January 1, 2018 to January 31, 2018		—		—		—		—
February 1, 2018 to February 28, 2018		—		—		—		—
March 1, 2018 to March 31, 2018		—		—		—		—
Total		—		—		—		—

¹ We repurchased 23,625 shares of our common stock, at an average price of $23.90, in connection with the net settlement of shares issued as a result of the vesting of restricted shares during the quarter ended March 31, 2018.

² Our initial stock repurchase program, which authorized the repurchase of up to $50 million in common stock, was authorized by our board of directors and publicly announced on February 22, 2012. Our board of directors subsequently authorized two additional stock repurchase programs, each of which authorized the repurchase of up to an additional $50 million in common stock. These programs have been publicly announced on November 15, 2012 and February 19, 2014, respectively, and are currently indefinitely suspended until we are better able to evaluate the long-term customer demand and assess our estimates of operations and cash flow. At March 31, 2018, we had approximately $14.7 million remaining under this authorization.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

The exhibits listed in the exhibit index following the signature page are furnished as part of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		LUMBER LIQUIDATORS HOLDINGS, INC. (Registrant)
Date: April 30, 2018	By:	/s/ Martin D. Agard
		Martin D. Agard
		Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Exhibit Description
10.1	Class Action Settlement Agreement in Formaldehyde MDL and Durability MDL dated March 15, 2018 by and between the Plaintiffs in the Formaldehyde MDL and the Durability MDL and Lumber Liquidators, Inc.
10.2	Form of Restricted Award Agreement (Director)
10.3	Form of NEO Performance Award
31.1	Certification of Principal Executive Officer of Lumber Liquidators Holdings, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer of Lumber Liquidators Holdings, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer and Principal Financial Officer of Lumber Liquidators Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial statements from the Company’s Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements

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EX-10.1

Exhibit 10.1

UNITED STATES DISTRICT COURT FOR

EASTERN DISTRICT OF VIRGINIA

ALEXANDRIA DIVISION

	)
IN RE: LUMBER LIQUIDATORS	)	MDL No. 1 :15-md-02627 (AJT/TRJ)
CHINESE- MANUFACTURED	)
LAMINATE FLOORING) PRODUCTS	)
MARKETING, SALES PRACTICES AND )	)
PRODUCTS LIABILITY LITIGATION	)
	)
	)
IN RE: LUMBER LIQUIDATORS	)	MDL No. 1:16-md-02743 (AJT/TRJ)
CHINESE- MANUFACTURED	)
LAMINATE FLOORING) DURABILITY	)
MARKETING AND SALES PRACTICES	)
LITIGATION	)
	)

CLASS ACTION SETTLEMENT AGREEMENT IN FORMALDEHYDE MDL AND DURABILITY MDL

This SETTLEMENT AGREEMENT is entered into, subject to final approval of the Court and entry of final judgment of dismissal with prejudice, between the following:

A.           Plaintiffs Lila Washington (dec.), Maria and Romualdo Ronquillo, Joseph Michael Balero, Ryan and Kristin Brandt, Devin and Sara Clouden, Kevin and Julie Parnella, and Shawn and Tanya Burke (collectively the “Formaldehyde Plaintiffs”), individually and as representatives of the purported class (“Formaldehyde Class”), in In Re: Lumber Liquidators Chinese-Manufactured Laminate Flooring Products Marketing, Sales Practices and Products Liability Litigation, MDL No. I :15-md-02627 (AJT) (the “Formaldehyde MDL”) pending in the United States District Court for the Eastern District of Virginia (“Court”); and

B.            Plaintiffs Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel (collectively the “Durability Plaintiffs”), individually and as representatives of the purported class (“Durability Class”), in In Re: Lumber Liquidators Chinese-Manufactured Laminate Flooring Durability Marketing and Sales Practices Litigation, MDL No. 1:16-md-02743 (the “Durability MDL”) pending before the Court; and

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C.           Defendant Lumber Liquidators, Inc. (“Lumber Liquidators” or “Defendant”).

The Formaldehyde Plaintiffs, Durability Plaintiffs, and Defendant are, at times, collectively referred to as the “Parties.” The Durability Plaintiffs and the Formaldehyde Plaintiffs are collectively referred to as the “Plaintiffs.”

RECITALS

A.           WHEREAS, beginning on or about March 3, 2015, multiple purported class action lawsuits were filed against Lumber Liquidators in various U.S. federal district courts and state courts involving claims of formaldehyde emissions from Chinese-manufactured laminate flooring in violation of the Airborne Toxic Control Measure found in Chapter 17 of the California Code of Regulations, sections 93120 et seq. issued by the California Air Resources Board (“CARB”).

B.           WHEREAS, on June 12, 2015, the United States Judicial Panel on Multidistrict Litigation (the “MDL Panel”) issued an order transferring and consolidating the formaldehyde cases to the United States District Court for the Eastern District of Virginia. The consolidated case is captioned In re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales, Practices and Products Liability Litigation, MDL No. 1:15-md-02627 (the “Formaldehyde MDL”).

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C.           WHEREAS, pursuant to court order, Plaintiffs filed a First Amended Representative Class Action Complaint in the Formaldehyde MDL on September 18, 2015. The complaint asserted twelve causes of action including: 1) Fraudulent concealment, 2) Violation of the California Unlawful, Unfair, or Fraudulent Business Acts and Practices Law, Cal. Bus. & Prof. Code s 17200 et seq., 3) Violation of the California False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq., 4) Violation of the California Consumer Legal Remedies Act, Cal. Code § 1750 et seq., 5) Violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201 et seq., 6) Violation of New York Gen. Bus. Law § 349 et seq., 7) Violation of the Texas Deceptive Trade Practices Act, Tex. Bus. & Com. Code § 17.50 et seq., 8) Violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 III. Comp. Stat. § 505/1 et seq., 9) breach of implied warranty, 10) Violation of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq., 11) Negligent misrepresentation, and 12) Declaratory relief.

D.           WHEREAS, Lumber Liquidators filed a motion for summary judgment as to the Formaldehyde MDL Representative Complaint. On June 20, 2017, the Court issued a revised Memorandum Opinion in the Formaldehyde MDL granting Lumber Liquidators partial summary judgment as to (1) all claims filed by Laura Washington; (2) claims filed by the Cloudens (New York plaintiffs), the Burkes (Illinois plaintiffs), and Lila Washington (California plaintiff) for fraudulent concealment (Count 1); (3) all claims for violations of the California False Advertising Law (Count III); (4) all claims for violation of the California Legal Remedies Act (Count IV); (5) all claims for violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Count VIII); and 6) all Plaintiffs’ demands for declaratory relief (Count XII). The court denied the remainder of the motion, and the following claims remain: (1) claims filed by Lila Washington, the Ronquillos, and Mr. Balero (California plaintiffs) and the Brandts (Florida plaintiffs) and Parnellas (Texas plaintiffs) for fraudulent concealment (Count 1); (2) claims filed by Lila Washington, the Ronquillos, and Mr. Balero (California plaintiffs under the California Unlawful, Unfair, or Fraudulent Business Acts and Practices Law (Count II); (3) the Brandts’ (Florida plaintiffs) claims under the Florida Deceptive and Unfair Trade Practices Act (Count V); (4) the Parnellas’ (Texas plaintiffs) claims under the Texas Deceptive Trade Practices Act (Count VII); (5) the Cloudens’ (New York plaintiffs) claims under New York General Business Law Section 349 (Count VI); (6) all plaintiffs’ claims for breach of implied warranty and violations of the Magnuson-Moss Warranty Act (County IX-X) and (7) the Brandts’ (Florida plaintiffs) claims for negligent misrepresentation (Count XI).

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E.           WHEREAS, the court further ruled that plaintiffs in the more than 100 pending cases, most purporting to represent class actions, must come forward to explain why their cases are factually or legally unique such that they should not be bound by the summary judgment ruling. On July 31, 2017, Plaintiffs filed a Report on Personal Injury and Objections to Application of the Summary Judgment Ruling identifying 19 plaintiffs who objected to the application of the summary judgment ruling to their claims.

F.           WHEREAS, Lumber Liquidators filed a motion to dismiss the nationwide class allegations, on which the court has not yet ruled.

G.           WHEREAS, Lumber Liquidators filed a motion to dismiss all personal injury claims asserted in class action complaints. Plaintiffs subsequently agreed and the Court ordered that no Chinese formaldehyde class action pending in the Formaldehyde MDL will seek damages for personal injury on a class-wide basis. The order did not affect any claims for personal injury brought solely on an individual basis.

H.           WHEREAS, approximately 26 fact depositions and 10 expert depositions were completed in the Formaldehyde MDL.

I.            WHEREAS, 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 three amended complaints were subsequently filed challenging certain representations about the durability and the abrasion class ratings of Lumber Liquidators’ Chinese-manufactured laminate flooring. The California court ordered that all non-California plaintiffs re-file and were to be transferred to the district court located near their place of residence. The non-California plaintiffs refiled their actions and were subsequently transferred to the respective districts of each plaintiff. Additional plaintiffs filed purported class actions in Mississippi, Florida, and Alabama.

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J.           WHEREAS, on October 3, 2016, the MDL Panel issued an order transferring and consolidating the durability class actions to the United States District Court for the Eastern District of Virginia. The consolidated case is captioned In re: Lumber Liquidators Chinese- Manufactured Laminate Flooring Durability Marketing and Sales Practices Litigation, MDL No. 1:16-md-02743 (the “Durability MDL”).

K.          WHEREAS, pursuant to court order, the Durability Plaintiffs filed a Representative Class Action Complaint on February 27, 2017, alleging ten causes of action, including: 1) Breach of implied warranties, 2) Fraudulent concealment, 3) Violation of the Magnuson-Moss Warranty Act, 25 U.S.C. § 2301 et seq., 4) Violation of the California Unfair Competition Law, Cal. Bus. & Prof. Code s 17200 et seq., 5) Violation of the California False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq., 6) Violation of the California Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq., 7) Violation of the Alabama Deceptive Trade Practices Act, Ala. Code § 8-12-1 et seq., 8) Violation of the Nevada Deceptive Trade Practices Act, Nev. Rev. Stat. § 41,600 and § 598.0915 et seq., 9) Violation of the New York General Business Law § 349, and 10) Violation of the Virginia Consumer Protection Act, VA Code § 59.1-98 et seq.

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L.           WHEREAS, Lumber Liquidators filed a motion to dismiss the Durability MDL Representative Complaint. On July 7, 2017, the Court partially granted Lumber Liquidators’ motion and dismissed: (1) all Plaintiffs’ claims for breach of implied warranty (Count 1); (2) Alabama Plaintiff Florez’s claim for fraudulent concealment (Count ID; (3) Virginia Plaintiff Perel’s claim for breach of written warranty under the Magnuson-Moss Warranty Act (Count III); (4) California Plaintiff Moylen’s claim for damages under the California Legal Remedies Act (Count VI); and (5) Alabama Plaintiff Florez’s claim under the Alabama Deceptive Trade Practices Act. The Court denied the remainder of the motion to dismiss, and the following claims remain: 1) all Plaintiffs’ claims for fraudulent concealment other than that of Alabama Plaintiff Erin Florez (Count II); 2) all Plaintiffs’ implied warranty claims and all Plaintiffs’ written warranty claims under the Magnuson-Moss Warranty Act other than Plaintiff Perel (Count III); 3) California Plaintiff Moylen’s claim under the California Unfair Competition Law (Count IV); 4) California Plaintiff Moylen’s claim under the California False Advertising Law (Count V); 5) California Plaintiff Moylen’s claim for injunctive relief under California Legal Remedies Act (Count VI); 6) Nevada Plaintiff Hotaling’s claim under the New York General Business Law (Count IX); and 8) Virginia Plaintiff Perel’s claim under the Virginia Consumer Protection Act.

M.          WHEREAS, approximately 13 depositions in the Durability MDL were completed before the discovery was stayed.

N.           WHEREAS, in accordance with the Court ordered schedules, Plaintiffs have not yet moved for class certification in either the Formaldehyde MDL or the Durability MDL, and no class has been certified against Lumber Liquidators.

O.           WHEREAS, the Formaldehyde Plaintiffs and Defendant held mediations in December 2015 and July 2016, and had ongoing mediation negotiations that also involved the Durability Plaintiffs in 2017. Beginning August 17, 2017, the Parties participated in mediation before the Honorable Judge Leonie M. Brinkema of the Eastern District of Virginia and entered into a Memorandum of Understanding to settle all claims in the Formaldehyde MDL and Durability MDL on October 23, 2017 (the “MOU”).

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P.           WHEREAS, Formaldehyde Plaintiffs, the Formaldehyde Class, Durability Plaintiffs, the Durability Class, and Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL understand and acknowledge that Lumber Liquidators admits no fault or liability and that it expressly denies any fault or liability in connection with these claims and that Defendant has agreed to settle on the following terms set forth in this Settlement Agreement only to avoid the expense, inconvenience and uncertainty of further litigation.

NOW, THEREFORE, the Parties, in consideration of the foregoing, the terms and conditions set forth below, and the good and valuable consideration set forth herein, acknowledged by each of them to be satisfactory and adequate, and intending to be legally bound, it is agreed by and among the Parties that the Formaldehyde MDL and the Durability MDL are to be settled, and the Complaints dismissed on the merits, with prejudice, subject to Court approval, and the Parties mutually agree as follows:

1.             DEFINITIONS

In addition  to the terms defined above, capitalized terms shall have the meanings set forth below:

a. “Approved Claim” means a Claim submitted by a Claimant that the Settlement Administrator, determines to be timely, accurate, eligible, and in proper form consistent with this Settlement Agreement.

b. “Approved Claimants” means those verified purchasers of Chinese-made laminate flooring sold by Lumber Liquidators between January 1, 2009 and May 31, 2015, who submitted Approved Claims. If a customer had an installer, contractor, or other professional purchase the product on their behalf, the customer will be deemed a purchaser and eligible for participation in the Settlement Class provided:

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(1) They have evidence to support the purchase made on their behalf; and

(2) There is no double recovery by multiple Claimants related to the same purchase as determined by the Claims Administrator.

c. “CARB1” refers to the standard employed by the California Air Resources Board from at least January 1, 2009 to December 31, 2010 for levels of formaldehyde in laminate flooring (.21 parts per million).

d. “CARB2” refers to the standard employed by the California Air Resources Board from January 1, 2011 through May 31, 2015 for levels of formaldehyde in laminate flooring (.11 parts per million).

e. “CARB2/Durability Settlement Class” means all purchasers of Chinese-made laminate flooring from Lumber Liquidators between January 1, 2011 and May 31, 2015.

f. “CARB1 Settlement Class” means all purchasers of Chinese-made laminate flooring from Lumber Liquidators between January 1, 2009 and December 31, 2010.

g. “Claim” means a request to participate in the Settlement Fund submitted by a Class Member on a Claim Form to the Settlement Administrator in accordance with the terms of the Settlement Agreement. Each Claim shall be based on the total price of the Class Member’s purchase during the Class Period of the Chinese-manufactured laminate flooring referenced in the Definition of the Settlement Classes at ¶1.c. and 1.d. herein, before any taxes or other fees.

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h. “Claim Form” means the application provided by the Settlement Administrator to Class Members to make a Claim pursuant to this Settlement Agreement. The Settlement Administrator shall make the Claim Form available online and in print. The Claim Form shall be developed by the Settlement Administrator and is subject to review and approval by the Parties.

i. “Claim Deadline” means the date by which all Claim Forms must be postmarked or received by the Settlement Administrator to be considered timely. The Claim Deadline shall be 120 days after Preliminary Approval.

j. “Claimant” means a Class Member who has submitted a Claim by the Claim Deadline.

k. “Class Counsel” means the Co-Lead Counsel for the Formaldehyde MDL and the Co- Lead Counsel for the Durability MDL selected to represent the Settlement Classes by the Court.

l. “Class Member” means all persons in the United States who purchased Chinese-made laminate flooring from Lumber Liquidators between January 1, 2009 and May 31, 2015. Excluded from the Classes are (1) Defendant, (2) all present and former affiliates and/or officers or directors of Defendant, (3) the Judge of this Court, the Judge’s family and staff, (4) all individuals who have already entered a Release and Settlement Agreement with Lumber Liquidators related to their purchase of the Chinese-made laminate flooring product during the Class Period, (5) contractors, persons, or other entities who purchased Chinese-manufactured laminate flooring primarily for resale, (6) individuals bringing Personal Injury Claims as defined below and identified in Exhibit A, and (7) all persons who timely request to be excluded from the Settlement Class or Settlement Classes in accordance with the provisions of the Notice.

m. “Class Representatives for the Formaldehyde MDL Representative Complaint” means Plaintiffs Lila Washington, Maria and Romualdo Ronquillo, Joseph Michael Balero, Ryan and Kristin Brandt, Devin and Sara Clouden, Kevin and Julie Parnella, and Shawn and Tanya Burke.

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n. “Class Representatives for the Durability MDL Representative Complaint” means Plaintiffs Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel.

o. “Class Period” means January 1, 2009 through May 31, 2015. The “CARB2/Durability Period” means January 1, 2011 through May 31, 2015. The “CARB1 Period” means January 1, 2009 through December 31, 2010.

p. “Complaints” means all lawsuits and claims transferred to the Formaldehyde MDL and all lawsuits and claims transferred to the Durability MDL.

q. “Court” means the United States District Court for the Eastern District of Virginia.

r. “Days” mean calendar days, excluding federal holidays.

s. “Defendant” means Lumber Liquidators, Inc.

t. “Durability Plaintiffs” shall have the meaning set forth in the introductory paragraph of this Settlement Agreement.

u. “Effective Date” means the first date by which all of the following events shall have occurred:

(1)          The Court has entered the Preliminary Approval Order.

(2)          The Court has entered the Final Approval Order and Judgment approving the Settlement Agreement in all respects, dismissing the Formaldehyde MDL and the Durability MDL, including all of the Complaints, with prejudice.

(3)          The time for appeal from the Final Approval Order and Judgment shall have expired, or if any appeal of the Final Approval Order and Judgment as to the Settlement Agreement is taken, that appeal shall have been finally determined by the highest court, including any motions for reconsideration and/or petitions for writ of certiorari, and which Final Approval Order and Judgment is not subject to further adjudication or appeal.

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v. “Final Approval and Fairness Hearing” means the hearing at which the Court will:

(1)          Determine whether to grant Final Approval of this Settlement Agreement;

(2)          Consider any timely objections to this Settlement Agreement and all responses thereto; and

(3)          Consider Class Counsel’s request for an award of attorneys’ fees, costs and expenses.

w. “Final Approval Order and Judgment” shall mean the order finally approving this Settlement Agreement and dismissal of the Formaldehyde MDL and Durability MDL, including all of the Complaints, with prejudice.

x. “Formaldehyde Plaintiffs” shall have the meaning set forth in the introductory paragraph of this Settlement Agreement.

y. “Long Form Notice” means the Notice of Proposed Settlement of the Formaldehyde MDL and Durability MDL that will be published on the Settlement Administrator’s website.

z. “Net Settlement Fund” means the Settlement Fund less (subject to Court approval):

(1)          Service Awards;

(2)          Attorneys’ Fees not to exceed 33.33% of the Settlement Fund;

(3)          Plaintiffs’ Counsel’s actual costs and expenses related to the Formaldehyde MDL and Durability MDL; and

(4)          Notice and Administrative Expenses.

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aa. “Notice” means, collectively, the communications by which purchasers of Chinese-made laminate flooring from Lumber Liquidators between January 1, 2009 and May 31, 2015 are notified of this Settlement Agreement and the Court’s Preliminary Approval of this Settlement Agreement as required by Fed. R. Civ. P. 23(e).

bb. “Notice Date” shall be fifteen days after entry of the Preliminary Approval Order, or as soon as possible thereafter.

cc. “Notice Plan” means the notice program used by parties and the Settlement Administrator to inform Class Members about the Settlement Agreement.

dd. “Party” and “Parties” shall have the meaning set forth in the introductory paragraph of this Settlement Agreement.

ee. “Person(s)” shall mean any natural person, individual, corporation, association, partnership, trust, or any other type of legal entity.

ff. “Personal Injury Claims” means those claims filed by plaintiffs in the MDL or in state court as of the deadline for filing an objection or to opt out of the Settlement, and who are not bound by this settlement. A current list of those Claimants is attached at Exhibit A.

gg. “Plaintiffs” collectively shall mean the Formaldehyde Plaintiffs, the Formaldehyde Class, the Durability Plaintiffs, and the Durability Class.

hh. “Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL” means the law firms of Cohen Milstein Sellers & Toll PLLC; Cotchett, Pine & McCarthy, LLP; and Hagens Berman Sobol Shapiro LLP.

ii. “Plaintiffs’ Co-Lead Counsel for the Durability MDL” means the law firms of Robertson & Associates LLP; Whitfield Bryson & Mason LLP and Ahdoot & Wolfson, PC.

jj. “Preliminary Approval” or “Preliminary Approval Order” means the Court’s entry of an order of initial approval of this Settlement Agreement.

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kk. “Recitals” means the Recitals set forth above, which are incorporated by reference and are explicitly made part of this Agreement.

ll. “Released Claims” shall have the meaning set forth in Section 15 of this Settlement Agreement.

mm. “Released Parties” shall have the meaning set forth in Section 15 of this Settlement Agreement.

nn. “Releasing Parties” shall have the meaning set forth in Section 15 of this Settlement Agreement.

oo. “Request for Exclusion” means a request to opt-out or be excluded from the Class, timely submitted in accordance with the terms and conditions of this Settlement Agreement and the instructions provided in the Notice.

pp. “Service Awards” means cash awards paid to the Class Representatives for the Formaldehyde MDL Representative Complaint and the Class Representatives for the Durability MDL Representative Complaint as set forth below in Section 13.

qq. “Settlement Administrator” means the Angeion Group.

rr. “Settlement Agreement” or “Agreement” or “Settlement” refers to this document, and supersedes any prior agreements or discussions.

ss. “Settlement Class” or “Settlement Classes” means the CARB2/Durability Settlement Class and/or the CARB1 Settlement Class, which derive from the Formaldehyde MDL and Durability MDL pending in the Eastern District of Virginia, as identified herein.

tt. “Settlement Fund” means a total of $22 million dollars in cash and $14 million dollars in Store-credit Vouchers. The $22 million in cash shall be paid by Defendant into the Escrow Fund, as set forth below in Paragraph 4.A. The Store-credit Vouchers shall be provided by Defendant to the Settlement Administrator.

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uu. “Settlement Fund Escrow Account” means an escrow account established by Class Counsel and supervised by the Court to receive and maintain funds paid pursuant to this Settlement Agreement for the benefit of the Settlement Class.

vv. “Store-credit Vouchers” or “Vouchers” means product vouchers distributed by the Claims Administrator as part of this Settlement Agreement to certain Class Members who so elect of the CARB2/Durability Settlement Class for their use to purchase product from Lumber Liquidators.

2. NO ADMISSION OF WRONGDOING

A.           This Settlement Agreement is made to terminate any and all controversies, real or potential, asserted or unasserted, and claims for injuries or damages or any nature whatsoever, between Defendant and the Plaintiffs. Neither the execution of this Settlement Agreement or compliance with its terms shall constitute an admission of any fault or liability on the part of the Defendant, or any of the Released Parties. Defendant does not admit fault or liability of any sort and, in fact, Defendant expressly denies fault and liability.

B.           Further, there has been no consideration or determination as to whether any class pending as part of the Formaldehyde MDL No. 1:15-md-02627 or the Durability MDL No. 1:16- md-02743 would be suitable for class treatment in any form other than as the Settlement Classes agreed to in this Settlement Agreement. These Settlement Classes are not a concession and shall not be used as an admission that any class other than these Settlement Classes are appropriate.

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3. COOPERATION BY PARTIES AND REASONABLE BEST EFFORTS TO EFFECTUATE SETTLEMENT

The Parties and their counsel agree to cooperate fully with each other to promptly execute all documents and take all steps necessary to effectuate the terms and conditions of this Settlement Agreement. The Parties shall recommend approval of this Settlement Agreement by the Court. The Parties and their counsel further agree to support the final approval of the Settlement Agreement including against any appeal of the Final Approval Order and Judgment and including any collateral attack on the Settlement Agreement or the Final Approval Order and Judgment.

4. CONSIDERATION TO PLAINTIFFS

In exchange for the terms and conditions set forth herein, Defendant will provide the following consideration:

A.           Settlement Fund. Defendant will pay $22 million dollars in cash and $14 million dollars in Store-credit Vouchers for a total of $36 million to establish a common fund for the benefit of the Settlement Class. The Settlement Fund shall be paid in the following manner:

i.             Within five (5) days of the Court’s Preliminary Approval of the Settlement Agreement, Lumber Liquidators will transfer $500,000.00 to the Settlement Fund Escrow Account to be used to pay for Class Notice and the Settlement Administrator’s fees.

ii.            Within thirty (30) days of the Court’s Final Approval Order and Judgment, Lumber Liquidators will transfer $21,500,000.00 in cash to the Settlement Fund Escrow Account. To the extent Lumber Liquidators elects to sell/transfer stock to fund the cash obligation, Plaintiffs agree, at no risk, cost or expense to them, to cooperate with Lumber Liquidators to ensure the process is as expedient and efficient as possible. To the extent stock is used to fund the Settlement Agreement, the stock qualifies for a Section (a)(10) exemption of the Securities Act of 1933, as amended (the “Securities Act”). For the avoidance of doubt, the Court must find and order in its Final Approval Order and Judgment that any stock used to fund the Settlement Agreement is exempt from registration under Section 3(a)(10) of the Securities Act.

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iii.           Lumber Liquidators will work with Class Counsel and with the Settlement Administrator to prepare $14,000,000.00 worth of Store-credit Vouchers for distribution to eligible Claimants.

iv.           The payments described above constitute the entire payment due from Defendant or any of the Released Parties under the Settlement Agreement. The Parties agree and acknowledge that none of the Settlement Fund paid by Defendant under the Settlement Agreement shall be deemed to be, in any way, a penalty or a fine of any kind.

v.            A Settlement Fund Escrow Account shall be established and administered by Class Counsel under the Court’s continuing supervision and control. No disbursements of funds from the Settlement Fund Escrow Account will occur without order of the Court.

vi.           The Settlement Fund Escrow Account is intended by the Parties to be treated as a “qualified settlement fund” for federal income tax purposes pursuant to Treasury Reg. 1.468B-1, and to that end, the Parties shall cooperate with each other and shall not take a position in any filing or before any tax authority that is inconsistent with such treatment.

vii.          Defendant shall have no responsibility or liability relating to the administration, investment, or distribution of the Settlement Fund, which shall be the sole responsibility of Class Counsel and the Settlement Administrator.

B.           Distribution of the Net Settlement Fund. This is a common fund settlement to be administered on a claims-made basis. In order to be entitled to participate in the Settlement Fund, a member of the Classes, who has not requested exclusion, must submit a valid Claim on or before the deadline established by the Court. Any member of the Classes who does not submit a timely, valid Claim shall not be entitled to share in the Settlement Fund, but nonetheless shall be barred and enjoined from asserting any of the Released Claims described herein.

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There shall be two separate classes of participants: the CARB2/Durability Settlement Class and the CARB1 Settlement Class (sometimes jointly referred to as “Class” or “Classes”).

i.             CARB2/Durability Settlement Class

a.            The CARB2/Durability Settlement Class will be limited to purchasers of Chinese-made laminate flooring from Lumber Liquidators between January 1, 2011 and May 31, 2015. Benefits will only be available for Approved Claimants.

b.            All members of the CARB2/Durability Settlement Class will be entitled to make a claim against the Settlement Fund. Claim Forms will be submitted electronically or by mail and will be administered by the Settlement Administrator.

c.            CARB2/Durability Settlement Class members who submit an Approved Claim will have the option of choosing either a cash award or a Lumber Liquidators’ Store-credit Voucher. Claimants will be limited to one recovery per household, but if multiple purchases were made, the total purchase price of all purchases will be used to calculate the award.

d.            For CARB2/Durability Settlement Class members electing cash, each household will receive a cash award subject to participation and eligibility. The cash Settlement Fund will be distributed as follows: For each Approved Claim, the Approved Claimant receives back a percentage of what he or she paid for the purchase of his or her laminate flooring. That percentage may increase or be reduced by the Settlement Administrator so as to exhaust but not exceed the Settlement Fund.

e.            The total amount of cash shall not exceed the Settlement Fund described above.

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(i)            In the event that the cash fund is not exhausted after all Approved Claims, attorneys’ fees, costs, Service Awards, and administration costs have been paid, cash Approved Claimants will receive a proportional additional cash payment.

(ii)           If after having paid all attorneys’ fees, costs, Service Awards, and administrative costs, the cash Settlement Fund is reduced such that it cannot pay Approved Claimants the anticipated amount, the cash payments will be proportionally reduced across the Approved Claimants.

(iii)          If any amounts remain in the cash Settlement Fund (for example, because of uncashed checks), Class Counsel may seek a cy pres award to benefit the victims of 2017 hurricanes that struck the U.S. or its territories.

f.             For CARB2/Durability Settlement Class members electing Store-credit Vouchers, Lumber Liquidators will provide Vouchers, good for 3 years from date of issuance, one per household, with the following exceptions based on state escheat laws:

(i)            Store-credit Vouchers issued to Approved Claimants in the following states shall have no expiration date: California, Connecticut, Florida, Maine, Minnesota, Rhode Island, and Washington.

(ii)           Store-credit Vouchers issued to Approved Claimants in the following states shall have the expiration dates identified below:

(a)          Illinois - 5 year expiration

(b)          Maryland - 4 year expiration

(c)          North Dakota - 6 year expiration.

At the time of making the election for Store-credit Vouchers, or within 20 days thereafter, CARB2/Durability Settlement Class members may designate a family member or nationally recognized charity to be the recipient of the Store-credit Vouchers. The Settlement Administrator will determine whether a charity is a nationally recognized charity for purposes of this Settlement. The term “family member,” as defined by the SEC at 17 C.F.R. § 275.202(a)(11)(G)- 1, shall mean:

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All lineal descendants (including by adoption, stepchildren, foster children, and individuals that were a minor when another family member became a legal guardian of that individual) of a common ancestor (who may be living or deceased), and such lineal descendants’ spouses or spousal equivalents; provided that the common ancestor is no more than 10 generations removed from the youngest generation of family members.

g.            Approved Claimants may use their Store-credit Vouchers to purchase product and have the product shipped to a third party within the United States. Except as described above, the Store-credit Vouchers will not otherwise be transferrable, nor may they be sold or redeemed for cash.

h.            The total amount of Store-credit Vouchers will not exceed $14 million in the aggregate.

i.             The Store-credit Vouchers will be distributed as follows: For each Approved Claim, the Approved Claimant receives a voucher that contains an amount that is a percentage of the price he or she paid for the purchase of his or her laminate flooring. That percentage may increase or be reduced by the Settlement Administrator to exhaust but not exceed the portion of the Settlement Fund designated for Store-credit Vouchers.

j.             Depending on the level of eligible participation, the values of the Store- credit Vouchers may increase or decrease so that the full $14 million in Store-credit Vouchers are distributed to electing, Approved Claimants from the CARB2/Durability Settlement Class.

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ii.            CARB1 Settlement Class

a.            The CARB1 Settlement Class will be limited to purchasers of Chinese- made laminate flooring from Lumber Liquidators between January 1, 2009 and December 31, 2010. Benefits will only be available for Approved Claimants. If a Class Member made a purchase during both the 2009-2010 CARB1 Settlement Class period and the 2011-2015 CARB2/Durability Settlement Class period, he or she will be entitled to receive both: (a) the $50 cash benefit described below as a member of the CARB1 Settlement Class; and (b) either cash or a Store-credit Voucher as a member of the CARB2/Durability Settlement Class based upon the total purchase price of all purchases made between 2011-2015.

b.            Members of the CARB1 Settlement Class will be entitled to make a claim against the Settlement Fund for $50; provided, however, that a maximum of $1.0 million in cash will be set aside for the CARB1 Settlement Class.

c.            If the CARB1 Settlement Class Settlement Fund is oversubscribed (i.e., if Approved Claims exceed $1.0 million, such that funds are insufficient to pay Approved Claimants $50 each), then these cash payments will be proportionally reduced across the Approved Claimants. If, on the other hand, the $1.0 million cash fund set aside for CARB1 Settlement Class Members is not exhausted by Approved Claims, the remaining cash will be added to the funds available to pay Approved Claimants of the CARB2/Durability Settlement Class.

d.            Claim forms for CARB1 Settlement Class members will be submitted electronically or by mail, and will be administered by the Settlement Administrator.

e.            CARB1 Settlement Class members who are not also members of the CARB2/Durability Settlement Class may only elect cash and may not elect Store-credit Vouchers.

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5. PRELIMINARY APPROVAL OF SETTLEMENT AND CONDITIONAL CERTIFICATION OF SETTLEMENT CLASS

Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL shall prepare the motion seeking preliminary approval of the Settlement Class, and the Parties shall work in good faith to support the motion. The Court shall be asked to approve the terms and conditions of the Settlement Agreement, the notice to the Class, the method of notice, the claim forms, and the procedure for submitting claims, and to appoint Class Representatives for the CARB2/Durability Settlement Class and the CARB1 Settlement Class, and Class Counsel for both of these Settlement Classes, all as part of preliminary approval.

6. SETTLEMENT ADMINISTRATOR

The Settlement Administrator shall be selected by Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL based on cost, experience and reputation of the proposed administrators. The Settlement Administrator will work to:

A.           Provide Notice to potential Class Members;

B.           Maintain a Settlement website;

C.           Process Claim Forms;

D.           Preserve (on paper or transferred in to electronic format) all Requests for Exclusion, Claim Forms, and any and all other written communications from Class Members in response to the Notices for a period of one (1) year following the Claim Deadline, or pursuant to further order of the Court. All written communications received by the Settlement Administrator from Class Members relating to the Settlement Agreement shall be available and provided upon request to Class Counsel and Counsel for Defendant.

E.           Distribute the proceeds of the Settlement Fund in accordance with the Settlement Agreement;

F.           Confirm the issuance of payment to the Approved Claimants;

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G.           Provide any necessary certifications to the Court concerning the administration and processing of the claims; and

H.           Respond to inquiries from Class Counsel, Counsel for Lumber Liquidators, the Court, and Class Members.

7. NOTICE OF SETTLEMENT AND ADMINISTRATION OF CLAIMS

A.           Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL shall work with the Settlement Administrator to prepare the Notice program. It is the Parties’ intent that Class Members receive constitutionally adequate notice of the Settlement. Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL shall submit to the Court for approval the Notice Plan. The Notice Plan will provide the best notice practicable under the circumstances of the foregoing actions, conform to all aspects of Federal Rule of Civil Procedure 23, satisfy the Due Process Clause of the United States Constitution, and comply with the terms and conditions of the Agreement. Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL also shall work with the Settlement Administrator and/or other class notice specialists, as necessary, to prepare drafts of the proposed Class Notice. Lumber Liquidators shall have the right to review and approve the proposed Class Notice, including the content of the Settlement website. If any objections to the proposed Class Notice cannot be resolved by the Parties, they shall be submitted to the Court for resolution.

B.           Class Member Information

Defendant shall provide Class Counsel and the Settlement Administrator with information in its possession reflecting the name, e-mail address, telephone number, physical mailing address, and total value of Chinese-made laminate flooring purchased (collectively, “Class Member Information”) of each reasonably identifiable person or entity who falls within the definition of the Classes by the time this Agreement is executed. Defendant warrants and represents that the Class Member Information provided to Class Counsel accurately reflects the information retained by Defendant in the ordinary course of business.

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C.           Internet Website

Prior to the Notice Date, the Settlement Administrator shall establish an Internet website, www.laminatesettlement.com that will inform Settlement Class members of the terms of this Settlement, their rights, dates and deadlines and related information. The website shall include, in .pdf format and available for download, the following: (i) the Long Form Notice; (ii) the Claim Form; (iii) the Preliminary Approval Order; (iv) this Agreement (including all of its Exhibits), (v) the operative Complaints filed in the Formaldehyde and Durability MDLs; and (vi) any other materials agreed upon by the Parties and/or required by the Court. The Internet website shall provide Settlement Class Members with the ability to complete and submit the Claim Form electronically. The Internet website shall also make the Claim Form available for download. Banner ads on the Internet shall direct Class Members to the Settlement website at www.laminatesettlement.com.

D.           Toll-Free Telephone Number

Commencing by the Notice Date, the Settlement Administrator shall establish a toll-free telephone number, through which Settlement Class members may obtain information about the Formaldehyde MDL and the Durability MDL, the Settlement, and request a mailed copy of the Long Form Notice and/or the Claim Form, pursuant to the terms and conditions of this Settlement. The Long Form Notice and Claim Form will be mailed to all persons who request one via the toll-free phone number maintained by the Settlement Administrator.

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E.           Direct Notice – United States Mail

By the Notice Date, the Settlement Administrator will send the notice (“Postcard Notice”) by United States Postal Service (“USPS”) first class mail to all Settlement Class Members for whom a physical mailing address can be identified from the Class Member Information. Each Postcard Notice will include a claim number and will have a detachable claim form with business reply mail postage included. The Settlement Administrator shall send one of three versions of the Postcard Notice attached to the Settlement Administrator’s Declaration at Exhibit B to this Agreement: one for CARB2/Durability Settlement Class Members, one for CARB1 Settlement Class Members, and one for those who qualify for both the CARB2/Durability and CARB1 Settlement Classes.

Prior to the initial mailing of the Postcard Notice, postal mailing addresses will be checked against the National Change of Address (“NCOA”) database maintained by the USPS. Postcard Notices that are returned as undeliverable by the USPS and have a forwarding address will be re-mailed to that forwarding address, and Postcard Notices that are returned as undeliverable by the USPS without a forwarding address will be subject to address verification (“skip tracing”), utilizing a wide variety of data sources, including public records, real estate records, electronic directory assistance listings, etc. to locate updated addresses. Postcard notices will then be re-mailed to updated addresses located through skip tracing.

F.           Direct Notice – E-mail Notice

By the Notice Date, the Settlement Administrator shall e-mail each Settlement Class Member included in the Class Member Information provided by Defendant (“Email Notice”). The content of the Email Notice shall substantially conform to the information provided in the Claim Form and will contain a link that the Settlement Class members can click to take them directly to the claim filing page on the settlement agreement website where they can enter their individualized claim number and confirmation code.

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G.           Publication

By the Notice Date, and subject to the requirements of this Agreement and the Preliminary Approval Order, the Settlement Administrator will provide Notice to the Settlement Class as follows: Publishing the publication notice and digital notice pursuant to the Preliminary Approval Order and as set forth in the Notice Plan described in the Declaration of the Settlement Administrator attached hereto as Exhibit B; Publishing, on or before the Notice Date, the Long Form Notice on the settlement website (www.laminatesettlement.com), as specified in the Preliminary Approval Order and as set forth in the Notice Plan described in the Declaration of the Settlement Administrator attached hereto as Exhibit B; and Providing the Internet address, in the Long Form Notice and the Summary Notice, to the settlement website (www.laminatesettlement.com).

H.           Notice to Appropriate Federal and State Officials

Not later than 10 days after for the Court enters the Preliminary Approval Order, the Settlement Administrator shall comply with 28 U.S.C. § 1715.

I.           Confirmation

The Settlement Administrator is directed to file with the Court and serve upon Class Counsel a declaration confirming the dissemination of the Notice to the Class has taken place in accordance with this Order no later than fifteen (15) days before the Final Approval and Fairness Hearing.

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8. REQUESTS FOR EXCLUSION

A.           Members of CARB2/Durability Settlement Class and the CARB1 Settlement Class who wish to exclude themselves from their respective Class(es) must submit a written Request for Exclusion. To be effective, such a request must include the Class Member’s name, mailing address, e-mail address, the signature of the Class Member, identify their individual counsel (if any), and substantially the following statement: “I want to opt out of the Class(es) certified in the Lumber Liquidators Chinese-laminate flooring litigation.” Requests for Exclusion must be submitted via First Class U.S. Mail paid by the Class Member and sent to the Settlement Administrator at the address provided in the Notice. Requests for Exclusion shall be served not later than thirty (30) days prior to the Final Approval and Fairness Hearing. Personal Injury Claims already filed in the MDL or State Court and listed in Exhibit A are already excluded from the Settlement.

B.           The Settlement Administrator shall promptly log each Request for Exclusion that is received, and shall provide copies of the log and all such Requests for Exclusion to Class Counsel and Counsel for Defendant on a monthly basis and the final list no later than fifteen (15) days before the Final Approval and Fairness Hearing.

C.           Any Class Member who does not properly and timely mail a Request for Exclusion shall be automatically included in the Settlement Class and shall be bound by all the terms and provisions of the Settlement Agreement, and any Court order related to the Settlement, whether or not such Class Member received actual notice or shall have objected to the Settlement, and whether or not such Class Member makes a Claim upon or participates in the Settlement.

D.           If the number of Requests for Exclusion exceeds a percentage of the total size of the CARB2/Durability Settlement Class and the CARB1 Settlement Class combined, as agreed upon by the Parties hereto, Defendant has the option to terminate this Settlement Agreement. The confidential opt-out number shall be memorialized in a separate Supplemental Agreement and communicated confidentially to the Court.

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E.           The Class Representatives, Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL, and Plaintiffs’ Co-Lead Counsel for the Durability MDL covenant and agree to take no actions, directly or indirectly, designed or intended to influence any putative member of the Settlement Classes to opt out of the Settlement Agreement, or to assist others in doing so. The Parties acknowledge, however, that if and when Class Counsel answer Class Member questions pertaining to their respective matters, the Parties’ Settlement, or the Settlement Agreement or related matters, answering these questions shall not constitute taking action to influence any putative member of the Classes to opt out of the Settlement or to assist others in doing so.

9. OBJECTIONS

A.           Class Members who do not request exclusion from the Class may object to the Settlement Agreement. Class Members who choose to object to the Settlement must file written notices of intent to object with the Court and serve copies of any such objection on counsel for the Parties, identified in Section 27 unless filed via the Court’s ECF system, such that copies will be transmitted electronically to these counsel. Any Class Member may appear at the Final Approval and Fairness Hearing, in person or by counsel, and be heard to the extent permitted under applicable law and allowed by the Court. The right to object to the Settlement must be exercised individually by an individual Class Member and, except in the case of a deceased, minor, or incapacitated Person or where represented by counsel, not by the act of another Person acting or purporting to act in a representative capacity.

To be effective, an objection to the Settlement that is filed with the Court must:

i.             Contain a caption that includes the case name and the case number as follows: In Re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices and Products Liability Litigation, MDL No. 1:15-md-02627; or In Re Lumber Liquidators Chinese- Manufactured Laminate Flooring Durability Marketing and Sales Practices Litigation, MDL No. 1:16-md-2743; or both;

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ii.           Provide the name, mailing address, email address, telephone number and signature of the Class Member filing the intent to object, and identify his or her individual counsel, if any;

iii.           Provide a valid proof of membership in one of the Settlement Classes, or both;

iv.          File a written letter or brief detailing the specific basis for each objection, including any legal and factual support the objector wishes to bring to the Court’s attention and any evidence the objector wishes to introduce in support of the objection with the United States District Court for the Eastern District of Virginia not later than thirty (30) days prior to the Final Approval and Fairness Hearing;

v.           Be served contemporaneously on Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL, Plaintiffs’ Co-Lead Counsel for the Durability MDL, and Counsel for Defendant (unless filed via the Court’s ECF system, such that copies will be transmitted electronically to these counsel);

vi.          Contain the number of class action settlements objected to by the Class Member in the last three years;

vii.         State whether the objecting Class Member intends to appear at the Final Approval and Fairness Hearing, either in person or through counsel.

B.           Any Class Member who does not file a timely and adequate notice of intent to object in accordance with this Settlement Agreement waives the right to object or to be heard at the Final Approval and Fairness Hearing, unless the Court permits otherwise, and shall be forever barred from making any objection to the Settlement. To the extent any Class Member objects to the Settlement, and such objection is overruled in whole or in part, such Class Member will be forever bound by the Final Approval Order and Judgment of the Court.

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C.           The filing of an objection allows Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL, Plaintiffs’ Co-Lead Counsel for the Durability MDL, or Counsel for Defendant to request the Court to notice such objecting Class Member for and take his or her deposition consistent with the Federal Rules of Civil Procedure at an agreed-upon location, and to seek any documentary evidence or other tangible things that are relevant to the objection. Failure by an objecting Class Member to make himself or herself available for a deposition or to comply with expedited discovery requests may result in the Court striking the Class Member’s objection and otherwise denying that Class Member the opportunity to make an objection or be further heard. The Parties reserve the right to ask the Court to tax the costs of any such discovery to the objecting Class Member or the objecting Class Member’s separate counsel should the Court determine that the objection is frivolous or is made for an improper purpose.

D.           If the objection is made through an attorney, the written objection must also include: (1) the identity and number of the Class Members represented by objector’s counsel; and (2) the number of such represented Class Members who have opted out of the Settlement Class.

10. REPORT BY SETTLEMENT ADMINISTRATOR

A.           No later than fifteen (15) days before the Final Approval and Fairness Hearing, the Settlement Administrator shall provide to Class Counsel and Counsel for Defendant the following information:

i.             The number of Notices mailed or sent to Class Members;

ii.            The number of Class Members who have submitted Approved Claims for the CARB2/Durability Settlement Class and the CARB1 Settlement Class;

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iii.           The number of Class Members who have submitted Requests for Exclusion from the Settlement Classes and the names of such persons;

iv.           Any information about any objections to the Settlement that the Settlement Administrator has not previously forwarded; and

v.            Any other tracking information reasonably requested by Class Counsel or Counsel for Defendant.

B.           A report stating the total number of class members who have submitted timely and valid Requests for Exclusions and the names of such class members shall be filed by Class Counsel not later than ten (10) days before the Final Approval and Fairness Hearing.

11. FINAL APPROVAL

A.           If the Court preliminarily approves the Settlement, Class Counsel, with the cooperation of counsel for Defendant, shall submit a motion for final approval of the Settlement Agreement by the Court at a date set by the Court, but no later than forty-five (45) days before the Final Approval and Fairness Hearing. The parties may submit supplemental memoranda in support of the motions for final settlement approval or the awarding of costs and fees at a date set by the Court, but no later than ten (10) days before the Final Approval and Fairness Hearing.

B.           The Notice to the Class shall contain a date, time and location for the Final Approval and Fairness Hearing to be conducted by the Court. The Parties shall jointly request the Court to set a hearing on Final Approval of the Settlement Agreement approximately hundred

(100) days from the date the Court enters an order granting preliminary approval of the Settlement Agreement.

C.           The Parties shall request the Court upon final approval of this Settlement Agreement, to enter the Final Approved Order and Judgment, which shall, inter alia:

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i.             Grant final approval to the Settlement and Settlement Agreement as fair, reasonable, adequate, in good faith and in the best interests of the Class(es), and order the Parties to carry out the provisions of this Settlement Agreement;

ii.             Dismiss with prejudice and without costs all Complaints pending in the Formaldehyde MDL and the Durability MDL, including the Representative Complaints, and dismiss with prejudice and without costs the litigation against Defendant and the Released Parties;

iii.           Adjudge that Releasing Parties are conclusively deemed to have released Defendant and the Released Parties of the Released Claims;

iv.           Bar and permanently enjoin each Class Member who has not timely submitted a Request for Exclusion from prosecuting against the Released Persons any and all of the Released Claims;

v.             Reserve continuing and exclusive jurisdiction by the Court to preside over any ongoing proceedings relating to the Claims or this Settlement Agreement;

vi.           Determine under Fed. R. Civ. P. 54(b) that there is no just reason for delay and direct that the Final Judgment as to the Released Parties to be final and appealable and entered forthwith; and

vii.          To the extent stock will be used to fund the Settlement, find and conclude that the Court has sufficient information before it to assess the value of the claims and securities to be exchanged in the Settlement. Additionally, conclude that the applicable procedural and substantive fairness requirements of Section 3(a)(10) of the Securities Act have been satisfied, and find that any such stock used is exempt from registration under Section 3(a)(10) of the Securities Act.

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12. CLASS COUNSEL FEES AND ADMINISTRATIVE COST

A.           Co-lead Counsel for the Formaldehyde MDL and the Durability MDL may jointly or separately file for costs and fees in this action. At a time to be set by the Court, but no later than forty-five (45) days before the Final Approval and Fairness Hearing, Class Counsel may seek an award of attorneys’ fees of up to 33.33% of the Settlement Fund, and for actual costs and expenses, together with the cost of Notice and administrative costs, to be paid from the Settlement Fund. Co-Lead Counsel for the Formaldehyde MDL and Co-Lead Counsel for the Durability MDL may jointly or separately file motion(s) for attorneys’ fees, costs, and expenses.

B.           Within thirty-one (31) days of Final Approval Order and Judgment and entry by the Court of an order awarding attorneys’ fees, costs, and expenses (“Fee, Cost, and Expense Order”), any awarded attorneys’ fees, costs, and expenses shall be paid to Class Counsel from the Escrow Account by the Escrow Agent, notwithstanding the existence of or pendency of any appeal or collateral attack on the Settlement or any part thereof or the Fee, Cost, and Expense Order. In the event that the Effective Date does not occur or the Settlement is terminated pursuant to its terms, or if, as the result of any appeal or further proceedings on remand, or successful collateral attack, the Fee, Cost, and Expense Order is reversed or modified pursuant to a final court order and attorneys’ fees, costs, and expenses have been paid out of the Escrow Account to any extent, then Class Counsel shall be obligated and does hereby agree, within ten (10) business days after receiving notice of the foregoing from Defendants’ Counsel or from a court of appropriate jurisdiction, to refund to the Escrow Account such attorneys’ fees, costs, and expenses that have been paid, plus interest thereon at the same rate as would have been earned had those sums remained in the Escrow Account. For avoidance of doubt, however, under no circumstances shall Class Counsel be required to return to the Escrow Account or the Defendant the $500,000 paid pursuant to section 4(A)(i) to the Settlement Administrator or to any other Notice consultant or provider.

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13. SERVICE AWARDS

Subject to approval by the Court, the following seven (7) Plaintiff households identified in the Formaldehyde MDL representative complaint (A-G below) and the five (5) Plaintiff households identified in the Durability MDL representative complaint (H-L below) will each receive a Service Award for their service as named Plaintiffs in the MDLs in the amount of $5,000 each:

A.           Lila Washington (California) (dec.)

B.           Maria and Romualdo Ronquillo (California)

C.           Joseph Michael Balero (California)

D.           Ryan and Kristin Brandt (Florida)

E.           Devin and Sara Clouden (New York)

F.           Kevin and Julie Parnella (Texas)

G.           Shawn and Tanya Burke (Illinois)

H.           Erin Florez (Alabama)

I.           Jim Moylen (California)

J.           Kelly Ryan (Nevada)

K.          Karen Hotaling (New York)

L.           Logan Perel (Virginia)

No individual shall be entitled to more than one Service Award. If a husband and wife, or other co-purchasers were both Plaintiffs, they are entitled to a single Service Award.

14. CLAIM PROCESSING AND DISTRIBUTION OF SETTLEMENT

A.           Class Members may electronically complete and sign the appropriate Claim Form and submit it to the Settlement Administrator via an electronic Claim Form submission process to be established by the Settlement Administrator. Alternatively, Class Members may submit such Claim Forms via U.S. mail. A Claim Form shall be considered defective if the Claimant fails to timely submit the Claim Form, provide the required information on the Claim Form, or fails to electronically or physically sign certifying that the Claimant is entitled to the benefit sought.

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B.           Within thirty forty-five (45) days of the entry of the Final Approval Order and Judgment, the Settlement Administrator will notify Class Counsel of any Class Member who has submitted a deficient Claim Form, and those Class Members will be given ten (10) calendar days from the date of the deficiency notice to cure the deficiency.

C.           Within sixty (60) days of the Effective Date, the Settlement Administrator will distribute the checks and the vouchers.

D.           Cash payments made pursuant to this Settlement Agreement will be made to Claimants via physical checks mailed to the address provided on the Claim Form. Alternatively, if elected, Store-credit Vouchers will be mailed to the address provided on the Claim Form. Class Counsel and Counsel for Defense shall confer before the Settlement Administrator begins to distribute the checks or Store-credit Vouchers to the Class Members who have submitted an Approved Claim. If an appeal is filed, distribution of Settlement Fund to Claimants will be stayed until further order by the Court.

E.           The Class Members acknowledge that the Claims process may take longer than described above due to the number of potential Class Members. The Settlement Administrator will employ all due commercially reasonable speed to distribute claimed cash payments and Store-credit Vouchers to Approved Claimants as set forth herein.

F.           The Class Members shall be entitled solely to the Settlement Funds and Store- Credit Vouchers for settlement and satisfaction against Defendant and the Released Parties for the Released Claims, and shall not be entitled to any other payment or relief from Defendant or the Released Parties. The Class Representatives, Class Members and their counsel, Class Counsel, as well as the Settlement Administrator will be reimbursed and indemnified solely out of the Settlement Funds. Defendant and the other Released Parties shall not be liable for any costs, fees, or expenses of any description, including any costs, fees or expenses of the Class Representatives or their attorneys, experts, advisors, or other representatives of the Class.

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15. RELEASE BY ALL SETTLEMENT CLASS MEMBERS

A.           Effective upon Final Approval, Plaintiffs, for and on behalf of themselves, and every member of the Settlement Classes, every purchaser of Chinese-manufactured laminate flooring sold by Lumber Liquidators between January 1, 2009 and May 31, 2015, and each of their respective heirs and assigns, except for those who have requested to be excluded from the Classes pursuant to Section 8 of this Agreement, and those who as of the Final Approval and Judgment have filed personal injury cases as set out in Exhibit A (hereafter the “Releasing Parties’), jointly and severally, hereby RELEASE, HOLD HARMLESS, FOREVER DISCHARGE, AND SHALL FOREVER BE ENJOINED FROM PROSECUTION against Defendant and the Released Parties of any and all claims, causes of action, lawsuits, proceedings, damages, judgments, losses, penalties, liabilities, rights, obligations, duties, demands, liens, actions, administrative proceedings, warranty claims, remedies, costs, fees of any kind, expenses, and claims of any kind whatsoever, including based on fraud, whether known or unknown, continent or unsuspected, disclosed or undisclosed, liquidated or unliquidated, asserted or un- asserted, accrued or un-accrued, in law, in equity or otherwise, in contract, tort, warranty, strict liability or otherwise, that have been, could have been, or in the future can or might be asserted in any court, tribunal or proceeding (including but not limited to any claims arising under federal, state, foreign or common law, including any federal or state consumer protection law or personal injury claim), by or on behalf of Plaintiffs or any member of the Class, whether individual, direct, class, representative, legal, equitable, or other type or in any other capacity against Defendant and the Released Parties, which the Releasing Parties ever had, now have, or may have had, from the beginning of time to the Effective Date, by reason of, arising out of, relating to, or in connection with the acts, events, facts, matters, transactions, occurrences, statements, representations, misrepresentations, omissions, or any other matter whatsoever related directly or indirectly to: 1) the Plaintiffs’ and Class Members’ purchase and/or use of Chinese-manufactured laminate flooring sold by Lumber Liquidators between January 1, 2009 and May 31, 2015; 2) the manufacture, sale, distribution, labeling, marketing or advertising of Chinese-laminate flooring sold by Lumber Liquidators between January 1, 2009 and May 31, 2015; 3) Defendant’s compliance with state or federal labeling laws and regulations related to the Chinese-laminate flooring sold by Lumber Liquidators between January 1, 2009 and May 31, 2015; and/or 4) any claim by Plaintiffs of any nature related to Chinese-manufactured laminate flooring sold by Lumber Liquidators between January 1, 2009 and May 31, 2015 (the “Released Claims”).

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The Released Claims, however, shall not include any claims to enforce the Settlement Agreement, or the request of Class Counsel for fees, costs, and expenses as set forth in, or as related to, this Settlement Agreement. Nor shall the Released Claims extinguish any existing express warranty rights that do not pertain to the allegations in the Durability MDL or the Formaldehyde MDL, to the extent they exist.

B.           The “Released Parties” shall include Lumber Liquidators, Inc., its parent, subsidiaries, and affiliates, including but not limited to, Lumber Liquidators, Holdings, Inc.; Lumber Liquidators Services, LLC; Lumber Liquidators Leasing, LLC; individual Lumber Liquidators retail stores located throughout the United States; the China Regional Office; Fesco; Pure Air Control Services; ED Labs; and including but not limited to any controlling persons, associates, affiliates, or subsidiaries and each and all of their respective past or present officers, members, managers, directors, stockholders, principals, representatives, employees, attorneys, financial or investment advisors, insurers, consultants, experts, accountants, bankers, testing laboratories, advisors or agents, heirs, executors, trustees, general or limited partners or partnerships, limited liability companies, members, joint ventures, personal or legal representatives, estates, administrators, predecessors, successors, and assigns.

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C.           In agreeing to the foregoing waiver, the Releasing Parties expressly acknowledge and understand that they may hereafter discover facts in addition to or different from those which they now believe to be true with respect to the subject matter of the claims released herein, but expressly agree that they have taken these possibilities into account in electing to participate in this release, and that the release given herein shall be and remain in effect as a full and complete release notwithstanding the discovery or existence of any such additional or different facts, as to which the Releasing Parties expressly assume the risk.

D.           As of the Effective Date, by operation of the entry of the Final Approval Order and Judgment, each Class Member who does not file a valid Request for Exclusion, automatically, upon entry of the Final Approval Order and Judgment, shall be held to have fully released, waived, relinquished, and discharged the Released Parties from the Released Claims, to the fullest extent permitted by law, and shall be enjoined from continuing, instituting, or prosecuting any legal proceeding against the Released Parties relating in any way whatsoever to the Released Claims.

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E.           The Releasing Parties, on behalf of themselves and their respective assigns, agree not to sue or otherwise make a claim against any of the Released Parties that is in any way related to the Released Claims.

F.           With respect to the Released Claims, the Releasing Parties shall expressly waive any and all provisions, rights, and benefits conferred by any law of any state or territory of the United States which is similar, comparable or equivalent to California Civil Code Section 1543, which provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

16. DISMISSAL

The Releasing Parties stipulate and agree that upon the Court’s entry of the Final Approval Order and Judgment, and after expiration of any appeals of that Order, the following shall be DISMISSED WITH PREJUDICE (except for those Personal Injury cases filed in the Formaldehyde MDL or in state court and included on Exhibit A):

A.           All cases pending before the Court consolidated in In Re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices and Products Liability Litigation, MDL No. 1:15-md-02627, including any additional filed and/or transferred cases as of the date of Final Approval Order; and

B.           All cases pending before the Court in In Re Lumber Liquidators Chinese- Manufactured Laminate Flooring Durability Marketing and Sales Practices Litigation, MDL No. 1:16-md-2743, including any additional filed and/or transferred cases as of the date of Final Approval Order.

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17. CONFIDENTIALITY

Plaintiffs and Class Counsel agree that they will not affirmatively seek media coverage in print, Internet, or other media regarding this Settlement Agreement, but may neutrally respond to press or media inquiries by describing the Settlement as a good result for the Settlement Class, or other substantially similar words. Nothing in this paragraph, however, restricts Class Counsel from:

A.           Publishing the Settlement and the result on their websites;

B.           Utilizing media as set forth in the Court-approved Notice plan;

C.           Truthfully responding privately to inquiries concerning the Settlement from their clients, including Class Members; or

D.           Truthfully responding to any press or media inquiries regarding details of the Settlement.

18. AMENDMENT

This Agreement may be modified, amended or supplemented only by written agreement signed by or on behalf of all Parties, and if such modification, amendment or supplement is to be executed and become effective subsequent to the entry of the Preliminary Approval Order, only with the approval of the Court.

19. AUTOMATIC TERMINATION OF SETTLEMENT AGREEMENT AND TERMINATION RIGHTS

In the event that this Settlement Agreement does not become a final, enforceable contract that is approved by the Court and upheld on appeal for any reason:

A.           Except as expressly stated herein, this Settlement Agreement shall automatically become null and void and have no further force or effect, and all proceedings that have taken place with regard to this Settlement shall be without prejudice to the rights and contentions of the Parties;

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B.           If the Settlement Agreement is not preliminarily or finally approved by the Court, the Parties will resume the litigation of the referenced MDLs without prejudice as to their procedural status as of August 17, 2017;

C.           This Settlement Agreement, any provision of this Settlement Agreement and the fact of this Settlement Agreement having been made, shall not be admissible or entered into evidence for any purpose whatsoever; nor will any information produced solely in connection with any of the Parties’ mediations be admissible;

D.           If this Settlement Agreement; the order preliminarily approving the Settlement Agreement and/or Final Order and Judgment approving this Settlement Agreement is vacated, materially modified or reversed, in whole or part, this Settlement Agreement will be deemed terminated, unless the Parties, in their sole discretion within thirty (30) days of receipt of such ruling, agree to proceed with the Settlement Agreement as modified by the Court or on appeal.

E.           If the Settlement Agreement is terminated, any Settlement Funds in the Settlement Fund Escrow Account or that have come into possession of the Plaintiffs or Class Counsel, except for any funds paid or owed to the Settlement Administrator or to any other Notice consultant or provider, or any funds otherwise paid or owed for any Settlement administration or Notice-related purpose, shall be returned to Defendant within ten (10) Days of termination.

F.           This Section and the Section on Confidentiality shall survive any termination of this Settlement Agreement.

20. SEVERABILITY

With the exception of the provisions contained in Section 15, 16 and 19, in the event any covenant, term or other provision contained in this Settlement Agreement is held to be invalid, void or illegal, the same shall be deemed severed from the remainder of this Settlement Agreement and shall in no way affect, impair or invalidate any other covenant, condition or other provision herein. If any covenant, condition or other provision herein is held to be invalid due to its scope or breadth, such covenant, condition or other provision shall be deemed valid to the extent of the scope or breadth permitted by law.

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21. INCORPORATION OF EXHIBITS

All attached exhibits are hereby incorporated by reference as though set forth fully herein and are a material part of the Settlement Agreement.

22. GOVERNING LAW AND COMPLIANCE WITH TERMS OF SETTLEMENT AGREEMENT

All questions with respect to the construction of this Settlement Agreement and the rights and liabilities of the Parties shall be governed by the laws of the Commonwealth of Virginia, without giving effect to its law of conflict of laws.

The Court shall have continuing and exclusive jurisdiction to resolve any dispute that may arise with regard to the terms and conditions of this Settlement Agreement, and the Parties hereby consent to such jurisdiction.

23. PREPARATION OF SETTLEMENT AGREEMENT, SEPARATE COUNSEL AND AUTHORITY TO ENTER SETTLEMENT AGREEMENT

A.           The Parties and their counsel have each participated and cooperated in the drafting and preparation of this Settlement Agreement. Hence, in any construction to be made of this Settlement Agreement, the same shall not be construed against any Party as drafter of the Settlement Agreement.

B.           In entering this Settlement Agreement, each Party has relied upon the advice of the Party’s own attorneys of choice, and has not relied upon any representation of law or fact by any other Party hereto.

C.           This Settlement Agreement, including exhibits attached hereto, supersedes any and all prior agreements, including, without limitation, the MOU, and it constitutes the entire understanding between and among the Parties with regard to the matters herein. There are no representations, warranties, agreements, or undertakings, written or oral, between the Parties hereto, relating to the subject matter of this Settlement Agreement which are not fully expressed herein.

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D.           The Parties each represent and warrant that each of the Persons executing this Settlement Agreement is duly empowered and authorized to do so.

24. COUNTERPARTS

This Settlement Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

25. BINDING EFFECT

This Settlement Agreement shall be binding upon and inure to the benefit of the Parties and to their respective heirs, assigns, and successors-in-interest.

26. ENTIRE AGREEMENT

This Settlement Agreement and the Supplemental Agreement referenced in 8.D above, represent the entire agreement between the Parties and supersedes all other oral and written agreements and discussions. Each of the Parties covenants that he, she or it has not entered into this Settlement Agreement as a result of any representation, agreement, inducement, or coercion, except to the extent specifically provided herein. Each Party further covenants that the consideration recited herein is the only consideration for entering into this Settlement Agreement and that no promises or representations of another or further consideration have been made by any Person,

27. NOTICE

All notices, requests, demands and other communications to the Parties or their counsel required or permitted to be given pursuant to this Settlement Agreement shall be in writing and shall be delivered personally or mailed postage-prepaid by First Class U.S. Mail to the following persons at their addresses set forth as follows:

- 42 -

Formaldehyde	Durability
Plaintiffs’ Co-Lead Counsel:	Plaintiffs’ Co-Lead Counsel:
Steven Toll, Esq.	Alexander Robertson, IV, Esq.
Cohen Milstein Sellers & Toll PLLC	Robertson & Associates, LLP
1100 New York Ave, NW	32121 Lindero Canyon Rd, Suite 200
Suite 500 — West Tower	Westlake Village, CA 91361
Washington, DC 20005

Defendant Lumber Liquidators, Inc.

Lead Counsel:

Diane P. Flannery, Esq.

McGuireWoods LLP

Gateway Plaza

800 East Canal Street

Richmond, VA 23219

WHEREFORE, the undersigned, being duly authorized, have caused this Settlement Agreement to be executed on the dates shown below and agreed that it shall take effect on the last date of execution by all undersigned representatives of the Parties.

[signatures on following page]

- 43 -

Dated this 15th day of March, 2018.

Formaldehyde	Durability
Plaintiffs’ Co-Lead Counsel	Plaintiffs’ Co-Lead Counsel
/s/ Steven Toll	/s/ Alexander Robertson, IV
Steven Toll, Esq.	Alexander Robertson, IV,
Cohen Milstein Sellers & Toll PLLC	Esq. Robertson & Associates, LLP
1100 New York Ave, NW	32121 Lindero Canyon Road, Suite 200
Suite 500 — West Tower	Westlake Village, CA 91361
Washington, DC 20005
/s/ Niall McCarthy	/s/ Daniel K. Bryson
Niall McCarthy	Daniel K. Bryson, Esq.
Cotchett Pitre & McCarthy LLP	Whitfield Bryson & Mason LLP
840 Malcolm Rd #200	900 W. Morgan St.
Burlingame, CA 94010	Raleigh, NC 27603
/s/ Steve W. Berman	/s/ Robert R. Ahdoot
Steve W. Berman	Robert R. Ahdoot
Hagens Berman Sobol Shapiro LLP (WA-NA)	Ahdoot & Wolfson, P.C.
1918 Eighth Avenue	10728 Lindbrook Drive
Suite 3300	Los Angeles, CA 90024
Seattle, WA 98101
Defendant, Lumber Liquidators, Inc.
/s/ Lee Reeves
Lee Reeves
Sr. Vice President, Chief Legal Officer &
Corporate Secretary
Lumber Liquidators, Inc.
3000 John Deere Road
Toano, VA 23168

- 44 -

EX-10.2

Exhibit 10.2

 

[FORM OF RESTRICTED AWARD AGREEMENT - DIRECTOR]

3000 John Deere Road, Toano, VA 23168

Phone: (757) 259-4280* Fax (757) 259-7293

[Date]

[Name]

[Street]

[City, State]

RE: Non-Employee Director Restricted Stock Award Agreement

Dear [Name]:

Lumber Liquidators Holdings, Inc. (the “Company”) has designated you to be a recipient of restricted shares of the common stock of the Company, par value $.001 per share (“Stock”), subject to the service-based vesting restrictions and other terms set forth in this Award Agreement and in the Lumber Liquidators Holdings, Inc. 2011 Equity Compensation Plan, as amended (the “Plan”).

The grant of these restricted shares of Stock is made pursuant to the Plan. The Plan is administered by the Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”). The terms of the Plan are incorporated into this Award Agreement and, in the case of any conflict between the Plan and this Award Agreement, the terms of the Plan shall control. A copy of the Plan will be provided to you upon request.

1.            Grant. In consideration of your agreements contained in this Award Agreement, the Company hereby grants to you _______________ shares of Company Stock (the “Restricted Stock”) as of ________________ (the “Grant Date”). The Restricted Stock is subject to the vesting requirement set forth in Section 2 below. Until the vesting requirement has been satisfied, the Restricted Stock is forfeitable and nontransferable.

2.            Vesting. The grant of the Restricted Stock is subject to the following terms and conditions:

(a)           The shares of Restricted Stock shall 100% vest, and shall no longer be subject to forfeiture, upon your continued service on the Board through the date of, and immediately prior to, the 2019 annual meeting of stockholders. Additionally, the Committee may in its sole discretion (but is not obligated to) determine that your shares shall become 100% fully vested upon the date you cease serving on the Board.

(b)           The Restricted Stock granted hereunder shall also 100% vest upon a Change in Control of the Company (as defined in the Plan) to the extent not already vested.

(c)           Your shares of Restricted Stock will be forfeited at the time you cease serving on the Board if the shares of Restricted Stock are not vested at such time and the Committee does not exercise its discretion to determine that your shares of Restricted Stock shall become vested at such time.

3.            Dividends. During the period beginning with the Grant Date and ending with the vesting date under Section 2 above or the earlier forfeiture of your Restricted Stock, (a) dividends or other distributions paid in shares of Stock shall be subject to the same restrictions as set forth in Section 2 above, and (b) dividends paid or other distributions paid in cash on outstanding shares of Stock shall be paid at the same time as such dividends are paid by the Company with respect to authorized and issued shares held by its other stockholders of record (provided, however, dividends or other distributions paid in cash shall only be paid to you if you are serving on the Board as of the record date of such dividends or distributions and payment is made to the Company’s shareholders of record no later than two and one-half (2 1/2) months after the record date of the applicable dividends or distributions).

4.            Forfeiture and Repayment Provision. If the Committee determines, in its sole discretion, that you have, at any time, willfully engaged in conduct that is harmful to the Company (or any Related Company), the Committee may declare that all or a portion of this Restricted Stock award is immediately forfeited. If the Committee determines, in its sole discretion, that you have willfully engaged in conduct that is harmful to the Company (or any Related Company), you shall repay to the Company all or any vested shares of Company Stock owned by you as a result of this Award Agreement or all or any of the amount realized as a result of the sale of Company Stock awarded to you under this Award Agreement plus any dividends or distributions paid to you in cash, to the extent required by the Committee; so long as you have been notified in writing of the Committee’s determination within one year of the vesting of such Company Stock or payment of such dividends or distributions, as applicable, under this Award Agreement. Repayment or forfeiture required under this Section shall be enforced by the Board or its delegate, in the manner the Board or its delegate determines to be appropriate. Your acceptance of the Restricted Stock reflected in this Award Agreement constitutes acceptance of the forfeiture and repayment provisions of this Section. Notwithstanding the foregoing, in the event that a Change in Control of the Company has occurred subsequent to the date of this Award Agreement, a determination that you have willfully engaged in conduct that is harmful to the Company (or any Related Company) must be made by a Committee the majority of which is made up of members who were serving as independent directors of the Company during the three-month period immediately preceding the Change of Control of the Company. Further, notwithstanding anything to the contrary in this Agreement, no repayment or clawback shall be applicable to actions that occurred either prior or subsequent to your term as a non-employee Director.

5.            Cancellation of Restricted Stock. To facilitate the cancellation of any Restricted Stock pursuant to Section 2 above, you hereby appoint the Corporate Secretary of the Company as your attorney in fact, with full power of substitution, and authorize him or her, upon the occurrence of a forfeiture pursuant to Section 2 above, to notify the Company’s registrar and transfer agent of the forfeiture of such shares and, if necessary, to deliver to the registrar and transfer agent the certificate representing such shares together with instructions to cancel the shares forfeited. The registrar and transfer agent shall be entitled to rely upon any notices and instructions delivered by your attorney in fact concerning a forfeiture under the terms of this Award Agreement.

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6.            Custody of Certificates. At the option of the Company, custody of stock certificates evidencing the Restricted Stock shall be retained by the Company or held in uncertificated form.

7.            Rights as a Shareholder. Subject to the provisions of this Award Agreement, you generally will have all of the rights of a holder of Company Stock with respect to all of the Restricted Stock awarded to you under this Award Agreement from and after the Grant Date until the shares either vest or are forfeited, including the right to vote such shares and to receive dividends paid thereon in accordance with the provisions of Section 3.

8.            Transfer Restrictions. You may not sell, assign, transfer, pledge, hypothecate or encumber the Restricted Stock awarded to you under this Award Agreement prior to the time such Restricted Stock becomes fully vested in accordance with this Award Agreement.

9.            Fractional Shares. A fractional share of Company Stock will not be issued and any fractional shares shall be paid in cash.

10.          Adjustments. If the number of outstanding shares of Company Stock is increased or decreased as a result of a stock dividend, stock split or combination of shares, recapitalization, merger in which the Company is the surviving corporation, or other change in the Company’s capitalization without the receipt of consideration by the Company, the number and kind of your unvested Restricted Stock shall be proportionately adjusted by the Committee, whose determination shall be binding.

11.          Notices. Any notice to be given to the Company under the terms of this Award Agreement shall be addressed to the Corporate Secretary at Lumber Liquidators Holdings, Inc., 3000 John Deere Road, Toano, Virginia 23168. Any notice to be given to you shall be addressed to you at the address set forth above or your last known address at the time notice is sent. Notices shall be deemed to have been duly given if mailed first class, postage prepaid, addressed as above.

12.          Applicable Withholding Taxes. No Restricted Stock shall be delivered to you until you have paid to the Company (either in cash or by the surrender of shares of the Restricted Stock) the amount that must be withheld under federal, state and local income and employment tax laws or you and the Company have made satisfactory arrangements for the payment of such taxes.

13.          Applicable Securities Laws. You may be required to execute a customary written indication of your investment intent and such other agreements the Company deems necessary or appropriate to comply with applicable securities laws. The Company may delay delivery of the Restricted Stock until you have executed such indication or agreements.

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14.          Acceptance of Restricted Stock. By signing this Award Agreement, you indicate your acceptance of the Restricted Stock and your agreement to the terms and conditions set forth in this Award Agreement which, together with the terms of the Plan, shall become the Company’s Restricted Stock Award Agreement with you. You also hereby acknowledge that a copy of the Plan has been made available and agree to all of the terms and conditions of the Plan, as it may be amended from time to time. Unless the Company otherwise agrees in writing, the Restricted Stock granted under this Award Agreement will not become vested if you do not accept this Award Agreement within thirty days of the Grant Date.

15.          Clawback. Pursuant to Section 13.07 of the Plan, any Award granted pursuant to the Plan is subject to such deductions, repayment and clawback as may be required by any applicable law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement), or as otherwise set out herein. Acceptance of the Restricted Stock granted hereunder constitutes acceptance of the repayment provisions described in Section 13.07 of the Plan. Notwithstanding anything to the contrary in this Agreement, no repayment or clawback shall be applicable to actions that occurred either prior or subsequent to your term as a non-employee Director.

16.          Binding Effect. This Agreement shall be binding upon and inure to the benefit of your legatees, distributees, and personal representatives and the successors of the Company. Any references herein to the Company (or any Related Company) shall include any successor company to either.

17.          Section 409A. It is intended that the delivery of shares of Stock and the payment of dividends or other distributions under this Award Agreement will be exempt from the requirements of Section 409A of the Code.

IN WITNESS WHEREOF, the Company has caused this Restricted Stock Award Agreement to be signed, as of ________________.

LUMBER LIQUIDATORS HOLDINGS, INC.

By:

Name:

Its:

Agreed and Accepted:

[Name of Grant Recipient]

[Date]

4

EX-10.3

Exhibit 10.3

[FORM OF NEO PERFORMANCE AWARD AGREEMENT]

3000 John Deere Road, Toano, VA 23168

Phone: (757) 259-4280* Fax (757) 259-7293

[Date]

[Name]

[Street]

[City, State]

RE: Employee Performance-Based Restricted Stock Award Agreement

Dear [Name]:

Lumber Liquidators Holdings, Inc. (the “Company”) has designated you to be a recipient of restricted shares of the common stock of the Company, par value $.001 per share (“Stock”), subject to the performance and employment-based vesting restrictions and other terms set forth in this Award Agreement and in the Lumber Liquidators Holdings, Inc. 2011 Equity Compensation Plan, as amended (the “Plan”).

The grant of these restricted shares of Stock is made pursuant to the Plan. The Plan is administered by the Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”). The terms of the Plan are incorporated into this Award Agreement and in the case of any conflict between the Plan and this Award Agreement, the terms of the Plan shall control. A copy of the Plan will be provided to you upon request.

1.            Grant. In consideration of your agreements contained in this Award Agreement, the Company hereby grants to you ______ shares [Target Number of Shares] of Company Stock (the “Restricted Stock”) as of __________________ (the “Grant Date”). The Restricted Stock is subject to the vesting restrictions set forth in Section 2 below. Until the vesting restrictions have lapsed, the Restricted Stock is forfeitable and nontransferable.

2.            Vesting. The grant of the Restricted Stock is subject to the following terms and conditions:

(a)           Except as otherwise set forth herein, the Restricted Stock shall be considered performance-based (“Performance-Based”) and shall become eligible to become vested with respect to that number of shares of Performance-Based Restricted Stock subject to this Award Agreement that correlates to the performance objectives achieved for the two-year performance period beginning January 1, 2018 and ending December 31, 2019 (the “Performance Period”) set forth on the attached Exhibit A, as determined by the Committee in its sole discretion.

(b)           The shares of Performance-Based Restricted Stock that are eligible to become vested based on the Committee’s determination of the performance objectives set forth on Exhibit A achieved for the Performance Period (as described in Section 2(a) above) shall then become vested as to (i) fifty percent (50%) (rounded down to the nearest whole share) of the shares of Performance-Based Restricted Stock that are then eligible to become vested, as of such day after the Performance Period ends (which shall be no later than March 15, 2020) on which the Committee certifies in writing the performance objectives achieved for the Performance Period and the number of shares of Performance-Based Restricted Stock that are then eligible to become vested and (ii) the remaining number of shares of Performance-Based Restricted Stock that are then eligible to become vested, as of December 31, 2020, subject to your continued employment with the Company (or any Related Company) through the applicable vesting date. Notwithstanding the foregoing, none of the shares of Performance-Based Restricted Stock shall become eligible to become vested if the performance objectives for the Performance Period set forth on Exhibit A are not achieved at or above the designated levels set forth therein.

(c)           Upon a Change in Control before the end of the Performance Period, the shares of Performance-Based Restricted Stock subject to this Award Agreement shall become eligible to vest with respect to that number of shares of Performance-Based Restricted Stock that equals the number of shares of Performance-Based Restricted Stock that are eligible to vest at the one hundred percent (100%) target threshold. In the event no provision is made for the continuance, assumption or substitution by the Company or its successor in connection with a Change in Control of the shares of Performance-Based Restricted Stock, then, contemporaneously with the Change in Control, the shares of Performance-Based Restricted Stock shall become vested with respect to that number of shares of Performance-Based Restricted Stock that are eligible to vest at the time of the Change in Control, to the extent not vested previously, subject to your continued employment with the Company (or any Related Company) until the date of the Change in Control. If provision is made for the continuance, assumption or substitution by the Company or its successor in connection with the Change in Control of the shares of Performance-Based Restricted Stock, then the shares of Performance-Based Restricted Stock shall become vested, to the extent not vested previously, contemporaneously with the termination of your employment with the Company (or any Related Company) if your employment is terminated by you for Good Reason or is terminated by the Company (or any Related Company) and such termination is not a Termination for Cause, in each case on or after the Change in Control. “Good Reason” and “Termination for Cause” are defined in Section 17 of this Award Agreement.

(d)           If you die or become Disabled (as determined by the Committee) while you are employed by the Company (or any Related Company) and your employment with the Company (or any Related Company) is terminated as a result of such death or Disability prior to the end of the Performance Period (or, if earlier, a Change in Control), the shares of Performance-Based Restricted Stock shall remain outstanding until the end of the Performance Period (or, if earlier, until a Change in Control occurs) and shall become eligible to vest as if you had remained employed with the Company (or any Related Company) until the end of the Performance Period (or, if earlier, a Change in Control), and shall then become vested, at the time such shares of Performance-Based Restricted Stock would have become vested had you continued employment with the Company (or any Related Entity) until the end of the Performance Period (or, if earlier, a Change in Control), equal to the total number of shares of Performance-Based Restricted Stock that are then eligible to vest multiplied by a fraction (but not to exceed one (1)), the numerator of which is the number of full months elapsed from the Grant Date until the date of your death or Disability, and the denominator of which is the number of months between the Grant Date and the final vesting date applicable to the shares of Performance-Based Restricted Stock (which final vesting date will be the date of the Change in Control if no provision is made for the continuance, assumption or substitution by the Company or its successor in connection with the Change in Control of the shares of Performance-Based Restricted Stock). If you die or become Disabled (as determined by the Committee) while you are employed by the Company (or any Related Company), and your employment with the Company (or any Related Company) is terminated as a result of such death or Disability after the end of the Performance Period (or, if earlier, after a Change in Control), the total number of shares of Performance-Based Restricted Stock that are then eligible to become vested shall become vested (including for this purpose any shares in which you are already vested under this Award Agreement) equal to the total number of shares of Performance-Based Restricted Stock that are then eligible to vest (plus any shares in which you are already vested) multiplied by a fraction (not to exceed one (1)), the numerator of which is the number of full months elapsed from the Grant Date until the date of your death or Disability, and the denominator of which is the number of months between the Grant Date and the final vesting date applicable to the shares of Performance-Based Restricted Stock (which final vesting date will be the date of the Change in Control if no provision is made for the continuance, assumption or substitution by the Company or its successor in connection with the Change in Control of the shares of Performance-Based Restricted Stock).

2

(e)           Except as otherwise set forth above, you must be employed by the Company (or any Related Company) on the relevant date for any Performance-Based Restricted Stock to vest. If your employment with the Company (or any Related Company) terminates for any reason other than your death or Disability, any rights you may have under this Award Agreement with regard to unvested shares of Performance-Based Restricted Stock shall be null and void. Any rights you may have under this Award Agreement with regard to unvested shares of Performance-Based Restricted Stock shall be forfeited and become null and void at the earliest time at which the shares of Performance-Based Restricted Stock may no longer become vested pursuant to the terms hereof.

3.            Dividends. During the period beginning with the Grant Date and ending with the Vesting Date or the earlier forfeiture of your Performance-Based Restricted Stock, (a) dividends or other distributions paid in shares of Stock shall be subject to the same restrictions as set forth in Section 2 above, and (b) dividends or other distributions paid in cash shall be accumulated and paid to you with respect to all of the Performance-Based Restricted Stock granted to you pursuant to Section 1 of this Award Agreement, if and only if, and within thirty (30) days after the time, the shares of Performance-Based Restricted Stock to which the dividends or other distributions relate become vested. You will not be entitled to receive, and you will forfeit any rights to, any dividends and other distributions that relate to shares of Performance-Based Restricted Stock that do not become vested.

3

4.            Forfeiture and Repayment Provision. If the Committee determines, in its sole discretion, that you have, at any time, willfully engaged in conduct that is harmful to the Company (or any Related Company), the Committee may declare that all or a portion of this Performance-Based Restricted Stock award is immediately forfeited. If the Committee determines, in its sole discretion, that you have willfully engaged in conduct that is harmful to the Company (or any Related Company), you shall repay to the Company all or any vested shares of Company Stock owned by you as a result of this Award Agreement or all or any of the amount realized as a result of the sale of Company Stock awarded to you under this Award Agreement, to the extent required by the Committee. Repayment or forfeiture required under this Section shall be enforced by the Board or its delegate, in the manner the Board or its delegate determines to be appropriate. Your acceptance of the Performance-Based Restricted Stock reflected in this Award Agreement constitutes acceptance of the forfeiture and repayment provisions of this Section.

5.            Cancellation of Restricted Stock. To facilitate the cancellation of any Performance-Based Restricted Stock pursuant to Section 2 above, you hereby appoint the Corporate Secretary of the Company as your attorney in fact, with full power of substitution, and authorize him or her, upon the occurrence of a forfeiture pursuant to Section 2 above, to notify the Company’s registrar and transfer agent of the forfeiture of such shares and, if necessary, to deliver to the registrar and transfer agent the certificate representing such shares together with instructions to cancel the shares forfeited. The registrar and transfer agent shall be entitled to rely upon any notices and instructions delivered by your attorney in fact concerning a forfeiture under the terms of this Award Agreement.

6.            Custody of Certificates. At the option of the Company, custody of stock certificates evidencing the Performance-Based Restricted Stock shall be retained by the Company or held in uncertificated form.

7.            Rights as a Shareholder. Subject to the provisions of this Award Agreement, you generally will have all of the rights of a holder of Company Stock with respect to all of the Performance-Based Restricted Stock granted to you pursuant to Section 1 of this Award Agreement from and after the Grant Date until the shares either vest or are forfeited, including the right to vote such shares and to receive dividends and other distributions paid thereon in accordance with the provisions of Section 3.

8.             Transfer Restrictions. You may not sell, assign, transfer, pledge, hypothecate or encumber the Performance-Based Restricted Stock awarded to you under this Award Agreement prior to the time such Performance-Based Restricted Stock becomes fully vested in accordance with this Award Agreement.

9.            Fractional Shares. A fractional share of Company Stock will not be issued and any fractional shares may be disregarded by the Company.

10.          Adjustments. If the number of outstanding shares of Company Stock is increased or decreased as a result of a stock dividend, stock split or combination of shares, recapitalization, merger in which the Company is the surviving corporation, or other change in the Company’s capitalization without the receipt of consideration by the Company, the number and kind of your unvested Performance-Based Restricted Stock shall be proportionately adjusted by the Committee, whose determination shall be binding.

4

11.          Notices. Any notice to be given to the Company under the terms of this Award Agreement shall be addressed to the Corporate Secretary at Lumber Liquidators Holdings, Inc., 3000 John Deere Road, Toano, Virginia 23168. Any notice to be given to you shall be addressed to you at the address set forth above or your last known address at the time notice is sent. Notices shall be deemed to have been duly given if mailed first class, postage prepaid, addressed as above.

12.          Applicable Withholding Taxes. No Performance-Based Restricted Stock shall become nonforfeitable or transferable by you until you have paid to the Company the amount that must be withheld under federal, state and local income and employment tax laws or you and the Company have made satisfactory arrangements for the payment of such taxes.

13.          Applicable Securities Laws. You may be required to execute a customary written indication of your investment intent and such other agreements the Company deems necessary or appropriate to comply with applicable securities laws. The Company may delay delivery of the Performance-Based Restricted Stock until you have executed such indication or agreements.

14.          Acceptance of Performance-Based Restricted Stock. By signing this Award Agreement, you indicate your acceptance of the Performance-Based Restricted Stock and your agreement to the terms and conditions set forth in this Award Agreement which, together with the terms of the Plan, shall become the Company’s Performance-Based Restricted Stock Award Agreement with you. You also hereby acknowledge that a copy of the Plan has been made available and agree to all of the terms and conditions of the Plan, as it may be amended from time to time. Unless the Company otherwise agrees in writing, the Performance-Based Restricted Stock granted under this Award Agreement will not become vested if you do not accept this Award Agreement within thirty days of the Grant Date.

15.          Clawback. This Performance-Based Restricted Stock is subject to such clawback as may be determined under the Company’s Clawback Policy (as such Clawback Policy is in effect from time to time) or as may be required by any applicable law, government regulation or stock exchange listing requirement. Your acceptance of the Performance-Based Restricted Stock reflected in this Award Agreement constitutes acceptance of the clawback provisions described in this Section 15.

This Section 15 is intended to comply with Section 954 of Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all regulations and rulemaking thereunder and should be interpreted accordingly.

16.          Binding Effect. This Award Agreement shall be binding upon and inure to the benefit of your legatees, distributees, and personal representatives and the successors of the Company (or any Related Company). Any references herein to the Company (or any Related Company) shall include any successor company to either.

17.          Definitions. For purposes of this Award Agreement:

(a)          “Good Reason” shall have the same meaning as under any employment, severance or change in control agreement between you and the Company (or any Related Company), or if no such employment or severance agreement exists or such agreement does not contain any such definition, “Good Reason” shall mean (i) failure to pay or provide, or a material reduction in, your base salary or target bonus, or (ii) a material reduction in your responsibilities within the Company (or any Related Company).

5

(b)          “Termination for Cause” shall mean termination of your employment for “Cause” as defined under any employment, severance or change in control agreement between you and the Company (or any Related Company) or, if no such agreement exists or such agreement does not contain any such definition, “Cause” shall mean your (i) personal dishonesty, (ii) fraud, (iii) willful or repeated misconduct, (iv) gross negligence, (v) breach of a fiduciary duty to the Company (or any Related Company), (vi) intentional failure to perform your duties, (vii) material violation of Company (or any Related Company) policy, (viii) unsatisfactory performance of your job duties; provided, however, that in such instances where the Company (or any Related Company), at its sole discretion, deems such unsatisfactory performance curable, the Company (or any Related Company) shall give such notice and opportunity to cure as the Company (or any Related Company) deems reasonable, (ix) material noncompliance with financial reporting requirements under federal securities laws, (x) conviction of or plea of guilty or “no contest” to a felony or crime of moral turpitude under the laws of the United States or any state thereof, and/or (xi) action or inaction that materially diminishes or impairs the goodwill or reputation of the Company (or any Related Company).

[SIGNATURE PAGE FOLLOWS]

6

IN WITNESS WHEREOF, the Company has caused this Performance-Based Restricted Stock Award Agreement to be signed, as of this ____ date of ___________________, 2018.

LUMBER LIQUIDATORS HOLDINGS, INC.

By:

Name:

Its:

Agreed and Accepted:

[Name of Grant Recipient]

[Date]

7

LUMBER LIQUIDATORS HOLDINGS, INC.

EMPLOYEE PERFORMANCE-BASED

RESTRICTED STOCK AWARD AGREEMENT

Exhibit A

	Achievement Level Percentage
Performance Objectives (Weighting Percentage)	50%		100%		200%
[●] ([●]%)	$		$		$
[●] ([●]%)		%		%		%

The number of shares of Performance-Based Restricted Stock that will become eligible to become vested shall equal the number of shares of Performance-Based Restricted Stock subject to this Award Agreement multiplied by the Final Weighted Performance Percentage (rounded to the nearest whole share). The Final Weighted Performance Percentage shall be determined as follows: (A) determine [●] and [●] achieved for the Performance Period; (B) determine the Achievement Level Percentage in the chart above that correlates to [●] and [●] achieved for the Performance Period; if [●] and/or [●] falls between any of the identified Achievement Level Percentages in the chart above, then the Achievement Level Percentage for the applicable performance objective shall be determined by straight line interpolation between the two (rounded to the nearest hundredth of a percent) (for example, if [●] is $[●], then the Achievement Level Percentage for [●] will be [●]%); if [●] and/or [●] is less than the fifty percent (50%) Achievement Level Percentage, the Achievement Level Percentage for that performance objective shall be zero (0); if [●] and/or [●] exceeds the amount that would result in an Achievement Level Percentage of two hundred percent (200%), the Achievement Level Percentage for that performance objective shall be two hundred percent (200%); (C) multiply for each of [●] and [●] the Achievement Level Percentage determined under (B) by the Weighting Percentage in the chart above assigned to that performance objective; and (D) then calculate the sum of the products determined in (C) for each of the performance objectives; the resulting sum will be the Final Weighted Performance Percentage; in no event may the Final Weighted Performance Percentage exceed two hundred percent (200%).

Notwithstanding the foregoing, the Committee shall adjust the performance objectives as the Committee in its discretion may determine is appropriate in the event of unbudgeted acquisitions or divestitures or other extraordinary, unusual, infrequently occurring or non-recurring items in the business of Company or any Related Company, or their business units or products, or as otherwise set forth in the Plan, to fairly and equitable determine the shares of Performance–Based Restricted Stock that will become eligible to become vested in order to prevent any inappropriate enlargement or dilution of the Participant’s rights under this Agreement.

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, Dennis R. Knowles, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lumber Liquidators Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 30, 2018 

/s/ Dennis R. Knowles

Dennis R. Knowles

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Martin D. Agard, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lumber Liquidators Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 30, 2018

/s/ Martin D. Agard

Martin D. Agard

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Dennis R. Knowles, President and Chief Executive Officer of Lumber Liquidators Holdings, Inc. (the "Registrant"), and Martin D. Agard, Chief Financial Officer of the Registrant, each hereby certifies that, to the best of his knowledge:

1. The Registrant's quarterly report on Form 10-Q for the quarter ended March 31, 2018, to which this Certification is attached as Exhibit 32.1 (the "Periodic Report"), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Dennis R. Knowles	/s/ Martin D. Agard
Dennis R. Knowles	Martin D. Agard
President and Chief Executive Officer	Chief Financial Officer
(Principal Executive Officer)	(Principal Financial Officer)
Date: April 30, 2018	Date: April 30, 2018

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 26, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Entity Registrant Name	Lumber Liquidators Holdings, Inc.
Entity Central Index Key	0001396033
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		28,542,202

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current Assets:
Cash and Cash Equivalents	$ 12,606	$ 19,938
Merchandise Inventories	273,411	262,280
Prepaid Expenses	10,028	9,108
Other Current Assets	9,459	6,670
Total Current Assets	305,504	297,996
Property and Equipment, net	98,894	100,491
Goodwill	9,693	9,693
Other Assets	2,566	2,615
Total Assets	416,657	410,795
Current Liabilities:
Accounts Payable	60,701	67,676
Customer Deposits and Store Credits	43,493	38,546
Accrued Compensation	7,710	12,101
Sales and Income Tax Liabilities	5,499	4,273
Accrual for Multidistrict Litigation ("MDL") and Related Other Matters	37,193	36,960
Other Current Liabilities	20,061	18,605
Total Current Liabilities	174,657	178,161
Other Long-Term Liabilities	19,674	19,787
Revolving Credit Facility	26,000	15,000
Total Liabilities	220,331	212,948
Stockholders' Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 31,470 and 31,397 shares issued and 28,540 and 28,490 shares outstanding, respectively)	31	31
Treasury Stock, at cost (2,930 and 2,907 shares, respectively)	(141,439)	(140,875)
Additional Paid-in-Capital	209,676	208,629
Retained Earnings	129,242	131,214
Accumulated Other Comprehensive Loss	(1,184)	(1,152)
Total Stockholders' Equity	196,326	197,847
Total Liabilities and Stockholders' Equity	$ 416,657	$ 410,795

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	35,000,000	35,000,000
Common Stock, shares issued	31,470,000	31,397,000
Common Stock, shares outstanding	28,540,000	28,490,000
Treasury Stock, shares	2,930,000	2,907,000

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Net Sales	$ 261,772	$ 248,389
Cost of Sales	166,800	161,590
Gross Profit	94,972	86,799
Selling, General and Administrative Expenses	96,418	112,214
Operating Loss	(1,446)	(25,415)
Other Expense	321	512
Loss Before Income Taxes	(1,767)	(25,927)
Income Tax Expense	205	445
Net Loss	$ (1,972)	$ (26,372)
Net Loss per Common Share-Basic	$ (0.07)	$ (0.93)
Net Loss per Common Share-Diluted	$ (0.07)	$ (0.93)
Weighted Average Common Shares Outstanding:
Basic	28,508	28,292
Diluted	28,508	28,292

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Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net Loss	$ (1,972)	$ (26,372)
Foreign Currency Translation Adjustments	(32)	32
Total Other Comprehensive Income (Loss)	(32)	32
Comprehensive Loss	$ (2,004)	$ (26,340)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash Flows from Operating Activities:
Net Income (Loss)	$ (1,972)	$ (26,372)
Adjustments to Reconcile Net Loss:
Depreciation and Amortization	4,723	4,335
Stock-Based Compensation Expense	858	1,259
Loss on Disposal of Fixed Assets	7
Changes in Operating Assets and Liabilities:
Merchandise Inventories	(14,483)	(298)
Accounts Payable	(7,079)	(32,032)
Customer Deposits and Store Credits	5,062	9,587
Prepaid Expenses and Other Current Assets	(1,090)	733
Accrual for MDL and Related Other Matters	250	18,000
Other Assets and Liabilities	(1,157)	(4,971)
Net Cash Used in Operating Activities	(14,881)	(29,759)
Cash Flows from Investing Activities:
Purchases of Property and Equipment	(3,048)	(2,502)
Other Investing Activities	6
Net Cash Used in Investing Activities	(3,042)	(2,502)
Cash Flows from Financing Activities:
Borrowings on Revolving Credit Facility	15,000	35,000
Payments on Revolving Credit Facility	(4,000)	(3,000)
Payments on Capital Lease Obligations		(114)
Payments on Financed Insurance Obligations	(367)
Other Financing Activities	(524)	444
Net Cash Provided by Financing Activities	10,109	32,330
Effect of Exchange Rates on Cash and Cash Equivalents	482	631
Net (Decrease) Increase in Cash and Cash Equivalents	(7,332)	700
Cash and Cash Equivalents, Beginning of Period	19,938	10,271
Cash and Cash Equivalents, End of Period	$ 12,606	$ 10,971

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Basis of Presentation

3 Months Ended

Mar. 31, 2018

Basis of Presentation [Abstract]

Basis of Presentation

Note 1.Basis of Presentation

Lumber Liquidators Holdings, Inc. and its direct and indirect subsidiaries (collectively and, where applicable, individually, the “Company”) engage in business as a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories, operating as a single operating segment.  The Company offers an extensive assortment of exotic and domestic hardwood species, engineered hardwood, laminate, resilient vinyl and wood-look ceramic tile flooring direct to the consumer.  The Company also features the renewable flooring products, bamboo and cork, and provides a wide selection of flooring enhancements and accessories, including moldings, noise-reducing underlayment, adhesives and flooring tools.  The Company also provides in-home delivery and installation services to certain of its customers.  The Company sells primarily to homeowners or to contractors on behalf of homeowners through a network of store locations in primary or secondary metropolitan areas. As of March 31, 2018, the Company’s 398 stores spanned 46 states in the United States (“U.S.”) and included eight stores in Canada.  In addition to the store locations, the Company’s products may be ordered, and customer questions/concerns addressed, through its call center in Toano, Virginia, its website, www.lumberliquidators.com, and catalogs published from time-to-time. The Company finishes the majority of the Bellawood products on its finishing lines in Toano, Virginia, which along with the call center, corporate offices, and a distribution center, represent the “Corporate Headquarters.”

 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  In the opinion of management, all adjustments (consisting of normal and recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements.  However, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements.  Therefore, the interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s annual report filed on Form 10-K for the year ended December 31, 2017.

The condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries.  All intercompany transactions have been eliminated in consolidation.

Results of operations for the three months ended March 31, 2018 are not necessarily indicative of future results to be expected for the full year due to a number of factors, including seasonality.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2.Summary of Significant Accounting Policies

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash and cash equivalents, accounts payable and other liabilities approximates fair value because of the short-term nature of these items. The carrying amount of obligations under the revolving credit facility approximates fair value due to the variable rate of interest. 

Merchandise Inventories

The Company values merchandise inventories at the lower of merchandise cost or net realizable value. The Company periodically reviews the carrying value of items in inventory and records a lower of cost or net realizable value adjustment when there is evidence that the utility of inventory will be less than its cost.  In determining market value, the Company makes judgments and estimates as to the market value of its products, based on factors such as historical results and current sales trends.  Although the Company believes its products are appropriately valued as of the balance sheet date, there can be no assurance that future events or changes in key assumptions would not significantly impact their value. 

Recognition of Net Sales

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“Topic 606”), Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and when control of those goods and services has passed to the customer.  The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method.  However, because adoption of the standard did not change the timing or amount of the Company’s recognition of revenue and because the Company does not recognize revenues for partial contracts, there was no adjustment to retained earnings needed as part of the adoption of the new standard. 

The Company generates revenues primarily by retailing merchandise in the form of hardwood and wood-look flooring and accessories. Additionally, the Company expands its revenues by offering services to deliver and/or install this merchandise for its customers; it considers these services to be separate performance obligations.  The separate performance obligations are detailed on the customer’s invoice(s) and the customer often purchases flooring merchandise without purchasing installation or delivery services. Sales occur through a network of 398 stores spanning 46 states including eight stores in Canada. In addition, both the merchandise and services can be ordered through a call center and from the Company’s website, www.lumberliquidators.com.  The Company’s agreements with its customers are of short duration (less than a year) and as such the Company has elected not to disclose revenue for partially satisfied contracts that will be completed in the days following the end of a period as permitted by GAAP.  The Company reports its revenues exclusive of sales taxes collected from customers and remitted to governmental taxing authorities, consistent with past practice.

Revenue is based on consideration specified in a contract with a customer, and excludes any sales incentives from vendors and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or performing service for a customer. Revenues from installation and freight services are recognized when the delivery is made or the installation is complete, which approximates the recognition of revenue over time due to the short duration of service provided.  The price of the Company’s merchandise and services are specified in the contract and detailed on the invoice agreed to with the customer including any discounts.  The Company generally requires customers to pay a deposit, equal to approximately half of the retail sales value, when ordering merchandise not regularly carried in a given location or not currently in stock.  In addition, the Company generally does not extend credit to its customers with payment due in full at the time the customer takes possession of merchandise or when the service is provided. Customer payments and deposits received in advance of the customer taking possession of the merchandise or receiving the services are recorded as deferred revenues in the accompanying condensed consolidated balance sheet caption Customer Deposits and Store Credits.  The following table shows the activity in this account during the period:

	Three Months Ended March 31, 2018		Three Months Ended March 31, 2017
Customer Deposits and Store Credits, Beginning Balance	$	(38,546)	$	(32,639)
New Deposits		(285,522)		(277,279)
Recognition of Revenue		261,772		248,389
Sales Tax included in Customer Deposits		16,605		16,199
Other		2,198		3,203
Customer Deposits and Store Credits, Ending Balance	$	(43,493)	$	(42,127)

Subject to limitations under the Company’s policy, return of unopened merchandise is accepted for 30 days. The amount of revenue recognized for flooring merchandise is adjusted for expected returns, which are estimated based on the Company’s historical data, current sales levels, and forecasted economic trends. The Company uses the expected value method to estimate returns because it has a large number of contracts with similar characteristics.  The Company previously recognized revenue in full, recorded an allowance for expected returns (contra-revenue), and recorded a separate refund liability for expected returns. The Company reduces revenue by the amount of expected returns and records it within accrued expenses and other on the condensed consolidated balance sheet. The Company continues to estimate the amount of returns based on the historical data. In addition, the Company recognizes a related asset for the right to recover returned merchandise and records it in the Other Current Assets caption of the accompanying condensed consolidated balance sheet. This amount was $1.2 million at March 31, 2018.  The Company recognizes sales commissions as incurred since the amortization period is less than one year. The Company offers a range of limited warranties for the durability of the finish on its prefinished products.  These limited warranties range from one to 100 years, with lifetime warranties for certain of the Company’s products. Warranty reserves are based primarily on claims experience, sales history and other considerations. Warranty costs are recorded in cost of sales. These costs are included in Selling, General, and Administrative Expenses on the condensed consolidated statements of operations.

In total, we offer hundreds of different flooring products; however, no single flooring product represented a significant portion of our sales mix. By major product category, our sales mix was as follows:

	Three Months Ended March 31, 2018				Three Months Ended March 31, 2017
Solid and Engineered Hardwood, Bamboo and Cork	$	96,684	37%	$	109,054	44%
Manufactured Products1		90,929	35%		72,901	29%
Moldings and Accessories and Other		48,896	19%		49,043	20%
Installation and Delivery Services		25,263	9%		17,391	7%
Total	$	261,772	100%	$	248,389	100%
1 Includes laminate, vinyl, engineered vinyl plank and wood-look ceramic tile.

Cost of Sales

Cost of sales includes the cost of the product sold, cost of installation services, transportation costs from vendor to the Company’s distribution centers or store locations, any applicable finishing costs related to production of the Company’s proprietary brands, transportation costs from distribution centers to store locations, transportation costs for the delivery of products from store locations to customers, certain costs of quality control procedures, warranty and customer satisfaction costs, inventory adjustments including shrinkage, and costs to produce samples, reduced by vendor allowances.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), which creates ASC Topic 842, Leases, and supersedes the lease accounting requirements in Topic 840, Leases. In summary, Topic 842 requires organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Therefore, the new standard will become effective for the Company at the beginning of its 2019 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements including educating employees of the breadth of the new standard, evaluating software solutions to track leases, identifying all leases including reviewing contracts for potential embedded leases.  The Company is monitoring the FASB’s recent deliberations surrounding a simplified transition approach and is evaluating the practical expedients provided by that approach as well as those already included the standard.  When implemented, the standard is expected to have a material impact as operating leases will be recognized on the Company’s consolidated balance sheet.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2018

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 3.Stockholders’ Equity

Net Loss per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

	Three Months Ended
	March 31,
	2018		2017
Net Loss	$	(1,972)	$	(26,372)
Weighted Average Common Shares Outstanding—Basic		28,508		28,292
Effect of Dilutive Securities:
Common Stock Equivalents		—		—
Weighted Average Common Shares Outstanding—Diluted		28,508		28,292
Net Loss per Common Share—Basic	$	(0.07)	$	(0.93)
Net Loss per Common Share—Diluted	$	(0.07)	$	(0.93)

The following shares have been excluded from the computation of Weighted Average Common Shares Outstanding—Diluted because the effect would be anti-dilutive:

	Three Months Ended March 31,
	2018	2017
Stock Options	688	769
Restricted Shares	347	469

Stock Repurchase Program

The Company’s board of directors has authorized the repurchase of up to $150 million of the Company’s common stock.  At March 31, 2018, the Company had approximately $14.7 million remaining under this authorization.  The Company has not repurchased any shares of its common stock under this program in more than three years.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 4.   Stock-Based Compensation

The following table summarizes share activity related to stock options and restricted stock awards (“RSAs”):

	Stock Options	Restricted Stock Awards
Options Outstanding/Nonvested RSAs, December 31, 2017	690	480
Granted	77	174
Options Exercised/RSAs Released	(3)	(70)
Forfeited	(25)	(21)
Options Outstanding/Nonvested RSAs, March 31, 2018	739	563

During the three months ended March 31, 2018, the Company granted 30,887 shares of performance-based restricted stock awards, vesting over three-year period, with a grant date fair value of approximately $0.7 million to certain members of senior management in connection with the achievement of specific key financial metrics. The number of awards that will ultimately vest is contingent upon the achievement of these key financial metrics by the end of year two. Once these amounts have been determined, half of the shares will vest at the end of year two and the remaining half will vest at the end of year three. These awards are included above in Restricted Stock Awards Granted.

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Income Taxes

3 Months Ended

Mar. 31, 2018

Income Taxes [Abstract]

Income Taxes

Note 5.Income Taxes

The Company has a full valuation allowance recorded against its net deferred tax assets which effectively offsets its federal taxes at the statutory rate of 21%.  However, it does record tax expense each period for income taxes incurred in certain state and foreign jurisdictions.  For the three months ended March 31, 2018 and 2017, the resulting effective tax rate was (11.6)% and (1.7)%, respectively.

The Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”) was enacted on December 22, 2017, which reduced the U.S. federal corporate tax rate from 35% to 21% and eliminated the 20-year limit on the carryforward of losses, and resulted in the Company remeasuring its existing deferred tax balances in 2017.  In addition, generally beginning in 2018, the Tax Act alters the deductibility of certain items (e.g., certain compensation, interest, entertainment expenses), and allows qualifying capital expenditures to be deducted fully in the year of purchase. As of March 31, 2018, the Company has completed an initial analysis of the tax effects of the Tax Act but continues to monitor developments by federal and state rulemaking authorities regarding implementation of the Act. The Company has made reasonable estimates of the effects of the Tax Act on its deferred tax balances based on current information, but may need to adjust as new guidance becomes available. 

The Company intends to maintain a valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.  A reduction in the valuation allowance could result in a significant decrease in income tax expense in the period that the release is recorded. However, the exact timing and amount of any reduction in the Company’s valuation allowance are unknown at this time and will be subject to the earnings level it achieves in future periods.   

The Company files income tax returns with the U.S. federal government and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. During 2017, the Internal Revenue Service completed audits of the Company’s income tax returns through 2016.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 6.      Commitments and Contingencies

Governmental Investigations

In 2015 and early 2016, the Company received subpoenas issued in connection with a criminal investigation being conducted by the U.S. Department of Justice (the “DOJ”) and the SEC.  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 made with respect to these matters.  Any action by the DOJ or SEC with respect to these matters could include civil or criminal proceedings 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.

LitigationRelatingtoChinese Laminates

On March 15, 2018, the Company entered into a settlement agreement with the lead plaintiffs in the MDL (as defined in Part II – Item 1) and Abrasion MDL(as defined in Part II – Item 1), cases more fully described in the Company’s 2017 Annual Report on Form 10-K. Under the terms of the settlement agreement, which are consistent with the terms set forth in a previously disclosed memorandum of understanding, the Company has agreed to 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 settlement agreement is subject to certain contingencies, including court approvals.  There can be no assurance that the settlement agreement will be 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 or the Abrasion MDL. The $36 million aggregate settlement amount was accrued in 2017.

In addition to those purchasers who elect to opt out of the above settlement (the “Opt Outs”) and the Steele class action lawsuit, more fully described in the Company’s 2017 Annual Report on Form 10-K, which is a similar case to the MDL in Canada, 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 were settled in the first quarter of 2018, while some are in advanced stages of settlement negotiations. The Company recognized a $1 million charge during the fourth quarter of 2017 and a $250 thousand charge in the first quarter of 2018 for these matters. For the remaining Other Matters, while the Company believes that a further loss associated with the Opt Outs, Other Matters and the Steele class action lawsuit 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.

The Company has determined that probable losses have been incurred and has recognized charges to earnings within selling general and administrative expense during 2017 and the first quarter of 2018.  If the court does not approve the settlement agreement or if the Company 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.  

GoldMatter

Beginning in 2014, Dana Gold (“Gold”) filed a purported class action lawsuit alleging that certain bamboo flooring that the Company sells (the “Strand Bamboo Product”) is defective (the “Gold matter”).  On February 13, 2015, Gold filed an amended complaint that added three additional plaintiffs (collectively with Gold, “Gold Plaintiffs”).  Gold Plaintiffs did not quantify any alleged damages in their complaint but, in addition to attorneys’ fees and costs, Gold Plaintiffs seek a declaration that the Company’s actions violate the law and that it is financially responsible for notifying all purported class members, 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 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.  The trial is currently scheduled to begin in February 2019.

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 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 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.

Employee Classification Matters

In the second half of 2017, certain former and current store managers, store managers in training, and similarly situated current and former employees holding comparable positions but different titles (collectively, the “SM Plaintiffs”) filed purported class action lawsuits in New York and California 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”), in both cases alleging that the Company violated the Fair Labor Standards Act and certain state laws by classifying the SM Employees as exempt.  In both cases 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 both 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 these actions and therefore no accrual has been made related to either of them. Any such losses could, potentially, have a material adverse effect, individually or collectively, on the Company’s results of operations, financial condition, and liquidity.

AntidumpingandCountervailingDutiesInvestigation

InOctober2010,aconglomerationof domesticmanufacturersof multilayeredwoodflooringfileda petitionseekingthe impositionofantidumping(“AD”)andcountervailingduties(“CVD”)withtheUnitedStatesDepartmentofCommerce (“DOC”)andtheUnitedStatesInternationalTradeCommission(“ITC”)againstimportsof multilayeredwoodflooringfrom China.Thisrulingappliesto companies importing multilayered wood flooring from Chinese suppliers subject to the AD and CVD orders. The Company’s multilayered wood flooring imports from China accountedforapproximately 8% and 7%of its flooringpurchasesin 2017 and 2016, 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 such, it has appealed the original imposition of AD and CVD fees.

Aspartofitsprocessesintheseproceedings,theDOCconductsannualreviewsof theCVDandADrates.Insuchcases,the DOCwillissuepreliminaryratesthatarenotbindingand aresubjectto commentbyinterestedparties.Afterconsiderationof thecommentsreceived,theDOCwillissuefinalratesfortheapplicableperiod,whichmaylagbyayearormore. At the time of import, the Company makes deposits at the then prevailing rate, even while the annual review is in process.  Whenratesare declared final by the DOC,the Company accrues a receivable or payable depending on where that final rate compares to the deposits it has made.  The Company and or the domestic manufacturers can appeal the final rate for any period and can place a hold on final settlement by U.S. Customs and Border Protection while the appeals are pending.

In addition to its overall appeal of the imposition of AD and CVD, which is still pending, the Company as well as other involved parties have appealed many of the final rate determinations.  Those appeals are pending and, at times, have resulted in delays in settling the shortfalls and refunds in the table that follows. 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.

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.

Results by period for the Company are shown below. The column labeled ‘March 31, 2018 Receivable/Liability Balance’ represents the amount the Company would receive or pay as the result of subsequent adjustment to rates whether due to finalization by DOC or because of action of a court based on appeals by various parties.  It does not include any amounts paid for AD or CVD in the current period at the in-effect rate at that time.

Review Period	Period Covered	Rates at which Company Deposited	Final Rate	March 31, 2018 Receivable/Liability Balance
Antidumping
1	May 2011 through November 2012	6.78% and 3.3%	5.92%	$0.8 million liability1
2	December 2012 through November 2013	3.30%	13.74%	$4.1 million liability
3	December 2013 through November 2014	3.3% and 5.92%	17.37%	$5.5 million liability
4	December 2014 through November 2015	5.92% and 13.74%	0.0%	$2.1 million receivable
5	December 2015 through November 2016	5.92%,  13.74%, and 17.37%	Pending but preliminary determination was 0.0%	NA
6	December 2016 through November 2017	17.37% and 0.0%	Pending	NA
7	December 2017 through November 2018	0.0%	Pending	NA
Countervailing
1&2	April 2011 through December 2012	1.50%	0.83% / 0.99%	$0.2 million receivable
3	January 2013 through December 2013	1.50%	1.38%	$.05 million receivable
4	January 2014 through December 2014	1.50% and 0.83%	1.06%	$.02 million receivable
5	January 2015 through December 2015	0.83% and 0.99%	Pending but preliminary determination was 0.89%	NA
6	January 2016 through December 2016	0.99% and 1.38%	Pending	NA
7	January 2017 through December 2017	1.38% and 1.06%	Pending	NA
8	January 2018 through December 2018	1.06%	Pending	NA

1DOC has recommended reducing the rate for the first annual review period to 0.73% (from 5.92%) through remand.  The court had not yet accepted this recommendation as of March 31, 2018.  Should this rate hold through the appeal process, Lumber Liquidators would reverse the $0.8 million liability and record a receivable.

OtherMatters

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.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Summary of Significant Accounting Policies [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash and cash equivalents, accounts payable and other liabilities approximates fair value because of the short-term nature of these items. The carrying amount of obligations under the revolving credit facility approximates fair value due to the variable rate of interest. 

Merchandise Inventories

Merchandise Inventories

The Company values merchandise inventories at the lower of merchandise cost or net realizable value. The Company periodically reviews the carrying value of items in inventory and records a lower of cost or net realizable value adjustment when there is evidence that the utility of inventory will be less than its cost.  In determining market value, the Company makes judgments and estimates as to the market value of its products, based on factors such as historical results and current sales trends.  Although the Company believes its products are appropriately valued as of the balance sheet date, there can be no assurance that future events or changes in key assumptions would not significantly impact their value. 

Recognition of Net Sales

Recognition of Net Sales

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“Topic 606”), Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and when control of those goods and services has passed to the customer.  The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method.  However, because adoption of the standard did not change the timing or amount of the Company’s recognition of revenue and because the Company does not recognize revenues for partial contracts, there was no adjustment to retained earnings needed as part of the adoption of the new standard. 

The Company generates revenues primarily by retailing merchandise in the form of hardwood and wood-look flooring and accessories. Additionally, the Company expands its revenues by offering services to deliver and/or install this merchandise for its customers; it considers these services to be separate performance obligations.  The separate performance obligations are detailed on the customer’s invoice(s) and the customer often purchases flooring merchandise without purchasing installation or delivery services. Sales occur through a network of 398 stores spanning 46 states including eight stores in Canada. In addition, both the merchandise and services can be ordered through a call center and from the Company’s website, www.lumberliquidators.com.  The Company’s agreements with its customers are of short duration (less than a year) and as such the Company has elected not to disclose revenue for partially satisfied contracts that will be completed in the days following the end of a period as permitted by GAAP.  The Company reports its revenues exclusive of sales taxes collected from customers and remitted to governmental taxing authorities, consistent with past practice.

Revenue is based on consideration specified in a contract with a customer, and excludes any sales incentives from vendors and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or performing service for a customer. Revenues from installation and freight services are recognized when the delivery is made or the installation is complete, which approximates the recognition of revenue over time due to the short duration of service provided.  The price of the Company’s merchandise and services are specified in the contract and detailed on the invoice agreed to with the customer including any discounts.  The Company generally requires customers to pay a deposit, equal to approximately half of the retail sales value, when ordering merchandise not regularly carried in a given location or not currently in stock.  In addition, the Company generally does not extend credit to its customers with payment due in full at the time the customer takes possession of merchandise or when the service is provided. Customer payments and deposits received in advance of the customer taking possession of the merchandise or receiving the services are recorded as deferred revenues in the accompanying condensed consolidated balance sheet caption Customer Deposits and Store Credits.  The following table shows the activity in this account during the period:

	Three Months Ended March 31, 2018		Three Months Ended March 31, 2017
Customer Deposits and Store Credits, Beginning Balance	$	(38,546)	$	(32,639)
New Deposits		(285,522)		(277,279)
Recognition of Revenue		261,772		248,389
Sales Tax included in Customer Deposits		16,605		16,199
Other		2,198		3,203
Customer Deposits and Store Credits, Ending Balance	$	(43,493)	$	(42,127)

Subject to limitations under the Company’s policy, return of unopened merchandise is accepted for 30 days. The amount of revenue recognized for flooring merchandise is adjusted for expected returns, which are estimated based on the Company’s historical data, current sales levels, and forecasted economic trends. The Company uses the expected value method to estimate returns because it has a large number of contracts with similar characteristics.  The Company previously recognized revenue in full, recorded an allowance for expected returns (contra-revenue), and recorded a separate refund liability for expected returns. The Company reduces revenue by the amount of expected returns and records it within accrued expenses and other on the condensed consolidated balance sheet. The Company continues to estimate the amount of returns based on the historical data. In addition, the Company recognizes a related asset for the right to recover returned merchandise and records it in the Other Current Assets caption of the accompanying condensed consolidated balance sheet. This amount was $1.2 million at March 31, 2018.  The Company recognizes sales commissions as incurred since the amortization period is less than one year. The Company offers a range of limited warranties for the durability of the finish on its prefinished products.  These limited warranties range from one to 100 years, with lifetime warranties for certain of the Company’s products. Warranty reserves are based primarily on claims experience, sales history and other considerations. Warranty costs are recorded in cost of sales. These costs are included in Selling, General, and Administrative Expenses on the condensed consolidated statements of operations.

In total, we offer hundreds of different flooring products; however, no single flooring product represented a significant portion of our sales mix. By major product category, our sales mix was as follows:

	Three Months Ended March 31, 2018				Three Months Ended March 31, 2017
Solid and Engineered Hardwood, Bamboo and Cork	$	96,684	37%	$	109,054	44%
Manufactured Products1		90,929	35%		72,901	29%
Moldings and Accessories and Other		48,896	19%		49,043	20%
Installation and Delivery Services		25,263	9%		17,391	7%
Total	$	261,772	100%	$	248,389	100%
1 Includes laminate, vinyl, engineered vinyl plank and wood-look ceramic tile.

Cost of Sales

Cost of Sales

Cost of sales includes the cost of the product sold, cost of installation services, transportation costs from vendor to the Company’s distribution centers or store locations, any applicable finishing costs related to production of the Company’s proprietary brands, transportation costs from distribution centers to store locations, transportation costs for the delivery of products from store locations to customers, certain costs of quality control procedures, warranty and customer satisfaction costs, inventory adjustments including shrinkage, and costs to produce samples, reduced by vendor allowances.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), which creates ASC Topic 842, Leases, and supersedes the lease accounting requirements in Topic 840, Leases. In summary, Topic 842 requires organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Therefore, the new standard will become effective for the Company at the beginning of its 2019 fiscal year. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements including educating employees of the breadth of the new standard, evaluating software solutions to track leases, identifying all leases including reviewing contracts for potential embedded leases.  The Company is monitoring the FASB’s recent deliberations surrounding a simplified transition approach and is evaluating the practical expedients provided by that approach as well as those already included the standard.  When implemented, the standard is expected to have a material impact as operating leases will be recognized on the Company’s consolidated balance sheet.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Summary of Significant Accounting Policies [Abstract]

Schedule of Deferred Revenues

The following table shows the activity in this account during the period:

	Three Months Ended March 31, 2018		Three Months Ended March 31, 2017
Customer Deposits and Store Credits, Beginning Balance	$	(38,546)	$	(32,639)
New Deposits		(285,522)		(277,279)
Recognition of Revenue		261,772		248,389
Sales Tax included in Customer Deposits		16,605		16,199
Other		2,198		3,203
Customer Deposits and Store Credits, Ending Balance	$	(43,493)	$	(42,127)

Sales Mix by Major Product

In total, we offer hundreds of different flooring products; however, no single flooring product represented a significant portion of our sales mix. By major product category, our sales mix was as follows:

	Three Months Ended March 31, 2018				Three Months Ended March 31, 2017
Solid and Engineered Hardwood, Bamboo and Cork	$	96,684	37%	$	109,054	44%
Manufactured Products1		90,929	35%		72,901	29%
Moldings and Accessories and Other		48,896	19%		49,043	20%
Installation and Delivery Services		25,263	9%		17,391	7%
Total	$	261,772	100%	$	248,389	100%
1 Includes laminate, vinyl, engineered vinyl plank and wood-look ceramic tile.

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2018

Stockholders' Equity [Abstract]

Computation of Basic and Diluted Net Income (Loss) Per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

	Three Months Ended
	March 31,
	2018		2017
Net Loss	$	(1,972)	$	(26,372)
Weighted Average Common Shares Outstanding—Basic		28,508		28,292
Effect of Dilutive Securities:
Common Stock Equivalents		—		—
Weighted Average Common Shares Outstanding—Diluted		28,508		28,292
Net Loss per Common Share—Basic	$	(0.07)	$	(0.93)
Net Loss per Common Share—Diluted	$	(0.07)	$	(0.93)

Anti-Dilutive Securities Excluded from Computation of Weighted Average Common Shares Outstanding-Diluted

The following shares have been excluded from the computation of Weighted Average Common Shares Outstanding—Diluted because the effect would be anti-dilutive:

	Three Months Ended March 31,
	2018	2017
Stock Options	688	769
Restricted Shares	347	469

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Stock-Based Compensation [Abstract]

Summary of Activity Related to Stock Options and Restricted Stock Awards

The following table summarizes share activity related to stock options and restricted stock awards (“RSAs”):

	Stock Options	Restricted Stock Awards
Options Outstanding/Nonvested RSAs, December 31, 2017	690	480
Granted	77	174
Options Exercised/RSAs Released	(3)	(70)
Forfeited	(25)	(21)
Options Outstanding/Nonvested RSAs, March 31, 2018	739	563

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies [Abstract]

Schedule of Other Commitments

Results by period for the Company are shown below. The column labeled ‘March 31, 2018 Receivable/Liability Balance’ represents the amount the Company would receive or pay as the result of subsequent adjustment to rates whether due to finalization by DOC or because of action of a court based on appeals by various parties.  It does not include any amounts paid for AD or CVD in the current period at the in-effect rate at that time.

Review Period	Period Covered	Rates at which Company Deposited	Final Rate	March 31, 2018 Receivable/Liability Balance
Antidumping
1	May 2011 through November 2012	6.78% and 3.3%	5.92%	$0.8 million liability1
2	December 2012 through November 2013	3.30%	13.74%	$4.1 million liability
3	December 2013 through November 2014	3.3% and 5.92%	17.37%	$5.5 million liability
4	December 2014 through November 2015	5.92% and 13.74%	0.0%	$2.1 million receivable
5	December 2015 through November 2016	5.92%,  13.74%, and 17.37%	Pending but preliminary determination was 0.0%	NA
6	December 2016 through November 2017	17.37% and 0.0%	Pending	NA
7	December 2017 through November 2018	0.0%	Pending	NA
Countervailing
1&2	April 2011 through December 2012	1.50%	0.83% / 0.99%	$0.2 million receivable
3	January 2013 through December 2013	1.50%	1.38%	$.05 million receivable
4	January 2014 through December 2014	1.50% and 0.83%	1.06%	$.02 million receivable
5	January 2015 through December 2015	0.83% and 0.99%	Pending but preliminary determination was 0.89%	NA
6	January 2016 through December 2016	0.99% and 1.38%	Pending	NA
7	January 2017 through December 2017	1.38% and 1.06%	Pending	NA
8	January 2018 through December 2018	1.06%	Pending	NA

1DOC has recommended reducing the rate for the first annual review period to 0.73% (from 5.92%) through remand.  The court had not yet accepted this recommendation as of March 31, 2018.  Should this rate hold through the appeal process, Lumber Liquidators would reverse the $0.8 million liability and record a receivable.

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Basis of Presentation (Narrative) (Detail)	Mar. 31, 2018 store state territory
Basis of Presentation [Abstract]
Number of States in which Stores Operates | state	46
Number of Stores | store	398
Number of Canadian Stores | territory	8

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Summary of Significant Accounting Policies (Narrative) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($) store state territory
Summary of Significant Accounting Policies [Abstract]
Number of Stores | store	398
Number of States in which Entity Operates | state	46
Number of Canadian Stores | territory	8
Minimum years of product warranty	1 year
Maximum years of product warranty	100 years
Product warranty reserve | $	$ 1.2
Maximum amortization period for sales commissions	1 year

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Summary of Significant Accounting Policies (Schedule of Deferred Revenues) (Details) - Customer Deposits and Store Credits [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Deferred Revenue Arrangement [Line Items]
Customer Deposits and Store Credits, Beginning Balance	$ (38,546)	$ (32,639)
New Deposits	(285,522)	(277,279)
Recognition of Revenue	261,772	248,389
Sales Tax included in Customer Deposits	16,605	16,199
Other	2,198	3,203
Customer Deposits and Store Credits, Ending Balance	$ (43,493)	$ (42,127)

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Summary of Significant Accounting Policies (Sales Mix by Major Product) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Product Information [Line Items]
Net sales	$ 261,772	$ 248,389
Percent of sales	100.00%	100.00%
Solid and Engineered Hardwood, Bamboo and Cork[Member]
Product Information [Line Items]
Net sales	$ 96,684	$ 109,054
Percent of sales	37.00%	44.00%
Manufactured Products [Member]
Product Information [Line Items]
Net sales	$ 90,929	$ 72,901
Percent of sales	35.00%	29.00%
Moldings and Accessories and Other [Member]
Product Information [Line Items]
Net sales	$ 48,896	$ 49,043
Percent of sales	19.00%	20.00%
Installation and Delivery Services [Member]
Product Information [Line Items]
Net sales	$ 25,263	$ 17,391
Percent of sales	9.00%	7.00%

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Stockholders' Equity (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Stockholders' Equity [Abstract]
Stock Repurchase Program, Authorized Amount	$ 150.0
Common Stock Repurchased, Remaining Authorized Amount	$ 14.7
Treasury Stock, Shares, Acquired	0	0	0

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Stockholders' Equity (Computation of Basic and Diluted Net Income Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stockholders' Equity [Abstract]
Net Income (Loss)	$ (1,972)	$ (26,372)
Weighted Average Common Shares Outstanding-Basic	28,508	28,292
Effect of Dilutive Securities:
Common Stock Equivalents
Weighted Average Common Shares Outstanding-Diluted	28,508	28,292
Net Loss per Common Share-Basic	$ (0.07)	$ (0.93)
Net Loss per Common Share-Diluted	$ (0.07)	$ (0.93)

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Stockholders' Equity (Anti-Dilutive Securities Excluded from Computation of Weighted Average Common Shares Outstanding-Diluted) (Details) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earning per share	688	769
Restricted Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earning per share	347	469

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Stock-Based Compensation (Narrative) (Details) - Management [Member] - Performance-Base Restricted Stock Awards [Member] $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($) shares
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Awards granted | shares	30,887
Share-based compensation terms	The number of awards that will ultimately vest is contingent upon the achievement of these key financial metrics by the end of year two. Once these amounts have been determined, half of the shares will vest at the end of year two and the remaining half will vest at the end of year three
Grant date fair value of awards | $	$ 0.7
Vesting period of grants	3 years
Share-based Compensation Award, Tranche One [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Percentage of awards vested	50.00%
Vesting period of grants	2 years
Share-based Compensation Award, Tranche Two [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Percentage of awards vested	50.00%
Vesting period of grants	3 years

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Stock-Based Compensation (Summarizes Share Activity Related to Stock Options and Restricted Stock Awards) (Details)	3 Months Ended
	Mar. 31, 2018 shares
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance	690
Granted	77
Options Exercised/RSAs Released	(3)
Forfeited	(25)
Ending Balance	739
Restricted Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance	480
Granted	174
Options Exercised/RSAs Released	(70)
Forfeited	(21)
Ending Balance	563

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Income Taxes (Narrative) (Details)		1 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 21, 2017	Mar. 31, 2018	Mar. 31, 2017
Income Taxes [Abstract]
Effective tax rate			(11.60%)	(1.70%)
Statutory rate	21.00%	35.00%	21.00%

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Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Loss Contingencies [Line Items]
Environmental Compliance Plan, Outside Audit Period		5 years
Antidumping Duties [Member]
Loss Contingencies [Line Items]
Loss Contingency Multilayered Hardwood Products Purchase Percentage				8.00%	7.00%
Litigation Relating to Formaldehyde Abrasion MDL's [Member]
Loss Contingencies [Line Items]
Settlement Agreement Date		March 15, 2018
Litigation Settlement, Amount	$ 36,000			$ 36,000
Litigation Settlement, Expense		$ 250	$ 1,000
Cash and or Common Stock [Member] | Litigation Relating to Formaldehyde Abrasion MDL's [Member]
Loss Contingencies [Line Items]
Litigation Settlement, Amount	22,000
In Store Credit [Member] | Litigation Relating to Formaldehyde Abrasion MDL's [Member]
Loss Contingencies [Line Items]
Litigation Settlement, Amount	$ 14,000

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Commitments and Contingencies (Schedule of Other Commitments) (Details) - USD ($) $ in Thousands	3 Months Ended	4 Months Ended	12 Months Ended										19 Months Ended	21 Months Ended
	Mar. 31, 2018	Mar. 31, 2018	Dec. 31, 2017	Nov. 30, 2017	Dec. 31, 2016	Nov. 30, 2016	Dec. 31, 2015	Nov. 30, 2015	Dec. 31, 2014	Nov. 30, 2014	Dec. 31, 2013	Nov. 30, 2013	Nov. 30, 2012	Dec. 31, 2012
Antidumping Duties [Member] | First Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Antidumping Duty Rate, Maximum													5.92%
Contingent Liability	$ 800	$ 800
Antidumping Duties [Member] | First Annual Review [Member] | Scenario, Plan [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Antidumping Duty Rate, Maximum	0.73%
Contingent Liability, Period Increase (Decrease)	$ (800)
Antidumping Duties [Member] | Second Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate												3.30%
Loss Contingency Modified Purchase Price Of Antidumping Duty Rate, Maximum												13.74%
Contingent Liability	4,100	4,100
Antidumping Duties [Member] | Third Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Antidumping Duty Rate, Maximum										17.37%
Contingent Liability	5,500	5,500
Antidumping Duties [Member] | Fourth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Antidumping Duty Rate, Maximum								0.00%
Contingent Receibable	2,100	$ 2,100
Antidumping Duties [Member] | Fith Annual Review [Member] | Scenario, Plan [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Antidumping Duty Rate, Maximum						0.00%
Antidumping Duties [Member] | Seventh Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate		0.00%
Countervailing Duties [Member] | First and Second Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate														1.50%
Contingent Receibable	200	$ 200
Countervailing Duties [Member] | Third Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate											1.50%
Loss Contingency Modified Purchase Price Of Countervailing Duties Rate, Maximum											1.38%
Contingent Receibable	50	50
Countervailing Duties [Member] | Fourth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Countervailing Duties Rate, Maximum									1.06%
Contingent Receibable	$ 20	$ 20
Countervailing Duties [Member] | Fith Annual Review [Member] | Scenario, Plan [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Countervailing Duties Rate, Maximum							0.89%
Countervailing Duties [Member] | Eighth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate	1.06%
Deposit One [Member] | Antidumping Duties [Member] | First Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate													6.78%
Deposit One [Member] | Antidumping Duties [Member] | Third Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate										3.30%
Deposit One [Member] | Antidumping Duties [Member] | Fourth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate								5.92%
Deposit One [Member] | Antidumping Duties [Member] | Fith Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate						5.92%
Deposit One [Member] | Antidumping Duties [Member] | Sixth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate				17.37%
Deposit One [Member] | Countervailing Duties [Member] | First and Second Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Countervailing Duties Rate, Maximum														0.83%
Deposit One [Member] | Countervailing Duties [Member] | Fourth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate									1.50%
Deposit One [Member] | Countervailing Duties [Member] | Fith Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate							0.83%
Deposit One [Member] | Countervailing Duties [Member] | Sixth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate					0.99%
Deposit One [Member] | Countervailing Duties [Member] | Seventh Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate			1.38%
Deposit Two [Member] | Antidumping Duties [Member] | First Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate													3.30%
Deposit Two [Member] | Antidumping Duties [Member] | Third Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate										5.92%
Deposit Two [Member] | Antidumping Duties [Member] | Fourth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate								13.74%
Deposit Two [Member] | Antidumping Duties [Member] | Fith Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate						13.74%
Deposit Two [Member] | Antidumping Duties [Member] | Sixth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate				0.00%
Deposit Two [Member] | Countervailing Duties [Member] | First and Second Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Modified Purchase Price Of Countervailing Duties Rate, Maximum														0.99%
Deposit Two [Member] | Countervailing Duties [Member] | Fourth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate									0.83%
Deposit Two [Member] | Countervailing Duties [Member] | Fith Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate							0.99%
Deposit Two [Member] | Countervailing Duties [Member] | Sixth Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate					1.38%
Deposit Two [Member] | Countervailing Duties [Member] | Seventh Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Countervailing Duties Rate			1.06%
Deposit Three [Member] | Antidumping Duties [Member] | Fith Annual Review [Member]
Loss Contingencies [Line Items]
Loss Contingency Purchase Price Of Antidumping Duty Rate						17.37%