Lumber Liquidators 2007 Annual Report Download - page 58

Lumber Liquidators, Inc.
Notes to Financial Statements
(amounts in thousands, except share data and per share amounts)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Lumber Liquidators, Inc. (the “Company”) is a multi-channel specialty retailer of hardwood flooring, and
hardwood flooring enhancements and accessories, operating as a single business segment. The Company offers
an extensive assortment of exotic and domestic hardwood species, engineered hardwoods, and laminates direct to
the consumer. The Company also features the renewable flooring products, bamboo and cork, and provides a
wide selection of flooring enhancements and accessories, including moldings, noise-reducing underlay and
adhesives. These products are primarily sold under the Company’s private label brands, including the premium
Bellawood brand floors. The Company sells primarily to homeowners or to contractors on behalf of homeowners
through a network of 116 store locations in primary or secondary metropolitan areas in 43 states. In addition to
the store locations, the Company’s products may be ordered, and customer questions/concerns addressed,
through both our call center in Toano, Virginia, and our website, www.lumberliquidators.com. The Company
finishes the majority of the Bellawood products in Toano, Virginia, which along with the call center, corporate
offices, and finishing and distribution facility represent the “Corporate Headquarters.”
Organization and Basis of Financial Statement Presentation
The Company was organized in 1994 as a Massachusetts corporation and the original equity interest was
held solely by the founder and current chairman of the Board (the “Founder”). On August 28, 2007, the Company
was reincorporated in Delaware. As a Massachusetts corporation, the Company’s stock had no par value. As a
result of the reincorporation in Delaware, the par value was increased to $0.001 per share (the “Common Stock”).
In 2004, a private investment group purchased 7,952,018 shares of Series A Convertible Preferred Stock
with a par value of $0.01 (the “Redeemable Preferred Stock”) for $35,000. All shares of Redeemable Preferred
Stock were converted into shares of Common Stock on a one-to-one basis on November 8, 2007.
On November 9, 2007, the Company completed its offering of 3,800,000 shares of Common Stock in an
initial public offering at a per share price of $11.00, receiving net proceeds of approximately $36,150 (the
“IPO”). The Founder and the private investment group sold an additional 6,200,000 shares of common stock in
the IPO.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity date of three months or less when
purchased to be cash equivalents. For those short-term investments, the carrying amount is a reasonable estimate
of fair value. The Company accepts a range of debit and credit cards, and these transactions are generally
transmitted to a bank for reimbursement within 24 hours. The payments due from the banks for these debit and
credit card transactions are generally received, or settle, within 24-48 hours of the transmission date. The
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