Lumber Liquidators 2008 Annual Report Download - page 70

In November 2008, the parties completed the arbitration proceeding. Thereafter, in a ruling dated
December 1, 2008, the arbitrator determined that Kevin was entitled only to the Vested Shares and denied his
breach of contract, fraud and Wage Act claims against the Founder and the Company. The arbitrator ordered the
escrow agent to release the escrowed shares to the Founder and Kevin in amounts consistent with the arbitrator’s
ruling. The arbitrator did not award costs or attorney’s fees to any party. The Escrowed Shares were subsequently
released to Kevin and the Founder in accordance with the arbitrator’s award.
Vazilia Corporation
In July 2006, the Company entered into a purchase agreement with Vazilia Corporation (“Vazilia”) pursuant
to which the Company would purchase a total of approximately 27 million square feet of Vazilia’s assorted
products over a four-year period, with the unit prices set at the time a purchase order is created/accepted (the
“Purchase Agreement”). After entering into the Purchase Agreement, certain products ordered from Vazilia were
not delivered and certain products that were delivered did not meet the applicable specifications. As a result, the
Company has purchased these or similar products from other suppliers. The Company is not currently receiving
product under the Purchase Agreement.
On or about October 3, 2008, Vazilia filed a demand for arbitration in which it alleges that the Company has
breached the Purchase Agreement. Vazilia is seeking damages of approximately $1,600, plus costs of the
arbitration proceeding. In addition, Vazilia is requesting a declaration terminating the Purchase Agreement and
awarding liquidated damages provided thereunder.
In response to the demand for arbitration, the Company filed a counterclaim against Vazilia, which was
subsequently amended. The Company is seeking damages of approximately $1,530, plus interest, attorney’s fees
and costs, as well as a declaration that the Purchase Agreement is terminated. The Company denies the claims
asserted by Vazilia and intends to defend this matter and pursue its counterclaim vigorously. While there is a
reasonable possibility that a material loss may be incurred, the Company cannot estimate the loss, if any,
therefore no provision for losses has been provided.
NOTE 12. CONDENSED QUARTERLY FINANCIAL INFORMATION (unaudited)
The following tables present our unaudited quarterly results for 2008 and 2007.
Quarter Ended
March 31,
2008
June 30,
2008
September 30,
2008
December 31,
2008
(in thousands, except for per share amounts)
Net Sales ......................................... $114,549 $128,037 $123,063 $116,530
Gross Profit ....................................... 40,122 44,255 43,417 39,884
Selling, General and Administrative Expenses(1) ......... 32,314 34,934 34,607 28,838
Operating Income .................................. 7,808 9,321 8,810 11,046
Net Income ....................................... $ 4,312 $ 5,876 $ 5,463 $ 6,498
Net Income per Common Share – Basic ................. $ 0.16 $ 0.22 $ 0.20 $ 0.24
Net Income per Common Share – Diluted ............... $ 0.16 $ 0.22 $ 0.20 $ 0.24
(1) Selling, General and Administrative Expenses for the quarter ended December 31 includes ($2,960) of
stock-based compensation expense for the reversal of an accrual related to the Variable Plan.
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