Lumber Liquidators 2009 Annual Report Download - page 20

Our ability to obtain products from abroad and the operations of many of our international suppliers are subject to risks
that are beyond our control and that could harm our operations.
We rely on a select group of international suppliers to provide us with flooring products that meet our specifications. In
2009, approximately 44% of our product was sourced from Asia, approximately 13% was sourced from South America and
approximately 6% was sourced from other locations outside of North America. As a result, we are subject to risks associated
with obtaining products from abroad, including:
• political unrest, terrorism and economic instability resulting in the disruption of trade from foreign countries where
our products originate;
• currency exchange fluctuations;
• the imposition of new laws and regulations, including those relating to environmental matters and climate change
issues; imports, duties, taxes and other charges on exports or imports; labor conditions; quality and safety
standards; trade restrictions; and restrictions on funds transfers;
• disruptions or delays in production or shipments; and
• changes in local economic conditions in countries where our suppliers are located.
These and other factors beyond our control could disrupt the ability of our suppliers to ship certain products to us cost-
effectively or at all, which could harm our operations.
Increased hardwood costs could harm our results of operations.
The cost of the various species of hardwood that are used in our products is important to our profitability. Hardwood
lumber costs fluctuate because of changes in domestic and international supply and demand, labor costs, competition, market
speculation, product availability, environmental restrictions, government regulation and trade policies, weather conditions,
processing and freight costs and delivery delays. We generally do not have long-term supply contracts or guaranteed
purchase amounts. As a result, we may not be able to anticipate or react to changing hardwood costs by adjusting our
purchasing practices, and we may not always be able to increase the selling prices of our products in response to increases in
supply costs. If we cannot address changing hardwood costs appropriately, it could cause our operating results to deteriorate.
Increased delivery costs, particularly those relating to the cost of fuel, could harm our results of operations.
The efficient transportation of our products through our supply chain is a critical component of our operations. If the
cost of fuel or other costs, such as import tariffs, rise, it could result in increases in our cost of sales and selling, general and
administrative expenses due to additional delivery charges and in the fees transportation companies charge us to transport our
products to our stores and customers. We may be unable to increase the price of our products to offset increased delivery
charges, which could cause our operating results to deteriorate.
Damage, destruction or disruption of our Toano facility could significantly impede our ability to finish and distribute our
products.
We currently finish approximately 75% of all Bellawood products at our Toano facility. In 2009, Bellawood flooring
accounted for approximately one-fifth of our net sales. We also finish small quantities of certain of our other products there.
In addition, the Toano facility serves as our primary distribution center, and approximately 88% of our merchandise passes
through this facility before we move it to our stores. The Toano facility also houses our primary computer systems, which
control our management information and inventory management systems, and our corporate headquarters. If the Toano
facility or our inventory held there were damaged or destroyed by fire, wood infestation or other causes, our entire finishing
and distribution processes would be disrupted, which could cause significant lost production and delays in delivery. This
could impede our ability to stock our stores and deliver products to our customers, and cause our net sales and operating
results to deteriorate.
If our management information systems experience disruptions, it could disrupt our business and reduce our net sales.
We depend on our management information systems to integrate the activities of our stores, website and call center, to
process orders, to respond to customer inquiries, to manage inventory, to purchase merchandise and to sell and ship goods on
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