Lumber Liquidators 2010 Annual Report Download - page 21

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 76% of all Bellawood products at our Toano facility. In 2010, Bellawood flooring
accounted for approximately one-sixth 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 81% 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
a timely basis. We may experience operational problems with our information systems as a result of system failures, viruses,
computer “hackers” or other causes. Any significant disruption or slowdown of our systems could cause information,
including data related to customer orders, to be lost or delayed, which could result in delays in the delivery of products to our
stores and customers or lost sales. Moreover, our entire corporate network, including our telephone lines, is on an Internet-
based network. Accordingly, if our network is disrupted, we may experience delayed communications within our operations
and between our customers and ourselves, and may not be able to communicate at all via our network, including via
telephones connected to our network.
Any disruption of our website or our call center could disrupt our business and lead to reduced net sales and reputational
damage.
Our website and our call center are integral parts of our integrated multi-channel strategy. Customers use our website
and our call center as information sources on the range of products available to them and to order our products, samples or
catalogs. Our website, in particular, is vulnerable to certain risks and uncertainties associated with the Internet, including
changes in required technology interfaces, website downtime and other technical failures, security breaches and consumer
privacy concerns. If we cannot successfully maintain our website and call center in good working order, it could reduce our
net sales and damage our reputation.
Failure to manage our growth effectively could harm our business and operating results.
Our plans call for a significant number of new stores, and increased orders from our website, call center and catalogs.
Our existing management information systems, including our store management systems and financial and management
controls, may be unable to support our expansion. Managing our growth effectively will require us to continue to enhance
these systems, procedures and controls and to hire, train and retain regional managers, store managers and store staff. We
may not respond quickly enough to the changing demands that our expansion will impose on our management, staff and
existing infrastructure. Any failure to manage our growth effectively could harm our business and operating results.
Our success depends substantially upon the continued retention of certain key personnel.
We believe that our success has depended and continues to depend to a significant extent on the efforts and abilities of
our senior management team. The loss, for any reason, of the services of any of these key individuals and any negative
market or industry perception arising from such loss, could damage our business and harm our reputation.
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