Lumber Liquidators 2011 Annual Report Download - page 24

Failure to maintain relevant product endorsement agreements and product placement arrangements could harm our
reputation and cause our net sales to deteriorate.
We have established relationships with well-known and respected home improvement celebrities to evaluate, promote
and help establish with consumers the high-quality nature of our products. If these individuals were to stop promoting our
products, if we were unable to renew our endorsement contracts with them or if we could not find other endorsers of a similar
caliber, our net sales and reputation could be harmed. Similarly, any actions that persons endorsing our products may take,
whether or not associated with our products, which harm their or our reputations could also harm our brand image with
consumers and our reputation, and cause our net sales to deteriorate. We also have a number of product placement
arrangements with home improvement-related television shows. We rely on these arrangements to increase awareness of our
brands, and to enable potential customers to see both what our flooring will look like after installation and the relative ease
with which it can be installed. Any failure to continue these arrangements could cause our brands to become less well-known
and cause our net sales to deteriorate.
We may not be able to adequately protect our intellectual property, which could harm the value of our brands and harm
our business.
Our intellectual property is material to the conduct of our business. Our ability to implement our business plan
successfully depends in part on our ability to further build brand recognition using our trademarks, service marks and other
proprietary intellectual property, including our name and logo and the names and logos of our brands. We may incur
significant costs and expenses relating to our efforts to enforce our intellectual property rights. If our efforts to protect our
intellectual property are inadequate, or if any third party infringes on or misappropriates our intellectual property, the value
of our brands may be harmed, which could adversely affect our business and might prevent our brands from achieving or
maintaining market acceptance. We may also encounter claims from prior users of similar intellectual property in locales
where we operate or intend to operate. This could harm our image, brand or competitive position and cause us to incur
significant penalties and costs.
Risks Relating to Our Common Stock
Tom Sullivan has the ability to exercise influence over us and his interests in our business may be different than yours.
At December 31, 2011, Tom controlled approximately 7% of our outstanding common stock. Accordingly, he is able to
exercise influence over our business policies and affairs and all matters requiring a stockholders’ vote, including the
composition of our board of directors, the adoption of amendments to our certificate of incorporation and the approval of
mergers or sales of all or substantially all of our assets. This concentration of ownership could also delay, defer or even
prevent a change in control of our company and may make some transactions more difficult or impossible without his
support. Tom’s interests may conflict with yours, and he may seek to cause us to take courses of action that, in his judgment,
could enhance his investment in us, but which might involve risks to holders of our common stock or be harmful to our
business or other investors. In addition, the timing and volume of any transactions involving our common stock by Tom may,
among other things, cause fluctuations in the price of our common stock.
Our anti-takeover defense provisions may cause our common stock to trade at market prices lower than it might absent
such provisions.
Our certificate of incorporation and bylaws contain several provisions that may make it more difficult or expensive for a
third party to acquire control of us without the approval of our board of directors. These provisions include a staggered
board, the availability of “blank check” preferred stock, provisions restricting stockholders from calling a special meeting of
stockholders or requiring one to be called or from taking action by written consent and provisions that set forth advance
notice procedures for stockholders’ nominations of directors and proposals of topics for consideration at meetings of
stockholders. Our certificate of incorporation also provides that Section 203 of the Delaware General Corporation Law,
which relates to business combinations with interested stockholders, applies to us. These provisions may delay, prevent or
deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders
receiving a premium over the market price for their common stock. In addition, these provisions may cause our common
stock to trade at a market price lower than it might absent such provisions.
Our common stock price may be volatile and you may lose all or part of your investment.
The market price of our common stock could fluctuate significantly. Those fluctuations could be based on various
factors in addition to those otherwise described in this report, including:
• our operating performance and the performance of our competitors;
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