Lumber Liquidators 2011 Annual Report Download - page 52

Lumber Liquidators Holdings, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share data and per share amounts)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Lumber Liquidators Holdings, 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 256 store locations in primary or secondary
metropolitan areas in 46 states and seven store locations in Canada at December 31, 2011. In addition to the store locations,
the Company’s products may be ordered, and customer questions/concerns addressed, through both the call center in Toano,
Virginia, and the website, www.lumberliquidators.com. The Company finishes the majority of the Bellawood products on its
finishing line in Toano, Virginia, which along with the call center, corporate offices, and a distribution center, represent the
“Corporate Headquarters.”
Organization and Basis of Financial Statement Presentation
The consolidated financial statements of the Company, a Delaware corporation, include the accounts of its wholly
owned subsidiaries, including Lumber Liquidators, Inc. (“LLI”). All significant intercompany transactions have been
eliminated in consolidation. The prior year balance sheet reflects the segregation of goodwill from other assets.
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 consolidated 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. The Company had cash equivalents of $16,064 and $17,050 at December 31, 2011 and 2010, respectively.
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 Company considers all debit and credit card transactions
that settle in less than seven days to be cash and cash equivalents. Amounts due from the banks for these transactions
classified as cash and cash equivalents totaled $11,535 and $4,196 at December 31, 2011 and 2010, respectively.
Credit Programs
Credit is offered to the Company’s customers through a proprietary credit card, the Lumber Liquidators credit card,
underwritten by third party financial institutions and at no recourse to the Company. A credit line is offered to the
Company’s professional customers through the Lumber Liquidators Commercial Credit Program. This commercial credit
program is underwritten by a third party financial institution, generally with no recourse to the Company.
As part of the credit program with GE Money Bank (“GE”), the Company’s customers may use their Lumber
Liquidators credit card to tender installation services provided by the Company’s installation partner, The Home Service
Store, Inc. (“HSS”). GE funds HSS directly for these transactions and HSS is responsible for all credits and program fees. If
GE is not able to collect net credits or fees from HSS within 60 days, the Company has agreed to indemnify GE against any
losses related to HSS credits or fees. There are no maximum potential future payments under the guarantee. The Company is
able to seek recovery from HSS of any amounts paid on its behalf. The Company believes that the risk of significant loss
from the guarantee of these obligations is remote.
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