Lumber Liquidators 2013 Annual Report Download - page 19

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Market
According to the July 2013 Floor Coverings Industry report and quarterly updates from Catalina, the
hardwood flooring market represents approximately 11% of the overall U.S. floor coverings market, which
includes carpet and area rugs, solid and engineered hardwood, softwood and bamboo flooring, ceramic and
stone floor and wall tile, resilient sheet and floor tile, and laminate flooring. Due to improvements in the
quality and construction of certain products, ease of installation and lower average retail price points,
hardwood flooring’s share of the overall U.S. floor coverings market continues to increase, primarily by taking
share from soft surface flooring. Using Catalina estimates as a basis, we believe the 2013 retail value of the
U.S. hardwood and laminate flooring markets were approximately $4.2 billion and $1.8 billion, respectively.
Our share of the combined market was approximately 10.2% considering these products were approximately
64% of our sales mix in 2013.
The residential replacement wood flooring market is dependent on home-related, large-ticket discretionary
spending, which is itself influenced by a number of complex economic and demographic factors that may vary
locally, regionally and nationally. We believe this market is impacted by, among other things, home
remodeling activity, employment levels, housing turnover, home prices, new housing starts, consumer
confidence, borrowing rates, credit availability and the general health of consumer discretionary spending.
Overall, a number of these factors generally improved during both 2012 and 2013. However, many remain at
levels lower than historical averages. We expect continued strengthening over time, but marked by periodic
volatility when our customer is likely to be cautious and price-sensitive.
Catalina projects the hardwood flooring market will average annual growth of 5.0% per year through
2018, and perhaps greater, subject to the pace of macroeconomic recovery. We believe floor covering sales lag
single-family existing homes sales by approximately one year. As such, we believe we are well-positioned to
benefit from an improving housing market in the coming years. We continue to believe that the longer term
trends for our market remain favorable, including customer perception of hardwood flooring as an attractive
alternative to other floor coverings, the evolution of the hardwood flooring market, overall home improvement
spending and certain demographic trends.
Employees
As of December 31, 2013, we had 1,750 employees, 95% of whom were full-time and none of whom
were represented by a union. Of these employees, 70% work in our stores, 18% work in corporate store
support infrastructure or similar functions (including our call center employees) and 12% work either on our
finishing line or in our distribution centers. We believe that we have good relations with our employees.
Seasonality and Quarterly Results
Our quarterly results of operations fluctuate depending on the timing of our advertising expenses and the
timing of, and income contributed by, our new stores. Our net sales also fluctuate slightly as a result of
seasonal factors. We experience slightly higher net sales in spring and fall, when more home remodeling
activities are taking place, and slightly lower net sales in holiday periods and during the hottest summer
months. These seasonal fluctuations, however, are minimized to some extent by our national presence, as
markets experience different seasonal characteristics.
Intellectual Property and Trademarks
We have a number of marks registered in the United States, including Lumber Liquidators威, Bellawood威,
1-800-HARDWOOD威, 1-800-FLOORING威, Dura-Wood威, Quickclic威, Virginia Mill Works Co. Hand Scraped
and Distressed Floors威, Morning Star Bamboo Flooring威, Dream Home Laminate Floors威, Builder’s Pride威,
Schön Engineered Floors威, Casa de Colour Collection威and other product line names. We have also registered
certain marks in jurisdictions outside the United States, including the European Union, Canada, China,
Australia and Japan. We regard our intellectual property as having significant value and these names are an
important factor in the marketing of our brands. Accordingly, we take steps intended to protect our intellectual
property including, where necessary, the filing of lawsuits and administrative actions to enforce our rights. We
are not aware of any facts that could be expected to have a material adverse effect on our intellectual property.
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