Lumber Liquidators 2014 Annual Report Download - page 18

The residential replacement market for wood flooring 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, weather, employment levels, housing turnover (specifically, single family existing
home sales), home prices, new housing starts, consumer confidence, borrowing rates, credit availability and
the general health of consumer discretionary spending. The aggregate sales of single family homes displayed
year-over-year strength from the latter half of 2011 through the third quarter of 2013, but became and
remained negative on a year-over-year basis from the fourth quarter of 2013 through September 2014. We
continue to believe we are in a multi-year home remodeling recovery which began in 2009, which has been
and will continue to be marked by periodic volatility when our customer is likely to be cautious and
price-sensitive. Catalina projects the hardwood flooring market will have average annual growth of 4.0% to
5.0% for the next several years, subject to the pace of macroeconomic recovery, and we believe we are
well-positioned to benefit from an improving housing market.
Employees
As of December 31, 2014, we had 1,891 employees, 95% of whom were full-time and none of whom
were represented by a union. Of these employees, 71% work in our stores, 16% work in corporate store
support infrastructure or similar functions (including our call center employees) and 13% 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 fluctuate slightly as a result of seasonal
factors, and we adjust merchandise inventories in anticipation of those factors, causing variations in our build
of merchandise inventories. Generally, we experience higher than average net sales in the spring and fall,
when more home remodeling activities are taking place, and lower than average net sales in the winter months
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, Hardwood
Floors For Less!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.
Government Regulation
We are subject to extensive and varied federal, provincial, state and local government regulations in the
jurisdictions in which we operate, including laws and regulations relating to our relationships with our
employees and customers, public health and safety, zoning, accommodations for person with disabilities, and
fire codes. We operate each of our stores, offices, finishing facility and distribution centers in accordance with
standards and procedures designed to comply with applicable laws, codes and regulations. Our operations
and properties are also subject to federal, provincial, state and local laws and regulations relating to the use,
storage, handling, generation, transportation, treatment, emission, release, discharge and disposal of hazardous
materials, substances and wastes and relating to the investigation and cleanup of contaminated properties,
including off-site disposal locations. We do not currently incur significant costs complying with the laws and
regulations related to hazardous materials. However, we could be subject to material costs, liabilities or claims
relating to compliance in the future, especially in the event of changes in existing laws and regulations or in
their interpretation, as well as the passage of new laws and regulations.
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