Lumber Liquidators 2014 Annual Report Download - page 73

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Lumber Liquidators Holdings, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share data and per share amounts)
Note 10. Commitments and Contingencies − (continued)
advertising and representing that such products meet the CARB standards. The purported class consists of all
California consumers that purchased the subject products since 2011. In addition to attorneys’ fees and costs,
the Balero Plaintiffs seek (i) declarations that the Company’s policies and practices of labeling, advertising,
distributing and selling certain products it sells in California violate the CARB standards, (ii) injunctive relief
prohibiting the Company from continuing to distribute and/or sell laminate flooring products that violate the
CARB standards, (iii) restitution of all money and/or property that the Balero Plaintiffs and other purported
class members provided to the Company for the purchase and installation of certain products sold by the
Company that allegedly violate the CARB Standards, and (iv) damages, including actual, compensatory and
consequential, incurred by the Balero Plaintiffs and other purported class members in connection with the
Company’s alleged breach of warranty. The Company disputes the claims of the Balero Plaintiffs and intends
to defend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case,
insurance coverage issues and the legal standards that must be met for, among other things, class certification
and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may
result from this action.
Antidumping and Countervailing Duties Investigation
In October 2010, a conglomeration of domestic manufacturers of multilayered wood flooring filed a
petition seeking the imposition of antidumping (‘‘AD’’) and countervailing duties (‘‘CVD’’) with the
United States Department of Commerce (‘‘DOC’’) and the United States International Trade Commission
(‘‘ITC’’) against imports of multilayered wood flooring from China. This ruling applies to the Company’s
engineered hardwood imported from China, which accounted for approximately 11% of its flooring purchases
in 2014.
The DOC made preliminary determinations regarding CVD and AD rates in April 2011 and May 2011,
respectively. In December 2011, after certain determinations were made by the ITC and DOC, orders were
issued setting final AD and CVD rates at 3.3% and 1.5%, respectively. These rates became effective in the
form of additional duty deposits, which the Company has paid, and applied retroactively to the DOC
preliminary determinations of April 2011 and May 2011.
Following the issuance of the orders, a number of appeals were filed by several parties, including the
Company, challenging various aspects of the determinations made by both the ITC and DOC, including
certain aspects that may impact the validity of the AD and CVD orders and the applicable rates. The appeal of
the CVD order is expected to be concluded by mid-2015. On January 23, 2015, the Court of International
Trade issued a final decision rejecting the challenge of the AD rate for all but one Chinese exporter. This
decision is expected to be appealed to the Court of Appeals for the Federal Circuit later in 2015 and may take
a year to conclude.
As part of its processes in these proceedings, the DOC conducts annual reviews of the CVD and
AD rates. In such cases, the DOC issues preliminary rates that are not binding and subject to comment by
interested parties. After consideration of the comments received, the DOC will issue final rates for the
applicable period, which may lag by a year or more. As rates are adjusted through the administrative reviews,
the Company adjusts its payments prospectively based on the final rate.
In the first annual review in this matter, rates were modified for AD rates through November 2012 and
for CVD rates through 2011. Specifically, the AD rate was set at 5.92% and the CVD rate was set at 0.83%.
These rates are being appealed by several parties, including the Company. Nevertheless, at December 31,
2014, the Company was paying these rates on each applicable purchase.
In January 2015, pursuant to the second annual review, the DOC issued a preliminary AD rate of 18.27%
for purchases from December 2012 through November 2013 and a preliminary CVD rate of 0.97% for
purchases in fiscal year 2012. These rates are pending final determinations by the DOC which are currently
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