Lumber Liquidators 2015 Annual Report Download - page 17

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Item 1A. Risk Factors.
The risks described below could materially and adversely affect our business, results of operations,
financial condition and cash flows. These risks are not the only risks that we face. Our business operations
could also be affected by additional factors that apply to all companies operating in the U.S. and globally, as
well as other risks that are not presently known to us or that we currently consider to be immaterial.
Risks Related to Our Operations
Unfavorable allegations, government investigations and legal actions surrounding our products or us could
harm our reputation and impair our ability to grow or sustain our business.
We rely on our reputation for offering great value, superior service and a broad selection of high-quality,
safe flooring products. We are currently involved in a number of government investigations and legal actions,
many of which have resulted from unfavorable allegations regarding our products and us. Negative publicity
surrounding these government investigations and legal actions could continue to harm our reputation and the
demand for our products. Additional unfavorable allegations, government investigations and legal actions
involving our products and us could also affect our perception in the market and our brands and negatively
impact our business and financial condition. For instance, unfavorable allegations surrounding the product
quality of our laminates sourced from China has and could continue to negatively affect our operations. If this
negative impact is significant, our ability to maintain our liquidity and grow or sustain our business could be
jeopardized.
We are involved in a number of legal proceedings and, while we cannot predict the outcomes of such
proceedings and other contingencies with certainty, some of these outcomes could adversely affect our
business and financial condition.
We are, or may become, involved in legal proceedings, government and agency investigations, and
consumer, employment, tort and other litigation (see discussion of Legal Proceedings in Item 3 of this Annual
Report and Note 10 to the consolidated financial statements included in Item 8 of this Annual Report). We
cannot predict with certainty the outcomes of these legal proceedings. The outcome of some of these legal
proceeding could require us to take, or refrain from taking, actions which could be costly to implement or
otherwise negatively affect our operations or could require us to pay substantial amounts of money that could
have a material adverse effect on our liquidity, financial condition and results of operations and could affect
our ability to obtain capital or access our revolving line of credit and continue as a going concern.
Additionally, defending against lawsuits and legal proceedings may involve significant expense and diversion
of management’s attention and resources.
Implementing our Environmental Compliance Plan will be costly to implement and the failure to
implement the plan could adversely affect our ability to import and, therefore, our results of operations.
As disclosed on October 7, 2015, we reached a settlement with the United States Department of Justice
(‘‘DOJ’’) regarding our compliance with the Lacey Act. In connection with that settlement, we agreed to
implement an environmental compliance plan (the ‘‘Compliance Plan’’) and we will be subject to a probation
period of five years. The implementation of the Compliance Plan will be costly and, if the implementation
costs are more than we anticipate, it could adversely impact our operating results. Further, in the event we fail
to implement the Compliance Plan as required and in accordance with set deadlines, the government may
require us to cease the importation of hardwood flooring from China until the DOJ determines that the
Compliance Plan has been satisfactorily implemented. If we have to cease the importation of hardwood
flooring, our ability to operate would be substantially harmed and our business, including our results of
operations, would be adversely affected.
Federal, provincial, state or local laws and regulations, or our failure to comply with such laws and
regulations, could increase our expenses, restrict our ability to conduct our business and expose us to legal
risks.
We are subject to a wide range of general and industry-specific laws and regulations imposed by federal,
provincial, state and local authorities in the countries in which we operate including those related to customs,
the environment, foreign operations (such as the Foreign Corrupt Practices Act), truth-in-advertising, consumer
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