Lumber Liquidators 2015 Annual Report Download - page 20

our expectations and we may not achieve the benefits that we anticipate. Further, we may face challenges
relating to the management of inventory in separate warehouse facilities located on opposite coasts and the
impact of the East Coast distribution facility.
If either of these facilities or our inventory held in those locations were damaged or destroyed by fire,
wood infestation or other causes, our distribution processes would be disrupted, which could cause significant
delays in delivery. This could impede our ability to stock our stores and deliver products to our customers,
and cause our net sales and operating results to deteriorate.
Damage, destruction or disruption of our Toano facility or equipment could significantly impact our
operations and impede our ability to finish and distribute certain of our products.
Our Toano, Virginia facility serves as our corporate headquarters and, among other things, houses our
primary computer systems, which control our management information and inventory management systems. In
addition, in 2015, we finished approximately 79% of all Bellawood products, as well as small quantities of
certain other products, there. In 2015, Bellawood flooring accounted for approximately 13% of our net sales.
If the Toano facility or equipment were damaged or destroyed, it could harm our operations, cause significant
lost production and impact our ability to fulfill customer demand.
The operation of stores in Canada may present increased legal and operational risks.
We opened our first stores in Canada in 2011 and currently operate eight store locations there. As a result
of our limited penetration and operation history in the Canadian market, these stores may continue to be less
successful than we expect. Additionally, greater investments in advertising and promotional activity may be
required to continue to build brand awareness in that market. Furthermore, by comparison, we have limited
experience with the legal and regulatory environments and market practices outside of the United States and
cannot guarantee that we will be able to operate profitably in the Canadian market or in a manner and with
results similar to our U.S. stores. We may also incur increased costs in complying with applicable Canadian
laws and regulations as they pertain to both our products and our operations.
The operation of our Representative Office in China may present increased legal and operational risks.
We established a representative office in Shanghai, China to facilitate our product sourcing in Asia and
we may incur additional costs associated with its operation. In addition, we may incur increased costs to
comply with applicable Chinese laws and regulations that exceed our expectations. Further, if we fail to
comply with applicable laws and regulations, we could be subject to, among other things, litigation and
government and agency investigations.
Failure to effectively manage our third party installers may present increased legal and operational risks.
In certain geographical regions, we manage third party installers who provide installation services to
some of our customers. In some of these jurisdictions, we are subject to regulatory requirements and risks
applicable to general contractors, which include management of licensing, permitting and quality of our third
party installers. We have established processes and procedures designed to manage these requirements and
ensure customer satisfaction with the services provided by our third party installers. If we fail to manage these
processes effectively or provide proper oversight of these services, we may be subject to regulatory
enforcement and litigation and our net sales and our profitability and reputation could be harmed.
Failure to manage our growth effectively could harm our business and operating results.
Our plans call for a significant number of new stores, and increased orders from our website, call center
and catalogs. Our existing management information systems, including our store management systems,
compliance procedures and financial and reporting controls, may be unable to support our expansion.
Managing our growth effectively will require us to continue to enhance these systems, procedures and controls
and to hire, train and retain regional and store managers and personnel for our compliance and financial and
reporting departments. We may not respond quickly enough to the changing demands that our expansion will
impose on us. Any failure to manage our growth effectively could harm our business and operating results.
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