Lumber Liquidators 2015 Annual Report Download - page 22

Product liability claims could adversely affect our net sales, profitability and reputation.
We face an inherent risk of exposure to product liability claims in the event that the use of our products
is alleged to have resulted in economic loss, personal injury or property damage or violated environmental or
other laws. In the event that any of our products proves to be defective or otherwise in violation of applicable
law, we may be required to recall or redesign such products. Further, in such instances, we may be subject to
legal action. We maintain insurance against some forms of product liability claims, but such coverage may not
be available or adequate for the liabilities actually incurred. A successful claim brought against us in excess of
available insurance coverage, or any claim or product recall that results in significant adverse publicity against
us, may have a material adverse effect on our net sales and operating results.
Our ability to obtain products from abroad and the operations of many of our international suppliers are
subject to risks that are beyond our control and that could harm our operations.
We rely on a select group of international suppliers to provide us with flooring products that meet our
specifications. In 2015, approximately 48% of our product was sourced from North America, approximately
39% of our product was sourced from Asia, approximately 8% was sourced from Europe and Australia and
approximately 5% was sourced South America. As a result, we are subject to risks associated with obtaining
products from abroad, including:
• political unrest, terrorism and economic instability resulting in the disruption of trade from foreign
countries where our products originate;
• currency exchange fluctuations;
• the imposition of new laws and regulations, including those relating to environmental matters and
climate change issues; labor conditions; quality and safety standards; trade restrictions; and
restrictions on funds transfers;
• the imposition of new or different duties (including antidumping and countervailing duties), tariffs,
taxes and/or other charges on exports or imports, including as a result of errors in the classification
of products upon entry or changes in the interpretation or application of rates or regulations relating
to the import or export of our products;
• disruptions or delays in production, shipments, delivery or processing through ports of entry
(including those resulting from strikes, lockouts, work-stoppages or slowdowns, or other forms of
labor unrest);
• changes in local economic conditions in countries where our suppliers are located; and
• differences in product standards, acceptable business practice and legal environments.
These and other factors beyond our control could disrupt the ability of our suppliers to ship certain
products to us cost-effectively or at all, which could harm our operations.
Our ability to offer hardwood flooring, particularly products made of more exotic species, depends on the
continued availability of sufficient suitable hardwood.
Our business strategy depends on offering a wide assortment of hardwood flooring to our customers.
We sell flooring made from species ranging from domestic maple, oak and pine to imported cherry, koa,
mahogany and teak. Some of these species are scarce, and we cannot be assured of their continued
availability. Our ability to obtain an adequate volume and quality of hard-to-find species depends on our
suppliers’ ability to furnish those species, which, in turn, could be affected by many things including events
such as forest fires, insect infestation, tree diseases, prolonged drought and other adverse weather and climate
conditions. Government regulations relating to forest management practices also affect our suppliers’ ability to
harvest or export timber, and changes to regulations and forest management policies, or the implementation of
new laws or regulations, could impede their ability to do so. If our suppliers cannot deliver sufficient
hardwood and we cannot find replacement suppliers, our net sales and operating results may be negatively
impacted.
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