Lumber Liquidators 2015 Annual Report Download - page 64

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Lumber Liquidators Holdings, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share data and per share amounts)
Note 1. Summary of Significant Accounting Policies
Nature of Business
Lumber Liquidators Holdings, Inc. and its direct and indirect subsidiaries (collectively and, where
applicable, individually, the ‘‘Company’’) engage in business as a multi-channel specialty retailer of hardwood
flooring, and hardwood flooring enhancements and accessories, operating as a single operating segment. The
Company offers an extensive assortment of exotic and domestic hardwood species, engineered hardwood,
laminate and resilient vinyl flooring direct to the consumer. The Company also features the renewable flooring
products, bamboo and cork, and provides a wide selection of flooring enhancements and accessories, including
moldings, noise-reducing underlay, adhesives and flooring tools. The Company also provides in-home delivery
and installation services to certain of its customers. The Company sells primarily to homeowners or to
contractors on behalf of homeowners through a network of 366 store locations in primary or secondary
metropolitan areas in 46 states and eight store locations in Canada at December 31, 2015. In addition to the
store locations, the Company’s products may be ordered, and customer questions/concerns addressed, through
both its call center in Toano, Virginia, and its website, www.lumberliquidators.com. The Company finishes the
majority of the Bellawood products on its finishing lines in Toano, Virginia, which along with the call center,
corporate offices, and a distribution center, represent the ‘‘Corporate Headquarters.’’
Organization and Basis of Financial Statement Presentation
The consolidated financial statements of Lumber Liquidators Holdings, Inc., a Delaware corporation,
include the accounts of its wholly owned subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.
In 2014, the Company entered into an arrangement to begin to vertically integrate its domestic hardwood
supply to feed its finishing lines. During the quarter ended June 30, 2015, the Company decided to
discontinue certain of these vertical integration initiatives, which were previously consolidated as a variable
interest entity, and terminated its prior arrangement. As a result, the Company has recorded a charge of $1,457
in cost of sales in its consolidated statements of income upon deconsolidation of the variable interest entity.
The charge was measured as the difference between the fair value of the assets received upon termination and
the carrying value of the related net assets.
In order to conform to current year presentation, the Company has reclassified the deferred tax asset on the
accompanying December 31, 2014 consolidated balance sheet to a separate line item from other current assets.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company had cash equivalents of $8,551 and $12,700 at December 31, 2015 and 2014, respectively.
The Company considers all highly liquid investments with a maturity date of three months or less when
purchased to be cash equivalents, of which there was nil at December 31, 2015 and 2014, respectively. The
Company accepts a range of debit and credit cards, and these transactions are generally transmitted to a bank
for reimbursement within 24 hours. The payments due from the banks for these debit and credit card
transactions are generally received, or settled, within 24 to 48 hours of the transmission date. The Company
considers all debit and credit card transactions that settle in less than seven days to be cash and cash
equivalents. Amounts due from the banks for these transactions classified as cash and cash equivalents totaled
$8,551 and $12,700 at December 31, 2015 and 2014, respectively.
54