Lumber Liquidators Holdings, Inc. (NYSE:LL) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
Settlement of Gold Litigation
Lumber Liquidators Holdings, Inc. (“Holdings”) previously disclosed that, in March 2019, Lumber Liquidators, Inc. (the “Company”), who is a defendant in a putative class action litigation captioned Dana Gold, Tammy Emery, Mary Louise Ference, Laura Norris, Donald Fursman, and John Triana, on behalf of themselves and all other similarly situated v. Lumber Liquidators, Inc., a Delaware corporation; and Does 1 through 200, inclusive (the “Gold Litigation”), entered into a Memorandum of Understanding (“Gold MOU”) with the lead plaintiff in the Gold Litigation, Dana Gold, on behalf of herself and all others similarly situated (collectively, the “Gold Plaintiffs”) to memorialize an agreement in principle to settle the Gold Litigation on a nationwide basis.
On September 30, 2019, the Company entered into a definitive settlement agreement with the Gold Plaintiffs consistent with the terms of the Gold MOU (the “Settlement Agreement”). The Settlement Agreement is subject to approval by the United States District Court for the Northern District of California (the “Court”) and other contingencies.
The Settlement Fund will be used to pay notice and administrative fees relating to the Gold Litigation and to compensate those individuals that were Putative Class Members during the Class Period. Under the terms of the Settlement Agreement, the Company will contribute $14 million in cash and provide $14 million in store-credit vouchers, with a potential additional $2 million in store-credit vouchers possible based on obtaining a claim’s percentage of more than 7% (collectively, the “Vouchers”), for an aggregate settlement of up to $30 million (the “Settlement Fund”) to settle all claims asserted in the Gold Litigation (or which could have been asserted in the Gold Litigation) on behalf of all persons in the United States who purchased for personal, family or household use, Morning Star Strand Bamboo flooring (the “Putative Class Members”) at any time between January 1, 2012 through March 15, 2019 (the “Class Period”).
Holdings believes that its cash flow from operations, together with existing liquidity sources, is sufficient to fund the Settlement Fund, of which $1,000,000 of the cash portion will be paid to the fund within five days of the Court’s preliminary approval of the settlement and will be used to pay the notice and settlement administrator’s fees and the remaining $13,000,000 cash amount will be paid within 30 days of the Court’s final approval order of the Settlement Agreement and the dismissal of the Gold Litigation. The Company will work together with counsel for the Gold Plaintiffs and the settlement administrator to prepare the Vouchers for distribution to approved claimants as set forth in the Settlement Agreement. The Gold Plaintiffs’ legal fees and costs, not to exceed 33.33% of the Settlement Fund, are included as part of the Settlement Fund.
Holdings previously disclosed that it had accrued within selling general and administrative expenses (“SG&A”) a $28 million liability with the offset in the caption “Accrual for Legal Matters and Settlements Current” in its December 31, 2018 financial statements.
There can be no assurance that a settlement will be finalized by the parties and approved by the Court or as to the ultimate outcome of the Gold Litigation. The execution of the Settlement Agreement does not constitute an admission by the Company of any fault or liability and the Company does not admit fault or liability. If the settlement cannot be finalized by the parties or the Settlement Agreement is not approved by the Court, the Company will defend the Gold Litigation vigorously and believes there are meritorious defenses and legal standards that must be met for, among other things, success on the merits. If the parties are unable to finalize the settlement, the Gold Litigation could have a material adverse effect on Holding’s financial condition and results of operations.
Forward-Looking Statements
This Current Report on Form 8-K may contain “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by words such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “thinks,” “estimates,” “seeks,” “predicts,” “could,” “projects,” “potential” and other similar terms and phrases, are based on the beliefs of Holdings’ management, as well as assumptions made by, and information currently available to, Holdings’ management as of the date of such statements. These statements are subject to risks and uncertainties, all of which are difficult to predict and many of which are beyond Holdings’ control. Forward-looking statements in this Current Report on Form 8-K may include, without limitation, statements regarding expectations relating to the settlement of the Kramer Litigation and liquidity. Holdings specifically disclaims any obligation to update these statements, which speak only as of the dates on which such statements are made, except as may be required under the federal securities laws. Information regarding additional risks and uncertainties is contained in Holdings’ other reports filed with the Securities and Exchange Commission, including the Item 1A, “Risk Factors,” section of the Form 10-K for the year ended December 31, 2018.
About Lumber Liquidators Holdings, Inc. (NYSE:LL)
Lumber Liquidators Holdings, Inc. (Lumber Liquidators) is a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories. The Company offers an assortment of exotic and domestic hardwood species, engineered hardwood, laminate and resilient vinyl flooring direct to the consumer. It also features the renewable flooring products, bamboo and cork, and provides a 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. Its product categories include Solid and Engineered Hardwood; Laminate; Bamboo, Cork and Vinyl Plank, and Moldings and Accessories. The Company sells its products primarily to homeowners or to contractors on behalf of homeowners. Lumber Liquidators operates over 375 stores located in over 50 states and Canada. It has over 370 the United States stores in operation.