Lumber Liquidators Holdings, Inc. - [PDF Document] (2024)

Lumber Liquidators Holdings, Inc. - [PDF Document] (1)

2015 ANNUAL REPORT YEAR ENDED

1 2 . 3 1 . 2 0 1 5

“I went to several floor places to get estimates and I did not agree with any until I went to Lumber Liquidators - the price was right. No more carpet. Thank you Lumber Liquidators.” Dawn, New York

“Great customer service, great product, great price, great install. Love everything about the experience. Thanks Lumber Liquidators.” Stanley, Texas

“It’s PERFECT!!! We were so happy with it we plan to do another room immediately! Then, over the next year, do the entire home!! Thanks Lumber Liquidators, for all your helpful hints and assistance with deciding which flooring was best for us!” Cathy, New Hampshire

Lumber Liquidators Holdings, Inc. - [PDF Document] (2)

“The staff at Lumber Liquidators was excellent at helping us choose the floor that best fit our taste and budget.” Bruno, Florida

“We love the new look and how easy the floor was to put in. We’ve had lots of compliments and most say how they love the floor! Thanks Lumber Liquidators.”

Tammy, Missouri

“We tore carpet out of our home we just bought. We found this awesome flooring choice...It looks so good and we love it. The guys at the store were extremely helpful and nice. Thanks for making our home look good.”

Corinne, Pennsylvania

“Best thing I ever did to add style and value to my home.”

George, Texas

“These floors have changed the look of the house. No complaints at all. Great floors, great price and Lumber Liquidators provided quality personnel to install...Huge thanks from our home to all those involved.” Rachael, Texas

Our customers say it best!

Lumber Liquidators Holdings, Inc. - [PDF Document] (3)

April 2016

Dear Shareholders, Over the past year, we have reshaped and refocused Lumber Liquidators. We faced challenges on multiple fronts, from legacy legal and regulatory issues, to management changes, to public criticisms about the quality and safety of some of our products. We have met these headwinds with candor and determination, from the board room to the show room. We also used these events as an opportunity to reiterate our commitment to our core values as a company. Since our founding over two decades ago, we have built a competitive business model grounded on delivering great wood and exceptional customer service. Despite the difficulties of 2015, this business model has been resilient, and our commitment to our customers and our business has never been stronger. Now we are engaged in the process of rebuilding. Our full-year results showed declines year over year, but we are committed to the potential of our business, and believe we can return our company to growth and profitability. Over the course of 2015, we took actions designed to move on from legacy issues, foster renewed confidence in our brand, and strengthen our position in the market. We are focused on a few key priorities that we believe will provide a solid foundation for years to come. First, we will strengthen the performance of the stores across our network. This past year, we evaluated and took steps to improve the sales process in the store, while optimizing our pricing strategy. Our aim is to maximize sales while delivering an exceptional experience for customers. In early 2016, we were excited to bring aboard Dennis Knowles as our Chief Operating Officer, and are confident in the energy and expertise he will bring to these initiatives. We believe these efforts will improve sales performance at our individual locations, and bolster the financial and operational strength of our overall business. Second, we remain committed to our value proposition. Our historical successes have been driven by a commitment to a quality and differentiated product, well-tailored flooring expertise, and competitive prices. Over the past several months, we evaluated our offering to determine the right mix of products for today’s consumer, aligning our product portfolio with customer demand across our regions. Store associate expertise is a key component of our value to customers, and so a renewed emphasis on training is a top priority in the coming year. A third component of our vision is to ensure that our customers have confidence in the quality and safety of every product we sell. We took important steps to address quality, compliance, and regulatory issues in 2015. Jill Witter joined us as Chief Compliance and Legal Officer and is strengthening compliance processes designed to enable us to source from anywhere in the world with confidence. To that end, we are requalifying every vendor we do business with, and we are reviewing all of our processes in an effort to establish best practices across the organization. Finally, we believe there are some tangible ways to expand our business. We are taking steps to build out our service offering for the growing “do-it-for-me” market. During the fourth quarter of 2015, we increased our focus on coordinating installation services and received excellent customer feedback and increased revenues from those services. Both our board and our management team are confident in the potential of our core business. By focusing on these priorities, we believe we can enhance our relationships with our vendors and customers, and inspire fresh confidence in the value of Lumber Liquidators. I want to thank our entire global organization for their dedication and ongoing efforts, as well as our customers, suppliers, and shareholders for their continued support. I would especially like to thank Macon Brock for his counsel and valued service to the Company as a member of our Board of Directors and wish him well in his future endeavors. In summary, I am confident in our team, and look forward to building a thriving business in the years to come. John M. Presley President and Chief Executive Officer

Lumber Liquidators Holdings, Inc. - [PDF Document] (4)

Lumber Liquidators2015 Product Mix

2015 Financial Highlights

Stores Open

$40.7

$184.1

$221.8

$26.3

$47.1

$77.4$63.4

$(56.4)

$153.7

$378.5

MIL

LIO

NS

MIL

LIO

NS

MIL

LIO

NS

Lumber Liquidators Holdings, Inc. - [PDF Document] (5)

BOARD OF DIRECTORS

Nancy M. TaylorChairperson of the Board,

Lumber Liquidators Holdings, Inc.

Macon F. Brock, Jr.Founder and Chairman of the Board,

Dollar Tree, Inc.

W. Stephen CannonChairman,

Constantine Cannon LLP

Douglas T. MoorePresident and Chief Executive Officer,

Med-Air Homecare; Principal,First Street Consulting, LLC

John M. PresleyPresident and Chief Executive Officer,

Lumber Liquidators Holdings, Inc.

Peter B. RobinsonRetired Executive Vice President,

Burger King Corporation

Martin F. RoperPresident and Chief Executive Officer,

The Boston Beer Company, Inc.

Thomas D. SullivanFounder,

Lumber Liquidators Holdings, Inc.

Jimmie L. WadeRetired President and Member

Board of Directors,Advance Auto Parts, Inc.

OFFICERS

Carl R. DanielsSenior Vice President,

Supply Chain

Dennis R. KnowlesChief Operating Officer

Marco Q. PescaraChief Merchandising and

Marketing Officer

John M. PresleyPresident and Chief Executive Officer

Gregory A. Whirley, Jr.Interim Chief Financial Officer

and Senior Vice President, Finance

Sandra C. WhitehouseSenior Vice President,

Chief Human Resources Officer

Jill WitterSecretary;

Chief Compliance and Legal Officer

SHAREHOLDER INFORMATION

Corporate AddressLumber Liquidators Holdings, Inc.

3000 John Deere RoadToano, VA 23168(757) 259-4280

Independent Registered Public Accounting Firm

Ernst & Young LLP

Transfer Agent & RegistrarComputershareP.O. Box 30170

College Station, TX 77842(800) 662-7232

New York Stock ExchangeTicker Symbol: LL

Investor RelationsLumber Liquidators Holdings, Inc.

3000 John Deere RoadToano, VA 23168(757) 566-7512

[emailprotected]://ir.lumberliquidators.com

ANNUAL MEETING

May 23, 2016, 10:00 amHilton Garden Inn Williamsburg

1624 Richmond RoadWilliamsburg, VA 23185

Lumber Liquidators Holdings, Inc. - [PDF Document] (6)

[This page intentionally left blank.]

Lumber Liquidators Holdings, Inc. - [PDF Document] (7)

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

� ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015OR

□ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33767

Lumber Liquidators Holdings, Inc.(Exact Name of Registrant as Specified in its Charter)

Delaware 27-1310817(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

3000 John Deere Road, Toano, Virginia 23168(Address of principal executive offices) (Zip Code)

(757) 259-4280(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

Common Stock, par value $0.001 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes � No �

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes � No �

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes � No �

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes � No �

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K. �

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer � Accelerated Filer □ Non-accelerated Filer □(do not check if a smallerreporting company)

Smaller Reporting Company □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes � No �

As of June 30, 2015, the last business day of the registrant’s most recent second quarter, the aggregate market value of the registrant’s common stockheld by non-affiliates of the registrant was $542.6 million based on the closing sale price as reported on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of February 25, 2016:

Title of Class Number of Shares

Common Stock, $0.001 par value 27,088,460

DOCUMENTS INCORPORATED BY REFERENCEPart III incorporates certain information by reference from the registrant’s proxy statement for the 2016 annual meeting of stockholders, which will be

filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2015.

Lumber Liquidators Holdings, Inc. - [PDF Document] (8)

Lumber Liquidators Holdings, Inc. - [PDF Document] (9)

LUMBER LIQUIDATORS HOLDINGS, INC.ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Page

Cautionary note regarding forward-looking statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . 45

Item 8. Consolidated Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . 46

Item 9. Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . 85

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Item 12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . 85

Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

PART IV

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

i

Lumber Liquidators Holdings, Inc. - [PDF Document] (10)

[This page intentionally left blank.]

Lumber Liquidators Holdings, Inc. - [PDF Document] (11)

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENT

This report includes statements of the Company’s expectations, intentions, plans and beliefs thatconstitute ‘‘forward-looking statements’’ within the meanings of the Private Securities Litigation Reform Actof 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 the Company’smanagement, as well as assumptions made by, and information currently available to, the Company’smanagement as of the date of such statements. These statements are subject to risks and uncertainties, all ofwhich are difficult to predict and many of which are beyond the Company’s control. Forward-lookingstatements in this report may include, without limitation, statements regarding legal matters and settlementdiscussions, the terms of and compliance with the Plea Agreement with the Department of Justice (the ‘‘PleaAgreement’’) and the associated environmental compliance plan (the ‘‘Compliance Plan’’), the Company’sability to borrow under its asset-backed revolving credit facility, elevated levels of legal and professional fees,elevated levels of payroll and stock-based compensation expense, sales growth, comparable store net sales,number of stores providing installation services, impact of cannibalization, impact of inflation, price changes,inventory availability and inventory per store, inventory valuation, earnings performance, stock-basedcompensation expense, margins, return on invested capital, advertising costs, costs to administer theCompany’s indoor air quality testing program, intention to conduct additional investigation and reviews inconnection with certain consumers’ indoor air quality tests, strategic direction, the scale of the expansion ofand transition to the Company’s laminate products sourced from Europe and North America, supply chain, thedemand for the Company’s products, benefits from an improving housing market, construction of engineeredhardwood as to not be subject to anti-dumping and countervailing duties, ultimate resolution of governmentalinvestigations, and store openings and remodels.

The Company’s actual results could differ materially from those projected in or contemplated by theforward-looking statements as a result of potential risks, uncertainties and other factors including, but notlimited to, changes in general economic and financial conditions, such as the rate of unemployment, consumeraccess to credit, and interest rate; the volatility in mortgage rates; the legislative/regulatory climate; politicalunrest in the countries of the Company’s suppliers; the ability to retain and motivate Company employees; theavailability of sufficient suitable hardwood; the impact on the Company if the Company is unable to maintainquality control over its products; the cost and effect on the Company’s reputation of, and consumers’purchasing decisions in connection with, unfavorable allegations surrounding the product quality of theCompany’s laminates sourced from China; the Company’s suppliers’ ability to meet its quality assurancerequirements; disruption in the Company’s suppliers’ abilities to supply needed inventory; the impact on theCompany’s business of its expansion of laminate products sourced from Europe and North America and theflooring industry’s demand for product from these regions; disruptions or delays in the production, shipment,delivery or processing through ports of entry; the strength of the Company’s competitors and their ability toincrease their market share; slower growth in personal income; the number of customers requesting and costassociated with addressing the Company’s indoor air quality testing program; the ability to collect necessaryadditional information from applicable customers in connection with indoor air quality test results; changes inbusiness and consumer spending and the demand for the Company’s products; changes in transportation costs;the rate of growth of residential remodeling and new home construction; the Company’s ability to offset theeffects of the rate of inflation, if higher than expected; the demand for and profitability of installation services;changes in the scope or rates of any antidumping or countervailing duty rates applicable to the Company’sproducts; the duration, costs and outcome of pending or potential litigation or governmental investigations;ability to successfully and timely implement the Compliance Plan; ability to make timely payments pursuantto the terms of the Plea Agreement; ability to borrow under its asset-backed revolving credit facility; ability toreach an appropriate resolution in connection with the governmental investigations; and inventory levels. TheCompany specifically disclaims any obligation to update these statements, which speak only as of the dates onwhich such statements are made, except as may be required under the federal securities laws. These risks andother factors include those listed in this Item 1A. ‘‘Risk Factors,’’ and elsewhere in this report.

References to ‘‘we,’’ ‘‘our,’’ ‘‘us,’’ ‘‘the Company’’ and ‘‘Lumber Liquidators’’ generally refers to LumberLiquidators Holdings, Inc. and its consolidated subsidiaries collectively and, where applicable, individually.

1

Lumber Liquidators Holdings, Inc. - [PDF Document] (12)

PART I

Item 1. Business.

Overview

Lumber Liquidators is the largest specialty retailer of hardwood flooring in North America, offering acomplete purchasing solution across an extensive assortment of exotic and domestic hardwood species,engineered hardwood, laminate, resilient vinyl, bamboo and cork. We operate as a single operating segment,with our call center, website and customer service network supporting retail store operations.

We believe we have achieved a reputation for offering great value, superior service and a broad selectionof high-quality hardwood flooring products. With a balance of price, selection, quality, availability and service,we believe our value proposition is the most complete within a highly-fragmented hardwood flooring market.The foundation for our value proposition is strengthened by our unique store model, the industry expertise ofour people, our singular focus on hard-surface flooring and our expansion of our advertising reach andfrequency.

Lumber Liquidators is a Delaware corporation with headquarters in Toano, Virginia. We were founded in1994 and our initial public offering was in November 2007. Our common stock trades on the New York StockExchange under the symbol ‘‘LL.’’ We operate in a holding company structure with Lumber LiquidatorsHoldings, Inc. serving as our parent company and certain direct and indirect subsidiaries, including LumberLiquidators, Inc., Lumber Liquidators Services, LLC, Lumber Liquidators Production, LLC, and LumberLiquidators Canada Inc., conducting our operations.

Our Business

Market

According to the July 2015 Issue of Floor Covering Weekly, U.S. installed floor covering product sales in2014 were $35.6 billion, excluding installation. Within this market, U.S. hardwood and laminate flooring salesaccounted for 19.1% of the total. Flooring sales are driven by a number of factors including discretionaryincome and the housing market. Including installation, the overall flooring industry has grown at a compoundannual growth rate of 5.1% from 2009 through 2014. Over the same period, hardwood and laminate flooringsales, including the cost of installation grew at a compound annual growth rate of 5.5%. We believeimprovements in the quality and construction of certain products, ease of installation, and a broad range ofretail price points, will drive continued hard surface flooring share gain versus soft surface flooring in thefuture.

Competition

We compete for customers in a highly fragmented marketplace, where we believe no one retailer hascaptured more than a 15% share of the market for hardwood flooring. Although the market includes thenational home improvement warehouse chains, warehouse clubs and online retailers, we believe the majorityof the industry consists of local one-store flooring retailers, small chains of stores that may specialize in oneor two flooring categories and a limited number of regional chains. Catalina Research, Inc., a companyproviding market research on various flooring types, estimates there are approximately 9,000 specialty floorcoverings stores in the U.S.

Customers

We target several distinct customer groups who each have varied needs with respect to their flooringpurchase, including do-it-yourself (‘‘DIY’’) customers, do-it-for-me (‘‘DIFM’’) customers, and commercialcustomers. Each of the customer groups we serve are passionate about their flooring purchase and value ourwide assortment of flooring products, availability, and the quality of those products. Each of these customergroups require a unique customer service approach based on the ability of our associates to share detailedproduct knowledge and preferred installation methods. We offer DIFM customers installation services, whileour DIY and commercial customers receive additional support throughout their purchase, including dedicatedcall center resources. All customer groups are offered delivery services.

2

Lumber Liquidators Holdings, Inc. - [PDF Document] (13)

Products and Services

Product Selection

We offer an extensive assortment of wood flooring under 19 proprietary brand names, led by our flagship,Bellawood. We have invested significant resources developing these national brand names, as well as theLumber Liquidators name. Our hardwood flooring products are available in various widths and lengths and aregenerally differentiated in terms of quality and price based on the species, wood grade, warranty anddurability of finish. Prefinished floors are the dominant choice for residential customers over unfinished woodplanks that have a finish applied after installation. We also offer an assortment of flooring enhancements,installation and accessories, including moldings, underlays and tools. Our revenue by major product categoryis included in Note 1 of our consolidated financial statements in Item 8 of this report.

Direct Sourcing

Sourcing directly from mills and other vendors enables us to offer a broad assortment of high-quality,proprietary products to our customers at a consistently low cost. We seek to establish strong, long-termrelationships with our vendor partners around the world. In doing so, we look for vendors that havedemonstrated an ability to meet our demanding specifications and the capability to provide sustainable andgrowing supplies of high-quality and innovative products.

Supply Chain

Our supply chain is focused on delivering a complete assortment of products to our customers in anefficient manner. In the first quarter of 2014, we began operating a 500,000 square foot leased distributioncenter in Pomona, California as the primary distribution center for our western stores. In 2014, we completedconstruction of a million square foot distribution center on 110 acres of land we own in Henrico County,Virginia to consolidate the distribution facilities located in Hampton Roads, Virginia, increase the efficiency ofour East Coast operations and provide a foundation for future store base expansion. We began the transition ofour operations from those facilities to the new facility in 2014, and the facility was fully operational in 2015.

During 2015, we leased third party consolidation services to break bulk shipments from mills intoquantities and assortments that can be sent directly to our store locations. We terminated these services at theend of the second quarter of 2015 as we enhanced our utilization of our distribution centers. Additionally, anumber of our vendors maintain certain inventory levels for shipment directly to our stores or our customers.Our product is generally transported boxed and palletized, and the weight of our product generally iscorrelated with our supply chain costs.

Compliance and Quality Control

The Company’s compliance programs are designed to ensure the products we sell are safe, responsiblysourced, and meet all regulatory and statutory requirements, including without limitation requirementsassociated with the Lacey Act and the California Air Resources Board (‘‘CARB’’). We utilize a variety of duediligence processes and controls, including supplier audits, periodic on site visits, and product testing. TheCompany utilizes a risk-based approach to implement and operate the various aspects of its complianceprogram. Our compliance program considers, among other things, product risk, the level of vertical integrationat our mills, legality concerns noted by both private and government parties, and the results of on-site auditsperformed by, or on behalf of, the Company. Our evaluation of risk is a key component in our allocation ofresources to ensure the Company meets its standards for product compliance and safety. We believe our LaceyAct Compliance program is one of the most stringent programs in the industry. Compliance and QualityControl teams located in the United States and in China are supplemented with external resources that provideindependent analyses which are incorporated into our review processes and monitor our sourcing efforts acrossall areas from which we source product. Compliance programs are continually under review, updated andenhanced as appropriate to stay current with statutory and regulatory requirements.

Additionally, we began operating a 1,500 square foot lab within our new East Coast distribution facilityduring the first quarter of 2015. The lab features two temperature and humidity controlled conditioning roomsand two emission chambers correlated to a CARB-approved Third Party Certifier standard. We believe thisequipment mirrors the capabilities of CARB and other state-of-the-art emission testing facilities. We believe

3

Lumber Liquidators Holdings, Inc. - [PDF Document] (14)

no other flooring retailer has comparable facilities. This new lab will complement and augment the capabilitiesof the facilities we operate in Toano, Virginia and in Shanghai, China, as well as those utilized by oursuppliers to help ensure compliance with CARB requirements.

Installation

Historically, approximately one in 10 of our customers opt to utilize the fully-insured and licensedprofessional installation services which we make available to measure and install flooring at competitive pricesat each of our stores. As of December 31, 2015, we utilized a network of associates to perform certaincustomer-facing, consultative services and coordinated the installation of our flooring products by third-partyprofessional installers in 186 of our stores. Service revenue for installation transactions we control is includedin net sales, with the corresponding costs in cost of sales. We believe our greater interaction with the customerand greater control over the third party services provided will ultimately result in a better customer experienceand higher utilization by the customer. Installation services are offered in our remaining stores through anational arrangement with a third-party. Under this national arrangement, we receive certain reimbursem*ntsbased on volume, which offset other expenses.

Store Model

As of December 31, 2015, we operated 374 retail stores, with 366 located throughout the United Statesand eight in Ontario, Canada, after closing one of our Canadian stores at the end of its lease term during thefourth quarter.

We generally seek locations with lower rent than retailers requiring high traffic or impulse purchases andare able to adapt a range of existing buildings to our format, from free-standing buildings to strip centers tosmall shopping centers. Generally, our stores are approximately 6,500 to 7,500 square feet, which includes ashowroom format designed to emphasize our products and a small warehouse. Our real estate strategyconsiders total long-term share within a market over unit-based analysis. We enter into short leases, generallyfor a base term of five to seven years with renewal options, to maximize our real estate flexibility.

We routinely evaluate our store site selection criteria and are currently targeting retail corridors within amarket over the more industrial locations we historically sought. We consistently monitor performance ofcurrent stores as well as the market opportunity for new locations, adjusting as needed to optimize theprofitability and growth potential of our network.

Sales Approach

We have an integrated multi-channel sales model that enables our stores, call center, website and catalogsto work together in a coordinated manner. We believe that due to the average size of the sale and the generalinfrequency of a hardwood flooring purchase, many of our customers conduct extensive research usingmultiple channels before making a purchase decision. Though our customers utilize a range of these channelsin the decision-making process, the final sale is most often completed in the store, working with our flooringexperts. Our customers typically plan well in advance for the inconvenience of removing old flooring andinstalling new flooring. In larger, more complex projects, greater lead time and preparation is often required.Our research indicates that the length of a hardwood flooring purchase can vary significantly from initialinterest to final sale, but averages approximately 100 days.

Our objective is to help the consumer through the entire purchase cycle from aspiration to installation,whether in our store or in their home. Our goal is to provide our customers with everything needed tocomplete their flooring project — to remove the existing floor, install the new floor with complementarymoldings and accessories, and finally, maintain the floor for its lifetime.

Our sales strategy emphasizes customer service by providing superior, convenient, educational tools forour customers to learn about our products and the installation process. Flooring samples of most of theproducts we offer are available in our stores, or can be ordered through our call center and website. Once anorder is placed, customers may choose to either have their purchases delivered or pick them up at a nearbystore location.

We are committed to responding to our potential and existing customers in a timely manner. Our callcenter is staffed by flooring experts cross-trained in sales, customer service and product support. In addition to

4

Lumber Liquidators Holdings, Inc. - [PDF Document] (15)

receiving telephone calls, our call center associates chat online with visitors to our website, respond to emailsfrom our customers and engage in telemarketing activities. Customers can contact our call center to place anorder, to make an inquiry or to order a catalog.

Knowledgeable Salespeople

A large segment of residential homeowners are in need of a trusted expert, whether as a guide through arange of flooring alternatives and services or as a resource to both DIY and DIFM customers. We train andposition our store management and associates to establish these individual customer relationships, which oftenlast beyond the current purchase to subsequent purchases for additional rooms in the existing house or even tothe remodeling of a new home.

We place an emphasis on identifying, hiring and empowering employees who share a passion for ourbusiness philosophy. Many of our store managers have previous experience with the home improvement, retailflooring or flooring installation industries. We provide continuous training for our store associates, rangingfrom topic-specific modules offered through our online learning management system to participation in ourLumber Liquidators University (‘‘LLU’’) program. LLU is a training event for all of our regional and storemanagers that focuses on selling techniques and in-depth product training.

Digital

Our website contains a broad range of information on our products and services, including acomprehensive knowledge base of tools on wood flooring, product reviews, before and after photos fromprevious customers, product information and how-to installation videos. A consumer also has the ability tochat live with a flooring expert regarding questions about a flooring purchase or installation, either online orover the phone.

We continue to develop several new and responsive mobile, tablet and website functions to assistconsumers with their flooring choice. We also have an active presence on Facebook, Pinterest, YouTube andTwitter.

Advertising and Financing

Advertising: We utilize a mix of traditional and online media, ecommerce, direct mail, social media,and financing offers to emphasize product credibility, value, brand awareness, customer education and directselling. We increase brand awareness in a variety of ways, including through sports, celebrity endorsem*ntsand product placement opportunities. Overall, we actively manage the mix of our media to efficiently drivesales while building brand awareness of our value proposition.

Financing: We offer our residential customers a financing alternative through a proprietary credit card,the Lumber Liquidators credit card, underwritten by a third party financial institution, generally with norecourse to us. This program serves the dual function of providing financial flexibility to our customers andoffering us promotional opportunities featuring deferred interest, which we often combine with productpromotions. Our customers may also use their Lumber Liquidators credit card for installation services.Additionally, we offer our commercial customers a financing alternative. This program is also underwritten bya third party financial institution, generally at no recourse to us. The commercial credit program provides ourprofessional customers a range of additional services that we believe add efficiency to their businesses.

Employees

As of December 31, 2015, we had 1,842 employees, 96% of whom were full-time and none of whomwere represented by a union. Of these employees, 71% work in our stores, 17% work in corporate storesupport infrastructure or similar functions (including our call center employees) and 12% work either on ourfinishing line or in one of our distribution centers. We believe that we have good relations with ouremployees.

Seasonality and Quarterly Results

Our quarterly results of operations can fluctuate depending on the timing of our advertising expenses andthe timing of, and income contributed by, our new stores. Our net sales fluctuate slightly as a result ofseasonal factors, and we adjust merchandise inventories in anticipation of those factors, causing variations in

5

Lumber Liquidators Holdings, Inc. - [PDF Document] (16)

our build of merchandise inventories. Generally, we experience higher than average net sales in the spring andfall, when more home remodeling activities are taking place, and lower than average net sales in the colderwinter months and during the hottest summer months.

Intellectual Property and Trademarks

We have a number of marks registered in the United States, including Lumber Liquidators�, HardwoodFloors For Less!�, Bellawood�, 1-800-HARDWOOD�, 1-800-FLOORING�, Quickclic�, Virginia Mill WorksCo. Hand Scraped and Distressed Floors�, Morning Star Bamboo Flooring�, Dream Home Laminate Floors�,Builder’s Pride�, Schön Engineered Floors�, Casa de Colour Collection� and other product line names. Wehave also registered certain marks in jurisdictions outside the United States, including the European Union,Canada, China, Australia and Japan. We regard our intellectual property as having significant value and thesenames are an important factor in the marketing of our brands. Accordingly, we take steps intended to protectour intellectual property including, where warranted, the filing of lawsuits and administrative actions toenforce our rights.

Government Regulation

We are subject to extensive and varied federal, provincial, state and local government regulations in thejurisdictions in which we operate, including laws and regulations relating to our relationships with ouremployees and customers, public health and safety, zoning, accommodations for persons with disabilities, andfire codes. We operate each of our stores, offices, finishing facility and distribution centers in accordance withstandards and procedures designed to comply with applicable laws, codes and regulations. Certain of ouroperations and properties are also subject to federal, provincial, state and local laws and regulations relating tothe use, storage, handling, generation, transportation, treatment, emission, release, discharge and disposal ofhazardous materials, substances and wastes and relating to the investigation and cleanup of contaminatedproperties, including off-site disposal locations. We do not currently incur significant costs complying with thelaws and regulations related to hazardous materials. However, we could be subject to material costs, liabilitiesor claims relating to compliance in the future, especially in the event of changes in existing laws andregulations or in their interpretation, as well as the passage of new laws and regulations.

Our suppliers are subject to the laws and regulations of their home countries, as well as those relative tothe import of their products into the United States, including, in particular, laws regulating labor, forestry andthe environment. Our suppliers are subject to periodic compliance audits, onsite visits and other reviews, asappropriate, in efforts to ensure that they are in compliance with all laws and regulations. We also supportsocial and environmental responsibility among our supplier community and our suppliers agree to comply withour expectations concerning environmental, labor and health and safety matters. Those expectations includerepresentations and warranties that our suppliers comply with the laws, rules and regulations of the countriesin which they operate.

Products that we import into the United States and Canada are subject to laws and regulations imposed inconjunction with such importation, including those issued and/or enforced by U.S. Customs and BorderProtection and the Canadian Border Services Agency. In addition, certain of our products are subject to lawsand regulations relating to the importation, acquisition or sale of illegally harvested plants and plant productsand the emissions of hazardous materials. We work closely with our suppliers to address the applicable lawsand regulations in these areas.

Available Information

We maintain a website at www.lumberliquidators.com. The information on or available through ourwebsite is not, and should not be considered, a part of this report. You may access our annual reports onForm 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, aswell as other reports relating to us that are filed with or furnished to the Securities and Exchange Commission(‘‘SEC’’) free of charge on our website as soon as reasonably practicable after such material is electronicallyfiled with, or furnished to, the SEC. In addition, you may read and copy any materials we file with the SEC atthe SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operationof the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC alsomaintains an Internet site, www.sec.gov, which contains reports, proxy and information statements, and otherinformation that we file electronically with the SEC.

6

Lumber Liquidators Holdings, Inc. - [PDF Document] (17)

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 operationscould also be affected by additional factors that apply to all companies operating in the U.S. and globally, aswell 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 couldharm 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 publicitysurrounding these government investigations and legal actions could continue to harm our reputation and thedemand for our products. Additional unfavorable allegations, government investigations and legal actionsinvolving our products and us could also affect our perception in the market and our brands and negativelyimpact our business and financial condition. For instance, unfavorable allegations surrounding the productquality of our laminates sourced from China has and could continue to negatively affect our operations. If thisnegative impact is significant, our ability to maintain our liquidity and grow or sustain our business could bejeopardized.

We are involved in a number of legal proceedings and, while we cannot predict the outcomes of suchproceedings and other contingencies with certainty, some of these outcomes could adversely affect ourbusiness and financial condition.

We are, or may become, involved in legal proceedings, government and agency investigations, andconsumer, employment, tort and other litigation (see discussion of Legal Proceedings in Item 3 of this AnnualReport and Note 10 to the consolidated financial statements included in Item 8 of this Annual Report). Wecannot predict with certainty the outcomes of these legal proceedings. The outcome of some of these legalproceeding could require us to take, or refrain from taking, actions which could be costly to implement orotherwise negatively affect our operations or could require us to pay substantial amounts of money that couldhave a material adverse effect on our liquidity, financial condition and results of operations and could affectour 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 diversionof management’s attention and resources.

Implementing our Environmental Compliance Plan will be costly to implement and the failure toimplement 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 toimplement an environmental compliance plan (the ‘‘Compliance Plan’’) and we will be subject to a probationperiod of five years. The implementation of the Compliance Plan will be costly and, if the implementationcosts are more than we anticipate, it could adversely impact our operating results. Further, in the event we failto implement the Compliance Plan as required and in accordance with set deadlines, the government mayrequire us to cease the importation of hardwood flooring from China until the DOJ determines that theCompliance Plan has been satisfactorily implemented. If we have to cease the importation of hardwoodflooring, our ability to operate would be substantially harmed and our business, including our results ofoperations, would be adversely affected.

Federal, provincial, state or local laws and regulations, or our failure to comply with such laws andregulations, could increase our expenses, restrict our ability to conduct our business and expose us to legalrisks.

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

7

Lumber Liquidators Holdings, Inc. - [PDF Document] (18)

protection, privacy, zoning and occupancy matters as well as the operation of retail stores and warehouse,production and distribution facilities and provision of installation services. In addition, various federal,provincial and state laws govern our relationship with and other matters pertaining to our employees,including wage and hour laws, requirements to provide meal and rest periods or other benefits, health careinsurance issues, minimum wage standards, family leave mandates, requirements regarding working conditionsand accommodations to certain employees, citizenship or work authorization and related requirements,insurance and workers’ compensation rules and anti-discrimination laws. If we fail to comply with these lawsand regulations, we could be subject to legal risk, our operations could be impacted negatively and ourreputation could be damaged. Likewise, if such laws and regulations should change, including labor laws thatimpact exempt status and overtime eligibility, our costs of compliance may increase, thereby impacting ourresults and hurting our profitability.

Certain portions of our operations are subject to laws and regulations governing the use, storage,handling, generation, treatment, emission, release, discharge and disposal of certain hazardous materials andwastes, the remediation of contaminated soil and groundwater and the health and safety of employees. If weare unable to comply with, extend or renew a material approval, license or permit required by such laws, or ifthere is a delay in renewing any material approval, license or permit, our net sales and operating results coulddeteriorate or otherwise cause harm to our business.

With regard to our products, we may spend significant time and resources in order to comply withapplicable advertising, importation, exportation, environmental, health and safety laws and regulations. If weshould violate these laws and regulations, we could experience delays in shipments of our goods, be subject tofines, penalties, criminal charges, or other legal risks, be liable for costs and damages, or suffer reputationalharm, which could reduce demand for our merchandise and hurt our business and results of operations.Further, if such laws and regulations should change, we may experience increased costs or incur decreasedefficiency in order to adhere to the new standards.

Our growth strategy is impacted by our ability to open new stores and is subject to many unpredictablefactors.

As of December 31, 2015, we had 374 stores throughout the United States and Canada, 152 of which weopened after January 1, 2011. Assuming the continued success of our store model and satisfaction of ourinternal criteria, we plan to open a significant number of new stores over the next several years. This growthstrategy and the investment associated with the development of each new store may cause our operatingresults to fluctuate and be unpredictable or decrease our profits. Our future results and ability to implementour growth strategy will depend on various factors, including the following:

• our ability to maintain our reputation of providing safe, compliant products;

• consumer recognition of the quality of our products;

• the successful resolution of the various pending government investigations and legal proceedings;

• the successful selection of new markets and store locations;

• the implementation of and results generated by our new showroom format;

• our ability to negotiate leases on acceptable terms;

• management of store opening costs;

• the quality of our operations;

• our ability to meet customer demand;

• the continued popularity of hardwood flooring;

• our cash flow, access to capital and business condition; and

• general economic conditions.

8

Lumber Liquidators Holdings, Inc. - [PDF Document] (19)

In addition, the following may impact the net sales and performance of our new stores compared toprior years:

• as we open more stores, our rate of expansion relative to the size of our store base will decline;

• we may not be able to identify suitable store locations in markets into which we seek to expand andmay not be able to open as many stores as planned;

• consumers in new markets may be less familiar with our brands, and we may need to increase brandawareness in those markets through additional investments in advertising;

• new stores may have higher construction, occupancy or operating costs, or may have lower averagestore net sales, than stores opened in the past;

• we may experience difficulties, delays or failures in obtaining the necessary licenses, permits orother approvals necessary to open and operate particular store locations;

• we may incur higher maintenance costs than in the past;

• newly opened stores may not succeed or may reach profitability more slowly than we expect, andthe ramp-up to profitability may become longer in the future as we enter more mid-sized and smallermarkets and add stores to larger markets where we already have a presence; and

• future markets and stores may not be successful and, even if we are successful, our average store netsales and our comparable store net sales may not increase at historical rates.

Finally, our progress in opening new stores from quarter to quarter may occur at an uneven rate, whichmay result in quarterly net sales and profit growth falling short of market expectations in some periods.

Our net sales and profit growth could be adversely affected if comparable store net sales are less than weexpect.

While future net sales growth will depend substantially on our plans for new store openings, the level ofcomparable store net sales (which represent the change in period-over-period net sales for stores beginningtheir thirteenth full month of operation) will also affect our net sales growth and business results. Amongother things, increases in our baseline store volumes and the number of new stores opened in existing markets,which tend to open at a higher base level of net sales, will impact our comparable store net sales. As a result,it is possible that we will not achieve our targeted comparable store net sales growth or that the change incomparable store net sales could be negative. If this were to happen, net sales and profit growth would beadversely affected.

Increased transportation costs, particularly those relating to the cost of fuel, could harm our results ofoperations.

The efficient transportation of our products through our supply chain is a critical component of ouroperations. If the cost of fuel or other costs, such as import tariffs, duties and international container rates,rise, it could result in increases in our cost of sales due to additional transportation charges and in the feesdelivery companies charge us to transport our products to our stores and customers. We may be unable toincrease the price of our products to offset increased transportation charges, which could cause our operatingresults to deteriorate.

Business and operation risks exist in connection with our distribution centers.

In 2013, we purchased 110 acres of undeveloped land in Henrico County, Virginia upon which weconstructed a million square foot distribution center. The facility became fully operational in January 2015.This was our first real estate purchase and is the first distribution center owned by us. The cost of operatingand managing the East Coast distribution center may exceed our expectations and we may not achieve thebenefits that we anticipate from consolidating our East Coast facilities into this East Coast distribution center.

In addition, since early 2014, we have leased and operated a 500,000 square foot distribution center inPomona, California, our first distribution center located outside of Virginia. The costs of operating may exceed

9

Lumber Liquidators Holdings, Inc. - [PDF Document] (20)

our expectations and we may not achieve the benefits that we anticipate. Further, we may face challengesrelating to the management of inventory in separate warehouse facilities located on opposite coasts and theimpact 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 significantdelays 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 ouroperations 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 ourprimary computer systems, which control our management information and inventory management systems. Inaddition, in 2015, we finished approximately 79% of all Bellawood products, as well as small quantities ofcertain 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 significantlost 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 resultof our limited penetration and operation history in the Canadian market, these stores may continue to be lesssuccessful than we expect. Additionally, greater investments in advertising and promotional activity may berequired to continue to build brand awareness in that market. Furthermore, by comparison, we have limitedexperience with the legal and regulatory environments and market practices outside of the United States andcannot guarantee that we will be able to operate profitably in the Canadian market or in a manner and withresults similar to our U.S. stores. We may also incur increased costs in complying with applicable Canadianlaws 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 andwe may incur additional costs associated with its operation. In addition, we may incur increased costs tocomply with applicable Chinese laws and regulations that exceed our expectations. Further, if we fail tocomply with applicable laws and regulations, we could be subject to, among other things, litigation andgovernment 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 tosome of our customers. In some of these jurisdictions, we are subject to regulatory requirements and risksapplicable to general contractors, which include management of licensing, permitting and quality of our thirdparty installers. We have established processes and procedures designed to manage these requirements andensure customer satisfaction with the services provided by our third party installers. If we fail to manage theseprocesses effectively or provide proper oversight of these services, we may be subject to regulatoryenforcement 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 centerand 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 controlsand to hire, train and retain regional and store managers and personnel for our compliance and financial andreporting departments. We may not respond quickly enough to the changing demands that our expansion willimpose on us. Any failure to manage our growth effectively could harm our business and operating results.

10

Lumber Liquidators Holdings, Inc. - [PDF Document] (21)

Our insurance coverage and self-insurance reserves may not cover existing or future claims.

We maintain various insurance policies for employee health, workers’ compensation, general liability,property damage, cyber security and professional liability, including directors and officers insurance:

• We are self-insured on certain health insurance plans and are responsible for losses up to a certainlimit for these respective plans.

• Beginning in 2013, we are self-insured with regard to workers’ compensation coverage, in whichcase we are responsible for losses up to certain retention limits on both a per-claim and aggregatebasis.

• We continue to be responsible for losses up to a certain limit for general liability and propertydamage insurance.

• Our professional liability and cyber security insurance contain limitations on the amount and scopeof coverage.

With the large number of cases and government investigations we have pending, we may be required todefend the Company, its officers, directors and former employees and we may be subject to financial harm inthe event such cases or investigations are adversely determined and insurance coverage will not, or is notsufficient to, cover any related losses. For policies under which we are responsible for losses, we record aliability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Ourestimated liability is not discounted and is based on a number of assumptions and factors, including historicaltrends, actuarial assumptions and economic conditions, and is closely monitored and adjusted when warrantedby changing circ*mstances. Fluctuating healthcare costs, our growth rate and changes from our pastexperience with workers’ compensation claims could affect the accuracy of estimates based on historicalexperience. Should a greater amount of claims occur compared to what was estimated or medical costsincrease beyond what was expected, our accrued liabilities might not be sufficient and we may be required torecord additional expense. Unanticipated changes may produce materially different amounts of expense thanthat reported under these programs, which could adversely impact our operating results.

We have entered into a number of lease agreements with companies controlled by our founder and thisconcentration of leases may pose certain business risks.

As of December 31, 2015, we lease our Toano facility, which includes a store location, a warehouse and30 of our other store locations from entities owned, in whole or in part, by Tom Sullivan, our founder and acurrent member of our board of directors. Although our percentage of total stores leased from such entitieshas decreased over the last year, this concentration of leases subjects us to risk in the event action or inactionby Tom or such entities impacts our leasehold interests in the locations.

Risks Related to Our Suppliers, Products and Product Sourcing

If our suppliers do not use ethical business practices, comply with applicable laws and regulations andensure that their products meet our quality standards, our reputation could be harmed due to negativepublicity and we could be subject to legal risk.

While our suppliers agree to operate in compliance with applicable laws and regulations, including thoserelating to environmental and labor practices, we do not control our suppliers. Accordingly, despite ourcontinued investment in quality control, we cannot guarantee that they comply with such laws and regulationsor operate in a legal, ethical and responsible manner. Violation of environmental, labor or other laws by oursuppliers or their failure to operate in a legal, ethical and responsible manner could cause us to violate suchlaws and could reduce demand for our products if, as a result of such violation or failure, we were to attractnegative publicity. Further, we require our suppliers to adhere to our quality standards. While we do monitorour suppliers’ adherence to such standards, there is no guarantee that we will be able to identify theirnon-compliance. Moreover, the failure of our suppliers to adhere to applicable legal requirements and thequality standards that we set for our products could lead to government investigations, litigation, write-offsand recalls, which could damage our reputation and our brands, increase our costs, and otherwise hurt ourbusiness.

11

Lumber Liquidators Holdings, Inc. - [PDF Document] (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 productsis alleged to have resulted in economic loss, personal injury or property damage or violated environmental orother laws. In the event that any of our products proves to be defective or otherwise in violation of applicablelaw, we may be required to recall or redesign such products. Further, in such instances, we may be subject tolegal action. We maintain insurance against some forms of product liability claims, but such coverage may notbe available or adequate for the liabilities actually incurred. A successful claim brought against us in excess ofavailable insurance coverage, or any claim or product recall that results in significant adverse publicity againstus, 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 aresubject 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 ourspecifications. In 2015, approximately 48% of our product was sourced from North America, approximately39% of our product was sourced from Asia, approximately 8% was sourced from Europe and Australia andapproximately 5% was sourced South America. As a result, we are subject to risks associated with obtainingproducts from abroad, including:

• political unrest, terrorism and economic instability resulting in the disruption of trade from foreigncountries where our products originate;

• currency exchange fluctuations;

• the imposition of new laws and regulations, including those relating to environmental matters andclimate change issues; labor conditions; quality and safety standards; trade restrictions; andrestrictions 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 classificationof products upon entry or changes in the interpretation or application of rates or regulations relatingto 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 oflabor 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 certainproducts 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 thecontinued 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 continuedavailability. Our ability to obtain an adequate volume and quality of hard-to-find species depends on oursuppliers’ ability to furnish those species, which, in turn, could be affected by many things including eventssuch as forest fires, insect infestation, tree diseases, prolonged drought and other adverse weather and climateconditions. Government regulations relating to forest management practices also affect our suppliers’ ability toharvest or export timber, and changes to regulations and forest management policies, or the implementation ofnew laws or regulations, could impede their ability to do so. If our suppliers cannot deliver sufficienthardwood and we cannot find replacement suppliers, our net sales and operating results may be negativelyimpacted.

12

Lumber Liquidators Holdings, Inc. - [PDF Document] (23)

Our dependence on certain suppliers makes us vulnerable to the extent we rely on them.

We rely on a concentrated number of suppliers for a significant portion of our supply needs. Wegenerally do not have long-term contracts with our suppliers, and we typically obtain our hardwood supplieson an order-by-order basis, writing orders for future deliveries from 90 to 180 days before delivery. In thefuture, our suppliers may be unable to supply us, or supply us on acceptable terms, due to various factors,which could include political instability in the supplier’s country, insufficient production capacity, product linefailures, collusion, a supplier’s financial instability, inability or refusal to comply with applicable laws, traderestrictions, tariffs or our standards, duties, insufficient transport capacity and other factors beyond our control.If we can no longer obtain merchandise from our larger suppliers, or they refuse to continue to supply us oncommercially reasonable terms or at all, and we cannot find replacement suppliers, we could experiencedeterioration in our net sales and operating results.

If we fail to identify and develop relationships with a sufficient number of qualified suppliers, our ability toobtain products that meet our high quality standards could be harmed.

We purchase flooring directly from mills located around the world. We believe that these direct supplierrelationships are important to our business. In order to retain the competitive advantage that we believe resultsfrom these relationships, we need to continue to identify, develop and maintain relationships with qualifiedsuppliers that can satisfy our high standards for quality and our requirements for hardwood in a timely andefficient manner. The need to develop new relationships will be particularly important as we seek to expandour operations, enhance our product offerings, and expand our product assortment and geographic source oforigin in the future. Any inability to do so could reduce our competitiveness, slow our plans for furtherexpansion and cause our net sales and operating results to deteriorate.

Increased hardwood costs could harm our results of operations.

The cost of the various species of hardwood that are used in our products is important to our profitability.Hardwood lumber costs fluctuate as a result of a number of factors including changes in domestic andinternational supply and demand, labor costs, competition, market speculation, product availability,environmental restrictions, government regulation and trade policies, duties, weather conditions, processingand freight costs, and delivery delays and disruptions. We generally do not have long-term supply contracts orguaranteed purchase amounts. As a result, we may not be able to anticipate or react to changing hardwoodcosts by adjusting our purchasing practices, and we may not always be able to increase the selling prices ofour products in response to increases in supply costs. If we cannot address changing hardwood costsappropriately, it could cause our operating results to deteriorate.

We may not be able to successfully anticipate consumer trends and our failure to do so may adverselyimpact our net sales and profitability.

As part of our business proposition, it is important for us to anticipate and respond to changingpreferences and consumer demands in a timely manner. If we fail to identify and respond to emerging trends,consumer acceptance of the merchandise in our stores and our image with our customers may be harmed,which could reduce customer traffic in our stores and adversely affect our net sales. Moreover, consumerdemand within our mix of products may shift and such change may negatively impact our net sales andoperating results.

Risks Related to Economic Factors and Our Industry

Changes in economic conditions may adversely impact demand for our products, reduce access to creditand cause our customers and others with whom we do business to suffer financial hardship, all of whichcould adversely impact our business, results of operations and financial condition.

Our business, financial condition and results of operations have and may continue to be affected byvarious economic factors. Changes in the current economic environment and uncertainty about the futurecould lead to reduced consumer and business spending, including by our customers. Such changes may alsocause customers to shift their spending to products we either do not sell or do not sell as profitably. Further, areduced access to credit may adversely affect the ability of consumers to purchase our products. This potential

13

Lumber Liquidators Holdings, Inc. - [PDF Document] (24)

reduction in access to credit may impact our ability to offer customers credit card financing through thirdparty credit providers on terms similar to those offered previously, or at all. In addition, economic conditions,including decreased access to credit, may result in financial difficulties leading to restructurings, bankruptcies,liquidations and other unfavorable events for our customers, suppliers and other service providers. If suchconditions deteriorate, our industry, business and results of operations may be severely impacted.

The hardwood flooring industry depends on the economy, home remodeling activity, the homebuildingindustry and other important factors.

The hardwood flooring industry is highly dependent on the remodeling of existing homes and new homeconstruction. In turn, remodeling and new home construction depend on a number of factors which are beyondour control, including interest rates, tax policy, employment levels, consumer confidence, credit availability,real estate prices, demographic trends, weather conditions, natural disasters and general economic conditions.For example, discretionary consumer spending could be limited, spending on remodeling of existing homescould be reduced and purchases of new homes could decline if:

• the national economy or any regional or local economy where we operate weakens;

• interest rates rise;

• credit becomes less available;

• tax rates and health care costs increase;

• regions where we operate experience unfavorable demographic trends;

• fuel costs or utility expenses increase; or

• home prices depreciate.

In the event of a decrease in discretionary spending, home remodeling activity or new home construction,demand for our products, including hardwood flooring, could be impacted negatively and our business andoperating results could be harmed.

Competition could cause price declines, decrease demand for our products and decrease our market share.

We operate in the wood flooring industry, which is highly fragmented and competitive. We facesignificant competition from national and regional home improvement chains, national and regional specialtyflooring chains, Internet-based companies and privately-owned single-site enterprises. We compete on the basisof price, customer service, store location and range, quality and availability of the hardwood flooring that weoffer our customers. If our positioning with regard to one or more of these factors should erode, deteriorate,fail to resonate with consumers or misalign with demand or expectations, our business and results may beimpacted negatively.

Our competitive position is also influenced by the availability, quality and cost of merchandise, laborcosts, finishing, distribution and sales efficiencies and our productivity compared to that of our competitors.Further, as we expand into new and unfamiliar markets, we may face different competitive environments thanin the past. Likewise, as we continue to enhance and develop our product offerings, we may experience newcompetitive conditions.

Some of our competitors are larger organizations, have existed longer, are more diversified in theproducts they offer and have a more established market presence with substantially greater financial,marketing, personnel and other resources than we have. In addition, our competitors may forecast marketdevelopments more accurately than we do, develop products that are superior to ours or produce similarproducts at a lower cost, or adapt more quickly to new technologies or evolving customer requirements thanwe do. Intense competitive pressures from one or more of our competitors could cause price declines,decrease demand for our products and decrease our market share.

Hardwood flooring may become less popular as compared to other types of floor coverings in the future.For example, our products are made using various hardwood species, including rare exotic hardwood species,and concern over the environmental impact of tree harvesting could shift consumer preference towards

14

Lumber Liquidators Holdings, Inc. - [PDF Document] (25)

synthetic or inorganic flooring. In addition, hardwood flooring competes against carpet, vinyl sheet, vinyl tile,ceramic tile, natural stone and other types of floor coverings. If consumer preferences shift toward types offloor coverings other than hardwood flooring, we may experience decreased demand for our products.

All of these competitive factors may harm us and reduce our net sales and operating results.

If we are unable to access our credit facility or other sources of capital, our financial position, liquidity,and results of operations could suffer,

We have relied on a bank credit facility to fund seasonal needs for working capital. Our continued accessto this facility depends on our ability to meet the conditions to borrowing, including that all representationsare true and correct at the time of the borrowing. Our failure to meet these requirements or obtain alternativesources of capital could impact:

• our ability to fund working capital, capital expenditures and other general corporate purposes;

• our ability to meet liquidity needs; and

• our flexibility in planning for, or reacting to, changes in our business and the industry in which weoperate.

Risks Related to Our Information Technology

If our management information systems experience disruptions, it could disrupt our business and reduceour net sales.

We depend on our management information systems to integrate the activities of our stores, website andcall center, to process orders, to respond to customer inquiries, to manage inventory, to purchase merchandiseand to sell and ship goods on a timely basis. We may experience operational problems with our informationsystems as a result of system failures, viruses, computer ‘‘hackers’’ or other causes. We may incur significantexpenses in order to repair any such operational problems. Any significant disruption or slowdown of oursystems could cause information, including data related to customer orders, to be lost or delayed, which couldresult in delays in the delivery of products to our stores and customers or lost sales. Moreover, our entirecorporate network, including our telephone lines, is on an Internet-based network. Accordingly, if our networkis disrupted, we may experience delayed communications within our operations and between our customersand ourselves, and may not be able to communicate at all via our network, including via telephones connectedto our network.

The selection and implementation of information technology initiatives may impact our operationalefficiency and productivity.

In order to better manage our business, we expect to invest in our information systems. In doing so, wemust select the correct investments and implement them in an efficient manner. The costs, potential problemsand interruptions associated with implementing technology initiatives could disrupt or reduce the efficiency ofour operations. Furthermore, these initiatives might not provide the anticipated benefits or provide them in adelayed or more costly manner. Accordingly, issues relating to our selection and implementation ofinformation technology initiatives may negatively impact our business and operating results.

Any disruption of our website or our call center could disrupt our business and lead to reduced net salesand reputational damage.

Our website and our call center are integral parts of our integrated multi-channel strategy. Customers useour website and our call center as information sources on the range of products available to them and to orderour products, samples or catalogs. Our website, in particular, is vulnerable to certain risks and uncertaintiesassociated with the Internet, including changes in required technology interfaces, website downtime and othertechnical failures, security breaches and consumer privacy concerns. If we cannot successfully maintain ourwebsite and call center in good working order, it could reduce our net sales and damage our reputation.Further, the costs associated with such maintenance may exceed our estimations.

15

Lumber Liquidators Holdings, Inc. - [PDF Document] (26)

We may incur costs and losses resulting from security risks we face in connection with our electronicprocessing, transmission and storage of confidential customer information.

We accept electronic payment cards for payment in our stores and through our call center. In addition,our online operations depend upon the secure transmission of confidential information over public networks,including information permitting cashless payments. As a result, we may become subject to claims forpurportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information,and we may also be subject to lawsuits or other proceedings relating to these types of incidents. Further, acompromise of our security systems that results in our customers’ personal information being obtained byunauthorized persons could adversely affect our reputation with our customers and others, as well as ouroperations, results of operations and financial condition, and could result in litigation against us or theimposition of penalties. A security breach could also require that we expend significant additional resourcesrelated to the security of information systems and could result in a disruption of our operations, particularlyour online sales operations.

Additionally, privacy and information security laws and regulations change, and compliance with themmay result in cost increases due to necessary systems changes and the development of new administrativeprocesses. If we fail to comply with these laws and regulations or experience a data security breach, ourreputation could be damaged, possibly resulting in lost future business, and we could be subjected toadditional legal risk as a result of non-compliance.

Risks Related to Our Personnel

Our success depends substantially upon the continued retention of certain key personnel.

We believe that our success has depended and continues to depend to a significant extent on the effortsand abilities of our senior management team and other key personnel. The loss, for any reason, of the servicesof any of these key individuals and any negative market or industry perception arising from such loss, coulddamage our business and harm our reputation.

We announced the appointment of John M. Presley as our chief executive officer in November 2015.Mr. Presley replaced Thomas D. Sullivan, who had been serving as acting chief executive officer sinceRobert M. Lynch’s resignation in May 2015. Earlier in 2015, we appointed Gregory A. Whirley, Jr. as ourinterim Chief Financial Officer to replace Daniel E. Terrell, who had served as our Chief Financial Officersince October 2006. Also in 2015, we integrated the leadership of our merchandising and marketingdepartments and promoted Marco Q. Pescara from Chief Marketing Officer to Chief Merchandising andMarketing Officer. Any significant leadership change or executive management transition involves inherentrisk, and we could experience disruptions in our executive management transition, or any executivemanagement transition that may occur in the future, which could hinder our strategic planning, execution andfuture performance.

Our success depends upon our ability to meet our labor needs.

Our success depends in part on our ability to attract, hire, train and retain qualified managers andassociates. Buying hardwood flooring is an infrequent event, and typical consumers have very little knowledgeof the range, characteristics and suitability of the products available to them before starting the purchasingprocess. Therefore, consumers in the hardwood flooring market expect to have sales associates serving themwho are knowledgeable about the entire assortment of products offered by the retailer and the process ofchoosing and installing hardwood flooring. As a result, competition for qualified store managers and salesassociates among flooring retailers is intense. We may not succeed in attracting and retaining the personnel werequire to conduct our current operations and support our potential future growth. In addition, as we expandinto new markets, we may find it more difficult to hire, motivate and retain qualified employees.

Although none of our employees are currently covered under collective bargaining agreements, we cannotguarantee that our employees will not elect to be represented by labor unions in the future. If some or ourentire workforce were to become unionized and collective bargaining agreement terms were significantlydifferent from our current compensation arrangements or work practices, it could have a material adverseeffect on our business and operating results.

16

Lumber Liquidators Holdings, Inc. - [PDF Document] (27)

Risks Relating to Our Marketing and Advertising

Our success depends on the effectiveness of our advertising strategy.

We believe that our growth was achieved in part through our successful investment in local and nationaladvertising. Historically, we have used extensive advertising to encourage customers to drive to our stores,which were typically located some distance from population centers in areas that have lower rents thantraditional retail locations. Further, a significant portion of our advertising was directed at the DIY and DIFMconsumers. While our marketing strategy continues to support our real estate strategy and remains focused onretaining the DIY and DIFM customers, we have broadened the reach and frequency of our advertising toincrease the recognition of our value proposition and the number of customers served. We may need to furtherincrease our advertising expense to support our business strategies in the future. If our advertisem*nts fail todraw customers in the future, or if the cost of advertising or other marketing materials increases significantly,we could experience declines in our net sales and operating results.

We may not be able to adequately protect our intellectual property, which could harm the value of ourbrands and impact our business.

Our intellectual property is material to the conduct of our business. The successful implementation of ourbusiness plan depends in part on our ability to further build brand recognition using our trademarks, servicemarks and other proprietary intellectual property, including our name and logo and the names and logos of ourbrands. We may incur significant costs and expenses relating to our efforts to enforce our intellectual propertyrights. If our efforts to protect our intellectual property are inadequate, or if any third party infringes on ormisappropriates our intellectual property, the value of our brands may be harmed, which could adversely affectour business and might prevent our brands from achieving or maintaining market acceptance.

We may initiate claims or litigation against parties for infringement of our intellectual property rights orto establish the invalidity, non-infringement, or unenforceability of the proprietary rights of others. Likewise,we may have similar claims or litigation brought against us by competitors and others. Under either situationand regardless of any ultimate determination on the merits, we could incur significant expense and be forcedto divert the efforts of key employees from our operations. Moreover, such claims or litigation could harm ourimage, brand or competitive position and cause us to incur significant penalties and costs.

Risks Relating to Our Common Stock

Our common stock price may be volatile and all or part of any investment in our common stock may be lost.

The market price of our common stock could fluctuate significantly. Those fluctuations could be based onvarious factors in addition to those otherwise described in this report, including:

• our operating performance and the performance of our competitors;

• the public’s reaction to our filings with the SEC, our press releases and other public announcements;

• unfavorable market reactions to allegations regarding the safety of our products and the relatedlitigation and/or government investigations resulting therefrom, as well as any payments, judgmentsor other losses in connection with such lawsuits and/or investigations;

• changes in recommendations or earnings estimates by research analysts who follow LumberLiquidators or other companies in our industry;

• variations in general economic conditions;

• actions of our current stockholders, including sales of common stock by our directors and executiveofficers;

• the arrival or departure of key personnel; and

• other developments affecting us, our industry or our competitors.

In addition, the stock market may experience significant price and volume fluctuations. These fluctuationsmay be unrelated to the operating performance of particular companies but may cause declines in the market

17

Lumber Liquidators Holdings, Inc. - [PDF Document] (28)

price of our common stock. The price of our common stock could fluctuate based upon factors that have littleor nothing to do with our company or its performance.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of researchanalysts and investors due to various factors.

Our quarterly operating results may fluctuate significantly because of various factors, including:

• changes in comparable store net sales and customer transactions, including as a result of decliningconsumer confidence or the introduction of new products;

• the timing of new store openings and related net sales and expenses;

• profitability and performance of our stores;

• the timing of remodels and relocations of existing stores and related net sales and expenses;

• the impact of inclement weather, natural disasters and other calamities;

• variations in general economic conditions;

• unfavorable customer reactions to allegations regarding the safety of our products, the impact oflitigation and/or government investigations to which we are subject, as well as any payments,judgments or other losses in connection with such lawsuits and/or investigations;

• the timing and scope of sales promotions and product introductions;

• changes in consumer preferences and discretionary spending;

• fluctuations in supply prices; and

• tax expenses, impairment charges and other non-operating costs.

Due to these factors, results for any one quarter are not necessarily indicative of results to be expectedfor any other quarter or for any year. Average store net sales or comparable store net sales in any particularfuture period may decrease. In the future, operating results may fall below the expectations of researchanalysts and investors, which could cause the price of our common stock to fall.

Our anti-takeover defense provisions may cause our common stock to trade at market prices lower than itmight absent such provisions.

Our certificate of incorporation and bylaws contain several provisions that may make it more difficult orexpensive for a third party to acquire control of us without the approval of our board of directors. Theseprovisions include a staggered board, the availability of ‘‘blank check’’ preferred stock, provisions restrictingstockholders from calling a special meeting of stockholders or requiring one to be called or from taking actionby written consent and provisions that set forth advance notice procedures for stockholders’ nominations ofdirectors and proposals of topics for consideration at meetings of stockholders. Our certificate of incorporationalso provides that Section 203 of the Delaware General Corporation Law, which relates to businesscombinations with interested stockholders, applies to us. These provisions may delay, prevent or deter amerger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in ourstockholders receiving a premium over the market price for their common stock. In addition, these provisionsmay cause our common stock to trade at a market price lower than it might absent such provisions.

Risk Related to Accounting Standards

Changes in accounting standards and subjective assumptions, estimates and judgments by managementrelated to complex accounting matters could significantly affect our financial results.

Generally accepted accounting principles and related accounting pronouncements, implementationguidelines and interpretations with regard to a wide range of matters that are relevant to our business,including but not limited to, consolidation, revenue recognition, stock-based compensation, lease accounting,sales returns reserves, inventories, self-insurance, income taxes, unclaimed property laws and litigation, arehighly complex and involve many subjective assumptions, estimates and judgments by our management.

18

Lumber Liquidators Holdings, Inc. - [PDF Document] (29)

Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments byour management could significantly change our reported or expected financial performance.

Failure to maintain effective systems of internal and disclosure control could have a material adverse effecton our results of operation and financial condition.

Effective internal and disclosure controls are necessary for us to provide reliable financial reports andeffectively prevent fraud, and to operate successfully as a public company. If we cannot provide reliablefinancial reports or prevent fraud, our reputation and operating results would be harmed. As part of ourongoing monitoring of internal control, we may discover material weaknesses or significant deficiencies ininternal control that require remediation. A ‘‘material weakness’’ is a deficiency, or a combination ofdeficiencies, in internal control over financial reporting, such that there is a reasonable possibility that amaterial misstatement of a company’s annual or interim financial statements will not be prevented or detectedon a timely basis.

We have in the past discovered, and may in the future discover, areas of its internal controls that needimprovement. Even so, we continue to work to improve our internal controls. We cannot be certain that thesemeasures will ensure that we implement and maintain adequate controls over our financial processes andreporting in the future. Any failure to maintain effective controls or to timely implement any necessaryimprovement of our internal and disclosure controls could, among other things, result in losses from fraud orerror, harm our reputation, or cause investors to lose confidence in the reported financial information, all ofwhich could have a material adverse effect on our results of operation and financial condition.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of February 25, 2016, we operated 375 stores located in 46 states and Canada, including one openedsince December 31, 2015. In addition to our eight stores in Ontario, Canada, the table below sets forth thelocations (alphabetically by state) of our 367 U.S. stores in operation as of February 25, 2016.

State Stores State Stores State Stores State Stores

Alabama 5 Iowa 3 Nevada 3 Rhode Island 1Arizona 5 Kansas 3 New Hampshire 5 South Carolina 8Arkansas 2 Kentucky 4 New Jersey 13 South Dakota 1California 40 Louisiana 5 New Mexico 1 Tennessee 6Colorado 7 Maine 3 New York 19 Texas 30Connecticut 8 Maryland 10 North Carolina 12 Utah 2Delaware 3 Massachusetts 10 North Dakota 1 Vermont 1Florida 26 Michigan 10 Ohio 13 Virginia 13Georgia 10 Minnesota 6 Oklahoma 3 Washington 7Idaho 2 Mississippi 2 Oregon 5 West Virginia 3Illinois 16 Missouri 5 Pennsylvania 20 Wisconsin 5Indiana 8 Nebraska 2

We lease all of our stores and our corporate headquarters located in Toano, Virginia, which includes ourcall center, corporate offices, and distribution and finishing facility. Our corporate headquarters has 307,784square feet, of which approximately 32,000 square feet are office space, and is located on a 74-acre plot. Weown approximately 110 acres of land in Henrico County, Virginia where we constructed a million square footdistribution center that became fully operational in January 2015. We lease a 504,016 square feet facility inPomona, California, which, along with our new facility in Virginia, serve as our primary distribution facilities.

As of February 25, 2016, our Toano facility, which includes a store location, a warehouse and 30 of ourstore locations are leased from related parties. See discussion of properties leased from related parties in Note5 to the consolidated financial statements included in Item 8 of this report and within Certain Relationshipsand Related Transactions, and Director Independence in Item 13 of this report.

19

Lumber Liquidators Holdings, Inc. - [PDF Document] (30)

Item 3. Legal Proceedings.

Government Investigations

Lacey Act Related Matters

On September 26, 2013, sealed search warrants were executed at our corporate offices in Toano andRichmond, Virginia by the Department of Homeland Security’s Immigration and Customs Enforcement andthe U.S. Fish and Wildlife Service. The search warrants requested information, primarily documentation,related to the importation of certain of our wood flooring products in accordance with the Lacey Act. Sincethen, we have cooperated with the federal authorities, including the Department of Justice (‘‘DOJ’’), in theirinvestigation.

On October 7, 2015, Lumber Liquidators, Inc. (‘‘LLI’’) reached a settlement with the DOJ in connectionwith this investigation. Under the terms of a Plea Agreement with the DOJ (the ‘‘Plea Agreement’’) executedon October 7, 2015, LLI agreed to plead guilty to one felony count for entry of goods by means of falsestatements and four misdemeanor due care counts under the Lacey Act. These violations do not require LLI tohave acted with a deliberate or willful intent to violate the law, and LLI did not stipulate that it acted withsuch deliberate or willful intent. As part of the settlement, LLI agreed to pay a combined total of$10.0 million in fines, community service payments and forfeited proceeds. The payments include a$7.8 million fine, community service contributions of $0.9 million and $0.3 million to the National Fishand Wildlife Foundation and the Rhinoceros and Tiger Conservation fund, respectively, and a $1.0 millionforfeiture payment. We had previously recorded this amount in SG&A expenses in the first quarter of 2015.At December 31, 2015, $6.2 million was included in current liabilities and $3.8 million was included in otherlong-term liabilities on the accompanying consolidated balance sheet. We paid $6.2 million of the settlementamount in the first quarter of 2016, and we expect to pay $2.0 million in the first quarter of 2017 and$1.8 million in the first quarter of 2018.

LLI also agreed in the Plea Agreement to implement an environmental compliance plan (the‘‘Compliance Plan’’) for a probation period of five years. If LLI fails to implement the Compliance Planwithin three months of sentencing, the government may require us to cease the importation of hardwoodflooring from China until the DOJ determines that the Compliance Plan has been satisfactorily implemented.During the first four years, LLI has agreed to engage an outside consulting firm to conduct audits ofcompliance with the Compliance Plan and certain requirements of the Lacey Act.

We have agreed to guarantee all payments and performance due from LLI, including but not limited topayments for fines, community service, forfeited proceeds and special assessments and the performance ofLLI’s obligations under and compliance with the Compliance Plan and related audits.

In addition, as part of its internal compliance review procedures in the second quarter of 2015, wedetermined that there were Lacey Act compliance concerns related to a limited amount of our engineeredhardwood flooring. As a result, we suspended sales of approximately $4.1 million of this product pendingfurther investigation, and brought this matter to the attention of the DOJ. During the investigation, wedetermined that there were no compliance concerns with respect to approximately $0.9 million of thesuspended engineered hardwood flooring. In connection with the Plea Agreement with the DOJ, we alsoreached a settlement with the DOJ related to the remaining $3.2 million of suspended engineered hardwoodflooring. Pursuant to a Complaint for Forfeiture In Rem and a Stipulation for Settlement and Joint Motion forEntry of Consent Order of Forfeiture (the ‘‘Consent’’), the DOJ agreed to accept a $3.2 million payment inlieu of a civil forfeiture of this product. We had previously recorded this amount in SG&A expenses in thesecond quarter of 2015. We paid this amount in October 2015 pending entry of the Consent and, pursuant to amotion granted, are now permitted to sell the suspended engineered hardwood flooring and retain anyproceeds of the sale. The Consent was entered by the court on January 7, 2016, and final judgment wasentered on January 8, 2016.

The Plea Agreement was approved by the United States District Court for the Eastern District of Virginiaon October 22, 2015. A sentencing hearing was held on February 1, 2016 and the court entered a finaljudgment on February 3, 2016. The terms of the final judgment are consistent with the Plea Agreement.

20

Lumber Liquidators Holdings, Inc. - [PDF Document] (31)

Securities Laws

In March 2015, we received a grand jury subpoena issued in connection with a criminal investigationbeing conducted by the U.S. Attorney’s Office for the Eastern District of Virginia (the ‘‘U.S. Attorney’’). Inaddition, on May 19, 2015 and July 13, 2015, the Company received subpoenas from the New York RegionalOffice of the SEC in connection with an inquiry by the SEC staff. Based on the subpoenas, we believe thefocus of both the U.S. Attorney investigation and SEC investigation primarily relate to compliance withdisclosure, financial reporting and trading requirements under the securities laws since 2011. We are fullycooperating with the U.S. Attorney’s subpoena, the SEC’s subpoenas and the related investigations by theU.S. Attorney and SEC staff. Given that the investigation by the U.S. Attorney and SEC staff are still ongoing,we cannot estimate the reasonably possible loss or range of loss that may result from this matter.

California Air Resources Board

We believe that the California Air Resources Board (‘‘CARB’’) is regularly looking at the entire industryto ensure compliance with its emissions standards. While conducting routine inspections of our products,CARB has performed ‘‘deconstructive’’ testing on our products as well as, we believe, products from others inthe industry. In CARB’s preliminary findings, some of the samples of our finished product that CARBdeconstructed and tested exceeded the CARB limits for raw composite wood cores. This could occur fornumerous reasons, including one or more of the variability factors associated with this type of testing. InMay 2015, CARB notified us that additional samples of finished products were obtained in 2014, some ofwhich, based on deconstructive testing, exceeded the CARB limits for raw composite wood cores. CARB hasfurther informed us that it has performed additional deconstructive testing on certain finished products itobtained in March 2015, with certain of the samples of our products exceeding the CARB limits for rawcomposite wood cores.

We have been fully cooperative with CARB as CARB continues to work on this matter by, among otherthings, providing CARB with requested information related to the products CARB tested and removinglaminate flooring sourced from China from our stores in California. Based on discussions with CARB, ourbest estimate of the probable loss that may result from this matter is approximately $1.5 million, which werecorded in other current liabilities and selling, general and administrative expenses in the fourth quarter of2015. We believe that there is at least a reasonable possibility that a loss greater than the amount accrued maybe incurred, but we are unable to estimate the amount at this time.

Securities Litigation Matter

On or about November 26, 2013, Gregg Kiken (‘‘Kiken’’) filed a securities class action lawsuit (the‘‘Kiken Lawsuit’’), which was subsequently amended, in the United States District Court for the EasternDistrict of Virginia against us, our founder, former Chief Executive Officer and President, former ChiefFinancial Officer and former Chief Merchandising Officer (collectively, the ‘‘Kiken Defendants’’). On or aboutSeptember 17, 2014, the City of Hallandale Beach Police Officers’ and Firefighters’ Personnel RetirementTrust (‘‘Hallandale’’) filed a securities class action lawsuit (the ‘‘Hallandale Lawsuit’’) in the United StatesDistrict Court for the Eastern District of Virginia against us, our former Chief Executive Officer and Presidentand our former Chief Financial Officer (collectively, the ‘‘Hallandale Defendants,’’ and with the KikenDefendants, the ‘‘Defendants’’). On March 23, 2015, the court consolidated the Kiken Lawsuit with theHallandale Lawsuit, appointed lead plaintiffs and lead counsel for the consolidated action, and captioned theconsolidated action as In re Lumber Liquidators Holdings, Inc. Securities Litigation.

The lead plaintiffs filed a consolidated amended complaint on April 22, 2015. The consolidated amendedcomplaint alleges that the Defendants made material false and/or misleading statements that caused losses toinvestors. In particular, the lead plaintiffs allege that the Defendants made material misstatements or omissionsrelated to our compliance with the Lacey Act, the chemical content of certain of our wood products, and oursupply chain and inventory position. The lead plaintiffs do not quantify any alleged damages in theirconsolidated amended complaint but, in addition to attorneys’ fees and costs, they seek to recover damages onbehalf of themselves and other persons who purchased or otherwise acquired our stock during the putativeclass period at allegedly inflated prices and purportedly suffered financial harm as a result. The Defendantsmoved to dismiss the consolidated amended complaint but, on December 21, 2015, the court denied thismotion. We dispute these claims and intend to defend the matter vigorously. Given the uncertainty of

21

Lumber Liquidators Holdings, Inc. - [PDF Document] (32)

litigation, the current status of the case, and the legal standards that must be met for, among other things,class certification and success on the merits, we cannot estimate the reasonably possible loss or range of lossthat may result from this action.

NW Bamboo Matter

On February 27, 2014, NW Bamboo Trim, Inc. (‘‘NWBT’’) filed suit in the Circuit Court of the City ofRichmond, Virginia against us and a supplier of bamboo trim products (the ‘‘Supplier’’). In its complaint,NWBT alleges that (i) we breached a contract with NWBT by not purchasing certain products from NWBT,(ii) we tortiously interfered with NWBT’s relationship with the Supplier, and (iii) we and the Supplierconspired to harm NWBT’s business. We filed a motion seeking to dismiss the claims, which was granted asit pertained to the breach of contract claim. The case then proceeded on the two remaining causes of action.

On October 12, 2015, as part of its required discovery disclosures, NWBT identified a valuation of itsbusiness of approximately $2.8 million as the basis for its compensatory damages claim. Subsequently, wefiled a motion for summary judgment seeking dismissal of NWBT’s case. On December 21, 2015, the Courtgranted our motion for summary judgment and dismissed the two remaining causes of action in NWBT’scomplaint. On January 20, 2016, NWBT filed a notice of appeal in connection with the trial court’s dismissalof NWBT’s case.

In light of the trial court’s ruling and our views regarding the merits of NWBT’s appeal, the likelihood ofa material loss in connection with this matter is now remote.

TCPA Matter

On or about March 4, 2014, Richard Wade Architects, P.C. (‘‘RWA’’) filed a lawsuit in the United StatesDistrict Court for the Northern District of Illinois (the ‘‘RWA Lawsuit’’), which was subsequently amended,alleging that we violated the Telephone Consumer Protection Act (‘‘TCPA’’), the Illinois Consumer Fraud Actand the common law by sending an unsolicited facsimile advertisem*nt to RWA and a proposed class. RWAsought recourse on its own behalf as well as other similarly situated parties who are members of the proposedclass that received unsolicited facsimile advertisem*nts from us. The TCPA provides for recovery of actualdamages or five hundred dollars for each violation, whichever is greater. If it is determined that a defendantacted willfully or knowingly in violating the TCPA, the amount of the award may be increased by up to threetimes the amount provided above.

Although we believed we had valid defenses to the claims asserted, we entered into a settlement of theclaims in the RWA Lawsuit. On September 3, 2015, the Court entered an order granting final approval to thesettlement and certifying a settlement class. Under the settlement agreement, we paid a total of $0.3 millionincluding the plaintiffs’ attorneys’ fees, class notice and administration costs, a sum to RWA and cashpayments to members of the settlement class who file valid claims. The settlement amount was accrued in2014 and was paid into an escrow fund on August 18, 2015. The settlement payment was released to classcounsel on October 16, 2015 after the final approval order became a final and non-appealable order.Settlement payments to class members who submitted claims have now been issued by the claimsadministrator, with a final accounting of the settlement fund to be filed with the court by March 4, 2016.

Prop 65 Matter

On or about July 23, 2014, Global Community Monitor and Sunshine Park LLC (together, the‘‘Prop 65 Plaintiffs’’) filed a lawsuit, which was subsequently amended, in the Superior Court of the State ofCalifornia, County of Alameda, against us. In the amended complaint, the Prop 65 Plaintiffs allege that weviolated California’s Safe Drinking Water and Toxic Enforcement Act of 1986, Health and Safety Codesection 25249.5, et seq. (‘‘Proposition 65’’). In particular, the Prop 65 Plaintiffs allege that we failed to warnconsumers in California that certain of our products (collectively, the ‘‘Products’’) emit formaldehyde inexcess of the applicable safe harbor limits. The Prop 65 Plaintiffs did not quantify any alleged damages intheir amended complaint but, in addition to attorneys’ fees and costs, the Prop 65 Plaintiffs seek (i) equitablerelief involving the reformulation of the Products, additional warnings related to the Products, the issuance ofnotices to certain of the purchasers of the Products (the ‘‘Customers’’) and the waiver of restocking fees forCustomers who return the Products and (ii) civil penalties in the amount of two thousand five hundred dollarsper day for each violation of Proposition 65.

22

Lumber Liquidators Holdings, Inc. - [PDF Document] (33)

We dispute the claims of the Prop 65 Plaintiffs and intend to defend the matter vigorously. Our bestestimate of the probable loss that may result from this action is approximately $0.9 million, which we accruedin the fourth quarter of 2015. We believe that there is at least a reasonable possibility that a loss may differfrom the amount accrued, but we are unable to estimate the amount at this time.

Gold Matter

On or about December 8, 2014, Dana Gold (‘‘Gold’’) filed a purported class action lawsuit in theUnited States District Court for the Northern District of California alleging that the Morning Star bambooflooring (the ‘‘Bamboo Product’’) that we sell is defective. On February 13, 2015, Gold filed an amendedcomplaint that added three additional plaintiffs (collectively with Gold, ‘‘Gold Plaintiffs’’). We moved todismiss the amended complaint. After holding a hearing and taking the motion under submission, the courtdismissed most of Gold Plaintiffs’ claims but allowed certain omission-based claims to proceed. GoldPlaintiffs filed a Second Amended Complaint on December 16, 2015, and then a Third Amended Complainton January 20, 2016. In the Third Amended Complaint, Gold Plaintiffs allege that we have engaged in unfairbusiness practices and unfair competition by falsely representing the quality and characteristics of the BambooProduct and by concealing the Bamboo Product’s defective nature. Gold Plaintiffs seek the certification of aclass of individuals in the United States who purchased the Bamboo Product, as well as 7 state subclasses ofindividuals who are residents of California, New York, Illinois, West Virginia, Minnesota, Pennsylvania, andFlorida, respectively, and purchased the Bamboo Product for personal, family, or household use. GoldPlaintiffs did not quantify any alleged damages in their complaint but, in addition to attorneys’ fees and costs,Gold Plaintiffs seek (i) a declaration that our actions violate the law and that we are financially responsible fornotifying all purported class members, (ii) injunctive relief requiring us to replace and/or repair all of theBamboo Product installed in structures owned by the purported class members, and (iii) a declaration that wemust disgorge, for the benefit of the purported classes, all or part of our profits received from the sale of theallegedly defective Bamboo Product and/or to make full restitution to Gold Plaintiffs and the purportedclass members.

We filed our answer to the Third Amended Complaint on February 3, 2016, and discovery in the matteris now proceeding. We dispute the Gold Plaintiffs’ claims and intend to defend the matter vigorously. Giventhe uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for,among other things, class certification and success on the merits, we cannot estimate the reasonably possibleloss or range of loss that may result from this action.

Litigation Relating to Products Liability

Beginning on or about March 3, 2015, numerous purported class action cases were filed in variousU.S. federal district courts and state courts involving claims of excessive formaldehyde emissions from ourflooring products (collectively, the ‘‘Products Liability Cases’’). The plaintiffs in these various actions soughtrecovery under a variety of theories, which although not identical are generally similar, including negligence,breach of warranty, state consumer protection act violations, state unfair competition act violations, statedeceptive trade practices act violations, false advertising, fraudulent concealment, negligent misrepresentation,failure to warn, unjust enrichment and similar claims. The purported classes consisted either or both of allU.S. consumers or state consumers that purchased the subject products in certain time periods. The plaintiffsalso sought various forms of declaratory and injunctive relief and various damages, including restitution,actual, compensatory, consequential, and, in certain cases, punitive damages, and interest, costs, and attorneys’fees incurred by the plaintiffs and other purported class members in connection with the alleged claims, andorders certifying the actions as class actions. Plaintiffs had not quantified damages sought from us in theseclass actions.

On June 12, 2015, United States Judicial Panel on Multi District Litigation, (the ‘‘MDL Panel’’) issuedan order transferring and consolidating 10 of the related federal class actions to the United States DistrictCourt for the Eastern District of Virginia (the ‘‘Virginia Court’’). In a series of subsequent conditional transferorders, the MDL Panel has transferred the other cases to the Virginia Court. We continue to seek to have anynewly filed cases transferred and consolidated in the Virginia Court and ultimately, we expect all federal classactions involving formaldehyde allegations, including any newly filed cases, to be transferred and consolidatedin the Virginia Court. The consolidated case in the Virginia Court is captioned In re: Lumber LiquidatorsChinese-Manufactured Flooring Products Marketing, Sales, Practices and Products Liability Litigation.

23

Lumber Liquidators Holdings, Inc. - [PDF Document] (34)

Pursuant to court order, plaintiffs filed a Representative Class Action Complaint in the Virginia Court onSeptember 11, 2015. The complaint challenged the labeling of our flooring products and asserted claims underCalifornia, New York, Illinois, Florida and Texas law for fraudulent concealment, violation of consumerprotection statutes, negligent misrepresentation and declaratory relief, as well as a claim for breach of impliedwarranty under California law. Thereafter, on September 18, 2015, plaintiffs filed the First AmendedRepresentative Class Action Complaint (‘‘FARC’’) in which they added implied warranty claims underNew York, Illinois, Florida and Texas law, as well as a federal warranty claim. We filed a motion to dismissand answered the FARC. The Virginia Court granted the motion as to claims for negligent misrepresentationfiled on behalf of certain plaintiffs, deferred as to class action allegations, and otherwise denied the motion.We also filed a motion to strike nationwide class allegations and a motion to strike all claims of personalinjury made in class action complaints, on which the Virginia court has not yet ruled. Discovery is nowproceeding in this matter.

In addition, on or about April 1, 2015, Sarah Steele (‘‘Steele’’) filed a purported class action lawsuit inthe Ontario, Canada Superior Court of Justice against us. In the complaint, Steele’s allegations include(i) strict liability, (ii) breach of implied warranty of fitness for a particular purpose, (iii) breach of impliedwarranty of merchantability, (iv) fraud by concealment, (v) civil negligence, (vi) negligent misrepresentation,and (vii) breach of implied covenant of good faith and fair dealing. Steele did not quantify any allegeddamages in her complaint but, in addition to attorneys’ fees and costs, Steele seeks (i) compensatory damages,(ii) punitive, exemplary and aggravated damages, and (iii) statutory remedies related to our breach of variouslaws including the Sales of Goods Act, the Consumer Protection Act, the Competition Act, the ConsumerPackaging and Labelling Act and the Canada Consumer Product Safety Act.

We dispute the plaintiffs’ claims and intend to defend these matters vigorously. Given the uncertainty oflitigation, the preliminary stage of these cases and the legal standards that must be met for, among otherthings, class certification and success on the merits, we cannot estimate the reasonably possible loss or rangeof loss that may result from these actions.

In connection with the Products Liability Cases, on April 22, 2015, five of our general and umbrellaliability insurers brought an action in the United States District Court for the Eastern District of Virginia, (the‘‘Virginia Action’’). Through the Virginia Action, these insurers sought a declaratory judgment that they werenot obligated to defend or indemnify us in connection with the lawsuits asserted against us arising out of itssale of laminate flooring sourced from China. One insurer also asserted a claim seeking reformation of onepolicy to include a ‘‘total pollution exclusion’’ endorsem*nt, contending that it was omitted from that policy asthe result of a mutual mistake.

On April 27, 2015, we filed a similar but more comprehensive action against nine of our general,umbrella and excess insurers (including the five Plaintiffs in the Virginia Action) in the Circuit Court forDane County, Wisconsin (where four of the insurers are domiciled) (the ‘‘Wisconsin Action’’). In theWisconsin Action, we asserted breach of contract claims against its general liability insurers, alleging thatthese insurers had wrongfully failed to defend us in connection with the Chinese-manufactured laminateflooring claims. We also asserted breach of contract and bad faith claims against two of its general liabilityinsurers, arising out of the manner in which those insurers computed retrospective premiums under theirpolicies in connection with the Chinese-manufactured laminate flooring lawsuits. Finally, we soughtdeclaratory relief from the court as to its rights and the insurers’ responsibilities under their policies.

We moved to dismiss the Virginia Action, contending that the federal court should abstain from decidingthe case in favor of the more comprehensive state-court Wisconsin Action. Thereafter, the four insurers whowere not plaintiffs in the Virginia Action have filed motions to intervene as plaintiffs in the Virginia Action, inan effort to make the Virginia Action ‘‘as comprehensive’’ as the Wisconsin Action. We have opposed themotions to intervene. By order dated September 4, 2015, the court largely denied our motion to dismiss,allowing the Virginia Action to proceed. While the court dismissed the reformation claim without prejudice, aspled with insufficient specificity, the court granted leave to amend, and an amended complaint was filed onSeptember 15, 2015. On October 2, 2015, we stipulated to entry of judgment on the reformation claim, andmoved to dismiss the remaining claims in favor of proceeding in Wisconsin. The defendant-insurers in theWisconsin Action have filed motions to dismiss or stay the Wisconsin Action in favor of the Virginia Action.

24

Lumber Liquidators Holdings, Inc. - [PDF Document] (35)

The defendants in the Wisconsin Action have also moved for protective orders seeking to forestall theirobligation to respond to discovery requests that we promulgated in the Wisconsin Action.

On February 1, 2016, the Wisconsin court stayed the Wisconsin Action in favor of the proceedings inVirginia. On February 5, 2016, we moved for reconsideration and that motion remains pending.

On February 9, 2016, the Virginia court denied our motion to dismiss. The Virginia court also granted theremaining insurers’ motion to intervene, but stayed proceedings on their excess and umbrella insurancepolicies pending resolution of the primary insurers’ claims.

Litigation Relating to Abrasion Claims

On May 20, 2015, a purported class action titled Abad v. Lumber Liquidators, Inc. was filed in theUnited States District Court for the Central District of California and two amended complaints weresubsequently filed. In the Second Amended Complaint (‘‘SAC’’), the plaintiffs (collectively, the ‘‘AbrasionPlaintiffs’’)seek to certify a national class composed of ‘‘All Persons in the United States who purchasedDefendant’s Dream Home brand laminate flooring products from Defendant for personal use in their homes,’’or, in the alternative, 32 statewide classes from California, North Carolina, Texas, New Jersey, Florida,Nevada, Connecticut, Iowa, Minnesota, Nebraska, Georgia, Maryland, Massachusetts, New York, WestVirginia, Kansas, Kentucky, Mississippi, Pennsylvania, South Carolina, Tennessee, Virginia, Washington,Maine, Michigan, Missouri, Ohio, Oklahoma, Wisconsin, Indiana, Illinois and Louisiana. The SAC allegesviolations of each of these states’ consumer protections statutes and the federal Magnuson-Moss Warranty Act,as well as breach of implied warranty and fraudulent concealment. The Abrasion Plaintiffs did not quantifyany alleged damages in the SAC but, in addition to attorneys’ fees and costs, seek an order certifying theaction as a class action, an order adopting the Abrasion Plaintiffs’ class definitions and finding that theAbrasion Plaintiffs are their proper representatives, an order appointing their counsel as class counsel,injunctive relief prohibiting us from continuing to advertise and/or sell laminate flooring products with falseabrasion class ratings, restitution of all monies it received from the Abrasion Plaintiffs and class members,damages (actual, compensatory, and consequential) and punitive damages.

We filed a motion to dismiss the SAC and the Abrasion Plaintiffs filed a motion for leave to file acorrected SAC. Our motion was subsequently granted in part and denied in part. The court also denied theAbrasion Plaintiffs’ motion for leave to file a corrected SAC. The Abrasion Plaintiffs have until March 1,2016, to file a Third Amended Complaint. We dispute the Abrasion Plaintiffs’ claims and intend to defendthese matters vigorously. Given the uncertainty of litigation, the preliminary stage of these cases, the legalstandards that must be met for, among other things, class certification and success on the merits, we cannotestimate the reasonably possible loss or range of loss that may result from these actions.

Morris Matter

On or about August 18, 2015, Kevin Morris (‘‘Morris’’) filed a purported class action lawsuit in theCircuit Court of the Twentieth Judicial Circuit in St. Clair County, Illinois alleging that the Casa de ColourCollection by Dura-Wood flooring (the ‘‘Morris Product’’), a brand of solid wood flooring sold by us, isdefective due to warping, cupping and buckling. Morris alleges that we have engaged in unfair businesspractices and unfair competition by falsely representing the quality and characteristics of the Morris Productand by concealing the Morris Product’s defective nature. In particular, Morris’s allegations include (i) commonlaw fraud, (ii) breach of implied warranty, (iii) breach of express warranty, (iv) breach of contract, (v) breachof duty of good faith and fair dealing, (vi) violation of the Illinois Consumer Fraud and Deceptive BusinessPractices Act (the ‘‘ICFA’’) and (vii) violation of the Uniform Deceptive Trade Practices Act (the ‘‘UDTPA’’).Morris did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs,Morris seeks (i) certification of the purposed class, (ii) injunctive relief requiring us to replace and/or repairall Morris Products installed in structures owned by the purported class, (iii) an award of compensatory,consequential and statutory damages, pre-judgment interest and post-judgment interest, (iv) a declaration thatwe must disgorge, for the benefit of the purported class, all or part of our profits received from the sale of theMorris Product and/or to make full restitution to Morris and the purported class, (v) a judgment for actualdamages for injuries suffered by Morris and the purported class as a result of our violation of the ICFA and(vi) a judgment awarding Morris and the purported class reasonable attorneys’ fees and costs in accordancewith the UDTPA. On September 25, 2015, we removed the action to the United States District Court for the

25

Lumber Liquidators Holdings, Inc. - [PDF Document] (36)

Southern District of Illinois. Subsequently, we filed a motion to dismiss. Morris failed to respond to themotion and, as a result, the lawsuit was dismissed without prejudice on November 10, 2015.

Ross Matter

On or about February 23, 2016, Joseph Ross and Linda Ross (collectively, ‘‘Ross’’) filed a purportedclass action lawsuit in the Second Judicial District Court, State of Nevada, County of Washoe. Ross seeks thecertification of a class of individuals in the State of Nevada who purchased certain hardwood flooring productsproduced in China (the ‘‘Ross Products’’). Ross alleges that the Ross Products are defective due to the RossProducts being contaminated with certain wood-boring insects. In particular, Ross’s allegations include(i) breach of warranty, (ii) negligence, (iii) strict liability, (iv) negligent misrepresentation, (v) willfulmisconduct, and (vi) unjust enrichment. In the complaint, Ross seeks (i) general and special damagesaccording to proof in excess of fifty thousand dollars, (ii) attorneys’ fees and costs according to proof,(iii) prejudgment and post-judgment interest on all sums awarded, according to proof at the maximum legalrate, (iv) costs of the lawsuit incurred, (v) restitution as authorized by law, (vi) punitive damages as authorizedby law, and (vii) specific performance under our express warranties. We dispute Ross’s claims and intend todefend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and thelegal standards that must be met for, among other things, class certification and success on the merits, wecannot estimate the reasonably possible loss or range of loss that may result from this action.

Derivative Litigation Matters

Consolidated Cases

On or about March 11, 2015, R. Andre Klein (‘‘Klein’’) filed a shareholder derivative suit in theUnited States District Court for the Eastern District of Virginia against our directors at that time, as well asour Senior Vice President, Supply Chain, former Chief Merchandising Officer, and former Chief FinancialOfficer (collectively, the ‘‘Klein Defendants’’). On or about April 1, 2015, Phuc Doan (‘‘Doan’’) filed ashareholder derivative suit in the United States District Court for the Eastern District of Virginia against ourdirectors at that time, as well as our Senior Vice President, Supply Chain, former Chief Merchandising Officer,and former Chief Financial Officer (collectively, the ‘‘Doan Defendants’’). On or about April 15, 2015,Amalgamated Bank, as trustee for the Longview 600 Small Cap Index Fund, filed a shareholder derivative suitin the United States District Court for the Eastern District of Virginia against our directors at that time, aswell as our former Chief Merchandising Officer, former Chief Financial Officer, Senior Vice President, SupplyChain and its former Chief Executive Officer and President (collectively, the ‘‘Amalgamated Defendants,’’ and,with the Klein and Doan Defendants, the ‘‘Individual Defendants’’). We were named as a nominal defendantonly in these three suits.

On May 27, 2015, the court consolidated the Klein, Doan, and Amalgamated Bank suits, appointed leadplaintiffs and lead counsel for the consolidated action, and captioned the consolidated action as In re LumberLiquidators Holdings, Inc. Shareholder Derivative Litigation. In the complaints, Klein’s, Doan’s andAmalgamated Bank’s (collectively, ‘‘Plaintiffs’’) allegations include (i) breach of fiduciary duties, (ii) abuse ofcontrol, (iii) gross mismanagement, (iv) unjust enrichment, (v) insider trading, (vi) corporate waste,(vii) common-law conspiracy, and (viii) statutory conspiracy. Plaintiffs did not quantify any alleged damagesin their complaints but, in addition to attorneys’ fees and costs, Plaintiffs seek (1) a declaration that theIndividual Defendants have breached and/or aided and abetted the breach of their fiduciary duties to us, (2) adetermination and award to us of the damages sustained by us as a result of the violations of each of theIndividual Defendants, jointly and severally, (3) a directive to us and the Individual Defendants to take allnecessary actions to reform and improve our corporate governance and internal procedures to comply withapplicable laws and to protect us and our shareholders from a repeat of the events that led to the filing of thisaction, (4) a determination and award to us of exemplary damages in an amount necessary to punish theIndividual Defendants and to make an example of the Individual Defendants to the community according toproof of trial, (5) the awarding of restitution to us from the Individual Defendants, (6) a requirement that weestablish corporate policies and procedures prohibiting the use of Chinese manufacturers of its products, (7) aprohibition against us using wood or wood products from the Russian Far East, (8) a requirement that weestablish corporate policies and procedures to ensure compliance with CARB standards for all of our flooringproducts, and (9) disgorgement and payment to us of all compensation and profits made by the Individual

26

Lumber Liquidators Holdings, Inc. - [PDF Document] (37)

Defendants, and each of them, at any time during which such Individual Defendants were breaching fiduciaryduties owed to us and/or committing, or aiding and abetting the commitment of, corporate waste.

Additionally, in May 2015, we received a shareholder demand from Timothy Horton (‘‘Horton’’). Theallegations and demands made by Horton overlap substantially with those raised in the consolidated action.On June 11, 2015, the Special Committee of the Board of Directors (the ‘‘Special Committee’’) exercised itsauthority to create a three-person Demand Review Committee, which is comprised of three independentdirectors and tasked with investigating the claims made in the consolidated action and the Horton demandletter and making a recommendation to the board of directors as to whether it would be in the best interests ofthe Company to pursue any of those claims. Thereafter, the members of the Demand Review Committee fileda motion to stay the consolidated action pending completion by the Demand Review Committee of itsinvestigation and recommendation to the board of directors.

Further, in the consolidated action, we filed a motion to dismiss based on the failure to make a demandupon our board of directors, and the Individual Defendants filed a motion to dismiss based on the failure tostate a claim. These motions are fully briefed and pending before the court. Based on the uncertainty oflitigation and the preliminary stage of the case, we cannot estimate the reasonably possible loss or range ofloss that may result from this action.

Costello Matter

On or about March 6, 2015, James Costello (‘‘Costello’’) filed a shareholder derivative suit in theCourt of Chancery of the State of Delaware against our directors at that time (the ‘‘Costello DerivativeDefendants’’). We were named as a nominal defendant only. On April 1, 2015, the case was voluntarilystayed. On June 19, 2015, the stay was lifted at Costello’s request and Costello subsequently filed anamended complaint. The amended complaint added our Senior Vice President, Supply Chain, former ChiefMerchandising Officer and former Chief Financial Officer as defendants (along with the DerivativeDefendants, the ‘‘Costello Defendants’’). Costello’s allegations include (i) breach of fiduciary duties, (ii) grossmismanagement, (iii) unjust enrichment, and (iv) insider selling and the misappropriation of certain of ourinformation in connection therewith. Costello did not quantify any alleged damages in the amended complaintbut, in addition to attorneys’ fees and costs, Costello seeks (i) against the Costello Defendants and in ourfavor the amount of damages sustained by us as a result of the Costello Defendants’ breaches of fiduciaryduties, gross mismanagement and unjust enrichment, (ii) extraordinary equitable and/or injunctive relief,including attaching, impounding, imposing a constructive trust on or otherwise restricting the proceeds of theCostello Defendants’ trading activities or their assets, (iii) awarding to us restitution from the CostelloDefendants, and each of them, and ordering disgorgement of all profits, benefits and other compensationobtained by the Costello Defendants; and (iv) additional equitable and/or injunctive relief that would requireus to institute certain compliance policies and procedures.

We filed a motion to dismiss the amended complaint based on the failure to make a demand upon ourboard of directors and the Costello Defendants filed a motion to dismiss based on the failure to state a claimand the exculpatory provision in the Company’s Certificate of Incorporation. On September 14, 2015, theparties entered into a stipulation voluntarily staying the case until the Demand Review Committee has anopportunity to investigate Costello’s allegations and make a recommendation to our board of directors, and theboard of directors has the opportunity to act on that recommendation. The court has approved the stipulation.

Based on the uncertainty of litigation and the preliminary stage of the case, we cannot estimate thereasonably possible loss or range of loss that may result from this action.

McBride Matter

On or about March 27, 2015, James Michael McBride (‘‘McBride’’) filed a shareholder derivative suit inthe Circuit Court of the City of Williamsburg and County of James City, Virginia against our directors at thattime, as well as our former Chief Merchandising Officer and former Chief Financial Officer (collectively,the ‘‘McBride Defendants’’). We were named as a nominal defendant only. In the complaint, McBride’sallegations include (i) breach of fiduciary duties, (ii) gross mismanagement, (iii) abuse of control, (iv) insidertrading, and (v) unjust enrichment. McBride did not quantify any alleged damages in his complaint but, inaddition to attorneys’ fees and costs, McBride seeks (i) the awarding, against the McBride Defendants, and infavor of us, of damages sustained by us as a result of certain of the McBride Defendants’ breaches of their

27

Lumber Liquidators Holdings, Inc. - [PDF Document] (38)

fiduciary duties and (ii) a directive to us to (a) take all necessary actions to reform and improve our corporategovernance and internal procedures, (b) comply with our existing governance obligations and all applicablelaws and (c) protect us and our investors from a recurrence of the events that led to the filing of this action.On July 6, 2015, McBride filed an amended complaint. The amended complaint added claims for statutoryconspiracy and common law conspiracy and, in connection with the statutory conspiracy claim, seeks damagesin the amount of three times the actual damages incurred by us as the result of the alleged wrongful acts.Pursuant to a voluntary agreement between the parties, the defendants have not yet responded to the amendedcomplaint. Based on the uncertainty of litigation and the preliminary stage of the case, we cannot estimate thereasonably possible loss or range of loss that may result from this action.

Antidumping and Countervailing Duties Investigation

In October 2010, a conglomeration of domestic manufacturers of multilayered wood flooring filed apetition seeking the imposition of antidumping (‘‘AD’’) and countervailing duties (‘‘CVD’’) with theUnited States Department of Commerce (‘‘DOC’’) and the United States International Trade Commission(‘‘ITC’’) against imports of multilayered wood flooring from China. This ruling applies to our engineeredhardwood imported from China, which accounted for approximately 10% of our flooring purchases in 2014and approximately 6% of our flooring purchases in 2015.

The DOC made preliminary determinations regarding CVD and AD rates in April 2011 and May 2011,respectively. In December 2011, after certain determinations were made by the ITC and DOC, orders wereissued setting final AD and CVD rates at 3.3% and 1.5%, respectively. These rates became effective in theform of additional duty deposits, which we have paid, and applied retroactively to the DOC preliminarydeterminations of April 2011 and May 2011.

Following the issuance of the orders, a number of appeals were filed by several parties, including us,with the Court of International Trade (‘‘CIT’’) challenging various aspects of the determinations made by boththe ITC and DOC, including certain aspects that may impact the validity of the AD and CVD orders and theapplicable rates. The appeal of the CVD order was dismissed in June 2015. On January 23, 2015, theCIT issued a decision rejecting the challenge of the AD rate for all but one Chinese exporter. This decisionwas finalized on July 6, 2015, appealed to the Court of Appeals for the Federal Circuit on July 31, 2015 andmay take a year to conclude.

As part of its processes in these proceedings, the DOC conducts annual reviews of the CVD andAD rates. In such cases, the DOC will issue preliminary rates that are not binding and were subject tocomment by interested parties. After consideration of the comments received, the DOC will issue final ratesfor the applicable period, which may lag by a year or more. As rates are adjusted through the administrativereviews, we adjust our payments prospectively based on the final rate.

In the first DOC annual review in this matter, rates were modified for AD rates through November 2012and for CVD rates through 2011. Specifically, the AD rate was set at 5.92% and the CVD rate was set at0.83%. These rates are being appealed to the CIT by several parties, including us. Based on what has beenpaid by us to date for the periods covered by the first annual review, we believed our best estimate of theprobable loss was approximately $0.8 million for shipments during the applicable time periods covered by thefirst annual review, which we recorded as a long-term liability in our accompanying consolidated balancesheet and in cost of sales in our second quarter 2015 consolidated financial statements.

In January 2015, pursuant to the second annual review, the DOC issued a non-binding preliminaryAD rate of 18.27% for purchases from December 2012 through November 2013 and a preliminary CVD rateof 0.97% for purchases in fiscal year 2012. The rates were finalized in early July 2015 with the AD rate set at13.74% and the CVD rate set at 0.99%. We have appealed these rates. Notwithstanding our appeal, as theserates are now confirmed, we believe our best estimate of the probable loss was approximately $4.1 million forshipments during the applicable time periods, which we recorded as a long-term liability in our accompanyingconsolidated balance sheet and in cost of sales in our second quarter 2015 consolidated financial statements.Beginning in July 2015, we began paying these rates on each applicable purchase.

28

Lumber Liquidators Holdings, Inc. - [PDF Document] (39)

The third annual review of the AD and CVD rates was initiated in February 2015. In January 2016, theDOC issued non-binding preliminary results in the third annual review. The preliminary AD rate was 13.34%and the CVD preliminary rate was 1.43%. These rates are expected to be finalized in the DOC’s final resultsin May 2016. Any change in the applicable rates as a result of the third annual review would apply to importsoccurring after the second period of review.

Based on the preliminary rates set in January 2016 in the third annual review for shipments subsequent toNovember 2013 (AD) and shipments subsequent to December 2012 (CVD), we would owe an additional$5.3 million for all shipments through December 31, 2015. As no rates have been finalized for these periods,we have not recorded an accrual in our consolidated financial statements for the impact of higher rates for thetime periods subsequent to the second annual review. Based on the information available, we believe there isat least a reasonable possibility that an additional charge may be incurred in the range of $0 to $5.3 million.A loss greater than this amount may be incurred, but we are unable to estimate the amount at this time.

In February 2016, the DOC initiated the fourth annual review of AD and CVD rates, which we expectwill follow a similar schedule as the preceding review.

Other Matters

We are also, from time to time, subject to claims and disputes arising in the normal course of business.In the opinion of management, while the outcome of any such claims and disputes cannot be predicted withcertainty, our ultimate liability in connection with these matters is not expected to have a material adverseeffect on the results of operations, financial position or cash flows.

Item 4. Mine Safety Disclosures.

None.

29

Lumber Liquidators Holdings, Inc. - [PDF Document] (40)

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities.

Market Information

Our common stock trades on the New York Stock Exchange (‘‘NYSE’’) under the trading symbol ‘‘LL.’’We are authorized to issue up to 35,000,000 shares of common stock, par value $0.001. Total shares ofcommon stock outstanding at February 25, 2016 were 27,088,460, and we had eight stockholders of record.

The following table sets forth the range of high and low sales prices per share as reported by the NYSEfor each quarter during the last two fiscal years.

Price Range

High Low

2015:Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21.74 $12.80Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.42 11.62Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.18 20.01First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.99 27.15

2014:Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67.86 $47.76Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77.27 52.76Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.75 72.86First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111.74 86.26

Issuer Purchases of Equity Securities

The following table presents our share repurchase activity for the quarter ended December 31, 2015(dollars in thousands, except per share amounts):

Period

TotalNumber ofShares

Purchased(1)

AveragePrice Paidper Share

TotalNumber ofShares

Purchased asPart ofPublicly

AnnouncedPlans orPrograms

MaximumDollar Valuethat May YetBe PurchasedUnder thePlans or

Programs(2)

October 1, 2015 to October 31, 2015 . . . . . . . . . — $ — — $14,728November 1, 2015 to November 30, 2015 . . . . . . 581 13.71 — 14,728December 1, 2015 to December 31, 2015 . . . . . . — — — 14,728Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581 $13.71 — $14,728

(1) We repurchased 581 shares of our common stock in connection with the net settlement of shares issuedas a result of the vesting of restricted shares during the quarter ended December 31, 2015.

(2) Our initial stock repurchase program, which authorized the repurchase of up to $50 million in commonstock, was authorized by our board of directors and publicly announced on February 22, 2012. Our boardof directors subsequently authorized two additional stock repurchase programs, each of which authorizedthe repurchase of up to an additional $50 million in common stock. These programs were publiclyannounced on November 15, 2012 and February 19, 2014, respectively.

Dividend Policy

We have never paid any dividends on our common stock. Any future decision to pay cash dividends willbe at the discretion of our board of directors and will be dependent on our results of operations, financialcondition, contractual restrictions and other factors that the board of directors considers relevant.

30

Lumber Liquidators Holdings, Inc. - [PDF Document] (41)

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 12. ‘‘Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters’’ for information regarding securities authorized for issuance under our equitycompensation plans.

Performance Graph

The following graph compares the performance of our common stock during the period beginningDecember 31, 2010 through December 31, 2015, to that of the total return index for the NYSE Composite, theDow Jones US Furnishings Index and the S&P SmallCap 600 Index (which includes Lumber Liquidators)assuming an investment of $100 on December 31, 2010. In calculating total annual stockholder return,reinvestment of dividends, if any, is assumed. The indices are included for comparative purpose only. They donot necessarily reflect management’s opinion that such indices are an appropriate measure of the relativeperformance of our common stock.

Comparison of 5 Year Cumulative Total ReturnAssumes Initial Investment of $100

December 2015450.00

400.00

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

12/31/2010

12/31/2011

12/31/2012

12/31/2013

12/31/2014

12/31/2015

Lumber Liquidators Holdings, Inc. Dow Jones US Furnishings Index S&P Smallcap 600 Index NYSE Composite

12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015

Lumber Liquidators Holdings, Inc . . . . . $100.00 $ 70.90 $212.08 $413.05 $266.20 $ 69.69Dow Jones US Furnishings Index. . . . . . $100.00 $105.55 $119.02 $175.47 $200.60 $222.66S&P Smallcap 600 Index . . . . . . . . . . . $100.00 $101.02 $117.51 $166.05 $175.61 $172.15NYSE Composite . . . . . . . . . . . . . . . . $100.00 $ 96.43 $112.10 $141.70 $151.44 $145.40

31

Lumber Liquidators Holdings, Inc. - [PDF Document] (42)

Item 6. Selected Financial Data.

The selected statements of income data for the years ended December 31, 2015, 2014 and 2013 and thebalance sheet data as of December 31, 2015 and 2014 have been derived from our audited consolidatedfinancial statements included in Item 8. ‘‘Consolidated Financial Statements and Supplementary Data’’ of thisreport. This information should be read in conjunction with those audited financial statements, the notesthereto, and Item 7. ‘‘Management’s Discussion and Analysis of Financial Condition and Results ofOperations’’ of this report.

The selected balance sheet data set forth below as of December 31, 2013, 2012 and 2011, and incomedata for the years ended December 31, 2012 and 2011 are derived from our audited consolidated financialstatements contained in reports previously filed with the SEC, which are not included herein. Our historicalresults are not necessarily indicative of our results for any future period.

Year Ended December 31,

2015(1) 2014 2013 2012 2011

(dollars in thousands, except per share amounts)

Statement of Income DataNet Sales . . . . . . . . . . . . . . . . . . . $ 978,776 $ 1,047,419 $ 1,000,240 $ 813,327 $ 681,587

Comparable store net sales(decrease) increase(2) . . . . . . . (11.1)% (4.3)% 15.8% 11.4% (2.0)%

Cost of Sales . . . . . . . . . . . . . . . . 699,918 629,252 589,257 504,542 440,912Gross Profit . . . . . . . . . . . . . . . . . 278,858 418,167 410,983 308,785 240,675Selling, General and AdministrativeExpenses . . . . . . . . . . . . . . . . . 362,051 314,094 284,960 230,439 198,237

Operating (Loss) Income . . . . . . . . (83,193) 104,073 126,023 78,346 42,438Interest expense . . . . . . . . . . . . . . 309 84 — — —Other (Income) Expense(3) . . . . . . . (75) 406 (442) (140) (587)(Loss) Income Before IncomeTaxes . . . . . . . . . . . . . . . . . . . . (83,427) 103,583 126,465 78,486 43,025

Provision for income taxes . . . . . . . (26,994) 40,212 49,070 31,422 16,769Net (Loss) Income . . . . . . . . . . . . $ (56,433) $ 63,371 $ 77,395 $ 47,064 $ 26,256

Net (loss) income per commonshare:Basic . . . . . . . . . . . . . . . . . . . . $ (2.08) $ 2.32 $ 2.82 $ 1.71 $ 0.95Diluted . . . . . . . . . . . . . . . . . . . $ (2.08) $ 2.31 $ 2.77 $ 1.68 $ 0.93

Weighted average common sharesoutstanding:Basic . . . . . . . . . . . . . . . . . . . . 27,082,299 27,264,882 27,484,790 27,448,333 27,706,629Diluted . . . . . . . . . . . . . . . . . . . 27,082,299 27,485,852 27,914,322 28,031,453 28,379,693

(1) Results for the year ended December 31, 2015 include pre-tax expenses of $9.4 million related to thepurchase of testing kits and professional fees in connection with our indoor air quality testing program,incremental legal and professional fees and settlement expenses, related to our defense of various legalmatters of approximately $37.0 million, asset impairment charges and other expenses related to thesimplification of our business and employee retention totaling approximately $16.2 million, and the writedown of our laminates and associated moldings sourced from China totaling approximately $22.5 million.

(2) A store is generally considered comparable on the first day of the thirteenth full calendar month afteropening.

(3) Includes interest income.

32

Lumber Liquidators Holdings, Inc. - [PDF Document] (43)

Year Ended December 31,

2015 2014 2013 2012 2011

(dollars in thousands, except per share amounts)

Balance Sheet DataCash and cash equivalents . . . . . . . . . . $ 26,703 $ 20,287 $ 80,634 $ 64,167 $ 61,675Merchandise inventories . . . . . . . . . . . 244,402 314,371 252,428 206,704 164,139Total assets . . . . . . . . . . . . . . . . . . . . 456,202 493,462 429,559 347,387 294,854Customer deposits and store credits . . . . 33,771 34,943 22,377 25,747 18,120Total debt and capital lease obligations,including current maturities . . . . . . . 20,000 — — — —

Total stockholders’ equity . . . . . . . . . . 277,568 332,054 309,329 234,541 215,084Working capital . . . . . . . . . . . . . . . . . 195,044 213,030 245,207 187,118 167,248

Other DataTotal stores in operation . . . . . . . . . . . 374 352 318 288 263Average sales . . . . . . . . . . . . . . . . . . . $ 1,625 $ 1,675 $ 1,705 $ 1,600 $ 1,560

(1) Working capital is defined as current assets minus current liabilities.

(2) Average sale, calculated on a total company basis, is defined as the average invoiced sale per customer,measured on a monthly basis and excluding transactions of less than $250 (which are generally sampleorders, or add-ons or fill-ins to previous orders) and of more than $30,000 (which are usually contractororders).

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Lumber Liquidators is the largest specialty retailer of hardwood flooring in North America, offering acomplete purchasing solution across an extensive assortment of exotic and domestic hardwood species,engineered hardwood, laminate, resilient vinyl, bamboo and cork. At December 31, 2015, we sold ourproducts through 374 Lumber Liquidators stores in 46 states in the United States (‘‘U.S.’’) and in Canada, acall center, websites and catalogs.

We believe we have achieved a reputation for offering great value, superior service and a broad selectionof high-quality hardwood flooring products. With a balance of price, selection, quality, availability and service,we believe our value proposition is the most complete within a highly-fragmented hardwood flooring market.The foundation for our value proposition is strengthened by our unique store model, the industry expertise ofour people, our singular focus on hard-surface flooring and our expansion of our advertising reach andfrequency.

Executive Summary

For the fiscal year ended December 31, 2015 we reported a net loss of $56.4 million, or $(2.08) perdiluted share, compared to net income of $63.4 million, or $2.31 per diluted share in the year endedDecember 31, 2014. Our operating results for the year ended December 31, 2015 included:

• Expenses of $9.4 million related to the purchase of testing kits and professional fees in connectionwith our indoor air quality testing program,

• Incremental legal and professional fees and settlement expenses, related to our defense of variouslegal matters of approximately $37.0 million,

• Asset impairment charges and other expenses related to the simplification of our business totalingapproximately $10.9 million,

• Employee retention expenses totaling approximately $5.3 million and

• Write down of our laminates and associated moldings sourced from China totaling approximately$22.5 million.

33

Lumber Liquidators Holdings, Inc. - [PDF Document] (44)

Our net sales for the year ended December 31, 2015 were $978.8 million, a decrease of $68.6 millionfrom the $1.05 billion recorded during the year ended December 31, 2014. Our comparable store salesdecreased 11.1%, driven by a 8.0% decrease in the number of customers invoiced and a 3.1% decrease in ouraverage sale.

We believe our net sales were negatively impacted by certain unfavorable allegations made surroundingthe product quality, and subsequent suspension, of our laminates sourced from China. The allegations werepart of a 60 Minutes episode that originally aired on March 1, 2015 (‘‘the Broadcast’’). During 2015, weresponded to the impact of these allegations on our sales by focusing our efforts on getting back to basics,taking care of our customers, and executing on our value proposition. As a result of these efforts, weaccomplished the following:

• Reduced our inventory levels and improved the quality of our on hand inventory while conservingcash flow,

• Simplified our product assortment by eliminating approximately 140 flooring varieties and relatedmoldings, which were identified as duplicative, discontinued or less popular products, to improve thecustomer shopping experience,

• Returned to the core of our business by ending planned vertical integration initiatives and tileexpansions,

• Improved our vendor relationships across the globe, and

• Distributed over 48,000 free indoor air quality screening kits as part of our voluntary commitment tohelp our customers better understand the air quality in their homes. Refer to Other Matters forfurther discussion of the indoor air quality testing program.

Settlement of the Lacey Act Investigation

Additionally, in conjunction with the Special Committee of the Board of Directors (the ‘‘SpecialCommittee’’), we continue to address various legal matters and regulatory matters facing the Company. Aspreviously disclosed, during the fourth quarter of 2015, we entered into a settlement with the DOJ related toour compliance with the Lacey Act. The settlement requires the Company to implement an EnvironmentalCompliance Program (the ‘‘Compliance Plan’’) and pay certain fines and forfeit assets totaling approximately$13.2 million. Based on our current expectations, we anticipate implementation and ongoing compliance costsof these enhancements to cost up to $3.5 million through 2016, of which approximately $0.5 million wasincurred in the fourth quarter of 2015. We believe the ongoing costs of our compliance program will be higherthan historical levels as we implement the Compliance Plan, however, the scope of those costs will bedetermined by future sourcing initiatives and other factors. Refer to Part I, Item 3. — Legal Proceedings for acomplete description of legal and regulatory issues facing the Company.

Update on Laminate Flooring Sourced from China

On May 7, 2015, we suspended the sale of our laminate products sourced from China pending furtherassessment of the situation. As a part of our assessment, we considered expectations regarding customersentiment, market conditions, findings by regulatory agencies, legal proceedings, channels for disposition andother factors. During the quarter ended December 31, 2015, we determined that we would not sell our currentinventory of laminate flooring sourced from China in our stores as a result of strategic and operationalconsiderations including the potential distraction these products could have on our employees and ourbusiness. As a result of this decision, we reduced the carrying value of this laminate flooring and relatedmoldings to its net realizable value of zero, resulting in a charge of approximately $22.5 million to cost ofsales. We expect to incur certain costs in the first half of 2016 related to the consolidation of this laminateinventory to a central warehouse of between $1.0 million and $3.0 million. We may also incur additional costsin future periods related to the ultimate disposition of this product.

In order to meet customer demand, we shifted the sourcing of laminate products previously manufacturedin China to suppliers located in Europe and North America. We believe our laminate assortment has beenreceived positively by our customers and further believe the sales of such products will approach historical

34

Lumber Liquidators Holdings, Inc. - [PDF Document] (45)

levels as a percentage of our sales mix. Laminates represented approximately 15.7% of our sales in 2015compared to 19.1% and 19.6% in 2014 and 2013, respectively.

Consumer Product Safety Commission Investigation

In March 2015, we received notice from the Consumer Product Safety Commission (‘‘CPSC’’) that it wasopening an investigation into the safety of formaldehyde in our laminate flooring sourced from China. We havecooperated with the CPSC throughout its investigation. During its investigation, the CPSC shared test resultsrelated to its independent testing of our laminate flooring sourced from China with the Agency for ToxicSubstances and Disease Registry (‘‘ATSDR’’). On February 10, 2016, the Agency for Toxic Substances andDisease Registry (‘‘ATSDR’’) published its findings regarding formaldehyde emissions from a limited sample setof our flooring that had been tested by the CPSC. The ATSDR report concluded that the 33 samples tested poseda low risk of cancer from exposure and that the amount of formaldehyde released could lead to health symptomssuch as an increase in breathing problems in certain susceptible populations as well as short-term eye, nose orthroat irritation. On February 18, 2016, the ATSDR issued a statement indicating its February 10, 2016 reportcontained certain errors in their calculations. In their statement, the ATSDR, after correcting their model,preliminarily revised its assessment of the possible health effects indicating that the samples tested could causeincreased symptoms and other respiratory issues for people with asthma and COPD. Additionally, the statementnoted that individuals could experience eye, nose and throat irritation at the lowest modeled levels offormaldehyde. Finally, the statement indicated the ATSDR had preliminarily increased the estimated risk of cancerfrom 2-9 cases per 100,000 people to 6-30 cases per 100,000 people but reconfirmed the model used wasconservative and that the calculated cancer risk is likely lower. The ATSDR has indicated that itsrecommendations will likely remain the same, but the agency will conduct a quality review of the model andrevised results before issuing its revised report.

The CPSC’s investigation has not concluded, and we will continue to work with the CPSC.

Strategic Direction

We are focused on several key initiatives that we believe will strengthen our operations and provide animproved shopping experience to our customers. These initiatives focus the Company on getting ‘‘back to thebasics’’ of what we do well and include:

• Focusing on store performance: We believe our store model highlights our assortment in agood-better-best format and provides a competitive advantage by allowing our associates tomaximize the amount of time they devote to assisting customers throughout the buying process. Weintend to place additional focus on training our store associates and will also ensure our incentiveprograms appropriately align store goals to our corporate strategy.

• Strengthening our value proposition: We offer a broad assortment of high quality flooring invarying widths, species, and constructions, as well as moldings and accessories, in addition tofocusing on emerging product categories such as wood look tile and butcher block countertops. Weseek to ensure that these products are available to meet customer demand at attractive retail pricesand train our store associates to be experts in the products we sell. We have devoted significantresources to identify opportunities and execute corrective actions to improve underperforming stores.Additionally, we are placing an increased emphasis on associate training and store procedures.

• Responsible, compliant sourcing activities: We continue to enhance certain complianceprocedures, which we believe will allow the Company to confidently source products from anywherein the world.

• Opportunistically expanding our business to better serve our customers: We serve both DIYcustomers as well as DIFM customers who choose to select their flooring products but prefer tohave those products installed for them. Since 2013, we have increased the number of stores whichoffer installation services coordinated by our associates, which increases our average sale as well asthe gross profit generated from those customers.

35

Lumber Liquidators Holdings, Inc. - [PDF Document] (46)

We believe the selected sales data, the percentage relationship between Net Sales and major categories inthe Consolidated Statements of Operations and the percentage change in the dollar amounts of each of theitems presented below are important in evaluating the performance of our business operations.

% of Net Sales % Increase (Decrease)in Dollar AmountsYear Ended December 31,

2015 2014 20132015

vs. 20142014

vs. 2013

Net Sales . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% -6.6% 4.7%Gross Profit . . . . . . . . . . . . . . . . . . . . . 28.5% 39.9% 41.1% -33.3% 1.7%Selling, General, and AdministrativeExpenses . . . . . . . . . . . . . . . . . . . . . . 37.0% 30.0% 28.5% 15.3% 10.2%

Operating Income (Loss) . . . . . . . . . . . . (8.5)% 9.9% 12.6% -179.9% -17.4%Other (Income) Expense . . . . . . . . . . . . . 0.0% 0.0% (0.0)% -52.2% -210.9%Income (Loss) Before Income Taxes . . . . (8.5)% 9.9% 12.6% -180.5% -18.1%Provision for Income Taxes . . . . . . . . . . . (2.8)% 3.8% 4.9% -167.1% -18.1%Net Income (Loss) . . . . . . . . . . . . . . . . . (5.8)% 6.1% 7.7% -189.1% -18.1%

SELECTED SALES DATAAverage Sale(1) . . . . . . . . . . . . . . . . . . . . $1,625 $1,675 $1,705 -3.1% -1.8%Average Retail Price per Unit Sold(2) . . . . . (6.0)% (1.9)% 5.7%Comparable Store Sales Increase(Decrease) (%) . . . . . . . . . . . . . . . . . . (11.1)% (4.3)% 15.8%

Number of Stores Open, end of period . . . . 374 352 318Number of Stores in Expanded ShowroomFormat . . . . . . . . . . . . . . . . . . . . . . . . 137 103 52

Number of Stores Opened in Period . . . . . . 23 34 30Number of Stores Closed in Period . . . . . . 1 — —Number of Stores Remodeled in Period(3) . . 12 17 22

Comparable stores(4):Customers invoiced(5) . . . . . . . . . . . . . . (8.0)% (2.5)% 9.2%Net sales of stores operating for 13 to36 months . . . . . . . . . . . . . . . . . . . . (6.2)% 4.2% 21.8%

Net sales of stores operating for morethan 36 months . . . . . . . . . . . . . . . . (11.8)% (5.1)% 14.9%

Net sales in markets with all storescomparable (no cannibalization) . . . . . . . (9.5)% (0.3)% 18.2%

Net sales in cannibalized markets(6) . . . . . . 9.9% 17.2% 45.2%

(1) Average sale, calculated on a total company basis, is defined as the average invoiced sale per customer,measured on a monthly basis and excluding transactions of less than $250 (which are generally sampleorders, or add-ons or fill-ins to previous orders) and of more than $30,000 (which are usually contractororders).

(2) Average retail price per unit sold is calculated on a total company basis and excludes non-merchandiserevenue.

(3) A remodeled store remains a comparable store as long as it is relocated within the primary trade area.

(4) A store is generally considered comparable on the first day of the thirteenth full calendar month afteropening.

(5) Change in number of customers invoiced is calculated by applying the average sale to total net sales atcomparable stores.

(6) A cannibalized market has at least one comparable store and one non-comparable store.

36

Lumber Liquidators Holdings, Inc. - [PDF Document] (47)

Results of Operations

For an understanding of the significant factors that influenced our performance during the past threefiscal years, the following discussion should be read in conjunction with the Consolidated FinancialStatements and the Notes to Consolidated Financial Statements presented in this report.

Fiscal 2015 Compared to Fiscal 2014

Net Sales

Net sales for 2015 decreased $68.6 million, or 6.6%, from 2014 as net sales in comparable storesdecreased $116.2 million which was partially offset by an increase in non-comparable stores of $47.6 million.Net sales in 2015 were impacted by a decrease of 8.0% attributable to the number of customers invoiced anda decrease of 3.1% in the average sale.

• We believe the number of customers invoiced decreased as a result of a number of factors, includingthe impact of the Broadcast on our reputation, our suspension of sales of all laminate productsourced from China during a large portion of 2015, and disruptions in our supply chain related tocertain engineered product.

• The Company’s average sale decreased as a result of a decrease in the average selling price of ourproducts offset by slight increases in the volume of product sold. During 2015, the Companyreduced the selling price of its products by 6.0% and focused on the sale of less productiveinventory in order to drive traffic and reduce inventory levels, and in response to negativeallegations impacting the Company’s reputation. These price decreases were found across all of theproducts we sell.

• Less than favorable net sales at comparable stores were offset by the expansion of the Company’sinstallation program which increased 40.9% to $30.0 million in fiscal year 2015.

Gross Profit

Gross profit decreased 33.3% to $278.9 million from $418.2 million in 2014. Gross profit decreased asa percentage of sales due to a number of factors including, costs and charges incurred as a result of changesin the Company’s business in response to the Broadcast, reductions in the average selling price of ourproducts, and other changes to our business. Notable items impacting gross margin include:

• Certain planned reductions in retail prices implemented in late 2014 and greater promotional pricingbeginning in March 2015 to drive customer traffic and reduce inventory levels.

• We incurred costs of $9.4 million for purchases of testing kits and professional fees related to theCompany’s indoor air quality testing program.

• We recorded a write-off related to our suspension of the sale of Chinese laminate products totaling$22.5 million.

• As more fully described in Part II, Item I — Legal Proceedings, Antidumping and CountervailingDuties Investigation, we recorded $4.9 million during fiscal 2015 as our best estimate of theprobable loss for antidumping and countervailing duties owed on applicable shipments of engineeredhardwood imported from China.

• We incurred approximately $1.6 million of incremental expenses in conjunction with theconsolidation and transition of the East Coast distribution center, which was completed by the end ofthe first quarter of 2015.

• Gross margin in 2015 included approximately $6.6 million in costs related to our decision todiscontinue certain non-core investments.

• We incurred approximately $1.2 million in additional expense during 2014 primarily related to ourBellawood Re-Launch and higher inventory levels.

37

Lumber Liquidators Holdings, Inc. - [PDF Document] (48)

Selling, General, and Administrative Expenses

Selling, General and Administrative expenses increased 15.3% to $362.1 million from $314.1 million in2014. Notable items impacting SG&A include:

• We recorded employee retention incentives totaling approximately $5.3 million.

• We incurred costs of $10.0 million related to our settlement with the Environment and NaturalResources Division of the DOJ related to our compliance with the Lacey Act and $3.2 millionrelated to our settlement regarding Lacey Act compliance concerns related to a limited amount ofengineered hardwood flooring.

• We recorded asset impairment charges totaling approximately $4.3 million related to discontinuingcertain non-core investments.

• We incurred significant legal and professional fees related to our defense of various legal andregulatory matters of approximately $23.8 million.

Operating Income (Loss)

Operating loss for 2015 was $83.2 million compared to operating income of $104.1 million in 2014.Operating (loss) income as a percent of net sales was (8.5)% for fiscal 2015 compared to 9.9% in 2014.

Provision for Income Taxes

The effective tax rates for 2015 and 2014 were 32.4% and 38.8%, respectively.

Diluted Earnings per Share

Net loss for the year ended December 31, 2015 was $56.4 million, resulting in a loss of $2.08 perdiluted share compared to net income of $63.4 million, or $2.31 per diluted share, for the year endedDecember 31, 2014.

Fiscal 2014 Compared to Fiscal 2013

Net Sales

Net sales for 2014 increased $47.2 million, or 4.7%, over 2013 as net sales in comparable storesdecreased $42.9 million and net sales in non-comparable stores increased $90.1 million. Net sales in 2014were impacted by a decrease of 2.5% attributable to the number of customers invoiced and a decrease of 1.8%in the average sale.

• We believed the number of customers invoiced decreased partially due to lower inventory levels incertain key merchandise categories, primarily laminates, resilient vinyl and engineered hardwoods,overall weakness in customer demand for wood flooring and the adverse impact of unusually severewinter weather experienced in U.S. and Canada during 2014.

• We also believed that lower average sale in 2014 was due to a 1.9% net decrease in the averageretail price per unit sold, partially offset by an increase in the number of units sold. Changes in thesales mix of flooring, including clearance of products not a part of our continuing assortment, anincrease in liquidation deals and greater ad-hoc discounting at the point of sale drove down theaverage retail price per unit sold. Partially offsetting this decrease were increases in sales mix ofmoldings and accessories, non-merchandise services and Bellawood products.

• Positive effect of the increase in net sales were attributable to the seven store locations servingcommunities recovering from the effects of Hurricane Sandy, store base expansion and the 2014increase of $16.2 million in sales related to delivery and installation services, up from $16.1 millionin 2013.

38

Lumber Liquidators Holdings, Inc. - [PDF Document] (49)

Gross Profit

Gross profit increased 1.7% to $418.2 million from $411.0 million in 2013. Notable items attributing toincreasing gross profit as a percentage of sales include:

• Increases in merchandise sales mix related to moldings and accessories, which generally produce agross margin higher than flooring.

• Changes in our supply chain structure, changes in international and domestic transportation rates andcertain operational efficiencies as well as greater costs of merchandise obsolescence and shrink,including increased inventory reserves, and our increased investment in quality control andassurance, offset by lower sample and customer satisfaction costs.

• These increases were partially offset by adverse factors related to net shifts in our sales mix offlooring products, greater ad-hoc discounting at the point of sale, sourcing initiatives and increases incustomers choosing installation and delivery services, which have average gross margins less thanour average merchandise transaction.

Selling, General and Administrative Expenses

Selling, General and Administrative expenses increased 10.2% to $314.1 million from $285.0 million in2013. Notable items impacting SG&A include:

• Salaries, commissions and benefits in 2014 increased primarily due to store base growth, corporatesupport, including global compliance, our test of installation services management, the start-up andoperations of the West Coast distribution center and higher net cost of benefits. These expenses werepartially offset in 2014 by lower commission rates earned by our store management and loweraccruals related to our management bonus plan, as compared to 2013.

• We incurred cost increases in occupancy and depreciation and amortization primarily due to storebase expansion and incremental expense related to the West Coast distribution center, which becamefully operational during the first quarter of 2014.

• Our stock-based compensation costs, which included a special grant of restricted stock to certainmembers of management in March 2013 which fully vested in March 2014 and a special award toour former chief executive officer Rob Lynch, resulted in approximately $0.8 million and$0.6 million of expense in 2014 and 2013, respectively.

Operating Income

Operating income for 2014 decreased $21.9 million over 2013 as the $7.2 million increase in gross profitwas more than fully offset by a $29.1 million increase in SG&A expenses.

Provision for Income Taxes

The effective tax rate for both 2014 and 2013 was 38.8%.

Diluted Earnings per Share

Net income for the year ended December 31, 2014 was $63.4 million, or $2.31 per diluted sharecompared to net income of $77.4 million, or $2.77 per diluted share, for the year ended December 31, 2013.

Liquidity and Capital Resources

Our principal capital requirements are for capital expenditures to maintain and grow our business,working capital and general corporate purposes. We periodically use excess cash flow to repurchase shares ofour common stock under our stock repurchase program, however, we have suspended our share repurchaseplan until we are better able to evaluate the long-term customer demand and assess our estimates of operationsand cash flow. Our principal sources of liquidity at December 31, 2015 were $26.7 million of cash and cashequivalents, our cash flow from operations and, including potential limitations, $67.2 million of availabilityunder our revolving credit facility.

39

Lumber Liquidators Holdings, Inc. - [PDF Document] (50)

During 2015, we reduced our inventory levels which generated significant operating cash flow. In thenear term, we do not expect significant further declines in inventory levels. As such, our ability to produceoperating cash flow will be dependent upon our ability to generate net sales and operating income in futureperiods. Additionally, there are significant uncertainties associated with the extent of the negative impact ofthe unfavorable product allegations against us and unresolved government investigations and legal matters.However, we believe that cash flow from operations, together with existing liquidity sources, will be sufficientto fund our operations and anticipated capital expenditures for the foreseeable future. If the impact of theseallegations is more negative than anticipated or the outcome of legal matters is unfavorable, we may need toseek additional sources of liquidity.

In 2016, we currently expect capital expenditures to total between $10 million and $20 million, but wewill continue to assess and adjust our level of capital expenditures based on changing circ*mstances. Includedin our capital requirements, we expect to selectively evaluate the opening of new stores and the remodelingand relocating of existing stores while continuing to focus on our current store base.

Cash and Cash Equivalents

In 2015, cash and cash equivalents increased $6.4 million to $26.7 million. The increase of cash and cashequivalents was primarily due to $9.2 million of net cash provided by operating activities and $20.0 millionborrowed under the revolving credit facility, which were partially offset by the use of $22.5 million for capitalexpenditures.

In 2014, cash and cash equivalents decreased $60.3 million to $20.3 million. The decrease of cash andcash equivalents was primarily due to $53.3 million of net cash used to repurchase common stock and$71.1 million for capital expenditures, including the construction of our East Coast distribution center,partially offset by net cash provided by operating activities of $57.1 million.

In 2013, cash and cash equivalents increased $16.5 million to $80.6 million. The increase of cash andcash equivalents was primarily due to $53.0 million of net cash provided by operating activities and$27.4 million of proceeds received from stock option exercises which was partially offset by the use of$34.8 million to repurchase common stock and $28.6 million for capital expenditures.

Merchandise Inventories

Merchandise inventory is our most significant asset, and is considered either ‘‘available for sale’’ or‘‘inbound in-transit,’’ based on whether we have physically received and inspected the products at anindividual store location, in our distribution centers or in another facility where we control and monitorinspection.

Merchandise inventories and available inventory per store in operation on December 31 were as follows:

2015 2014 2013

(in thousands)

Inventory − Available for Sale . . . . . . . . . . . . . . . . . $215,903 $265,949 $212,617Inventory − Inbound In-Transit . . . . . . . . . . . . . . . . . 28,499 48,422 39,811Total Merchandise Inventories . . . . . . . . . . . . . . . . $244,402 $314,371 $252,428

Available Inventory Per Store . . . . . . . . . . . . . . . . $ 577 $ 756 $ 669

Available inventory per store at December 31, 2015 was lower than both December 31, 2014 andDecember 31, 2013. The simplification of our product assortment was part of our strategy to get back tobasics and allowed us to reduce our inventory levels while ensuring that each store location has the right mixof product available for the customer. We believe this will enhance the shopping experience for our customers.We recorded a lower of cost or market adjustment of approximately $22.5 million related to our inventory oflaminate products sourced from China.

Inbound in-transit inventory generally varies due to the timing of certain international shipments andcertain seasonal factors, including international holidays, rainy seasons and specific merchandise categoryplanning.

40

Lumber Liquidators Holdings, Inc. - [PDF Document] (51)

Cash Flows

Operating Activities. Net cash provided by operating activities was $9.2 million for 2015,$57.1 million for 2014 and $53.0 million for 2013. The $47.9 million decrease in net cash flow fromoperating activities comparing 2015 to 2014 is primarily due to unprofitable operations, a decrease inmerchandise inventories of $42.8 million, and a decrease in accounts payable of $21.5 million. The$4.1 million increase in net cash flow from operating activities comparing 2014 to 2013 is primarily due toour profitable operations, an increase in customer deposits and store credits of $12.6 million, an increase inmerchandise inventories of $62.1 million, and an increase in accounts payable of $21.5 million.

Investing Activities. Net cash used in investing activities was $22.5 million for 2015, $71.1 million for2014 and $28.6 million for 2013. Net cash used in investing activities in each year included capital purchasesfor store base expansion, and investments in and maintenance of forklifts, our integrated informationtechnology solution, our finishing lines and our Corporate Headquarters. In 2014 and 2013, capitalexpenditures also included remodeling of existing stores to our expanded showroom format and $37.6 millionand $8.4 million, respectively, for land, buildings and equipment for the East Coast distribution facility and$1.2 million and $2.1 million, respectively, for equipment and leasehold improvements for the West Coastdistribution facility.

Financing Activities. Net cash provided by financing activities was $19.7 million in 2015. Net cashused in financing activities was $46.2 million in 2014 and $7.4 million in 2013. We used cash of $0.3 million,$53.3 million and $34.8 million in 2015, 2014 and 2013, respectively, to repurchase our common stock,primarily under our stock repurchase program initiated in February 2012. Stock option exercises provided$7.2 million and $27.3 million in 2014 and 2013, respectively. During 2015, we had net borrowings of$20.0 million under our revolving credit facility to fund capital expenditures and inventory purchases.

Revolving Credit Agreement

On April 24, 2015, the Company, exclusive of its non-domestic subsidiaries, entered into a SecondAmended and Restated Credit Agreement (as amended on May 21, 2015 and November 20, 2015, the ‘‘CreditAgreement’’) with Bank of America, N.A. as administrative agent, collateral agent and lender (the ‘‘Bank’’).The Credit Agreement amended and restated the Amended and Restated Credit Agreement that was enteredinto between Lumber Liquidators, Inc. and the Bank on February 21, 2012 and amended on March 27, 2015.Under the Credit Agreement, the Bank agreed to provide the Company with an asset-based revolving creditfacility (the ‘‘Revolving Credit Facility’’) under which the Company may obtain loans and letters of creditfrom the Bank up to a maximum aggregate outstanding principal amount of the lesser of $100.0 million or acalculated borrowing base. Letters of credit are subject to a sublimit of $20.0 million (subject to theborrowing base). The Credit Agreement expires on April 24, 2020, is guaranteed by the Company and certainof its domestic subsidiaries and is secured primarily by the Company’s inventory, including certain in-transitinventory, and credit card receivables.

The Revolving Credit Facility has no mandated payment provisions and a fee of 0.15% per annum onany unused portion, paid quarterly in arrears. Loans outstanding under the Revolving Credit Facility can bearinterest based on the Base Rate or the LIBOR Rate, each as defined in the Credit Agreement. Interest on BaseRate loans is charged at varying per annum rates computed by applying a margin ranging from 0.125% to0.375% (dependent on the Company’s average daily excess borrowing availability during the most recentlycompleted fiscal quarter) over the applicable base interest rate (defined as the greatest of the prime rate, aspecified federal funds rate plus 0.50%, or the one-month LIBOR Rate plus 1.00%). Interest on LIBOR Rateloans and fees for standby letters of credit are charged at varying per annum rates computed by applying amargin ranging from 1.125% to 1.375% (dependent on the Company’s average daily excess borrowingavailability during the most recently completed fiscal quarter) over the applicable LIBOR rate for one, two,three or six month interest periods as selected by the Company. At December 31, 2015, the applicable interestrate for outstanding borrowings was 1.4375%. For the year ended December 31, 2015, the Company paid cashfor interest in the amount of $0.2 million.

The Credit Agreement contains a fixed charge coverage ratio covenant that becomes effective in the eventthat the Company’s excess borrowing availability under the Revolving Credit Facility at any time during theterm of the Revolving Credit Facility falls below the greater of $10.0 million or 10% of the borrowing base.

41

Lumber Liquidators Holdings, Inc. - [PDF Document] (52)

At December 31, 2015, the Company had approximately $67.2 million available to borrow under theRevolving Credit Facility, $20.0 million in outstanding borrowings and supported $2.8 million and$2.7 million of letters of credit at December 31, 2015 and 2014, respectively.

Related Party Transactions

See the discussion of related party transactions in Note 5 to the consolidated financial statements includedin Item 8 of this report and within Certain Relationships and Related Transactions, and Director Independencein Item 13 of this report.

Contractual Commitments and Contingencies

Our significant contractual obligations and commitments as of December 31, 2015 are summarized in thefollowing table:

Payments Due by Period

TotalLess Than1 Year

1 to 3Years

3 to 5Years 5+ Years

Contractual obligationsOperating lease obligations(1) . . . . . . . . . . . . . $131,904 $30,285 $48,729 $30,841 $22,049Purchase obligations(2) . . . . . . . . . . . . . . . . . . 436 436 — — —Borrowings on revolving credit facility . . . . . . . 20,000 — — 20,000 —Total contractual obligations . . . . . . . . . . . . $152,340 $30,721 $48,729 $50,841 $22,049

(1) Included in this table is the base period or current renewal period for our operating leases. The operatingleases generally contain varying renewal provisions.

(2) Purchase obligations represent capital expenditure commitments.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or other financing activities with special-purposeentities.

Inflation

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affectour operating results. Although we do not believe that inflation has had a material impact on our financialposition or results of operations to date, a high rate of inflation in the future may have an adverse effect onour ability to maintain current levels of gross profit and SG&A expenses as a percentage of net sales if theselling prices of our products do not increase with these increased costs.

Other Matters

Legal Matters

We are involved in various lawsuits, claims, investigations, and proceedings. See the discussion ofcommitments and contingencies in Note 10 to the consolidated financial statements included in Item 8 of thisreport for a discussion of these matters.

Indoor Air Quality Testing Program Results

In early March 2015, we began voluntarily offering free indoor air quality screening to certain of ourflooring customers, predominately those who had purchased laminate flooring sourced from China, to addresscustomer questions about the air quality in their homes. Home air test kits were selected as a quick, effectiveway to measure the total level of formaldehyde in indoor air from all sources, not just from the flooring.

We retained Building Health Check, LLC (‘‘BHC’’) to coordinate our indoor air quality testing program.The customer receives the home test kit from BHC and controls the sampling process, with clear instructionson how to conduct the sampling. The samples are then sent by the customer to EDLab at Pure Air ControlServices, Inc. (‘‘EDLab’’) where EDLab then forwards them to one of EDLab’s partner laboratories, which areall accredited for formaldehyde analysis by the American Industrial Hygiene Association’s Laboratory

42

Lumber Liquidators Holdings, Inc. - [PDF Document] (53)

Accreditation Programs, LLC. We have also engaged independent monitoring resources to review the workflow process in connection with the testing program and to perform quality review services relating to thecompilation and dissemination of testing results.

In 2015, over 48,000 testing kits were sent to Lumber Liquidators customers through the program. In total,approximately 30,500 of testing kits have been returned (‘‘Phase 1’’). Of those returned, over 90% had indicatedindoor air concentrations of formaldehyde that were within the guidelines set by the World Health Organization(‘‘WHO’’) as protective against sensory irritation and long-term health effects. While various groups haverecommended higher or lower levels, there is currently no national standard for recommended indoor home airconcentrations of formaldehyde in the United States. We have chosen to use the guideline established by theWHO, which is an international consensus standard that draws on recent research and the expertise of the manygovernments, academic institutions and researchers that have studied formaldehyde emissions.

We have been and continue to directly contact the customers whose test results indicate an indoorformaldehyde level in excess of the WHO guideline for additional investigation and next steps. These‘‘Phase 2’’ steps primarily consist of independent third-party laboratory testing of flooring samples from thesecustomers. Throughout the third and fourth quarters of 2015, we facilitated customers with elevated Phase 1testing results to complete Phase 2. If the results of this testing indicates that the flooring is contributing toformaldehyde levels in a customer’s home at elevated levels, we will work with the customer, at theCompany’s discretion, to replace the customer’s floor or compensate the customer for the cost of the floor aspart of ‘‘Phase 3’’. We did not record a reserve for Phase 3 based on the results we have received to datefrom the testing of customer flooring samples. We believe the test results and number of tests obtained to dateprovided a reasonable basis to support our assertion that a material reserve related to the replacement ofcustomer floors was not warranted. We will, however, continue to evaluate the results of each phase of theindoor air quality testing program. Should our results differ from current trends, we could record a materialcharge in future periods.

Costs related to this testing program and subsequent follow-up with customers were included in cost ofsales for the year ended December 31, 2015. At December 31, 2015, we adjusted the reserve for an estimateof actual and future costs related to the air quality testing program. The reserve was based on actualexperience to date, estimated using information through the filing date of the financial statements and wasincluded in other current liabilities on the consolidated balance sheet as a portion of the total warranty andcustomer satisfaction reserve.

Cost of SalesYear Ended

ReserveAs of

December 31, 2015

Phase 1: Cost and administration for test kits which were probable of being sent tothe Company’s customers as part of the air quality testing program. . . . . . . . . . . . $7,307 $ —

Phase 2: Costs to service certain customers not satisfied by the results of the airquality testing program, primarily consisting of testing of flooring samples . . . . . . 2,138 809

Phase 3: Costs to satisfy remaining customer concerns based on results of floorsample testing results received to date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,445 $809

Should our actual experience related to results of our indoor air quality testing program and subsequentfollow-up with customers differ from these estimates, additional reserves may be recorded in the future.

Critical Accounting Policies and Estimates

Critical accounting policies are those that we believe are both significant and that require us to makedifficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertainmatters. We base our estimates and judgments on historical experiences and various other factors that webelieve to be appropriate under the circ*mstances. Actual results may differ from these estimates, and we

43

Lumber Liquidators Holdings, Inc. - [PDF Document] (54)

might obtain different estimates if we used different assumptions or conditions. We believe the followingcritical accounting policies affect our more significant judgments and estimates used in the preparation of ourfinancial statements:

Recognition of Net Sales

We recognize net sales for products purchased at the time the customer takes possession of themerchandise. We recognize service revenue, which consists primarily of installation revenue and freightcharges for in-home delivery, when the service has been rendered. We report sales exclusive of sales taxescollected from customers and remitted to governmental taxing authorities. Net sales are reduced by anallowance for anticipated sales returns that we estimate based on historical and current sales trends andexperience. We believe that our estimate for sales returns is an accurate reflection of future returns. Anyreasonably likely changes that may occur in the assumptions underlying our allowance estimates would not beexpected to have a material impact on our financial condition or operating performance. Actual sales returnsdid not vary materially from estimated amounts for 2015, 2014 or 2013.

In addition, customers who do not take immediate delivery of their purchases are generally required topay a deposit, equal to approximately half of the retail sales value, with the balance payable when thecustomer takes possession of the merchandise. These customer deposits benefit our cash flow and return oninvestment capital, because we receive partial payment for our customers’ purchases immediately. We recordthese deposits as a liability on our balance sheet in customer deposits and store credits until the customertakes possession of the merchandise.

Merchandise Inventories

We value our merchandise inventories at the lower of merchandise cost or market value. We determinemerchandise cost using the average cost method. All of the hardwood flooring we purchase from suppliers iseither prefinished or unfinished, and in immediate saleable form. To the extent that we finish and boxunfinished products, we include those costs in the average unit cost of related merchandise inventory. Indetermining market value, we make judgments and estimates as to the market value of our products, based onfactors such as historical results and current sales trends. Any reasonably likely changes that may occur inthose assumptions in the future may require us to record charges for losses or obsolescence against theseassets, but would not be expected to have a material impact on our financial condition or operatingperformance. Actual losses and obsolescence charges did not vary materially from estimated amounts for2015, 2014 or 2013.

Stock-Based Compensation

We currently utilize a single equity incentive plan under which we may grant non-qualified stock options,restricted shares, stock appreciation rights and other equity awards to employees, non-employee directors and otherservice providers. We recognize expense for our stock-based compensation based on the fair value of the awards thatare granted. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated atthe date of grant based on our historical experience and future expectations. Measured compensation cost is recognizedratably over the service period of the entire related stock-based compensation award.

The fair value of stock options was estimated at the date of grant using the Black-Scholes-Mertonvaluation model. In order to determine the related stock-based compensation expense, we used the followingassumptions for stock options granted during 2015:

• Expected life of 5.5 years;

• Expected stock price volatility of 50%;

• Risk-free interest rate of 1.7%; and

• Dividends are not expected to be paid in any year.

The expected stock price volatility is based on the historical volatility of our stock price. The volatility isestimated for a period of time equal to the expected term of the related option. The risk-free interest rate isbased on the implied yield of U.S. Treasury zero-coupon issues with an equivalent remaining term. The

44

Lumber Liquidators Holdings, Inc. - [PDF Document] (55)

expected term of the options represents the estimated period of time until exercise and is determined byconsidering the contractual terms, vesting schedule and expectations of future employee behavior. Had wearrived at different assumptions of stock price volatility or expected terms of our options, our stock-basedcompensation expense and results of operations could have been different.

Loss Contingencies

We are involved in various lawsuits, claims, investigations, and proceedings. Certain of these matters includespeculative claims for substantial or indeterminate amounts of damages. We record a liability when we believethat it is both probable that a loss has been incurred and the amount can be reasonably estimated. If we determinethat a loss is reasonably possible and a loss or range of the loss can be estimated, we disclose such amounts.Significant judgment is required to determine both probability and the estimated amount of any loss or range ofloss. We assess each legal matter and any related provisions at least quarterly and adjust them accordingly toreflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.

Until a final resolution related to loss contingencies for legal and other contingencies is reached, theremay be an exposure to loss in excess of the amount we have recorded, and such amounts could be material,either individually or in the aggregate, to our business, consolidated financial position, results of operations, orcash flows. Therefore, if one or more of these matters were resolved against us for amounts in excess ofmanagement’s expectations, our results of operations and financial condition, including in a particularreporting period, could be materially adversely affected.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk.

We are exposed to interest rate risk through the investment of our cash and cash equivalents. We invest ourcash in short-term investments with maturities of three months or less. Changes in interest rates affect the interestincome we earn, and therefore impact our cash flows and results of operations. In addition, borrowings under ourrevolving credit agreement are exposed to interest rate risk due to the variable rate of the facility. As ofDecember 31, 2015, we had $20.0 million outstanding under our revolving credit agreement.

We currently do not engage in any interest rate hedging activity and currently have no intention to do soin the foreseeable future. However, in the future, in an effort to mitigate losses associated with these risks, wemay at times enter into derivative financial instruments, although we have not historically done so. We do not,and do not intend to, engage in the practice of trading derivative securities for profit.

Exchange Rate Risk.

Less than two percent of our revenue, expense and capital purchasing activities are transacted incurrencies other than the U.S. dollar, including the Euro, Canadian dollar, Chinese yuan and Brazilian real.

We currently do not engage in any exchange rate hedging activity and currently have no intention to doso in the foreseeable future. However, in the future, in an effort to mitigate losses associated with these risks,we may at times engage in transactions involving various derivative instruments to hedge revenues, inventorypurchases, assets and liabilities denominated in foreign currencies.

45

Lumber Liquidators Holdings, Inc. - [PDF Document] (56)

Item 8. Consolidated Financial Statements and Supplementary Data.

Page

Index to Consolidated Financial Statements

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm . . . . . . . . . . . . . . 47

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on Internal Controlover Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Consolidated Balance Sheets as of December 31, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . 49

Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013 . . . 50

Consolidated Statements of Other Comprehensive (Loss) Income for the years ended December 31,2015, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015, 2014and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 . . . 53

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

46

Lumber Liquidators Holdings, Inc. - [PDF Document] (57)

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Lumber Liquidators Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Lumber Liquidators Holdings, Inc. asof December 31, 2015 and 2014, and the related consolidated statements of operations comprehensive income,stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. Ouraudits also included Financial Statement Schedule II — Analysis of Valuation and Qualifying Accounts foreach of the three years in the period ended December 31, 2015. These financial statements and schedule arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Lumber Liquidators Holdings, Inc. at December 31, 2015 and 2014, and theconsolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion,the related financial statement schedule, when considered in relation to the basic financial statements taken asa whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting OversightBoard (United States), Lumber Liquidators Holdings, Inc.’s internal control over financial reporting as ofDecember 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report datedFebruary 29, 2016 expressed an adverse opinion thereon.

/s/ Ernst & Young LLP

Richmond, VirginiaFebruary 29, 2016

47

Lumber Liquidators Holdings, Inc. - [PDF Document] (58)

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm,on Internal Control over Financial Reporting

The Board of Directors and Stockholders of Lumber Liquidators Holdings, Inc.

We have audited Lumber Liquidators Holdings, Inc.’s internal control over financial reporting as ofDecember 31, 2015, based on criteria established in Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).Lumber Liquidators Holdings, Inc.’s management is responsible for maintaining effective internal control overfinancial reporting, and for its assessment of the effectiveness of internal control over financial reporting includedin the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is toexpress an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessingthe risk that a material weakness exists, testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk, and performing such other procedures as we considered necessaryin the circ*mstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financialreporting, such that there is a reasonable possibility that a material misstatement of the company’s annual orinterim financial statements will not be prevented or detected on a timely basis. The following materialweakness has been identified and included in management’s assessment. Management has identified a materialweakness related to the design and operating effectiveness of user access controls related to the Company’senterprise resource planning system that are relevant to the preparation of the consolidated financial statementsand system of internal control over financial reporting. We also have audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), the consolidated balance sheets ofLumber Liquidators Holdings, Inc. as of December 31, 2015 and 2014, and the related consolidated statementsof operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in theperiod ended December 31, 2015. This material weakness was considered in determining the nature, timing,and extent of audit tests applied in our audit of the 2015 financial statements, and this report does not affectour report dated February 29, 2016, which expressed an unqualified opinion on those financial statements.

In our opinion, because of the effect of the material weakness described above on the achievement of theobjectives of the control criteria, Lumber Liquidators Holdings, Inc. has not maintained effective internalcontrol over financial reporting as of December 31, 2015, based on the COSO criteria.

/s/ Ernst & Young LLP

Richmond, VirginiaFebruary 29, 2016

48

Lumber Liquidators Holdings, Inc. - [PDF Document] (59)

Lumber Liquidators Holdings, Inc.

Consolidated Balance Sheets(in thousands, except share data)

December 31,2015

December 31,2014

AssetsCurrent Assets:

Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,703 $ 20,287Merchandise Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,402 314,371Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,931 5,575Refundable Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,596 —Deferred Tax Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,045 8,901Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,111 8,143Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322,788 357,277

Property and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,997 124,867Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,693 9,693Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,724 1,625Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 456,202 $ 493,462

Liabilities and Stockholders’ EquityCurrent Liabilities:

Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,247 $ 80,303Customer Deposits and Store Credits . . . . . . . . . . . . . . . . . . . . . . . . . 33,771 34,943Accrued Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057 3,693Sales and Income Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,914 7,472Other Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,755 17,836Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,744 144,247

Other Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,252 6,603Deferred Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,638 10,558Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 —Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,634 161,408

Stockholders’ Equity:Common Stock ($0.001 par value; 35,000,000 shares authorized;27,088,460 and 27,069,307 shares outstanding, respectively) . . . . . . . . 30 30

Treasury Stock, at cost (2,824,814 and 2,816,780 shares, respectively) . . . (138,987) (138,692)Additional Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,590 177,479Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237,600 294,033Accumulated Other Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . (1,665) (796)Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277,568 332,054

Total Liabilities and Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . $ 456,202 $ 493,462

See accompanying notes to consolidated financial statements

49

Lumber Liquidators Holdings, Inc. - [PDF Document] (60)

Lumber Liquidators Holdings, Inc.

Consolidated Statements of Operations(in thousands, except share data and per share amounts)

Year Ended December 31,

2015 2014 2013

Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 978,776 $ 1,047,419 $ 1,000,240Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699,918 629,252 589,257Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,858 418,167 410,983

Selling, General and Administrative Expenses . . . . . . . . . . . 362,051 314,094 284,960Operating (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . (83,193) 104,073 126,023

Other Expense (Income) . . . . . . . . . . . . . . . . . . . . . . . . . . 234 490 (442)(Loss) Income Before Income Taxes . . . . . . . . . . . . . . . . (83,427) 103,583 126,465

Income Tax (Benefit) Expense . . . . . . . . . . . . . . . . . . . . . . (26,994) 40,212 49,070Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (56,433) $ 63,371 $ 77,395

Net (Loss) Income per Common Share − Basic . . . . . . . . . $ (2.08) $ 2.32 $ 2.82

Net (Loss) Income per Common Share − Diluted . . . . . . . $ (2.08) $ 2.31 $ 2.77

Weighted Average Common Shares Outstanding:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,082,299 27,264,882 27,484,790Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,082,299 27,485,852 27,914,322

See accompanying notes to consolidated financial statements

50

Lumber Liquidators Holdings, Inc. - [PDF Document] (61)

Lumber Liquidators Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)(in thousands)

Year Ended December 31,

2015 2014 2013

Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(56,433) $63,371 $77,395

Other Comprehensive (Loss) Income:Foreign Currency Translation Adjustments . . . . . . . . . . . . . . (869) (234) (635)

Total Other Comprehensive (Loss) Income . . . . . . . . . . . . . . (869) (234) (635)Comprehensive (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . $(57,302) $63,137 $76,760

See accompanying notes to consolidated financial statements

51

Lumber Liquidators Holdings, Inc. - [PDF Document] (62)

Lumber Liquidators Holdings, Inc.

Consolidated Statements of Stockholders’ Equity(in thousands, except share data)

Common Stock Treasury Stock

AdditionalCapital

RetainedEarnings

AccumulatedOther

ComprehensiveIncome (Loss)

TotalStockholders’

EquitySharesParValue Shares Value

December 31, 2012 . . . . . . . . 27,214,144 $29 1,719,706 $ (50,552) $131,724 $153,267 $ 73 $234,541Stock-Based CompensationExpense . . . . . . . . . . . . — — — — 5,471 — — 5,471

Exercise of Stock Options . . . 718,665 1 — — 10,254 — — 10,255

Excess Tax Benefits on StockOption Exercises . . . . . . . — — — — 17,132 — — 17,132

Release of Restricted Shares . . 38,362 — — — — — — —

Common Stock Repurchased . . (413,601) — 413,601 (34,830) — — — (34,830)

Translation Adjustment . . . . . — — — — — — (635) (635)

Net Income . . . . . . . . . . . — — — — — 77,395 — 77,395

December 31, 2013 . . . . . . . . 27,557,570 $30 2,133,307 $ (85,382) $164,581 $230,662 $ (562) $309,329Stock-Based CompensationExpense . . . . . . . . . . . . — — — — 5,744 — — 5,744

Exercise of Stock Options . . . 149,707 — — — 3,150 — — 3,150

Excess Tax Benefits on StockOption Exercises . . . . . . . — — — — 4,004 — — 4,004

Release of Restricted Shares . . 45,503 — — — — — — —

Common Stock Repurchased . . (683,473) — 683,473 (53,310) — — — (53,310)

Translation Adjustment . . . . . — — — — — — (234) (234)

Net Income . . . . . . . . . . . — — — — — 63,371 — 63,371

December 31, 2014 . . . . . . . . 27,069,307 $30 2,816,780 $(138,692) $177,479 $294,033 $ (796) $332,054Stock-Based CompensationExpense . . . . . . . . . . . . — — — — 4,080 — — 4,080

Tax Effect of Stock-BasedCompensation . . . . . . . . . — — — — (969) — — (969)

Release of Restricted Shares . . 19,153 — — — — — — —

Common Stock Repurchased . . — — 8,034 (295) — — — (295)

Translation Adjustment . . . . . — — — — — — (869) (869)

Net Loss . . . . . . . . . . . . . — — — — — (56,433) — (56,433)

December 31, 2015 . . . . . . . . 27,088,460 $30 2,824,814 $(138,987) $180,590 $237,600 $(1,665) $277,568

See accompanying notes to consolidated financial statements

52

Lumber Liquidators Holdings, Inc. - [PDF Document] (63)

Lumber Liquidators Holdings, Inc.

Consolidated Statements of Cash Flows(in thousands)

Year Ended December 31,

2015 2014 2013

Cash Flows from Operating Activities:Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(56,433) $ 63,371 $ 77,395

Adjustments to Reconcile Net (Loss) Income to Net CashProvided by Operating Activities:Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . 17,392 14,714 11,666Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . (12,064) (152) (846)Stock-Based Compensation Expense . . . . . . . . . . . . . . . . 3,941 5,593 5,974Impairment Charges related to Property and Equipment . . . 4,392 — —Inventory Lower of Cost or Market Adjustments . . . . . . . . 26,162 — —Deconsolidation of Variable Interest Entity . . . . . . . . . . . . 1,457 — —

Changes in Operating Assets and Liabilities:Merchandise Inventories . . . . . . . . . . . . . . . . . . . . . . . 42,773 (62,140) (45,834)Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,450) 21,478 (15)Customer Deposits and Store Credits . . . . . . . . . . . . . . (1,075) 12,623 (3,354)Prepaid Expenses and Other Current Assets . . . . . . . . . . (18,385) (1,836) (257)Other Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . 22,494 3,436 8,271

Net Cash Provided by Operating Activities . . . . . . . . . . 9,204 57,087 53,000

Cash Flows from Investing Activities:Purchases of Property and Equipment . . . . . . . . . . . . . . . . . (22,478) (71,138) (28,585)Net Cash Used in Investing Activities . . . . . . . . . . . . . . (22,478) (71,138) (28,585)

Cash Flows from Financing Activities:Payments for Stock Repurchases . . . . . . . . . . . . . . . . . . . . . (295) (53,310) (34,830)Proceeds from the Exercise of Stock Options . . . . . . . . . . . . — 3,150 10,255Excess Tax Benefit from Stock-Based Compensation . . . . . . . — 4,004 17,132Borrowings on Revolving Credit Facility . . . . . . . . . . . . . . . 39,000 53,000 —Payments on Revolving Credit Facility . . . . . . . . . . . . . . . . (19,000) (53,000) —Net Cash Provided by (Used in) Financing Activities . . . 19,705 (46,156) (7,443)

Effect of Exchange Rates on Cash and Cash Equivalents . . . . (15) (140) (505)Net Increase (Decrease) in Cash and Cash Equivalents . . . . . 6,416 (60,347) 16,467Cash and Cash Equivalents, Beginning of Year . . . . . . . . . . . 20,287 80,634 64,167Cash and Cash Equivalents, End of Year . . . . . . . . . . . . . . . $ 26,703 $ 20,287 $ 80,634

See accompanying notes to consolidated financial statements

53

Lumber Liquidators Holdings, Inc. - [PDF Document] (64)

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, whereapplicable, individually, the ‘‘Company’’) engage in business as a multi-channel specialty retailer of hardwoodflooring, and hardwood flooring enhancements and accessories, operating as a single operating segment. TheCompany 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 flooringproducts, bamboo and cork, and provides a wide selection of flooring enhancements and accessories, includingmoldings, noise-reducing underlay, adhesives and flooring tools. The Company also provides in-home deliveryand installation services to certain of its customers. The Company sells primarily to homeowners or tocontractors on behalf of homeowners through a network of 366 store locations in primary or secondarymetropolitan areas in 46 states and eight store locations in Canada at December 31, 2015. In addition to thestore locations, the Company’s products may be ordered, and customer questions/concerns addressed, throughboth its call center in Toano, Virginia, and its website, www.lumberliquidators.com. The Company finishes themajority 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 beeneliminated in consolidation.

In 2014, the Company entered into an arrangement to begin to vertically integrate its domestic hardwoodsupply to feed its finishing lines. During the quarter ended June 30, 2015, the Company decided todiscontinue certain of these vertical integration initiatives, which were previously consolidated as a variableinterest entity, and terminated its prior arrangement. As a result, the Company has recorded a charge of $1,457in 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 andthe carrying value of the related net assets.

In order to conform to current year presentation, the Company has reclassified the deferred tax asset on theaccompanying 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 theUnited States requires management to make estimates and assumptions that affect the amounts reported in theconsolidated 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 whenpurchased to be cash equivalents, of which there was nil at December 31, 2015 and 2014, respectively. TheCompany accepts a range of debit and credit cards, and these transactions are generally transmitted to a bankfor reimbursem*nt within 24 hours. The payments due from the banks for these debit and credit cardtransactions are generally received, or settled, within 24 to 48 hours of the transmission date. The Companyconsiders all debit and credit card transactions that settle in less than seven days to be cash and cashequivalents. 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

Lumber Liquidators Holdings, Inc. - [PDF Document] (65)

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 − (continued)

Credit Programs

Credit is offered to the Company’s customers through a proprietary credit card, underwritten by athird party financial institution and generally at no recourse to the Company. A credit line is offered to theCompany’s professional customers through the Lumber Liquidators Commercial Credit Program. Thiscommercial credit program is underwritten by a third party financial institution, generally with no recourse tothe Company.

As part of the credit program, the Company’s customers may tender their Lumber Liquidators credit cardto receive installation services provided by the Company’s third party installation provider, who is responsiblefor all credits and program fees for the related transactions. The Company has agreed to indemnify thefinancial institution against any losses related to these credits or fees. There are no maximum potential futurepayments under the guarantee. The Company is able to seek recovery from the installation provider of anyamounts paid on its behalf. The Company believes that the risk of significant loss from the guarantee of theseobligations is remote.

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash and cash equivalents, accounts payable andother liabilities approximate fair value because of the short-term nature of these items and the carrying amountof obligations under our revolving credit facility approximate fair value due to the variable rate of interest.Of these financial instruments, the cash equivalents are classified as Level 1 as defined in the FinancialAccounting Standards Board Accounting Standards Codification (‘‘FASB ASC’’) 820 fair value hierarchy.

Certain non-financial assets, including property and equipment, have been written down and measured inthe consolidated financial statements at fair value. Fair value was based on expected future cash flows usingLevel 3 inputs under ASC 820.

Merchandise Inventories

The Company values merchandise inventories at the lower of cost or market value. Merchandise cost isdetermined using the average cost method. All of the hardwood flooring purchased from vendors is eitherprefinished or unfinished, and in immediate saleable form. The Company adds the finish to, and boxes, variousspecies of unfinished product, to produce certain proprietary products, primarily Bellawood, at its finishingfacility. These finishing and boxing costs are included in the average unit cost of related merchandiseinventory. The Company maintains an inventory reserve for loss or obsolescence based on historical resultsand current sales trends. This reserve was $26,882 and $3,242 at December 31, 2015 and 2014, respectively.

On May 7, 2015, the Company suspended the sale of laminate products sourced from China after certainallegations were made regarding these products. This inventory has been held in stores and distribution centersas the Company has continued to evaluate and assess alternatives for the disposition of these products and thepotential implications these alternatives could have on the net realizable value of the laminate flooringinventory sourced from China. During the quarter ended June 30, 2015, the Company recorded a charge ofapproximately $339 related to its laminate flooring sourced from China, primarily for flooring with less thanjob-lot quantities on hand as the Company did not intend to purchase additional quantities of such product.During the quarter ended December 31, 2015, in connection with changes in the executive management teamand based on the most recent evaluation of the alternatives for disposal, which considered strategic andoperational considerations including potential distractions these products could have on the Company’semployees and business, the Company determined that it would not sell the current inventory of laminateflooring sourced from China in its stores. As a result of this decision, the Company recorded a charge toreduce the remaining carrying value of this laminate flooring and related moldings to its net realizable valueof zero. The Company recorded total charges related to laminate flooring sourced from China of $22,499 incost of sales for the year ended December 31, 2015 in the accompanying consolidated statements of

55

Lumber Liquidators Holdings, Inc. - [PDF Document] (66)

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 − (continued)

operations. The Company is considering its options for disposal of this product. Costs related to shipping anddisposal will be recognized as incurred.

During the quarter ended June 30, 2015, the Company appointed its founder as acting chief executiveofficer. In connection with this and other management changes, the Company determined that it would refocuson its core business and it would not pursue an expansion into the tile flooring business in the near term. In2014, the Company had begun to sell tile flooring and related accessories in three stores as a potential growthopportunity. As a result, in the second quarter of 2015, the Company recorded a lower of cost or marketadjustment of $3,663 for certain tile flooring and related accessories, which is recorded in cost of sales for theyear ended December 31, 2015 in the accompanying consolidated statements of operations.

Impairment of Long-Lived Assets

The Company evaluates potential impairment losses on long-lived assets used in operations when eventsand circ*mstances indicate that the assets may be impaired, and the undiscounted cash flows estimated to begenerated by those assets are less than the carrying amounts of those assets. If impairment exists and theundiscounted cash flows estimated to be generated by those assets are less than the carrying amount of thoseassets, an impairment loss is recorded based on the difference between the carrying value and fair value ofthe assets.

In the third quarter of 2015, the Company finalized the termination of its agreement relating to certainvertical integration initiatives which changed the Company’s expectations of future cash flows from relatedlong-lived assets. As a result, the Company tested certain long-lived assets for impairment. The Companyrecorded a $3,043 impairment charge within selling, general and administrative (‘‘SG&A’’) expenses for thethree months ended September 30, 3015 in its accompanying consolidated statements of income. Theimpairment charge was measured under an income approach utilizing forecasted discounted cash flows. Fairvalue was based on expected future cash flows using Level 3 inputs under ASC 820. The most significantunobservable input used in the fair value analysis relates to the estimated sales price of the long-lived assets.

In the second quarter of 2015, the Company concluded that its decision not to pursue an expansion intothe tile flooring business in the near term was a triggering event requiring assessment of recoverability forcertain of its long-lived assets. As a result, the Company tested the long-lived assets for impairment related toits store locations selling a significant assortment of tile flooring. In the second quarter of 2015, the Companyrecorded a $1,350 impairment charge, which is recorded within SG&A expenses for the year endedDecember 31, 3015 in the accompanying consolidated statements of income. The impairment charge wasmeasured under an income approach utilizing forecasted discounted cash flows. Fair value was based onexpected future cash flows using Level 3 inputs under ASC 820. The most significant unobservable input usedin the fair value analysis relates to the estimated sales price of the long-lived assets.

No impairment charges were recognized in 2014 or 2013.

Goodwill and Other Indefinite-Lived Intangibles

Goodwill represents the costs in excess of the fair value of net assets acquired associated withacquisitions by the Company. Other assets include $800 for an indefinite-lived intangible asset for the phonenumber 1-800-HARDWOOD and related internet domain names. The Company evaluates these assets forimpairment on an annual basis, or whenever events or changes in circ*mstance indicate that the asset carryingvalue exceeds its fair value. Based on the analysis performed, the Company has concluded that no impairmentin the value of these assets has occurred.

Self-Insurance

The Company is self-insured for certain employee health benefit claims and for certain workers’compensation claims. The Company estimates a liability for aggregate losses below stop-loss coverage limits

56

Lumber Liquidators Holdings, Inc. - [PDF Document] (67)

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 − (continued)

based on estimates of the ultimate costs to be incurred to settle known claims and claims incurred but notreported as of the balance sheet date. The estimated liability is not discounted and is based on a number ofassumptions and factors including historical and industry trends and economic conditions. This liability couldbe affected if future occurrences and claims differ from these assumptions and historical trends. As ofDecember 31, 2015 and 2014, an accrual of $1,976 and $1,585 related to estimated claims was included inother current liabilities, respectively.

Recognition of Net Sales

The Company recognizes net sales for products purchased at the time the customer takes possession ofthe merchandise. Service revenue, primarily installation revenue and freight charges for in-home delivery, isincluded in net sales and recognized when the service has been rendered. The Company reports salesexclusive of sales taxes collected from customers and remitted to governmental taxing authorities, and net ofan allowance for anticipated sales returns based on historical and current sales trends and experience. Thesales returns allowance and related changes were not significant for 2015, 2014 or 2013.

In total, we offer more than 400 different flooring product stock-keeping units; however, no singleflooring product represented more than 2% of our sales mix. By major product category, our sales mix was asfollows:

2015 2014 2013

Solid and Engineered Hardwood . . . . . . . . . . . . . . . $378,501 $ 406,887 $ 413,709Laminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,722 199,775 195,382Bamboo, Cork, Vinyl Plank and Other . . . . . . . . . . . 221,776 212,735 193,960Moldings and Accessories . . . . . . . . . . . . . . . . . . . 184,144 195,539 180,713Non-Merchandise Services . . . . . . . . . . . . . . . . . . . 40,633 32,483 16,476Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $978,776 $1,047,419 $1,000,240

The Company generally requires customers to pay a deposit, equal to approximately half of the retailsales value, when purchasing merchandise inventories not regularly carried in a given store location, or notcurrently in stock. These deposits are included in customer deposits and store credits until the customer takespossession of the merchandise.

Cost of Sales

Cost of sales includes the cost of the product sold, cost of installation services, transportation costs fromvendor to the Company’s distribution centers or store locations, any applicable finishing costs related toproduction of the Company’s proprietary brands, transportation costs from distribution centers to storelocations, transportation costs for the delivery of products from store locations to customers, certain costs ofquality control procedures, inventory adjustments including shrinkage, and costs to produce samples, reducedby vendor allowances.

In early March 2015, the Company began voluntarily offering free indoor air quality screening to certainof its flooring customers, predominately those who had purchased laminate flooring sourced from China, toaddress customer questions about the air quality in their homes. During the year ended December 31, 2015,over approximately 48,000 testing kits were sent to Lumber Liquidators customers through the program. Intotal, approximately 30,500 testing kits have been returned. Of those returned, over 90% indicated indoor airconcentrations of formaldehyde within the guidelines set by the World Health Organization (‘‘WHO’’) asprotective against sensory irritation and long-term health effects. The Company has been and continues todirectly contact the customers whose test results indicate an indoor formaldehyde level in excess of the WHOguideline for additional investigation and next steps. These ‘‘Phase 2’’ steps primarily consist of independentthird-party laboratory testing of flooring samples from these customers. If the results of this testing indicates

57

Lumber Liquidators Holdings, Inc. - [PDF Document] (68)

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 − (continued)

that the flooring is contributing to formaldehyde levels in a customer’s home at elevated rates, the Companywill work with the customer, at the Company’s discretion, to replace the customer’s floor or compensate thecustomer for the cost of the floor as part of ‘‘Phase 3’’. Throughout 2015, the Company facilitated customerswith elevated Phase 1 testing results to complete Phase 2. To date, the Company did not record a reserve forPhase 3 based on the results it has received to date from the testing of customer flooring samples. TheCompany believes the test results and number of tests obtained to date provided a reasonable basis to supportit* assertion that a material reserve related to the replacement of customer floors was not warranted. TheCompany will, however, continue to evaluate the results of each phase of the indoor air quality testingprogram. Should its results differ from current trends, the Company could record a material charge in futureperiods.

The Company incurred $9,445 of direct costs primarily related to purchases of testing kits andprofessional fees for the year ended December 31, 2015. At December 31, 2015, the Company had a reserveof $809 for estimated future costs to evaluate whether the laminate flooring purchased from the Company wasthe primary driver of the air quality testing results being above WHO standards. The reserve was based onactual experience to date, estimated using information through the filing date of the financial statements andwas included in other current liabilities. Should the Company’s actual experience related to results of itsindoor air quality testing program and subsequent follow-up with customers differ from these estimates,additional reserves may be recorded in the future.

A rollforward of the reserve for the Company’s air quality testing program was as follows:

Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ —Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,873Reversal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,428)Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,636)

Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 809

Additionally, for the year ended December 31, 2015, the Company incurred customer satisfaction costs of$1,200, primarily related to projects using certain laminate or engineered hardwood products that wereincomplete as of the date sales of such laminate and engineered hardwood products were suspended during thesecond quarter of 2015. These costs were incurred to ensure customers could complete their projects in asatisfactory manner. Refer to Note 10, Commitments and Contingencies, for a discussion of these products.

The Company offers a range of limited warranties from the durability of the finish on its prefinishedproducts to its services provided. These limited warranties range from one to 100 years. Warranty reserves arebased primarily on claims experience, sales history and other considerations, including payments made tosatisfy customers for claims not directly related to the warranty on the Company’s products. Warranty costsare recorded in cost of sales. This reserve was $1,688 and $1,568 at December 31, 2015 and 2014,respectively. The Company is able to seek recovery from its vendors and installation providers for certainamounts paid.

Vendor allowances primarily consist of volume rebates that are earned as a result of attaining certainpurchase levels and reimbursem*nt for the cost of producing samples. Vendor allowances are accrued asearned, with those allowances received as a result of attaining certain purchase levels accrued over theincentive period based on estimates of purchases. Volume rebates earned are initially recorded as a reductionin merchandise inventories and a subsequent reduction in cost of sales when the related product is sold.Reimbursem*nt received for the cost of producing samples is recorded as an offset against cost of sales.

58

Lumber Liquidators Holdings, Inc. - [PDF Document] (69)

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 − (continued)

Advertising Costs

Advertising costs charged to selling, general and administrative (‘‘SG&A’’) expenses, net of vendorallowances, were $77,455, $82,604 and $75,506 in 2015, 2014 and 2013, respectively. The Company usesvarious types of media to brand its name and advertise its products. Media production costs are generallyexpensed as incurred, except for direct mail, which is expensed when the finished piece enters the postalsystem. Media placement costs are generally expensed in the month the advertising occurs, except forcontracted endorsem*nts and sports agreements, which are generally expensed ratably over the contract period.Amounts paid in advance are included in prepaid expenses and totaled $1,495 and $1,549 at December 31,2015 and 2014, respectively.

Store Opening Costs

Costs to open new store locations are charged to SG&A expenses as incurred, net of any vendor support.

Other Vendor Consideration

Consideration from non-merchandise vendors, including royalties and rebates, are generally recorded asan offset to SG&A expenses when earned.

Depreciation and Amortization

Property and equipment is carried at cost and depreciated on the straight-line method over the estimateduseful lives. The estimated useful lives for leasehold improvements are the shorter of the estimated usefullives or the remainder of the lease terms. For leases with optional renewal periods, the Company uses theoriginal lease term, excluding optional renewal periods, to determine the appropriate estimated useful lives.Capitalized software costs are capitalized from the time that technological feasibility is established until thesoftware is ready for use. The estimated useful lives are generally as follows:

Years

Buildings and Building Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 to 40Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 to 25Computer Software and Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 10Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 to 15

Operating Leases

The Company has operating leases for its stores, Corporate Headquarters, certain of its distributionfacilities, supplemental office facilities and certain equipment. The lease agreements for certain stores anddistribution facilities contain rent escalation clauses, rent holidays and tenant improvement allowances. Forscheduled rent escalation clauses during the lease terms or for rental payments commencing at a date otherthan the date of initial occupancy, the Company records minimum rental expenses in SG&A expenses on astraight-line basis over the terms of the leases. The difference between the rental expense and rent paid isrecorded as deferred rent on the consolidated balance sheets. For tenant improvement allowances, theCompany records deferred rent on the consolidated balance sheets and amortizes the deferred rent over theterms of the leases as reductions to rental expense.

Stock-Based Compensation

The Company records compensation expense associated with stock options and other forms of equitycompensation in accordance with FASB ASC 718. The Company may issue incentive awards in the form ofstock options, restricted shares and other equity awards to employees, non-employee directors and otherservice providers. The Company recognizes expense for its stock-based compensation based on the fair value

59

Lumber Liquidators Holdings, Inc. - [PDF Document] (70)

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 − (continued)

of the awards that are granted. Compensation expense is recognized only for those awards expected to vest,with forfeitures estimated at the date of grant based on historical experience and future expectations.Measured compensation cost is recognized ratably over the requisite service period of the entire relatedstock-based compensation award.

Foreign Currency Translation

The Company’s Canadian operations use the Canadian dollar as the functional currency. Assets andliabilities are translated at exchange rates in effect at the balance sheet date. Revenues and expenses aretranslated at the average monthly exchange rates during the year. Resulting translation adjustments arerecorded as a component of accumulated other comprehensive income on the consolidated balance sheets.

Income Taxes

Income taxes are accounted for in accordance with FASB ASC 740 (‘‘ASC 740’’). Income taxes areprovided for under the asset and liability method and consider differences between the tax and financialaccounting bases. The tax effects of these differences are reflected on the consolidated balance sheets asdeferred income taxes and measured using the effective tax rate expected to be in effect when the differencesreverse. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likelythan not that some portion of the deferred tax asset will not be realized. In evaluating the need for a valuationallowance, the Company takes into account various factors, including the nature, frequency and severity ofcurrent and cumulative losses, expected level of future taxable income, the duration of statutory carryforwardperiods and tax planning alternatives. In future periods, any valuation allowance will be re-evaluated inaccordance with ASC 740, and a change, if required, will be recorded through income tax expense in theperiod such determination is made.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than notthat the tax position will be sustained on examination by the relevant taxing authorities, based on the technicalmerits of its position. The tax benefits recognized in the financial statements from such a position aremeasured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimatesettlement. The Company classifies interest and penalties related to income tax matters as a component ofincome tax expense.

Net Income per Common Share

Basic net income per common share is determined by dividing net income by the weighted averagenumber of common shares outstanding during the year. Diluted net income per common share is determinedby dividing net income by the weighted average number of common shares outstanding during the year, plusthe dilutive effect of common stock equivalents, including stock options and restricted shares. Common stockand common stock equivalents included in the computation represent shares issuable upon assumed exerciseof outstanding stock options and release of restricted shares, except when the effect of their inclusion wouldbe antidilutive.

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (‘‘ASU 2016-02’’), whichcreates ASC Topic 842, Leases, and supersedes the lease accounting requirements in Topic 840, Leases. Insummary, Topic 842 requires organizations that lease assets — referred to as ‘‘lessees’’ — to recognize on thebalance sheet the assets and liabilities for the rights and obligations created by those leases. The amendmentsin ASU 2016-02 are effective for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2018. Therefore, the amendments in ASU 2016-02 will become effective for the Company atthe beginning of its 2019 fiscal year. The Company is currently assessing the impact of implementing the newguidance on its consolidated financial statements. When implemented, the standard is expected to have amaterial impact as its operating leases will be recognized on the consolidated balance sheet.

60

Lumber Liquidators Holdings, Inc. - [PDF Document] (71)

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 − (continued)

In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (‘‘ASU 2015-17’’),which amends ASC Topic 740, Balance Sheet Classification of Deferred Taxes. In summary, the core principleof Topic 740 is that an entity classify both current and noncurrent deferred income tax assets and liabilities inthe noncurrent section of the statement of financial position. The current requirement that deferred taxliabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is notaffected by this amendment. The amendments in ASU 2015-17 are effective for annual reporting periodsbeginning after December 15, 2017 and interim periods beginning after December 31, 2018. Early applicationis permitted for all entities as of the beginning of an interim or annual reporting period. The Company iscurrently assessing the impact of implementing the new guidance on its consolidated financial statements andhas not yet selected a method of adoption.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (‘‘ASU 2014-09’’), whichcreates ASC Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognitionrequirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognitionguidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the costguidance in Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts, andcreates new Subtopic 340-40, Other Assets and Deferred Costs — Contracts with Customers. In summary, thecore principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reportingperiods beginning after December 15, 2016, including interim periods within that reporting period, and earlyapplication is not permitted. Therefore, the amendments in ASU 2014-09 will become effective for theCompany at the beginning of its 2017 fiscal year. The Company is currently assessing the impact ofimplementing the new guidance on its consolidated financial statements and has not yet selected a method ofadoption.

Note 2. Property and Equipment

Property and equipment consisted of:

December 31,

2015 2014

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,937 $ 4,937Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,234 —Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,015 51,409Computer Software and Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,026 40,071Leasehold Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,495 30,715Assets under Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,623 51,097

189,330 178,229Less: Accumulated Depreciation and Amortization . . . . . . . . . . . . . . . . 67,333 53,362Property and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,997 $124,867

As of December 31, 2015 and 2014, the Company had capitalized $34,024 and $31,230 of computersoftware costs, respectively. Amortization expense related to these assets was $3,501, $3,212 and $2,659 for2015, 2014 and 2013, respectively.

61

Lumber Liquidators Holdings, Inc. - [PDF Document] (72)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 3. Other Current Liabilities

Other current liabilities consisted of:

December 31,

2015 2014

Accrued Legal and Settlement Expense . . . . . . . . . . . . . . . . . . . . . . . . . $14,011 $ 2,087Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,744 15,749Other Current Liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,755 $17,836

Note 4. Revolving Credit Agreement

On April 24, 2015, the Company, exclusive of the non-domestic subsidiaries, entered into a SecondAmended and Restated Credit Agreement (as amended on May 21, 2015 and November 20, 2015, the ‘‘CreditAgreement’’) with Bank of America, N.A. as administrative agent, collateral agent and lender (the ‘‘Bank’’).The Credit Agreement amended and restated the Amended and Restated Credit Agreement that was enteredinto between Lumber Liquidators, Inc. and the Bank on February 21, 2012 and amended on March 27, 2015.Under the Credit Agreement, the Bank agreed to provide the Company with an asset-based revolving creditfacility (the ‘‘Revolving Credit Facility’’) under which the Company may obtain loans and letters of creditfrom the Bank up to a maximum aggregate outstanding principal amount of the lesser of $100,000 or acalculated borrowing base. Letters of credit are subject to a sublimit of $20,000 (subject to the borrowingbase). The Credit Agreement expires on April 24, 2020, is guaranteed by the Company and certain of itsdomestic subsidiaries and is secured primarily by the Company’s inventory, including certain in-transitinventory, and credit card receivables.

The Revolving Credit Facility has no mandated payment provisions and a fee of 0.15% per annum onany unused portion, paid quarterly in arrears. Loans outstanding under the Revolving Credit Facility can bearinterest based on the Base Rate or the LIBOR Rate, each as defined in the Credit Agreement. Interest on BaseRate loans is charged at varying per annum rates computed by applying a margin ranging from 0.125% to0.375% (dependent on the Company’s average daily excess borrowing availability during the most recentlycompleted fiscal quarter) over the applicable base interest rate (defined as the greatest of the prime rate, aspecified federal funds rate plus 0.50%, or the one-month LIBOR Rate plus 1.00%). Interest on LIBOR Rateloans and fees for standby letters of credit are charged at varying per annum rates computed by applying amargin ranging from 1.125% to 1.375% (dependent on the Company’s average daily excess borrowingavailability during the most recently completed fiscal quarter) over the applicable LIBOR rate for one, two,three or six month interest periods as selected by the Company. At December 31, 2015, the applicable interestrate for outstanding borrowings was 1.4375%. For the year ended December 31, 2015, the Company paid cashfor interest in the amount of $237.

The Credit Agreement contains a fixed charge coverage ratio covenant that becomes effective in the eventthat the Company’s excess borrowing availability under the Revolving Credit Facility at any time during theterm of the Revolving Credit Facility falls below the greater of $10,000 or 10% of the borrowing base.

At December 31, 2015, the Company had $67,200 available to borrow under the Revolving CreditFacility and $20,000 in outstanding borrowings and supported approximately $2,800 and $2,700 of letters ofcredit at December 31, 2015 and 2014, respectively.

Note 5. Leases

The Company has operating leases for its stores, Corporate Headquarters and West Coast distributioncenter, supplemental office facilities and certain equipment. The store location leases are operating leases andgenerally have five-year base periods with one or more five-year renewal periods. The Corporate Headquartershas an operating lease with a base term running through December 31, 2019. The West Coast distributioncenter has an operating lease with a base term running through October 31, 2024.

62

Lumber Liquidators Holdings, Inc. - [PDF Document] (73)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 5. Leases − (continued)

As of December 31, 2015, 2014 and 2013, the Company leased the Corporate Headquarters, whichincludes a store location and 30, 30 and 29 of its locations, representing 8.3%, 8.8% and 9.4% of the totalnumber of store leases in operation, respectively, from entities controlled by the Company’s founder, who alsoserves as a member of the Board of Directors (‘‘Controlled Companies’’). During 2015, the Company alsoleased a warehouse, from one of the Controlled Companies.

Rental expense is as follows:

Year Ended December 31,

2015 2014 2013

Rental expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,825 $27,995 $21,874Rental expense related to Controlled Companies . . . . . . . . . 3,070 2,837 2,895

The future minimum rental payments under non-cancellable operating leases, segregating ControlledCompanies leases from all other operating leases, were as follows at December 31, 2015:

Operating Leases

Controlled Companies

StoreLeases

DistributionCenters & Other

Leases

TotalOperatingLeases

StoreLeases

HeadquartersLease

2016 . . . . . . . . . . . . . . . . . . . . . . $2,066 $1,271 $24,537 $ 2,411 $ 30,2852017 . . . . . . . . . . . . . . . . . . . . . . 1,611 1,309 21,214 2,435 26,5692018 . . . . . . . . . . . . . . . . . . . . . . 1,490 1,348 16,928 2,394 22,1602019 . . . . . . . . . . . . . . . . . . . . . . 1,121 1,388 13,046 2,305 17,8602020 . . . . . . . . . . . . . . . . . . . . . . 836 — 9,785 2,361 12,982Thereafter . . . . . . . . . . . . . . . . . . 1,390 — 12,206 8,452 22,048Total minimum lease payments . . . $8,514 $5,316 $97,716 $20,358 $131,904

Note 6. Stockholders’ Equity

Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per common share:

Year Ended December 31,

2015 2014 2013

Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . $ (56,433) $ 63,371 $ 77,395

Weighted Average Common SharesOutstanding − Basic . . . . . . . . . . . . . . . . . . . . 27,082,299 27,264,882 27,484,790

Effect of Dilutive Securities:Common Stock Equivalents . . . . . . . . . . . . . . — 220,970 429,532

Weighted Average Common SharesOutstanding − Diluted . . . . . . . . . . . . . . . . . . 27,082,299 27,485,852 27,914,322

Net (Loss) Income per Common Share − Basic . . . $ (2.08) $ 2.32 $ 2.82

Net (Loss) Income per Common Share − Diluted . . $ (2.08) $ 2.31 $ 2.77

63

Lumber Liquidators Holdings, Inc. - [PDF Document] (74)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 6. Stockholders’ Equity − (continued)

The following have been excluded from the computation of Weighted Average Common SharesOutstanding — Diluted because the effect would be antidilutive:

As of December 31,

2015 2014 2013

Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . 650,759 184,252 103,329Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . 225,027 16,999 176

Stock Repurchase Program

In 2012, the Company’s Board of Directors (‘‘Board’’) authorized the repurchase of up to $100,000 ofthe Company’s common stock from time to time on the open market or in privately negotiated transactions.In January 2014, the Company’s Board authorized the repurchase of up to an additional $50,000 of theCompany’s common stock, bringing the total authorization to $150,000 and at December 31, 2015, theCompany had $14,728 remaining under this authorization. The Company has not purchased any stock throughprivately negotiated transactions. Purchases under this program were as follows:

Year Ended December 31,

2015 2014 2013

Shares Repurchased . . . . . . . . . . . . . . . . . . . . . . — 671,200 403,630Average Price per Share . . . . . . . . . . . . . . . . . . . $— $ 77.68 $ 84.40Total Aggregate Costs . . . . . . . . . . . . . . . . . . . . . $— $ 52,138 $ 34,066

Note 7. Stock-Based Compensation

Stock-based compensation expense included in SG&A expenses consisted of:

Year Ended December 31,

2015(1) 2014 2013

Stock Options, Restricted Shares and StockAppreciation Rights . . . . . . . . . . . . . . . . . . . . . $3,941 $5,593 $5,974

(1) Includes the impact of actual forfeitures in the period due to the resignation of certain senior executives.

Overview

On May 6, 2011, the Company’s stockholders approved the Lumber Liquidators Holdings, Inc. 2011Equity Compensation Plan (the ‘‘2011 Plan’’), which succeeded the Lumber Liquidators Holdings, Inc. 2007Equity Compensation Plan. The 2011 Plan is an equity incentive plan for employees, non-employee directorsand other service providers from which the Company may grant stock options, restricted shares, stockappreciation rights (‘‘SARs’’) and other equity awards. The total number of shares of common stockauthorized for issuance under the 2011 Plan is 5.3 million. As of December 31, 2015, 1.0 million shares ofcommon stock were available for future grants. Stock options granted under the 2011 Plan expire no later thanten years from the date of grant and the exercise price shall not be less than the fair market value of theshares on the date of grant. Vesting periods are assigned to stock options and restricted shares on a grant bygrant basis at the discretion of the Board. The Company issues new shares of common stock upon exercise ofstock options and vesting of restricted shares.

The Company also maintains the Lumber Liquidators Holdings, Inc. Outside Directors Deferral Planunder which each of the Company’s non-employee directors has the opportunity to elect annually to defercertain fees until departure from the Board. A non-employee director may elect to defer up to 100% of his orher fees and have such fees invested in deferred stock units. Deferred stock units must be settled in common

64

Lumber Liquidators Holdings, Inc. - [PDF Document] (75)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 7. Stock-Based Compensation − (continued)

stock upon the director’s departure from the Board. There were 95,553 and 63,279 deferred stock unitsoutstanding at December 31, 2015 and 2014, respectively.

Stock Options

The following table summarizes activity related to stock options:

Shares

WeightedAverageExercisePrice

RemainingAverage

ContractualTerm (Years)

AggregateIntrinsicValue

Balance, December 31, 2012 . . . . . . . . . . . . . . . . 1,311,377 $ 17.79 6.5 $45,954

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,966 62.52Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . (718,665) 14.35Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,188) 29.04

Balance, December 31, 2013 . . . . . . . . . . . . . . . . 749,490 $ 33.04 7.3 $52,358

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,126 100.05Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . (149,707) 21.04Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,101) 60.71

Balance, December 31, 2014 . . . . . . . . . . . . . . . . 652,808 $ 42.81 6.9 $18,113

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410,164 25.34Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.00Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . (370,196) 44.71

Balance, December 31, 2015 . . . . . . . . . . . . . . . . 692,776 $ 31.45 7.7 $ 1,283

Exercisable at December 31, 2015 . . . . . . . . . . . . 221,561 $ 29.28 $ 540Vested and expected to vest December 31, 2015 . . . 692,776 $ 31.45 $ 1,283

The aggregate intrinsic value is the difference between the exercise price and the closing price of theCompany’s common stock on December 31. The intrinsic value of the stock options exercised during 2015,2014 and 2013 was nil, $10,278 and $49,137, respectively.

As of December 31, 2015, total unrecognized compensation cost related to unvested options wasapproximately $4,570, net of estimated forfeitures, which is expected to be recognized over a weightedaverage period of approximately 3.0 years.

The fair value of each stock option award is estimated by management on the date of the grant using theBlack-Scholes-Merton option pricing model. The weighted average fair value of options granted during 2015,2014 and 2013 was $11.87, $43.21 and $29.66, respectively.

The following are the ranges of assumptions for the periods noted:

Year Ended December 31,

2015 2014 2013

Expected dividend rate . . . . . . . . . . . . . 0% 0% 0%Expected stock price volatility . . . . . . . . 50% 45% 45%Risk-free interest rate . . . . . . . . . . . . . . 1.7% 1.8% 1.3 − 2.0%Expected term of options . . . . . . . . . . . . 5.5 years 5.5 years 6.0 − 7.5 years

The expected stock price volatility is based on the historical volatility of the Company’s stock price andin 2013, also included the historical volatilities of companies included in a peer group that was selected bymanagement whose shares or options are publicly available. The volatilities are estimated for a period of timeequal to the expected term of the related option. The risk-free interest rate is based on the implied yield of

65

Lumber Liquidators Holdings, Inc. - [PDF Document] (76)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 7. Stock-Based Compensation − (continued)

U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected term of the optionsrepresents the estimated period of time until exercise and is determined by considering the contractual terms,vesting schedule and expectations of future employee behavior.

Restricted Shares

The following table summarizes activity related to restricted shares:

Shares

WeightedAverage GrantDate FairValue

Nonvested, December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . 152,405 $15.19Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,814 66.11Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,362) 75.73Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,522) 37.51

Nonvested, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 178,335 $22.82Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,260 89.46Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,503) 95.02Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,003) 54.90

Nonvested, December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . 157,089 $15.00Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386,517 18.30Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,187) 41.57Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,748) 45.93

Nonvested, December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . 461,671 $12.95

The fair value of restricted shares released during 2015, 2014 and 2013 was $941, $4,371 and $3,060,respectively. As of December 31, 2015, total unrecognized compensation cost related to unvested restrictedshares was approximately $5,141, net of estimated forfeitures, which is expected to be recognized over aweighted average period of approximately 2.4 years.

Stock Appreciation Rights

The following table summarizes activity related to SARs:

Shares

WeightedAverageExercisePrice

RemainingAverage

ContractualTerm (Years)

AggregateIntrinsicValue

Balance, December 31, 2012 . . . . . . . . . . . . . . . 9,301 $ 17.79 6.5 $261

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,533 62.52Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . (678) 29.04

Balance, December 31, 2013 . . . . . . . . . . . . . . . 16,156 $ 33.04 7.3 $938

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,941 100.05Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,870) 60.71

Balance, December 31, 2014 . . . . . . . . . . . . . . . 16,227 $ 42.81 6.9 $389

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.00Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . (170) 93.68

Balance, December 31, 2015 . . . . . . . . . . . . . . . 16,057 $ 47.58 6.8 $ —

Exercisable at December 31, 2015 . . . . . . . . . . . 10,420 $ 41.59 6.6 $ —

The fair value method, estimated by management using the Black-Scholes-Merton option pricing model,is used to recognize compensation cost associated with SARs.

66

Lumber Liquidators Holdings, Inc. - [PDF Document] (77)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 8. Income Taxes

The components of income before income taxes were as follows:

Year Ended December 31,

2015 2014 2013

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(80,136) $105,447 $128,482Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,291) (1,864) (2,017)Total Income before Income Taxes . . . . . . . . . . . . $(83,427) $103,583 $126,465

The provision for income taxes consisted of the following:

Year Ended December 31,

2015 2014 2013

CurrentFederal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(14,088) $34,615 $43,159State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (975) 5,614 6,637Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 135 120

Total Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,930) 40,364 49,916

DeferredFederal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,276) (22) (745)State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,788) (130) (101)Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —

Total Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,064) (152) (846)Total Provision for Income Taxes . . . . . . . . . . . . . . . $(26,994) $40,212 $49,070

The reconciliation of significant differences between income tax expense applying the federal statutoryrate and the actual income tax expense at the effective rate are as follows:

Year Ended December 31,

2015 2014 2013

Income Tax Expense at Federal StatutoryRate . . . . . . . . . . . . . . . . . . . . . . . . . . $(29,200) 35.0% $36,254 35.0% $44,263 35.0%

(Decreases) Increases:State Income Taxes, Net of Federal IncomeTax Benefit . . . . . . . . . . . . . . . . . . . . (2,401) 2.9% 3,711 3.6% 4,146 3.3%

Valuation Allowance . . . . . . . . . . . . . . . 210 (0.2)% 458 0.4% 498 0.4%Foreign Operations . . . . . . . . . . . . . . . . 1,075 (1.3)% 329 0.3% 328 0.2%Non-deductible penalty . . . . . . . . . . . . . . 3,887 (4.7)% — —% — —%Other . . . . . . . . . . . . . . . . . . . . . . . . . . (565) 0.7% (540) (0.5)% (165) (0.1)%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(26,994) 32.4% $40,212 38.8% $49,070 38.8%

67

Lumber Liquidators Holdings, Inc. - [PDF Document] (78)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 8. Income Taxes − (continued)

The tax effects of temporary differences that result in significant portions of the deferred tax accounts areas follows:

December 31,

2015 2014

Deferred Tax Liabilities:Prepaid Expenses and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $ (77)Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,367) (16,900)

Total Gross Deferred Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (20,368) (16,977)

Deferred Tax Assets:Stock-Based Compensation Expense . . . . . . . . . . . . . . . . . . . . . . . 3,794 3,785Reserves and Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,825 4,296Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,034 15Inventory Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,699 1,606Inventory Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,457 5,582Foreign Net Operating Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,433 2,223Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 966 37

Total Gross Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,208 17,544Less Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,433) (2,223)

Total Net Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,775 15,321Net Deferred Tax Asset (Liability) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,407 $ (1,656)

In both 2015 and 2014, the Canadian operations were in a cumulative loss position. As such, theCompany has recorded a full valuation allowance on the net deferred tax assets in Canada. For the year endedDecember 31, 2015, the valuation allowance increased by $836 primarily as a result of an increase in theCanadian net operating loss that was partially offset by a currency exchange loss of $626. In future periods,the allowance could be reduced if sufficient evidence exists indicating that it is more likely than not that aportion or all of these deferred tax assets will be realized.

As of December 31, 2015 and 2014, the Company had foreign net operating loss carryforwards of$11,797 and $8,577, respectively, which begin to expire in 2030. These net operating losses may be carriedforward up to 20 years to offset future taxable income.

The Company made income tax payments of $7,855, $33,281 and $30,154 in 2015, 2014 and 2013,respectively.

The reconciliation of unrecognized tax benefits was as follows:

Year Ended December 31,

2015 2014

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,232 $ 915(Decrease) increase based on tax position related to the current year . . . (180) 430Increases in tax positions for prior years . . . . . . . . . . . . . . . . . . . . . . — 161Decreases in tax positions for prior years . . . . . . . . . . . . . . . . . . . . . (434) —Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) —Lapse of statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (211) (274)Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 396 $1,232

68

Lumber Liquidators Holdings, Inc. - [PDF Document] (79)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 8. Income Taxes − (continued)

As of December 31, 2015, the Company had $0.4 million of gross unrecognized tax benefits, $0.3 million ofwhich, if recognized, would affect the effective tax rate. It is reasonably possible that the amount of theunrecognized tax benefit with respect to certain of the uncertain tax positions will increase or decrease during thenext 12 months; however, the Company does not expect the change to have a significant effect on its results ofoperations, financial position or cash flows. As of December 31, 2014, the Company had $1.2 million of grossunrecognized tax benefits, $0.8 million of which, if recognized, would affect the effective tax rate.

The Company files income tax returns with the U.S. federal government and various state and foreignjurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities.The Internal Revenue Service has completed audits of the Company’s federal income tax returns for yearsthrough 2009.

Note 9. Profit-sharing Plan

The Company maintains a profit-sharing plan, qualified under Section 401(k) of the Internal RevenueCode, for all eligible employees. Employees are eligible to participate following the completion ofthree months of service and attainment of age 21. In 2013, the Company amended the plan to a safe harborplan, and began matching 100% of the first 3% of employee contributions and 50% of the next 2% ofemployee contributions. Additionally, employees are now immediately 100% vested in the Company’smatching contributions. Prior to 2013, the Company matched 50% of employee contributions up to 6% ofeligible compensation. The Company’s matching contributions, included in SG&A expenses, totaled $2,019,$1,937 and $1,590 in 2015, 2014 and 2013, respectively.

Note 10. Commitments and Contingencies

Government Investigations

Lacey Act Related Matters

On September 26, 2013, sealed search warrants were executed at the Company’s corporate offices inToano and Richmond, Virginia by the Department of Homeland Security’s Immigration and CustomsEnforcement and the U.S. Fish and Wildlife Service. The search warrants requested information, primarilydocumentation, related to the importation of certain of the Company’s wood flooring products in accordancewith the Lacey Act. Since then, the Company cooperated with the federal authorities, including theDepartment of Justice (‘‘DOJ’’), in their investigation.

On October 7, 2015, Lumber Liquidators, Inc. (‘‘LLI’’) reached a settlement with the DOJ in connectionwith this investigation. Under the terms of a Plea Agreement with the DOJ (the ‘‘Plea Agreement’’) executedon October 7, 2015, LLI agreed to plead guilty to one felony count for entry of goods by means of falsestatements and four misdemeanor due care counts under the Lacey Act. These violations do not require LLI tohave acted with a deliberate or willful intent to violate the law, and LLI did not stipulate that it acted withsuch deliberate or willful intent. As part of the settlement, LLI agreed to pay a combined total of $10,000 infines, community service payments and forfeited proceeds. The payments include a $7,800 fine, communityservice contributions of $880 and $350 to the National Fish and Wildlife Foundation and the Rhinoceros andTiger Conservation fund, respectively, and a $969 forfeiture payment. The Company had previously recordedthis amount in SG&A expenses in the first quarter of 2015. At December 31, 2015, $6,200 was included incurrent liabilities and $3,800 was included in other long-term liabilities on the accompanying consolidatedbalance sheet. The Company paid $6,200 of the settlement amount in the first quarter of 2016, and theCompany expects to pay $2,000 in the first quarter of 2017 and $1,800 in the first quarter of 2018.

LLI also agreed in the Plea Agreement to implement an environmental compliance plan (the‘‘Compliance Plan’’) for a probation period of five years. If LLI fails to implement the Compliance Planwithin three months of sentencing, the government may require the Company to cease the importation of

69

Lumber Liquidators Holdings, Inc. - [PDF Document] (80)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

hardwood flooring from China until the DOJ determines that the Compliance Plan has been satisfactorilyimplemented. During the first four years, LLI has agreed to engage an outside consulting firm to conductaudits of compliance with the Compliance Plan and certain requirements of the Lacey Act.

The Company has agreed to guarantee all payments and performance due from LLI, including but notlimited to payments for fines, community service, forfeited proceeds and special assessments and theperformance of LLI’s obligations under and compliance with the Compliance Plan and related audits.

In addition, as part of its internal compliance review procedures in the second quarter of 2015, theCompany determined that there were Lacey Act compliance concerns related to a limited amount of itsengineered hardwood flooring. As a result, the Company suspended sales of approximately $4,069 of thisproduct pending further investigation, and brought this matter to the attention of the DOJ. During theinvestigation, the Company determined that there were no compliance concerns with respect to approximately$914 of the suspended engineered hardwood flooring. In connection with the Plea Agreement with the DOJ,the Company also reached a settlement with the DOJ related to the remaining $3,155 of suspended engineeredhardwood flooring. Pursuant to a Complaint for Forfeiture In Rem and a Stipulation for Settlement and JointMotion for Entry of Consent Order of Forfeiture (the ‘‘Consent’’), the DOJ agreed to accept a $3,155 paymentin lieu of a civil forfeiture of this product. The Company previously recorded this amount in SG&A expensesin the second quarter of 2015. The Company paid this amount in October 2015 pending entry of the Consentand, pursuant to a motion granted, is now permitted to sell the suspended engineered hardwood flooring andretain any proceeds of the sale. The Consent was entered by the court on January 7, 2016, and final judgmentwas entered on January 8, 2016.

The Plea Agreement was approved by the United States District Court for the Eastern District of Virginiaon October 22, 2015. A sentencing hearing was held on February 1, 2016 and the court entered a finaljudgment on February 3, 2016. The terms of the final judgment are consistent with the Plea Agreement.

Securities Laws

In March 2015, the Company received a grand jury subpoena issued in connection with a criminalinvestigation being conducted by the U.S. Attorney’s Office for the Eastern District of Virginia (the‘‘U.S. Attorney’’). In addition, on May 19, 2015 and July 13, 2015, the Company received subpoenas from theNew York Regional Office of the SEC in connection with an inquiry by the SEC staff. Based on thesubpoenas, the Company believes the focus of both the U.S. Attorney investigation and SEC investigationprimarily relate to compliance with disclosure, financial reporting and trading requirements under thesecurities laws since 2011. The Company is fully cooperating with the U.S. Attorney’s subpoena, the SEC’ssubpoenas and the related investigations by the U.S. Attorney and SEC staff. Given that the investigation bythe U.S. Attorney and SEC staff are still ongoing, the Company cannot estimate the reasonably possible lossor range of loss that may result from this matter.

California Air Resources Board

The Company believes that the California Air Resources Board (‘‘CARB’’) is regularly looking at theentire industry to ensure compliance with its emissions standards. While conducting routine inspections of theCompany’s products, CARB has performed ‘‘deconstructive’’ testing on its products as well as, the Companybelieves, products from others in the industry. In CARB’s preliminary findings, some of the samples of theCompany’s finished product that CARB deconstructed and tested exceeded the CARB limits for rawcomposite wood cores. This could occur for numerous reasons, including one or more of the variability factorsassociated with this type of testing. In May 2015, CARB notified the Company that additional samples offinished products were obtained in 2014, some of which, based on deconstructive testing, exceeded the CARBlimits for raw composite wood cores. CARB has further informed the Company that it has performed

70

Lumber Liquidators Holdings, Inc. - [PDF Document] (81)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

additional deconstructive testing on certain finished products it obtained in March 2015, with certain of thesamples of the Company’s products exceeding the CARB limits for raw composite wood cores.

The Company has been fully cooperative with CARB as CARB continues to work on this matter by,among other things, providing CARB with requested information related to the products CARB tested andremoving laminate flooring sourced from China from its stores in California. Based on discussions withCARB, the Company’s best estimate of the probable loss that may result from this matter is approximately$1,500, which the Company recorded in other current liabilities and selling, general and administrativeexpenses in the fourth quarter of 2015. The Company believes that there is at least a reasonable possibilitythat a loss greater than the amount accrued may be incurred, but the Company is unable to estimate theamount at this time.

Securities Litigation Matter

On or about November 26, 2013, Gregg Kiken (‘‘Kiken’’) filed a securities class action lawsuit (the‘‘Kiken Lawsuit’’), which was subsequently amended, in the United States District Court for the EasternDistrict of Virginia against the Company, its founder, former Chief Executive Officer and President, formerChief Financial Officer and former Chief Merchandising Officer (collectively, the ‘‘Kiken Defendants’’). On orabout September 17, 2014, the City of Hallandale Beach Police Officers’ and Firefighters’ PersonnelRetirement Trust (‘‘Hallandale’’) filed a securities class action lawsuit (the ‘‘Hallandale Lawsuit’’) in theUnited States District Court for the Eastern District of Virginia against the Company, its former ChiefExecutive Officer and President and its former Chief Financial Officer (collectively, the ‘‘HallandaleDefendants,’’ and with the Kiken Defendants, the ‘‘Defendants’’). On March 23, 2015, the court consolidatedthe Kiken Lawsuit with the Hallandale Lawsuit, appointed lead plaintiffs and lead counsel for the consolidatedaction, and captioned the consolidated action as In re Lumber Liquidators Holdings, Inc. Securities Litigation.

The lead plaintiffs filed a consolidated amended complaint on April 22, 2015. The consolidated amendedcomplaint alleges that the Defendants made material false and/or misleading statements that caused losses toinvestors. In particular, the lead plaintiffs allege that the Defendants made material misstatements or omissionsrelated to their compliance with the l Lacey Act, the chemical content of certain of their wood products, andtheir supply chain and inventory position. The lead plaintiffs do not quantify any alleged damages in theirconsolidated amended complaint but, in addition to attorneys’ fees and costs, they seek to recover damages onbehalf of themselves and other persons who purchased or otherwise acquired the Company’s stock during theputative class period at allegedly inflated prices and purportedly suffered financial harm as a result. TheDefendants moved to dismiss the consolidated amended complaint but, on December 21, 2015, the courtdenied this motion. The Company disputes these claims and intends to defend the matter vigorously. Giventhe uncertainty of litigation, the current status of the case, and the legal standards that must be met for, amongother things, class certification and success on the merits, the Company cannot estimate the reasonablypossible loss or range of loss that may result from this action.

NW Bamboo Matter

On February 27, 2014, NW Bamboo Trim, Inc. (‘‘NWBT’’) filed suit in the Circuit Court of the City ofRichmond, Virginia against the Company and a supplier of bamboo trim products (the ‘‘Supplier’’). In itscomplaint, NWBT alleges that (i) the Company breached a contract with NWBT by not purchasing certainproducts from NWBT, (ii) the Company tortiously interfered with NWBT’s relationship with the Supplier, and(iii) the Company and the Supplier conspired to harm NWBT’s business. The Company filed a motion seekingto dismiss the claims, which was granted as it pertained to the breach of contract claim. The case thenproceeded on the two remaining causes of action.

71

Lumber Liquidators Holdings, Inc. - [PDF Document] (82)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

On October 12, 2015, as part of its required discovery disclosures, NWBT identified a valuation of itsbusiness of approximately $2,800 as the basis for its compensatory damages claim. Subsequently, theCompany filed a motion for summary judgment seeking dismissal of NWBT’s case. On December 21, 2015,the Court granted the Company’s motion for summary judgment and dismissed the two remaining causes ofaction in NWBT’s complaint. On January 20, 2016, NWBT filed a notice of appeal in connection with thetrial court’s dismissal of NWBT’s case.

In light of the trial court’s ruling and the Company’s views regarding the merits of NWBT’s appeal, thelikelihood of a material loss in connection with this matter is now remote.

TCPA Matter

On or about March 4, 2014, Richard Wade Architects, P.C. (‘‘RWA’’) filed a lawsuit in the United StatesDistrict Court for the Northern District of Illinois (the ‘‘RWA Lawsuit’’), which was subsequently amended,alleging that the Company violated the Telephone Consumer Protection Act (‘‘TCPA’’), the Illinois ConsumerFraud Act and the common law by sending an unsolicited facsimile advertisem*nt to RWA and a proposedclass. RWA sought recourse on its own behalf as well as other similarly situated parties who are members ofthe proposed class that received unsolicited facsimile advertisem*nts from the Company. The TCPA providesfor recovery of actual damages or five hundred dollars for each violation, whichever is greater. If it isdetermined that a defendant acted willfully or knowingly in violating the TCPA, the amount of the award maybe increased by up to three times the amount provided above.

Although the Company believed it had valid defenses to the claims asserted, it entered into a settlement ofthe claims in the RWA Lawsuit. On September 3, 2015, the Court entered an order granting final approval to thesettlement and certifying a settlement class. Under the settlement agreement, the Company paid a total of $300including the plaintiffs’ attorneys’ fees, class notice and administration costs, a sum to RWA and cash payments tomembers of the settlement class who file valid claims. The settlement amount was accrued in 2014 and was paidinto an escrow fund on August 18, 2015. The settlement payment was released to class counsel on October 16,2015 after the final approval order became a final and non-appealable order. Settlement payments to classmembers who submitted claims have now been issued by the claims administrator, with a final accounting of thesettlement fund to be filed with the court by March 4, 2016.

Prop 65 Matter

On or about July 23, 2014, Global Community Monitor and Sunshine Park LLC (together, the ‘‘Prop 65Plaintiffs’’) filed a lawsuit, which was subsequently amended, in the Superior Court of the State of California,County of Alameda, against the Company. In the amended complaint, the Prop 65 Plaintiffs allege that theCompany violated California’s Safe Drinking Water and Toxic Enforcement Act of 1986, Health and SafetyCode section 25249.5, et seq. (‘‘Proposition 65’’). In particular, the Prop 65 Plaintiffs allege that the Companyfailed to warn consumers in California that certain of the Company’s products (collectively, the ‘‘Products’’)emit formaldehyde in excess of the applicable safe harbor limits. The Prop 65 Plaintiffs did not quantify anyalleged damages in their amended complaint but, in addition to attorneys’ fees and costs, the Prop 65 Plaintiffsseek (i) equitable relief involving the reformulation of the Products, additional warnings related to theProducts, the issuance of notices to certain of the purchasers of the Products (the ‘‘Customers’’) and thewaiver of restocking fees for Customers who return the Products and (ii) civil penalties in the amount of twothousand five hundred dollars per day for each violation of Proposition 65.

The Company disputes the claims of the Prop 65 Plaintiffs and intends to defend the matter vigorously.The Company’s best estimate of the probable loss that may result from this action is approximately $900,which was accrued in the fourth quarter of 2015. The Company believes that there is at least a reasonablepossibility that a loss may differ from the amount accrued, but it is unable to estimate the amount at this time.

72

Lumber Liquidators Holdings, Inc. - [PDF Document] (83)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

Gold Matter

On or about December 8, 2014, Dana Gold (‘‘Gold’’) filed a purported class action lawsuit in theUnited States District Court for the Northern District of California alleging that the Morning Star bambooflooring (the ‘‘Bamboo Product’’) that the Company sells is defective. On February 13, 2015, Gold filed anamended complaint that added three additional plaintiffs (collectively with Gold, ‘‘Gold Plaintiffs’’). TheCompany moved to dismiss the amended complaint. After holding a hearing and taking the motion undersubmission, the court dismissed most of Gold Plaintiffs’ claims but allowed certain omission-based claims toproceed. Gold Plaintiffs filed a Second Amended Complaint on December 16, 2015, and then a ThirdAmended Complaint on January 20, 2016. In the Third Amended Complaint, Gold Plaintiffs allege that theCompany has engaged in unfair business practices and unfair competition by falsely representing the qualityand characteristics of the Bamboo Product and by concealing the Bamboo Product’s defective nature. GoldPlaintiffs seek the certification of a class of individuals in the United States who purchased the BambooProduct, as well as 7 state subclasses of individuals who are residents of California, New York, Illinois,West Virginia, Minnesota, Pennsylvania, and Florida, respectively, and purchased the Bamboo Product forpersonal, family, or household use. Gold Plaintiffs did not quantify any alleged damages in their complaintbut, in addition to attorneys’ fees and costs, Gold Plaintiffs seek (i) a declaration that the Company’s actionsviolate the law and that the Company is financially responsible for notifying all purported class members,(ii) injunctive relief requiring the Company to replace and/or repair all of the Bamboo Product installed instructures owned by the purported class members, and (iii) a declaration that the Company must disgorge, forthe benefit of the purported classes, all or part of its profits received from the sale of the allegedly defectiveBamboo Product and/or to make full restitution to Gold Plaintiffs and the purported class members.

The Company filed its answer to the Third Amended Complaint on February 3, 2016, and discovery inthe matter is now proceeding. The Company disputes the Gold Plaintiffs’ claims and intends to defend thematter vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standardsthat must be met for, among other things, class certification and success on the merits, the Company cannotestimate the reasonably possible loss or range of loss that may result from this action.

Litigation Relating to Products Liability

Beginning on or about March 3, 2015, numerous purported class action cases were filed in variousU.S. federal district courts and state courts involving claims of excessive formaldehyde emissions from theCompany’s flooring products (collectively, the ‘‘Products Liability Cases’’). The plaintiffs in these variousactions sought recovery under a variety of theories, which although not identical are generally similar,including negligence, breach of warranty, state consumer protection act violations, state unfair competition actviolations, state deceptive trade practices act violations, false advertising, fraudulent concealment, negligentmisrepresentation, failure to warn, unjust enrichment and similar claims. The purported classes consisted eitheror both of all U.S. consumers or state consumers that purchased the subject products in certain time periods.The plaintiffs also sought various forms of declaratory and injunctive relief and various damages, includingrestitution, actual, compensatory, consequential, and, in certain cases, punitive damages, and interest, costs,and attorneys’ fees incurred by the plaintiffs and other purported class members in connection with the allegedclaims, and orders certifying the actions as class actions. Plaintiffs had not quantified damages sought from theCompany in these class actions.

On June 12, 2015, United States Judicial Panel on Multi District Litigation (the ‘‘MDL Panel’’) issued anorder transferring and consolidating 10 of the related federal class actions to the United States District Courtfor the Eastern District of Virginia (the ‘‘Virginia Court’’). In a series of subsequent conditional transferorders, the MDL Panel has transferred the other cases to the Virginia Court. The Company continues to seekto have any newly filed cases transferred and consolidated in the Virginia Court and ultimately, the Companyexpects all federal class actions involving formaldehyde allegations, including any newly filed cases, to be

73

Lumber Liquidators Holdings, Inc. - [PDF Document] (84)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

transferred and consolidated in the Virginia Court. The consolidated case in the Virginia Court is captioned Inre: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales, Practices and ProductsLiability Litigation.

Pursuant to court order, plaintiffs filed a Representative Class Action Complaint in the Virginia Court onSeptember 11, 2015. The complaint challenged the Company’s labeling of its flooring products and assertedclaims under California, New York, Illinois, Florida and Texas law for fraudulent concealment, violation ofconsumer protection statutes, negligent misrepresentation and declaratory relief, as well as a claim for breachof implied warranty under California law. Thereafter, on September 18, 2015, plaintiffs filed the FirstAmended Representative Class Action Complaint (‘‘FARC’’) in which they added implied warranty claimsunder New York, Illinois, Florida and Texas law, as well as a federal warranty claim. The Company filed amotion to dismiss and answered the FARC. The Virginia Court granted the motion as to claims for negligentmisrepresentation filed on behalf of certain plaintiffs, deferred as to class action allegations, and otherwisedenied the motion. The Company also filed a motion to strike nationwide class allegations and a motion tostrike all claims of personal injury made in class action complaints, on which the Virginia court has not yetruled. Discovery is now proceeding in this matter.

In addition, on or about April 1, 2015, Sarah Steele (‘‘Steele’’) filed a purported class action lawsuit inthe Ontario, Canada Superior Court of Justice against the Company. In the complaint, Steele’s allegationsinclude (i) strict liability, (ii) breach of implied warranty of fitness for a particular purpose, (iii) breach ofimplied warranty of merchantability, (iv) fraud by concealment, (v) civil negligence, (vi) negligentmisrepresentation, and (vii) breach of implied covenant of good faith and fair dealing. Steele did not quantifyany alleged damages in her complaint but, in addition to attorneys’ fees and costs, Steele seeks(i) compensatory damages, (ii) punitive, exemplary and aggravated damages, and (iii) statutory remediesrelated to the Company’s breach of various laws including the Sales of Goods Act, the Consumer ProtectionAct, the Competition Act, the Consumer Packaging and Labelling Act and the Canada Consumer ProductSafety Act.

The Company disputes the plaintiffs’ claims and intends to defend these matters vigorously. Given theuncertainty of litigation, the preliminary stage of these cases and the legal standards that must be met for,among other things, class certification and success on the merits, the Company cannot estimate the reasonablypossible loss or range of loss that may result from these actions.

In connection with the Products Liability Cases, on April 22, 2015, five of the Company’s general andumbrella liability insurers brought an action in the United States District Court for the Eastern District ofVirginia, (the ‘‘Virginia Action’’). Through the Virginia Action, these insurers sought a declaratory judgmentthat they were not obligated to defend or indemnify the Company in connection with the lawsuits assertedagainst the Company arising out of its sale of laminate flooring sourced from China. One insurer also asserteda claim seeking reformation of one policy to include a ‘‘total pollution exclusion’’ endorsem*nt, contendingthat it was omitted from that policy as the result of a mutual mistake.

On April 27, 2015, the Company filed a similar but more comprehensive action against nine of itsgeneral, umbrella and excess insurers (including the five Plaintiffs in the Virginia Action) in the Circuit Courtfor Dane County, Wisconsin (where four of the insurers are domiciled) (the ‘‘Wisconsin Action’’). In theWisconsin Action, the Company asserted breach of contract claims against its general liability insurers,alleging that these insurers had wrongfully failed to defend the Company in connection with theChinese-manufactured laminate flooring claims. The Company also asserted breach of contract and bad faithclaims against two of its general liability insurers, arising out of the manner in which those insurers computedretrospective premiums under their policies in connection with the Chinese-manufactured laminate flooringlawsuits. Finally, the Company sought declaratory relief from the court as to its rights and the insurers’responsibilities under their policies.

74

Lumber Liquidators Holdings, Inc. - [PDF Document] (85)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

The Company moved to dismiss the Virginia Action, contending that the federal court should abstain fromdeciding the case in favor of the more comprehensive state-court Wisconsin Action. Thereafter, the four insurerswho were not plaintiffs in the Virginia Action have filed motions to intervene as plaintiffs in the Virginia Action,in an effort to make the Virginia Action ‘‘as comprehensive’’ as the Wisconsin Action. The Company has opposedthe motions to intervene. By order dated September 4, 2015, the court largely denied the Company’s motion todismiss, allowing the Virginia Action to proceed. While the court dismissed the reformation claim withoutprejudice, as pled with insufficient specificity, the court granted leave to amend, and an amended complaint wasfiled on September 15, 2015. On October 2, 2015, the Company stipulated to entry of judgment on thereformation claim, and moved to dismiss the remaining claims in favor of proceeding in Wisconsin.

The defendant-insurers in the Wisconsin Action have filed motions to dismiss or stay the WisconsinAction in favor of the Virginia Action. The defendants in the Wisconsin Action have also moved for protectiveorders seeking to forestall their obligation to respond to discovery requests that the Company promulgated inthe Wisconsin Action.

On February 1, 2016, the Wisconsin court stayed the Wisconsin Action in favor of the proceedings inVirginia. On February 5, 2016, the Company moved for reconsideration and that motion remains pending.

On February 9, 2016, the Virginia court denied its motion to dismiss. The Virginia court also granted theremaining insurers’ motion to intervene, but stayed proceedings on their excess and umbrella insurancepolicies pending resolution of the primary insurers’ claims.

Litigation Relating to Abrasion Claims

On May 20, 2015, a purported class action titled Abad v. Lumber Liquidators, Inc. was filed in theUnited States District Court for the Central District of California and two amended complaints weresubsequently filed. In the Second Amended Complaint (‘‘SAC’’), the plaintiffs (collectively, the ‘‘AbrasionPlaintiffs’’) seek to certify a national class composed of ‘‘All Persons in the United States who purchasedDefendant’s Dream Home brand laminate flooring products from Defendant for personal use in their homes,’’or, in the alternative, 32 statewide classes from California, North Carolina, Texas, New Jersey, Florida,Nevada, Connecticut, Iowa, Minnesota, Nebraska, Georgia, Maryland, Massachusetts, New York,West Virginia, Kansas, Kentucky, Mississippi, Pennsylvania, South Carolina, Tennessee, Virginia, Washington,Maine, Michigan, Missouri, Ohio, Oklahoma, Wisconsin, Indiana, Illinois and Louisiana. The SAC allegesviolations of each of these states’ consumer protections statutes and the federal Magnuson-Moss Warranty Act,as well as breach of implied warranty and fraudulent concealment. The Abrasion Plaintiffs did not quantifyany alleged damages in the SAC but, in addition to attorneys’ fees and costs, seek an order certifying theaction as a class action, an order adopting the Abrasion Plaintiffs’ class definitions and finding that theAbrasion Plaintiffs are their proper representatives, an order appointing their counsel as class counsel,injunctive relief prohibiting the Company from continuing to advertise and/or sell laminate flooring productswith false abrasion class ratings, restitution of all monies it received from the Abrasion Plaintiffs and classmembers, damages (actual, compensatory, and consequential) and punitive damages.

The Company filed a motion to dismiss the SAC and the Abrasion Plaintiffs filed a motion for leave tofile a corrected SAC. The Company’s motion was subsequently granted in part and denied in part. The courtalso denied the Abrasion Plaintiffs’ motion for leave to file a corrected SAC. The Abrasion Plaintiffs haveuntil March 1, 2016, to file a Third Amended Complaint. The Company disputes the Abrasion Plaintiffs’claims and intends to defend these matters vigorously. Given the uncertainty of litigation, the preliminarystage of these cases, the legal standards that must be met for, among other things, class certification andsuccess on the merits, the Company cannot estimate the reasonably possible loss or range of loss that mayresult from these actions.

75

Lumber Liquidators Holdings, Inc. - [PDF Document] (86)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

Morris Matter

On or about August 18, 2015, Kevin Morris (‘‘Morris’’) filed a purported class action lawsuit in theCircuit Court of the Twentieth Judicial Circuit in St. Clair County, Illinois alleging that the Casa de ColourCollection by Dura-Wood flooring (the ‘‘Morris Product’’), a brand of solid wood flooring sold by theCompany, is defective due to warping, cupping and buckling. Morris alleges that the Company has engaged inunfair business practices and unfair competition by falsely representing the quality and characteristics of theMorris Product and by concealing the Morris Product’s defective nature. In particular, Morris’s allegationsinclude (i) common law fraud, (ii) breach of implied warranty, (iii) breach of express warranty, (iv) breach ofcontract, (v) breach of duty of good faith and fair dealing, (vi) violation of the Illinois Consumer Fraud andDeceptive Business Practices Act (the ‘‘ICFA’’) and (vii) violation of the Uniform Deceptive Trade PracticesAct (the ‘‘UDTPA’’). Morris did not quantify any alleged damages in his complaint but, in addition toattorneys’ fees and costs, Morris seeks (i) certification of the purposed class, (ii) injunctive relief requiring theCompany to replace and/or repair all Morris Products installed in structures owned by the purported class,(iii) an award of compensatory, consequential and statutory damages, pre-judgment interest and post-judgmentinterest, (iv) a declaration that the Company must disgorge, for the benefit of the purported class, all or part ofthe Company’s profits received from the sale of the Morris Product and/or to make full restitution to Morrisand the purported class, (v) a judgment for actual damages for injuries suffered by Morris and the purportedclass as a result of the Company’s violation of the ICFA and (vi) a judgment awarding Morris and thepurported class reasonable attorneys’ fees and costs in accordance with the UDTPA. On September 25, 2015,the Company removed the action to the United States District Court for the Southern District of Illinois.Subsequently, the Company filed a motion to dismiss. Morris failed to respond to the motion and, as a result,the lawsuit was dismissed without prejudice on November 10, 2015.

Ross Matter

On or about February 23, 2016, Joseph Ross and Linda Ross (collectively, ‘‘Ross’’) filed a purportedclass action lawsuit in the Second Judicial District Court, State of Nevada, County of Washoe. Ross seeks thecertification of a class of individuals in the State of Nevada who purchased certain hardwood flooring productsproduced in China (the ‘‘Ross Products’’). Ross alleges that the Ross Products are defective due to the RossProducts being contaminated with certain wood-boring insects. In particular, Ross’s allegations include(i) breach of warranty, (ii) negligence, (iii) strict liability, (iv) negligent misrepresentation, (v) willfulmisconduct, and (vi) unjust enrichment. In the complaint, Ross seeks (i) general and special damagesaccording to proof in excess of $50,000, (ii) attorneys’ fees and costs according to proof, (iii) prejudgmentand post-judgment interest on all sums awarded, according to proof at the maximum legal rate, (iv) costs ofthe lawsuit incurred, (v) restitution as authorized by law, (vi) punitive damages as authorized by law, and(vii) specific performance under our express warranties. The Company disputes Ross’s claims and intends todefend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and thelegal standards that must be met for, among other things, class certification and success on the merits, theCompany cannot estimate the reasonably possible loss or range of loss that may result from this action.

Derivative Litigation Matters

Consolidated Cases

On or about March 11, 2015, R. Andre Klein (‘‘Klein’’) filed a shareholder derivative suit in theUnited States District Court for the Eastern District of Virginia against the Company’s directors at that time,as well as its Senior Vice President, Supply Chain, former Chief Merchandising Officer and former ChiefFinancial Officer (collectively, the ‘‘Klein Defendants’’). On or about April 1, 2015, Phuc Doan (‘‘Doan’’)filed a shareholder derivative suit in the United States District Court for the Eastern District of Virginiaagainst the Company’s directors at that time, as well as its Senior Vice President, Supply Chain, former ChiefMerchandising Officer and former Chief Financial Officer (collectively, the ‘‘Doan Defendants’’). On or about

76

Lumber Liquidators Holdings, Inc. - [PDF Document] (87)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

April 15, 2015, Amalgamated Bank, as trustee for the Longview 600 Small Cap Index Fund, filed ashareholder derivative suit in the United States District Court for the Eastern District of Virginia against theCompany’s directors at that time, as well as its former Chief Merchandising Officer, former Chief FinancialOfficer, Senior Vice President, Supply Chain and its former Chief Executive Officer and President(collectively, the ‘‘Amalgamated Defendants,’’ and, with the Klein and Doan Defendants, the ‘‘IndividualDefendants’’). The Company was named as a nominal defendant only in these three suits.

On May 27, 2015, the court consolidated the Klein, Doan, and Amalgamated Bank suits, appointed leadplaintiffs and lead counsel for the consolidated action, and captioned the consolidated action as In re LumberLiquidators Holdings, Inc. Shareholder Derivative Litigation. In the complaints, Klein’s, Doan’s andAmalgamated Bank’s (collectively, ‘‘Plaintiffs’’) allegations include (i) breach of fiduciary duties, (ii) abuse ofcontrol, (iii) gross mismanagement, (iv) unjust enrichment, (v) insider trading, (vi) corporate waste,(vii) common-law conspiracy, and (viii) statutory conspiracy. Plaintiffs did not quantify any alleged damagesin their complaints but, in addition to attorneys’ fees and costs, Plaintiffs seek (1) a declaration that theIndividual Defendants have breached and/or aided and abetted the breach of their fiduciary duties to theCompany, (2) a determination and award to the Company of the damages sustained by the Company as aresult of the violations of each of the Individual Defendants, jointly and severally, (3) a directive to theCompany and the Individual Defendants to take all necessary actions to reform and improve the Company’scorporate governance and internal procedures to comply with applicable laws and to protect the Company andits shareholders from a repeat of the events that led to the filing of this action, (4) a determination and awardto the Company of exemplary damages in an amount necessary to punish the Individual Defendants and tomake an example of the Individual Defendants to the community according to proof of trial, (5) the awardingof restitution to the Company from the Individual Defendants, (6) a requirement that the Company establishcorporate policies and procedures prohibiting the use of Chinese manufacturers of its products, (7) aprohibition against the Company using wood or wood products from the Russian Far East, (8) a requirementthat the Company establish corporate policies and procedures to ensure compliance with CARB standards forall of its flooring products, and (9) disgorgement and payment to the Company of all compensation and profitsmade by the Individual Defendants, and each of them, at any time during which such Individual Defendantswere breaching fiduciary duties owed to the Company and/or committing, or aiding and abetting thecommitment of, corporate waste.

Additionally, in May 2015, the Company received a shareholder demand from Timothy Horton(‘‘Horton’’). The allegations and demands made by Horton overlap substantially with those raised in theconsolidated action. On June 11, 2015, the Special Committee of the Board of Directors (the ‘‘SpecialCommittee’’) exercised its authority to create a three-person Demand Review Committee, which is comprisedof three independent directors and tasked with investigating the claims made in the consolidated action andthe Horton demand letter and making a recommendation to the board of directors as to whether it would be inthe best interests of the Company to pursue any of those claims. Thereafter, the members of the DemandReview Committee filed a motion to stay the consolidated action pending completion by the Demand ReviewCommittee of its investigation and recommendation to the board of directors.

Further, in the consolidated action, the Company filed a motion to dismiss based on the failure to make ademand upon the Company’s board of directors, and the Individual Defendants filed a motion to dismiss basedon the failure to state a claim. These motions are fully briefed and pending before the court. Based on theuncertainty of litigation and the preliminary stage of the case, the Company cannot estimate the reasonablypossible loss or range of loss that may result from this action.

77

Lumber Liquidators Holdings, Inc. - [PDF Document] (88)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

Costello Matter

On or about March 6, 2015, James Costello (‘‘Costello’’) filed a shareholder derivative suit in the Courtof Chancery of the State of Delaware against the Company’s directors at that time (the ‘‘Costello DerivativeDefendants’’). The Company was named as a nominal defendant only. On April 1, 2015, the case wasvoluntarily stayed. On June 19, 2015, the stay was lifted at Costello’s request and Costello subsequently filedan amended complaint. The amended complaint added the Company’s Senior Vice President, Supply Chain,former Chief Merchandising Officer and former Chief Financial Officer as defendants (along with theDerivative Defendants, the ‘‘Costello Defendants’’). Costello’s allegations include (i) breach of fiduciaryduties, (ii) gross mismanagement, (iii) unjust enrichment, and (iv) insider selling and the misappropriationof certain of our information in connection therewith. Costello did not quantify any alleged damages in theamended complaint but, in addition to attorneys’ fees and costs, Costello seeks (i) against the CostelloDefendants and in the Company’s favor the amount of damages sustained by the Company as a resultof the Costello Defendants’ breaches of fiduciary duties, gross mismanagement and unjust enrichment,(ii) extraordinary equitable and/or injunctive relief, including attaching, impounding, imposing a constructivetrust on or otherwise restricting the proceeds of the Costello Defendants’ trading activities or their assets,(iii) awarding to the Company restitution from the Costello Defendants, and each of them, and orderingdisgorgement of all profits, benefits and other compensation obtained by the Costello Defendants; and(iv) additional equitable and/or injunctive relief that would require the Company to institute certaincompliance policies and procedures.

The Company filed a motion to dismiss the amended complaint based on the failure to make a demandupon the Company’s board of directors and the Costello Defendants filed a motion to dismiss based on thefailure to state a claim and the exculpatory provision in the Company’s Certificate of Incorporation. OnSeptember 14, 2015, the parties entered into a stipulation voluntarily staying the case until the DemandReview Committee has an opportunity to investigate Costello’s allegations and make a recommendation to theCompany’s board of directors, and the board of directors has the opportunity to act on that recommendation.The court has approved the stipulation.

Based on the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimatethe reasonably possible loss or range of loss that may result from this action.

McBride Matter

On or about March 27, 2015, James Michael McBride (‘‘McBride’’) filed a shareholder derivative suit inthe Circuit Court of the City of Williamsburg and County of James City, Virginia against the Company’sdirectors at that time, as well as its former Chief Merchandising Officer and former Chief Financial Officer(collectively, the ‘‘McBride Defendants’’). The Company was named as a nominal defendant only. In thecomplaint, McBride’s allegations include (i) breach of fiduciary duties, (ii) gross mismanagement, (iii) abuseof control, (iv) insider trading, and (v) unjust enrichment. McBride did not quantify any alleged damages inhis complaint but, in addition to attorneys’ fees and costs, McBride seeks (i) the awarding, against theMcBride Defendants, and in favor of the Company, of damages sustained by the Company as a result ofcertain of the McBride Defendants’ breaches of their fiduciary duties and (ii) a directive to the Company to(a) take all necessary actions to reform and improve its corporate governance and internal procedures,(b) comply with its existing governance obligations and all applicable laws and (c) protect the Company andits investors from a recurrence of the events that led to the filing of this action. On July 6, 2015, McBridefiled an amended complaint. The amended complaint added claims for statutory conspiracy and common lawconspiracy and, in connection with the statutory conspiracy claim, seeks damages in the amount of three timesthe actual damages incurred by the Company as the result of the alleged wrongful acts. Pursuant to avoluntary agreement between the parties, the defendants have not yet responded to the amended complaint.

78

Lumber Liquidators Holdings, Inc. - [PDF Document] (89)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

Based on the uncertainty of litigation and the preliminary stage of the case, the Company cannot estimate thereasonably possible loss or range of loss that may result from this action.

Antidumping and Countervailing Duties Investigation

In October 2010, a conglomeration of domestic manufacturers of multilayered wood flooring filed apetition seeking the imposition of antidumping (‘‘AD’’) and countervailing duties (‘‘CVD’’) with theUnited States Department of Commerce (‘‘DOC’’) and the United States International Trade Commission(‘‘ITC’’) against imports of multilayered wood flooring from China. This ruling applies to the Company’sengineered hardwood imported from China, which accounted for approximately 10% of its flooring purchasesin 2014 and approximately 6% of its flooring purchases in 2015.

The DOC made preliminary determinations regarding CVD and AD rates in April 2011 and May 2011,respectively. In December 2011, after certain determinations were made by the ITC and DOC, orders wereissued setting final AD and CVD rates at 3.3% and 1.5%, respectively. These rates became effective in theform of additional duty deposits, which the Company has paid, and applied retroactively to the DOCpreliminary determinations of April 2011 and May 2011.

Following the issuance of the orders, a number of appeals were filed by several parties, including theCompany, with the Court of International Trade (‘‘CIT’’) challenging various aspects of the determinationsmade by both the ITC and DOC, including certain aspects that may impact the validity of the AD and CVDorders and the applicable rates. The appeal of the CVD order was dismissed in June 2015. On January 23,2015, the CIT issued a decision rejecting the challenge of the AD rate for all but one Chinese exporter. Thisdecision was finalized on July 6, 2015, appealed to the Court of Appeals for the Federal Circuit on July 31,2015 and may take a year to conclude.

As part of its processes in these proceedings, the DOC conducts annual reviews of the CVD and ADrates. In such cases, the DOC will issue preliminary rates that are not binding and were subject to commentby interested parties. After consideration of the comments received, the DOC will issue final rates for theapplicable period, which may lag by a year or more. As rates are adjusted through the administrative reviews,the Company adjusts its payments prospectively based on the final rate.

In the first DOC annual review in this matter, rates were modified for AD rates through November 2012and for CVD rates through 2011. Specifically, the AD rate was set at 5.92% and the CVD rate was set at0.83%. These rates are being appealed to the CIT by several parties, including the Company. Based on whathas been paid by the Company to date for the periods covered by the first annual review, the Companybelieves its best estimate of the probable loss was approximately $833 for shipments during the applicabletime periods covered by the first annual review, which the Company recorded as a long-term liability in itsaccompanying consolidated balance sheet and in cost of sales in its second quarter 2015 consolidated financialstatements.

In January 2015, pursuant to the second annual review, the DOC issued a non-binding preliminary ADrate of 18.27% for purchases from December 2012 through November 2013 and a preliminary CVD rate of0.97% for purchases in fiscal year 2012. The rates were finalized in early July 2015 with the AD rate set at13.74% and the CVD rate set at 0.99%. The Company has appealed these rates. Notwithstanding our appeal,as these rates are now confirmed, the Company believes its best estimate of the probable loss was $4,089 forshipments during the applicable time periods, which the Company recorded as a long-term liability on itsaccompanying consolidated balance sheet and in cost of sales in its second quarter 2015 consolidated financialstatements. Beginning in July 2015, the Company began paying these rates on each applicable purchase.

The third annual review of the AD and CVD rates was initiated in February 2015. In January 2016, theDOC issued non-binding preliminary results in the third annual review. The preliminary AD rate was 13.34%and the CVD preliminary rate was 1.43%. These rates are expected to be finalized in the DOC’s final results

79

Lumber Liquidators Holdings, Inc. - [PDF Document] (90)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 10. Commitments and Contingencies − (continued)

in May 2016. Any change in the applicable rates as a result of the third annual review would apply to importsoccurring after the second period of review.

Based on the preliminary rates set in January 2016 in the third annual review for shipments subsequent toNovember 2013 (AD) and shipments subsequent to December 2012 (CVD), the Company would owe anadditional $5,300 for all shipments through December 31, 2015. As no rates have been finalized for theseperiods, the Company has not recorded an accrual in its consolidated financial statements for the impact ofhigher rates for the time periods subsequent to the second annual review. Based on the information available,the Company believes there is at least a reasonable possibility that an additional charge may be incurred in therange of $0 to $5,300. A loss greater than this amount may be incurred, but the Company is unable toestimate the amount at this time.

In February 2016, the DOC initiated the fourth annual review of AD and CVD rates, which the Companyexpects will follow a similar schedule as the preceding review.

Other Matters

We are also, from time to time, subject to claims and disputes arising in the normal course of business.In the opinion of management, while the outcome of any such claims and disputes cannot be predicted withcertainty, our ultimate liability in connection with these matters is not expected to have a material adverseeffect on the results of operations, financial position or cash flows.

Note 11. Condensed Quarterly Financial Information (unaudited)

The following tables present the Company’s unaudited quarterly results for 2015 and 2014.

Quarter Ended

March 31,2015

June 30,2015

September 30,2015

December 31,2015

Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $259,961 $247,944 $236,064 $234,807Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . 91,612 62,284 70,996 53,966Selling, General and Administrative Expenses . . 97,680 90,551 88,333 85,487Operating (Loss) Income . . . . . . . . . . . . . . . . (6,068) (28,267) (17,337) (31,521)Net (Loss) Income(1),(2),(3) . . . . . . . . . . . . . . . . $ (7,780) $ (20,347) $ (8,479) $ (19,827)

Net income per Common Share − Basic . . . . . . $ (0.29) $ (0.75) $ (0.31) $ (0.73)Net income per Common Share − Diluted . . . . . $ (0.29) $ (0.75) $ (0.31) $ (0.73)Number of Stores Opened in Quarter . . . . . . . . 4 7 7 4Comparable store net sales (Decrease) Increase . . (1.8)% (10.0)% (14.6)% (17.2)%

(1) Includes pretax lower of cost or market inventory adjustments recorded for Chinese laminate and tileinventory of $4,002 in the Second Quarter and $22,160 in the Fourth Quarter. See ‘‘Note 1. Summary ofSignificant Accounting Policies’’ above.

(2) Includes pretax charges for legal matters of $10,000 in the First Quarter, $8,077 in the Second Quarter,and $2,400 in the Fourth Quarter. See ‘‘Note 10. Commitments and Contingencies’’ above.

(3) Includes pretax impairment charges related to long-lived assets of $1,350 in the Second Quarter and$3,043 in the Third Quarter. See ‘‘Note 1. Summary of Significant Accounting Policies’’ above.

80

Lumber Liquidators Holdings, Inc. - [PDF Document] (91)

Lumber Liquidators Holdings, Inc.

Notes to Consolidated Financial Statements(amounts in thousands, except share data and per share amounts)

Note 11. Condensed Quarterly Financial Information (unaudited) − (continued)

Quarter Ended

March 31,2014

June 30,2014

September 30,2014

December 31,2014

Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $246,291 $263,085 $266,067 $271,976Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . 101,287 106,238 104,158 106,484Selling, General and Administrative Expenses . . 78,866 79,066 78,377 77,805Operating (Loss) Income . . . . . . . . . . . . . . . . 22,421 27,172 25,781 28,679Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . $ 13,694 $ 16,607 $ 15,725 $ 17,345

Net income per Common Share − Basic . . . . . . $ 0.50 $ 0.61 $ 0.58 $ 0.64Net income per Common Share − Diluted . . . . . $ 0.49 $ 0.60 $ 0.58 $ 0.64Number of Stores Opened in Quarter . . . . . . . . 13 13 5 3Comparable store net sales (Decrease) Increase . . (0.6)% (7.1)% (4.9)% (4.2)%

Note 12. Subsequent Events

In February 2016, the Company paid settlement amounts totaling $6,200, as described in Note 10, underLacey Act Related Matters.

Due to a planned build in inventory, the Company borrowed an additional $10,000 under its RevolvingCredit Facility, as described in Note 4. As of February 29, 2016, the Company has $30,000 in outstandingborrowings under the Revolving Credit Facility.

81

Lumber Liquidators Holdings, Inc. - [PDF Document] (92)

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the SecuritiesExchange Act of 1934, as amended (the ‘‘Exchange Act’’), that are intended to ensure that information thatwould be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms, and that such information is accumulated andcommunicated to our management, including the Chief Executive Officer and the Interim Chief FinancialOfficer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management,including our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the designand operation of our disclosure controls and procedures as of December 31, 2015. Based on this evaluation,our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls andprocedures were not effective as of December 31, 2015 due to the material weakness in internal control overfinancial reporting related to deficiencies in our information technology general controls described below.

Management has identified a material weakness in its internal control over financial reporting related toinformation technology general controls in the area of user access. For additional information regarding thenature of this material weakness, see ‘‘Management’s Report on Internal Control Over Financial Reporting’’below. We have developed a remediation plan for this material weakness, which is described below under‘‘Remediation Activities.’’

Notwithstanding the identified material weakness and management’s assessment that internal controlover financial reporting was ineffective as of December 31, 2015, management believes that the auditedconsolidated financial statements contained in this Annual Report on Form 10-K fairly present, in all materialrespects, our financial condition, results of operations and cash flows for the fiscal years presented inconformity with accounting principles generally accepted in the United States of America. Additionally, thismaterial weakness did not result in any adjustments or restatements of the Company’s audited and unauditedconsolidated financial statements or disclosures for any prior period previously reported by the Company.

(b) Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal controlover financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgatedunder the Exchange Act as a process, designed by, or under the supervision of the Company’s principalexecutive and principal financial officer and affected by the Company’s Board of Directors, management andother personnel, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with accounting principles generallyaccepted in the United States of America. Internal control over financial reporting includes maintainingrecords that in reasonable detail accurately and fairly reflect our transactions and disposition of assets;providing reasonable assurance that transactions are recorded as necessary for preparation of our financialstatements in accordance with generally accepted accounting principles; providing reasonable assurance thatreceipts and expenditures are made only with appropriate authorizations; and providing reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets thatcould have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provideabsolute assurance that a misstatement of our financial statements would be prevented or detected. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions or that the degree of compliance with policies orprocedures may deteriorate.

82

Lumber Liquidators Holdings, Inc. - [PDF Document] (93)

Management, with the participation of the Company’s principal executive and principal financial officer,conducted an evaluation of the effectiveness of our internal control over financial reporting as ofDecember 31, 2015 based on the framework and criteria established in Internal Control — IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Thisevaluation included review of the documentation of controls, evaluation of the design effectiveness of controls,testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on the foregoing,management concluded that the Company’s internal control over financial reporting was not effective as ofDecember 31, 2015 for the reasons described below.

In the course of completing its assessment of internal control over financial reporting as of December 31,2015, management identified deficiencies related to the design and operating effectiveness of its informationtechnology (‘‘IT’’) general controls for the Company’s enterprise resource planning system (referred tohereinafter as the ‘‘ERP system’’). The ERP system is utilized in the performance of transactional andmanagement review controls that comprise the principal element of the Company’s system of internal controlover financial reporting and are relevant to the preparation of its consolidated financial statements. Thesedeficiencies involve user access controls that are intended to ensure that access and revisions to financialapplications and data is adequately restricted to appropriate personnel. The ineffective user access controlsresulted in ineffective segregation of duties within the Company’s IT environment, whereby certain personneland contractors have the capability to perform conflicting duties within the ERP system. Finally, the Companydid not maintain effective controls over certain periodic reviews of user access. As a result of the aggregatedeficiencies identified, there is a reasonable possibility that the effectiveness of business process controls thatutilize electronic data and financial reports generated from the affected ERP system could be adverselyaffected. While these control deficiencies did not result in any audit adjustments, these control deficienciescould result in a material misstatement to the annual or interim consolidated financial statements anddisclosures that would not be prevented or detected on a timely basis. Accordingly, management hasconcluded that these control deficiencies constitute a material weakness. Therefore, management hasconcluded that, as of December 31, 2015, there was a material weakness in internal control over financialreporting related to information technology general controls in the area of user access for the Company’sERP system. A material weakness is a deficiency, or a combination of deficiencies, in internal control overfinancial reporting, such that there is a reasonable possibility that a material misstatement of our annual orinterim financial statements will not be prevented or detected on a timely basis.

Our internal control over financial reporting as of December 31, 2015 has been audited by Ernst &Young LLP, an independent registered public accounting firm, as stated in their report, which follows below.

(c) Remediation Activities

We are actively engaged in the implementation of a remediation plan to ensure that controls contributingto this material weakness are designed appropriately and will operate effectively. The remediation actions weare taking and expect to take include the following:

— Improving the design, operation and monitoring of control activities and procedures associated withuser and administrator access to the affected IT system, including both preventive and detectivecontrol activities;

— Standardize the assignment of user access roles and responsibilities within the Company’s ERPsystem;

— Reviewing the responsibilities in the functional areas that support and monitor our IT systems

Management believes that these efforts will effectively remediate the material weakness. However, thematerial weakness in our internal control over financial reporting will not be considered remediated until thenew controls are fully implemented, in operation for a sufficient period of time, and tested and concluded bymanagement to be designed and operating effectively. We cannot provide any assurance that these remediationefforts will be successful or that our internal control over financial reporting will be effective as a result ofthese efforts. In addition, as the Company continues to evaluate and work to improve its internal control overfinancial reporting within the area of IT general controls, management may determine to take additionalmeasures to address control deficiencies or determine to modify the remediation plan described above.

83

Lumber Liquidators Holdings, Inc. - [PDF Document] (94)

Management will test and evaluate the implementation of these new processes and internal controls during theyear ended December 31, 2016 to ascertain whether they are designed and operating effectively to providereasonable assurance that they will prevent or detect a material error in the Company’s financial statements ona timely basis. Subject to the foregoing, management is working towards having these remediation effortscompleted by December 31, 2016. Management is committed to continuous improvement of our internalcontrol over financial reporting and will continue to diligently review our financial reporting controls andprocedures.

(d) Changes in Internal Control over Financial Reporting

Except as noted in the preceding paragraphs, there have been no changes in the Company’s internalcontrol over financial reporting during the quarter ended December 31, 2015 that have materially affected, orare reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

None.

84

Lumber Liquidators Holdings, Inc. - [PDF Document] (95)

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item is incorporated by reference from the definitive proxy statement forour 2016 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2015.

Code of Ethics

We have a Code of Business Conduct and Ethics, which applies to all employees, officers and directorsof Lumber Liquidators Holdings, Inc. and its direct and indirect subsidiaries. Our Code of Business Conductand Ethics meets the requirements of a ‘‘code of ethics’’ as defined by Item 406 of Regulation S-K, andapplies to our Chief Executive Officer, Chief Financial Officer (who is both our principal financial andprincipal accounting officer), as well as all other employees. Our Code of Business Conduct and Ethics alsomeets the requirements of a code of conduct under Rule 303A.10 of the NYSE Listed Company Manual. OurCode of Business Conduct and Ethics is posted on our website at www.lumberliquidators.com in the‘‘Corporate Governance’’ section of our Investor Relations home page.

We intend to provide any required disclosure of an amendment to or waiver from our Code of BusinessConduct and Ethics on our website at www.lumberliquidators.com in the ‘‘Corporate Governance’’ section ofour Investor Relations home page promptly following the amendment or waiver. We may elect to disclose anysuch amendment or waiver in a report on Form 8-K filed with the SEC either in addition to or in lieu of thewebsite disclosure. The information contained on or connected to our website is not incorporated by referencein this report and should not be considered part of this or any other report that we file with or furnish tothe SEC.

Item 11. Executive Compensation.

The information required by this Item is incorporated by reference from the definitive proxy statement forour 2016 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2015.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters.

The information required by this Item is incorporated by reference from the definitive proxy statement forour 2016 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2015.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is incorporated by reference from the definitive proxy statement forour 2016 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2015.

Item 14. Principal Accountant Fees and Services.

The information required by this Item is incorporated by reference from the definitive proxy statement forour 2016 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2015.

85

Lumber Liquidators Holdings, Inc. - [PDF Document] (96)

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this annual report:

Consolidated Financial Statements

Refer to the financial statements filed as part of this annual report in Part II, Item 8.

1. Financial Statement Schedules.

The following financial statement schedule is filed as part of this annual report under Schedule II —Analysis of Valuation and Qualifying Accounts for the years ended December 31, 2015, 2014 and 2013. Allother financial statement schedules have been omitted because the required information is either included inthe financial statements or the notes thereto or is not applicable.

2. Exhibits

The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part ofthis report.

86

Lumber Liquidators Holdings, Inc. - [PDF Document] (97)

Lumber Liquidators Holdings, Inc.Schedule II — Analysis of Valuation and Qualifying Accounts

For the Years Ended December 31, 2015, 2014 and 2013(in thousands)

BalanceBeginningof Year

AdditionsCharged toCost andExpenses Deductions(1) Other

Balance Endof Year

For the Year Ended December 31, 2013Reserve deducted from assets to which it appliesInventory reserve for loss or obsolescence . . . $1,035 $ 1,465 $(1,225) $— $ 1,275Income tax valuation allowance . . . . . . . . . . $1,267 $ 498 $ — $— $ 1,765

For the Year Ended December 31, 2014Reserve deducted from assets to which it appliesInventory reserve for loss or obsolescence . . . $1,275 $ 3,198(2) $(1,231) $— $ 3,242Income tax valuation allowance . . . . . . . . . . $1,765 $ 458 $ — $— $ 2,223

For the Year Ended December 31, 2015Reserve deducted from assets to which it appliesInventory reserve for loss or obsolescence . . . $3,242 $28,897(3) $(5,257) $— $26,882Income tax valuation allowance . . . . . . . . . . $2,223 $ 210 $ — $— $ 2,433

(1) Deductions are for the purposes for which the reserve was created.

(2) Addition of $1,200 for reserves related to the Company’s Bellawood transition.

(3) Includes $22,499 for laminate flooring sourced from China and $3,663 related to the tile exit.

87

Lumber Liquidators Holdings, Inc. - [PDF Document] (98)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized on February 29, 2016.

LUMBER LIQUIDATORS HOLDINGS, INC.(Registrant)

By: /s/ John M. Presley

John M. PresleyChief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in the capacities indicated onFebruary 29, 2016.

Signature Title

/s/ John M. Presley

John M. Presley

Chief Executive Officer and Director(Principal Executive Officer)

/s/ Gregory A. Whirley, Jr.

Gregory A. Whirley, Jr.

Interim Chief Financial Officer andSenior Vice President, Finance(Principal Financial and Principal Accounting Officer)

/s/ Nancy M. Taylor

Nancy M. Taylor

Chairperson of the Board

/s/ Macon F. Brock, Jr.

Macon F. Brock, Jr.

Director

/s/ Douglas T. Moore

Douglas T. Moore

Director

/s/ Peter B. Robinson

Peter B. Robinson

Director

/s/ Martin F. Roper

Martin F. Roper

Director

/s/ Thomas D. Sullivan

Thomas D. Sullivan

Director

/s/ Jimmie L. Wade

Jimmie L. Wade

Director

88

Lumber Liquidators Holdings, Inc. - [PDF Document] (99)

EXHIBIT INDEX

ExhibitNumber Exhibit Description

3.01 Certificate of Incorporation of Lumber Liquidators Holdings, Inc. (filed as Exhibit 3.1 to theCompany’s current report on Form 8-K, filed on January 4, 2010 (File No. 001-33767), andincorporated by reference)

3.02 By-Laws of Lumber Liquidators Holdings, Inc. (filed as Exhibit 3.2 to the Company’s currentreport on Form 8-K, filed on January 4, 2010 (File No. 001-33767), and incorporated byreference)

4.01 Form of Certificate of Common Stock of Lumber Liquidators Holdings, Inc. (filed as Exhibit 4.1to the Company’s current report on Form 8-K, filed on January 4, 2010 (File No. 001-33767),and incorporated by reference)

10.01* Lumber Liquidators Holdings, Inc. 2011 Equity Compensation Plan (filed as Exhibit 10.1 to theCompany’s Registration Statement on Form S-8, filed May 6, 2011 (File No. 333-173981), andincorporated by reference)

10.02* Lumber Liquidators 2007 Equity Compensation Plan (filed as Exhibit 10.1 to the Company’sPost –effective Amendment No. 1 to its Registration Statement on Form S-8, filed January 4,2010 (File No. 333-147247), and incorporated by reference)

10.03* Lumber Liquidators 2006 Equity Plan for Non-Employee Directors (filed as Exhibit 10.2 to theCompany’s Post –effective Amendment No. 1 to its Registration Statement on Form S-8, filedJanuary 4, 2010 (File No. 333-147247), and incorporated by reference)

10.04* Offer Letter Agreement with Marco Pescara (filed as Exhibit 10.06 to the Company’sRegistration Statement on Form S-1, filed April 23, 2007 (File No. 333-142309), andincorporated by reference)

10.05* Form of Non-Qualified Employee Stock Option Agreement, effective October 18, 2006 (filed asExhibit 10.07 to the Company’s Registration Statement on Form S-1, filed April 23, 2007 (FileNo. 333-142309), and incorporated by reference)

10.06 Lease by and between ANO LLC and Lumber Liquidators (relating to Toano facility) (filed asExhibit 10.08 to the Company’s Amendment No. 1 to its Registration Statement on Form S-1,filed May 30, 2007 (File No. 333-142309), and incorporated by reference)

10.07* Form of Option Award Agreement, effective November 16, 2007 (filed as Exhibit 10.10 to theCompany’s annual report on Form 10-K, filed on March 12, 2008 (File No. 001-33767), andincorporated by reference)

10.08* Form of Restricted Stock Agreement, effective November 16, 2007 (filed as Exhibit 10.11 to theCompany’s annual report on Form 10-K, filed on March 12, 2008 (File No. 001-33767), andincorporated by reference)

10.09 Form of Option Award Agreement, effective December 31, 2010 (filed as Exhibit 10.13 to theCompany’s annual report on Form 10-K, filed on February 23, 2010 (File No. 001-33767), andincorporated by reference)

10.10* Form of Restricted Stock Agreement, effective December 31, 2010 (filed as Exhibit 10.14 to theCompany’s annual report on Form 10-K, filed on February 23, 2010 (File No. 001-33767), andincorporated by reference)

10.11* Form of Option Award Agreement, effective May 6, 2011 (filed as Exhibit 10.2 to the Company’scurrent report on Form 8-K, filed May 6, 2011 (File No. 001-33767), and incorporated byreference)

10.12* Form of Restricted Stock Agreement, effective May 6, 2011 (filed as Exhibit 10.1 to theCompany’s current report on Form 8-K, filed May 6, 2011 (File No. 001-33767), andincorporated by reference)

89

Lumber Liquidators Holdings, Inc. - [PDF Document] (100)

ExhibitNumber Exhibit Description

10.13* Employment Agreement with Robert M. Lynch (filed as Exhibit 10.1 to the Company’s currentreport on Form 8-K, filed December 21, 2010 (File No. 005-83765), and incorporated byreference)

10.14* Amendment to Employment Agreement with Robert M. Lynch (filed as Exhibit 10.1 to theCompany’s current report on Form 8-K, filed December 21, 2011 (File No. 005-83765), andincorporated by reference)

10.15 Second Amended and Restated Credit Agreement, dated as of April 24, 2015, among LumberLiquidators Holdings, Inc. and its domestic subsidiaries, including Lumber Liquidators, Inc. andLumber Liquidators Services, LLC (collectively, the ‘‘Borrowers’’) and Bank of America, N.A.as administrative agent, collateral agent and lender. (filed as Exhibit 10.1 to the Company’scurrent report on Form 8-K, filed April 29, 2015 (File No. 001-33767), and incorporated byreference)

10.16 First Amendment to Second Amended and Restated Credit Agreement, dated as of May 21, 2015,among Lumber Liquidators Holdings, Inc. and its domestic subsidiaries, including LumberLiquidators, Inc. and Lumber Liquidators Services, LLC (collectively, the ‘‘Borrowers’’) andBank of America, N.A. as administrative agent, collateral agent and lender. (filed as Exhibit 10.1to the Company’s current report on Form 8-K, filed May 21, 2015 (File No. 001-33767), andincorporated by reference)

10.17 Second Amendment to Second Amended and Restated Credit Agreement, dated as ofNovember 20, 2015, among Lumber Liquidators Holdings, Inc. and its domestic subsidiaries,including Lumber Liquidators, Inc. and Lumber Liquidators Services, LLC (collectively, the‘‘Borrowers’’) and Bank of America, N.A. as administrative agent, collateral agent and lender(filed as Exhibit 10.1 to the Company’s current report on Form 8-K, filed November 20, 2015(File No. 001-33767), and incorporated by reference)

10.18* Amended and Restated Annual Bonus Plan (filed as Exhibit 10.17 to the Company’s annualreport on Form 10-K, filed on February 20, 2013 (File No. 001-33767), and incorporated byreference)

10.19* Form of Option Award Agreement, effective January 24, 2013 (filed as Exhibit 10.18 to theCompany’s annual report on Form 10-K, filed on February 20, 2013 (File No. 001-33767), andincorporated by reference)

10.20* Form of Restricted Stock Agreement, effective January 24, 2013 (filed as Exhibit 10.19 to theCompany’s annual report on Form 10-K, filed on February 20, 2013 (File No. 001-33767), andincorporated by reference)

10.21* Form of Stock Appreciation Right Agreement, effective January 24, 2013 (filed as Exhibit 10.20to the Company’s annual report on Form 10-K, filed on February 20, 2013 (File No. 001-33767),and incorporated by reference)

10.22* Form of Option Award Agreement (Employee), effective November 23, 2015

10.23* Form of Restricted Stock Agreement (Director), effective November 23, 2015

10.24* Form of Restricted Stock Agreement (Employee), effective November 23, 2015

10.25* Relocation Agreement with Robert M. Lynch, dated February 5, 2014 (filed as Exhibit 10.1 tothe Company’s current report on Form 8-K, filed February 5, 2014 (File No. 005-83765) andincorporated by reference)

90

Lumber Liquidators Holdings, Inc. - [PDF Document] (101)

ExhibitNumber Exhibit Description

10.26* Offer Letter Agreement with Gregory A. Whirley, Jr., dated April 24, 2015 (filed as Exhibit 10.3to the Company’s current report on Form 8-K, filed on April 29, 2015 (File No. 001-33767), andincorporated by reference)

10.27* Consultancy, Separation and Release Agreement, dated April 28, 2015, by and between LumberLiquidators Holdings, Inc. and Daniel E. Terrell. (filed as Exhibit 10.2 to the Company’s currentreport on Form 8-K, filed on April 29, 2015 (File No. 001-33767), and incorporated byreference)

10.28* Form of Service Option Award Agreement (Tom Sullivan) (filed as Exhibit 10.1 to theCompany’s current report on Form 8-K, filed August 5, 2015 (File No. 001-33767) andincorporated by reference)

10.29* Form of Service Option Award Agreement, (Tom Sullivan)

10.30* Form of Performance Option Award Agreement (Tom Sullivan) (filed as Exhibit 10.2 to theCompany’s current report on Form 8-K, filed August 1, 2015 (File No. 001-33767) andincorporated by reference)

10.31* Form of Performance Option Award Agreement (Tom Sullivan)

10.32* Separation and Release Agreement between Lumber Liquidators Services, LLC and William K.Schlegel, dated July 21, 2015 (filed as Exhibit 10.3 to the Company’s current report onForm 8-K, filed August 5, 2015 (File No. 001-33767) and incorporated by reference)

10.33* Form of Severance Benefit Agreement (filed as Exhibit 99.2 to the Company’s current report onForm 8-K, filed August 5, 2015 (File No. 001-33767) and incorporated by reference)

10.34* Form of Retention Agreement (filed as Exhibit 99.3 to the Company’s current report onForm 8-K, filed August 1, 2015 (File No. 001-33767) and incorporated by reference)

10.35 Plea Agreement between Lumber Liquidators, Inc. and the Department of Justice (filed asExhibit 10.1 to the Company’s current report on Form 8-K, filed October 7, 2015 (FileNo. 001-33767) and incorporated by reference)

10.36 Stipulation for Settlement and Joint Motion for Entry of Consent Order of Forfeiture betweenLumber Liquidators, Inc. and the Department of Justice (filed as Exhibit 10.2 to the Company’scurrent report on Form 8-K, filed October 7, 2015 (File No. 001-33767) and incorporated byreference)

10.37* Option Award Agreement with John M. Presley, dated November 9, 2015

10.38* Offer Letter Agreement with Carl R. Daniels, dated September 7, 2011

10.39* Offer Letter Agreement with Jill Witter, dated August 14, 2015

10.40* Executive Employment Agreement with John M. Presley (filed as Exhibit 10.1 to the Company’scurrent report on Form 8-K, filed February 29, 2016 (File No. 001-33767) and incorporated byreference)

10.41* Offer Letter Agreement with Dennis R. Knowles, dated February 23, 2016 (filed as Exhibit 10. tothe Company’s current report on Form 8-K, filed February 29, 2016 (File No. 001-33767) andincorporated by reference)

21.01 Subsidiaries of Lumber Liquidators Holdings, Inc.

23.01 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

31.01 Certification of Principal Executive Officer of Lumber Liquidators Holdings, Inc. pursuant toSection 302 of the Sarbanes-Oxley Act of 2002

91

Lumber Liquidators Holdings, Inc. - [PDF Document] (102)

ExhibitNumber Exhibit Description

31.02 Certification of Principal Financial Officer of Lumber Liquidators Holdings, Inc. pursuant toSection 302 of the Sarbanes-Oxley Act of 2002

32.01 Certification of Principal Executive Officer and Principal Financial Officer of Lumber LiquidatorsHoldings, Inc. pursuant to Section 906 of the Sarbanes-Oxley act of 2002

101 The following financial statements from the Company’s Form 10-K for the year endedDecember 31, 2015, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) ConsolidatedStatements of Income, (iii) Consolidated Statements of Other Comprehensive Income,(iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of CashFlows, (vi) Notes to Consolidated Financial Statements

* Indicates a management contract or compensation plan, contract or agreement.

92

Lumber Liquidators Holdings, Inc. - [PDF Document] (103)

[This page intentionally left blank.]

Lumber Liquidators Holdings, Inc. - [PDF Document] (104)

[This page intentionally left blank.]

Lumber Liquidators Holdings, Inc. - [PDF Document] (105)

[This page intentionally left blank.]

Lumber Liquidators Holdings, Inc. - [PDF Document] (106)

Store LocationsALABAMABirmingham - 1805 Tin Valley Circle • 205.572.4850 Huntsville - 8402 Whitesburg Drive • 256.513.4656 Mobile - 3725 Airport Blvd • 251.545.3353 Montgomery - 4345 Atlanta Highway • 334.239.3488Pelham - 2242 Pelham Parkway • 205.941.9955

ARIZONAChandler - 2460 E Germann Rd • 623.321.3590 Peoria - 9700 N 91st Ave #124 • 623.239.3062 Phoenix - 2120 S 7th St • 602.454.2552Scottsdale - 8340 E Rain Tree Dr • 480.582.1400Tucson - 3745 N I10 EB Frontage Rd, Suite 107 • 520.790.7029

ARKANSASLittle Rock - 6 Freeway Dr, Suite 500 • 501.588.4735Springdale - 1840 W Sunset Ave • 479.439.8544

CALIFORNIA Albany - 1061 Eastshore Highway, Suite 120 • 510.292.4052 Bakersfield - 3601 Ming Ave, Suite A • 661.412.0063 Burlingame - 1501 Adrian Rd • 650.204.4663 City of Commerce - 6548 Telegraph Rd • 323.721.0800 City of Industry - 19555 E Walnut Dr S • 626.465.1560 Corona - 280 Teller St • 951.356.0223Fairfield - 1595 Holiday Lane, Suite B4 •707.439.8500 Fresno - 2955 S Orange Ave • 559.708.4281 Lakewood - 5832 Lakewood Boulevard • 562.239.3669 Livermore - 6242 Preston Ave • 925.605.7309 Los Angeles (West LA) - 11612 W Olympic Boulevard • 213.785.3456 Modesto - 3250 Dale Road, Suite A1 • 209.554.7291 Monrovia - 720 E Huntington Drive • 626.408.0611 Moreno Valley - 12125 Day St • 951.842.3520 Murrieta - 26540 Jefferson Ave • 951.837.4112 North Hills - 16735 Roscoe Boulevard • 818.232.0918Pacheco - 110 2nd Ave South, Unit A-1 • 925.231.1059 Palm Desert - 73-806 Dinah Shore Dr • 760.469.4368 Pittsburg - 2685 E Leland Rd • 925.318.1426 Rancho Cordova - 2863 Zinfandel Dr • 916.369.7300 Rancho Cucamonga - 10920 Foothill Blvd • 909.937.1122 Redlands - 1448 Industrial Park Avenue • 909.321.2328 Roseville - 9400 Fairway Dr • 916.877.8106 San Diego - 7930 Miramar Rd • 858.689.0800 San Diego - 222 Verus St • 619.207.4667 San Francisco - 3150 Geary Boulevard • 415.373.0100 San Jose - 1575 Terminal Ave • 408.463.6300 San Jose - 942 Blossom Hill Rd • 669.444.1824 San Leandro - 2997 Teagarden St • 510.524.7800 San Luis Obispo - 170 Suburban Rd, Suite 130 • 805.706.0387 San Marcos - 860 Los Vallecitos Boulevard • 760.566.7926 Santa Ana - 1850 East Edinger Ave • 714.258.8100 Santa Barbara - 18 S Milpas Street • 805.298.1266 Now Open! Santa Clarita - 18821 Soledad Canyon Rd • 661.244.3800 Santa Rosa - 930 Piner Rd • 707.324.3630Santee - 240-102 Town Center Parkway • 619.363.7661 Now Open!Stockton - 963 W March Lane • 209.337.3704Torrance - 1431 W Knox St • 424.271.0014Ventura - 6250 Inez St • 805.256.7070Westminister - 14741 Goldenwest St • 714.248.7425

COLORADOAurora - 14015 E. Exposition Avenue • 720.307.6645 Coming Soon! Colorado Springs - 4624 Northpark Dr • 719.266.9299 Denver - 5060 Acoma St • 303.292.1515 Fort Collins - 2415 E Mulberry St, Suite 8 • 970.372.0197 Grand Junction - 2465 Highway 6 and 50 • 970.628.0160 Littleton - 8500 W Crestline Ave • 720.593.4350Lone Tree - 8204-B E Park Meadows Dr • 720.259.4370 Longmont - 633 Frontage Rd • 720.204.3477

CONNECTICUTDanbury - 71 Newtown Rd • 203.702.1430Hartford - 121 Brainard Rd • 860.527.8434Milford - 1389 Boston Post Rd • 203.693.4022 Now Open! North Haven - 430 Universal Dr N • 203.889.4703 Norwalk - 651 Connecticut Ave • 203.842.0840 Torrington - 237 High Street • 860.387.7032 Now Open!Waterbury - 1012 Wolcott St • 203.721.6145

Waterford - 150 Cross Rd • 860.237.4545

DELAWAREClaymont - 203 Naamans Rd • 302.798.1400 Delmar - 38491 Sussex Highway • 302.248.5345 Dover - 2940 N DuPont Highway • 302.747.5988Newark - 23 University Drive • 302.273.8193 Coming Soon!

FLORIDABrandon - 1045 W Brandon Blvd • 813.473.2830 Dania - 1906 Tigertail Boulevard • 954.922.3120 Florida City - 33550 SW Dixie Highway • 786.838.0638 Fort Myers - 5020 South Cleveland Ave • 239.332.2829 Holly Hill - 1757 N Nova Rd #103 • 386.868.1191 Jacksonville - 9300 Arlington Expressway • 904.404.9025 Jacksonville - 624 Beautyrest Ave • 904.783.6446 Lutz - 18448 US Highway 41 • 813.909.7744 Melbourne - 2525 W New Haven • 321.473.3510Miami - 8785 Southwest 133 St • 786.507.8820 Miami Gardens - 3355 Northwest 167th St • 305.351.7666Naples - 4404 Tamiami Trail East • 239.206.1171New Port Richey - 5201 US-19 • 727.223.1212 Now Open! Ocala - 3701 SW College Road • 352.541.2751 Now Open! Orlando - 9655 S. Orange Blossom Trail • 407.999.0020 Panama City - 901 N East Ave • 850.387.4328 Pensacola - 4117 Davis Highway • 850.857.1333 Plant City - 4017 S Frontage Rd • 863.808.1058 Port St. Lucie - 317 Northwest Peaco*ck Boulevard - 772.905.5044 St. Petersburg - 2599 22nd Ave North • 727.394.3255 Sanford - 2885 S Orlando Dr • 321.420.1176 Sarasota - 2214 N Washington Boulevard • 941.749.1200 Tallahassee - 1516 A Capital Circle Southeast • 850.942.0000 Tampa - 8444 West Hillsborough Avenue - 813.867.2760 Coming Soon!Venice - 454 US 41 BYP N - 941.216.7784 Now Open!Vero Beach - 2124 58th Avenue - 772.222.7838 Now Open!West Palm Beach - 3200 Shawnee Avenue - 561.665.5061

GEORGIAAlpharetta - 735 N Main St • 404.692.4483 Augusta - 3475 Old Petersburg Rd, Suite 330 • 706.955.2789 Byron - 170 Tower Center Dr • 478.225.4604 Columbus - 4211 Milgen Rd, Unit 3 • 706.405.3367 Conyers - 1820 Highway 20 SE, Suite 120 • 770.860.0606 Douglasville - 7424 Douglas Boulevard • 470.377.0055 Duluth - 3855 Venture Dr • 678.430.3953 Kennesaw - 2500 N Cobb Pkwy • 770.850.0606 Newnan - 33 Amlajack Boulevard • 678.228.2405 Savannah - 4131 Ogeechee Rd, Suite 101 • 912.480.0519

IDAHOBoise - 7428 W Mossy Cup St • 208.286.1180 Idaho Falls - 1574 North Hitt Road, Suite 1 • 208.881.9782

ILLINOISArlington Heights - 1460 E Algonquin Rd • 847.357.0400Bolingbrook - 117 S Weber Rd • 630.364.4600Champaign - 301 W Marketview Dr • 217.903.5632 Chicago - 1606 N Throop St • 773.696.2600 Cicero - 2942 S Cicero Ave • 872.888.7376 Crystal Lake - 4500 W Northwest Highway • 815.219.4832 East Peoria - 1467 N Main St • 309.740.1801 Fairview Heights - 5520 N Illinois St • 618.327.0090 Lombard - 543 E Roosevelt Rd • 630.426.1248 Naperville - 2603 Aurora Ave • 331.213.2462Oak Lawn - 4145 W 95th St • 708.572.8888Rockford - 3290 S Alpine Rd • 815.873.6631 South Elgin - 356 Randall Road • 847.481.6987 Now Open! Springfield - 2731 N Dirksen Pkwy • 217.953.4006 Tinley Park - 16195 Harlem Ave • 708.928.6036West Chicago (Geneva) - 33W461 Roosevelt Rd • 630.206.1535

INDIANAEvansville - 1200 N Willow Rd, Suite 203 • 812.618.1301 Fort Wayne - 2639 Goshen Rd • 260.494.3210 Greenwood - 2117 Independence Dr • 317.522.0076 Indianapolis - 10207 E Washington Street • 317.762.2341 Now Open! Indianapolis - 8410 N Michigan Rd • 317.541.1444 Lafayette - 4315 Commerce Dr; Suite 410 • 765.588.3554 Merrillville - 1140 W 81st Ave • 219.801.7622

South Bend - 3725 Cleveland Rd, Suite 600 • 574.485.2524

IOWADavenport - 321 W Kimberly Rd • 563.726.0682 Marion - 1418 Twixt Town Rd • 319.243.3035 Urbandale - 10131 Hickman Rd • 515.322.1465

KANSASLenexa - 9800 Quivira Rd • 913.254.9800 Topeka - 5907 Southwest 21st St • 785.783.0608 Wichita - 8909 W Kellogg Dr #105 • 316.768.4552

KENTUCKYBowling Green - 1109 Lovers Lane, Suite 1-D • 270.282.0790 Florence - 7800 Connector Dr • 859.918.9961 Jeffersontown - 2223 Plantside Dr • 502.499.6600Lexington - 2320 Fortune Dr, Suite 170 • 859.963.1441

LOUISIANABaton Rouge - 11770 Airline Highway • 225.298.1388 Broussard - 3401 US 90 • 337.326.4683 Harahan - 800 S Clearview Pkwy • 504.733.6230 Shreveport - 343 Bert Kouns Industrial Loop • 318.402.0992Slidell - 2170 Gause Boulevard West • 985.288.1890

MAINEAuburn - 730 Center St, Suite 4 • 207.692.2236 Brewer - 510 Wilson St • 207.631.2370 Scarborough - 443 US Route 1 • 207.885.9900

MARYLANDAnnapolis - 10 Lincoln Court, Suite 1933 • 443.951.0202 Beltsville - 10711A Baltimore Ave • 301.931.3467Edgewood - 2710 Pulaski Highway, Suite C • 443.490.0180 Frederick - 7311 N Grove Rd • 240.575.3065 Glen Burnie - 585-A East Ordnance Rd • 443.422.6758Lutherville Timonium - 2151 York Rd • 443.846.0430Middle River - 9902 C Pulaski Highway • 301.971.4772 Now Open!Rockville - 800 Hungerford Drive • 301.971.4772Waldorf - 2260 Crain Highway • 240.435.2092Windsor Mill - 2707 N Rolling Rd, Suite 106 • 410.944.9988

MASSACHUSETTSBraintree - 240 Wood Rd • 781.849.9663 Hyannis - 20 Charles St • 508.815.4121 Leominster - 110 Water Tower Plaza • 978.751.3745Plymouth - 76 Shops at 5 Way • 508.927.1138 Shrewsbury - 835C Hartford Turnpike • 508.925.9070 Swansea - 207 Swansea Mall Dr • 508.689.5925West Hatfield - 10 West St, North Building, Suite 1 • 413.349.4064 West Roxbury - 1455 VFW Pkwy • 617.327.1222 Wilbraham - 2148 Boston Rd • 413.682.1583Woburn - 345 Washington St, Suite 13 • 781.935.4111

MICHIGANAuburn Hills - 2434 Pontiac Rd • 248.630.3941 Clinton Township - 35906 Groesbeck Highway • 586.863.0090 Comstock Park - 230 Lamoreaux Dr, NE • 616.997.2500 Kalamazoo - 4432 W Main St, Suite 20 • 269.743.0030 Lansing - 446 E Edgewood Blvd, Suite A-112 • 517.455.7672 Redford - 13080 Inkster Rd • 313.532.1200 Saginaw - 5901 Brockway Road • 989.321.2628 Taylor - 23267 Eureka Rd • 734.407.7983Traverse City - 2404 S Airport Rd • 231.668.9207Ypsilanti - 2623 Ellsworth Rd • 734.547.3143

MINNESOTABlaine - 40 County Rd 10 NE • 763.784.3440Burnsville - 1355 141st Street West • 507.298.2469 Chanhassen - 2973 Water Tower Place • 952.314.4975 Duluth - 367 Garfield Ave, Suite 5 • 218.260.4917 Rochester - 5139 Highway 52 North • 507.216.0978 Woodbury - 7700 Hudson Rd, Suite 400 • 651.967.0260

MISSISSIPPIGulfport - 9444 Highway 49 • 228.206.2306 Coming Soon! Horn Lake - 6550 Interstate Boulevard • 662.298.4764 Jackson - 950 W County Line Rd, Suite 104 • 601.991.9000

MISSOURIColumbia - 3200 Clark Lane • 573.234.4453 Fenton - 958 S Highway Dr • 636.764.0429

Lumber Liquidators Holdings, Inc. - [PDF Document] (107)

Lees Summit - 300 Northeast 291 Highway • 816.272.2528 Saint Peters - 4016 N Service Rd • 636.875.1044Springfield - 3103 E Chestnut Expressway • 417.459.4421

NEBRASKALincoln - 6401 Q St • 402.858.1927 Omaha - 4147 S 84th St • 402.218.1720

NEVADAHenderson - 27 S Stephanie St, Suite 150 • 702.893.3338 Las Vegas - 4588 N Rancho Dr, Unit 3 • 702.802.0873 Reno - 9728 S Virginia St, Suite D • 775.851.4949

NEW HAMPSHIRELebanon - 91 Mechanic St • 603.448.2778 Manchester - 1207 Hanover St • 603.666.0333 Nashua - 225 Daniel Webster Highway • 603.821.2136 North Hampton - 5 Lafayette Rd • 603.379.6024Somersworth - 182 Tri City Plaza • 603.617.4760

NEW JERSEYCherry Hill - 1205 Warren Ave • 856.324.4450 East Brunswick - 2 Claire Rd, Suite 2C • 732.387.4274 Fairfield - 311 RT-46, Unit F • 862.881.4606 Hamilton - 8 Commerce Way, Suite 110 • 609.588.8082Hillsborough - 6 Old Camplain Rd • 908.428.6000 Millville - 2251 N 2nd St • 609.736.2404Oakhurst - 1604 SR-35 • 732.963.2035 Pleasantville - 7034 Black Horse Pike • 609.910.0897 South Hackensack - 14 E Wesley St • 201.343.5255 Toms River - 1258 Hooper Ave • 848.480.0787Union - 1603 Route 22 • 908.613.0843Woodbridge - 507 King Georges Rd • 908.259.4170Woodbury - 1450 Clements Bridge Rd, Suite 15 • 856.291.6500

NEW MEXICOAlbuquerque - 5300 Pan American Freeway • 505.883.7200

NEW YORKAlbany - 158B Railroad Ave, Unit B • 518.393.8430 Bronx - 999 Brush Ave • 347.773.2075 Brooklyn - 64 12th St • 347.756.4215 Cheektowaga - 1650 Walden Ave • 716.833.6777 Elmira - 830 County Rd 64, Suite 12 • 607.873.6603 Freeport - 137 E Sunrise Highway • 516.415.1607 Hauppauge - 22 Central Ave • 631.232.2020 Johnson City - 420 Harry L Dr, Suite E • 607.231.0328 Long Island City - 32-32 49th St • 347.527.7664 Middletown - 400 Route 211 East • 845.326.1503 New York - 30 E 18th St (Union Square) • 212.352.1111 New York - 95 Delancey St • 347.286.7552 Riverhead - 144 Kroemer Ave • 631.494.3142Rochester - 3150 W Henrietta Rd, Suite 3 • 585.617.0973Staten Island - 2040 Forest Avenue • 917.426.0580 Syracuse - 509 Liberty St • 315.476.1111 Wappingers Falls - 1708 US-9 • 845.223.7764 Westbury - 24 Kinkel St • 516.874.2033 Yonkers - 132 Saw Mill River Rd • 914.595.1411

NORTH CAROLINAArden - 495 Watson Rd • 828.483.4189 Charlotte - 1108 Thomasboro Dr • 704.509.5555 Durham - 3157 Hillborough Rd • 919.246.9986 Fayetteville - 1916 Skibo Rd • 910.302.8180 Now Open! Gastonia - 2930-39/42 E Franklin Blvd • 704.879.2231 Greensboro - 3402 W Wendover Ave • 336.790.0060 Greenville - 315 SE Greenville Boulevard • 252.558.1559 Hickory - 527 US Highway 70 SW • 828.449.3282 Matthews - 11101 E Independence Boulevard • 704.749.2490 Raleigh - 2011 Raleigh Boulevard, Suite 106 • 919.828.4449 Salisbury - 403 Bendix Dr • 704.314.0664 Wilmington - 6816 Gordon Rd, Suite B • 910.795.0025

NORTH DAKOTAFargo - 3453 7th Ave North, Suite A • 701.540.4026

OHIOCanton - 6331 Promler Ave • 330.754.0005 Cincinnati - 454 Ohio Pike • 513.823.2544 Cincinnati - 4810 Peter Place • 513.942.4406 Cleveland - 540 Old Brookpark Rd • 216.661.2100 Columbus - 4242 West Broad Street, Suite A • 614.851.4500 Columbus - 1454 Morse Rd • 614.636.4666 Dayton - 452 Springboro Pike • 937.684.9660

Mentor - 9690 Mentor Ave • 440.709.3000North Olmsted - 26103 Lorain Rd • 440.252.3220Ontario - 2178 W 4th St • 419.989.4240Perrysburg - 26495 Southpoint Rd • 419.931.6770 Reynoldsburg - 2736 Brice Rd • 614.285.3101 Youngstown - 7661 South Ave • 330.259.3250

OKLAHOMANorman - 700 Ed Noble Pkwy • 405.896.8223Oklahoma City - 5835 W Reno Ave • 405.948.1800 Tulsa - 9137 E 71st Street, Suite B • 918.270.2111 New Location!

OREGONEugene - 4095 W 11th Ave • 541.393.2585 Portland - 2245 Northwest Nicolai St • 503.221.4944Portland - 12225 NE Glisan St • 503.308.8901Salem - 3920 Rickey St SE • 503.967.7447Tigard - 7301 SW Dartmouth • 503.964.6827

PENNSYLVANIAChambersburg - 1660 Lincoln Way E, Suite A • 717.977.3958 Colmar - 285 Bethlehem Pike, Suite 101 • 215.525.6203 Cranberry Township - 1000 Cranberry Square Dr • 724.705.0280 Erie - 5630 Peach St • 814.806.2308 Fairless Hills - 150 Lincoln Highway • 267.281.6360 Now Open! Greensburg - 1075 S Main St • 412.927.0354 Lancaster - 834 Plaza Boulevard • 717.454.3001Monroeville - 4721 William Penn Highway • 412.204.0013Muncy - 170 S Lycoming Mall Rd, Suite 220 • 570.415.0043New Cumberland - 2 Laurel Rd • 717.798.8605 Oaks - N 1420 E Dr; 422 Business Center • 484.991.4075Philadelphia - 10500 Roosevelt Boulevard • 267.234.7570 Philadelphia - 1530 S Christopher Columbus • 267.314.7030Pittsburgh - 4700 Campbells Run Rd • 412.788.4666 Reading - 4782 Pottsville Pike • 484.334.4320 State College - 1524 N Atherton St, Suite 120 • 814.409.7994Stroudsburg - 1600 North 9th Street • 570.534.4644Whitehall - 1218 MacArthur Rd • 610.628.1186 Wilkes-Barre - 211 Mundy St • 570.301.6908York - 2920 Whiteford Rd • 717.327.4107

RHODE ISLANDWarwick - 1301 Bald Hill Rd • 401.626.4245

SOUTH CAROLINACharleston - 2049 Savannah Highway, Suite 10 • 843.720.7888 Columbia - 4068-A Fernandina Rd • 803.753.1767 Florence - 2011 N Cashua Dr • 843.536.4524 Greer - 1367 W Wade Hampton Blvd • 864.416.4670N Charleston - 2093 Eagle Landing Blvd • 843.212.4800N Myrtle Beach - 2006 Highway 17 S • 843.353.0390Rock Hill - 1801 Cherry Road • 803.610.1680 Now Open!Simpsonville - 3005 Kemet Way • 864.881.6620

SOUTH DAKOTASioux Falls - 2519 S Shirley Ave • 605.610.3230

TENNESSEEChattanooga - 4295 Cromwell Rd, Suite 401 • 423.933.3201 Kingsport - 2637 E Stone Dr • 423.343.4168 Knoxville - 504 Carden Jennings Lane, Suite 104 • 865.622.3740 LaVergne - 131 Charter Place • 615.793.6993Madison - 1553 Gallatin Pike North • 615.997.0021Memphis - 6949 Appling Farm Pkwy, Suite 106 • 901.743.3339

TEXASAmarillo - 2008 S Soncy Rd • 806.553.4655 Arlington - 808 Interstate 20 • 817.789.6160 Austin - 8627 North I-35 • 512.444.0244 Austin - 801 E William Cannon Dr #125 • 512.537.8078 Beaumont - 4395 W Cardinal Dr, Suite 200 & 300 • 409.299.3645 Brownsville - 6820 N Expressway • 956.465.0715 Carrollton - 1620 North I-35, Suite 300 • 972.323.5077 Corpus Christi - 1910 S Padre Island Dr • 361.356.4910 Dallas - 2984 W Wheatland Rd, Suite A-1 • 214.390.3678 Denton - 2311 Colorado Boulevard • 940.312.1292 Now Open! El Paso - 1111 Barranca Dr, Suite 100 • 915.590.3300 Fort Worth - 425 Sherry Lane • 682.207.6770 Now Open! Houston - 11314 I-45 N • 832.706.2804 Houston - 5829 W Sam Houston Pkwy • 832.467.9993 Houston - 6148 S Loop East • 713.649.3900Hurst - 842 Airport Freeway • 682.730.6778 Irving - 3578 W Airport Freeway • 469.607.0441

Katy - 455 Katy Ft Bend Road • 281.819.2900 Now Open! League City - 2227 Gulf Freeway • 281.724.4546 Lubbock - 5004 Frankford Ave, Suite 700 • 806.577.4109 McAllen - 3401 W Expressway 83 • 956.467.5679 Mesquite - 3301 Interstate 30, Suite 101 • 214.453.0442 Plano - 1717 N Central Expressway • 972.422.0727 San Antonio - 2200-2 Northwest Loop 410 • 210.524.9996 Selma - 15403 Interstate 35 North • 210.570.1425 Sherman - 1215 S Sam Rayburn Freeway • 903.487.0368 Spring - 21755 I-45 • 281.825.5255 Stafford - 13911 Murphy Rd • 713.481.5930 Tyler - 3216 W Gentry Pkwy • 903.705.4242 Woodway - 6802 Woodway Dr • 254.230.1755

UTAHLindon - 1451 West 40 South • 801.429.9465 Salt Lake City - 389 West 1830 South, #800 • 801.886.8878

VERMONTWilliston - 329 Harvest Lane, Suite 200 • 802.316.4113

VIRGINIAChantilly - 14310 Sullyfield Circle, Suite 500A • 703.563.4321 Fredericksburg - 4507 Jefferson Davis Highway • 540.446.5035 Hampton - 2326 W Mercury Blvd • 757.952.0620 Leesburg - 1065 Edwards Ferry Rd NE • 571.762.0541 Lorton - 8245 Backlick Rd, Suite I • 703.339.1180 Lynchburg - 3700 Candlers Mountain Rd • 434.845.1207 Now Open! Manassas - 10356 Festival Lane • 571.535.4352 Norfolk - 416 Campostella Rd • 757.494.7900 North Chesterfield - 9990 Robious Rd • 804.404.7292 Richmond - 8818-B W Broad St • 804.404.7856 Salem - 356 Apperson Dr • 540.765.4200 Toano - 3000 John Deere Rd • 757.566.7546Virginia Beach - 317 Village Rd • 757.215.0856

WASHINGTONBellevue - 2021 130th Ave Northeast, Suite E - 425.458.3671 Kennewick - 6300 W Deschutes Ave, Bld B101 • 509.396.6912 Mukilteo - 11338 Mukilteo Speedway • 425.320.3980 Seattle - 3300 1st Ave South, Suite 200 • 206.625.5200 Spokane Valley - 12918 E Indiana Ave • 509.891.0111Tacoma - 3001 S Huson St, Suite A1 • 253.617.0071 Tukwila - 120 Andover Park East • 253.333.9830

WEST VIRGINIAMartinsburg - 85 Lynn Haven Drive Unit E • 304.596.0920 Nitro - 4200 1st Ave #209 • 304.759.8639Wheeling - 2738 Chapline St • 304.907.0137

WISCONSINDePere - 1452 Mid Valley Dr • 920.351.4570Kenosha - 7650 75th St, Suite 3 • 262.835.1100 Madison - 4615 Verona Rd • 608.620.7306 Sun Prairie - 2255 McCoy Rd • 608.318.4140 West Allis - 6740 Greenfield Ave • 414.386.0425

CANADAONTARIOBarrie - 106 Saunders Rd, Unit 10 & 11 • 705.242.1050Cambridge - 611 Hespeler Rd • 226.887.4278Mississauga - 3145 Dundas St West, Unit 11 • 289.326.0360Pickering - 1095 Kingston Rd, Unit 5 • 647.930.0352Stoney Creek - 442 Millen Rd, Unit 111 & 112 • 289.205.0402Toronto - 1400 O’Connor Dr, Suite 6 • 647.933.2490 Toronto - 470 Norfinch Dr • 647.955.4850Windsor - 1925 Provincial Rd • 519.916.1103

Lumber Liquidators Holdings, Inc. - [PDF Document] (108)

Our customers say it best!“We are so impressed with the level of professionalism, attention to detail and willingness to go above and beyond to ensure that we were happy with the installation of our new laminate flooring. We love our new dark colored laminate floors!” Paulette & Duane, Florida

“Carpet in the house was old and dirty - these floors bring out the best in this room and feels way better than before.” Umar, New Jersey

“It looks awesome. When I walked in the door I wanted to lay down on the floor and hug it. Beautifully rustic weathered rich appearance! Love it!” Paula, Maryland

“We did a total remodel of the kitchen and dining room & we did all the work ourselves. We are so pleased with how everything turned out, and we were amazed by how easy the floor was to install...we love it. Great floor at a great price!” Tina, New York

“We installed this solid hardwood in the living room, dining room, entryway, and kitchen - almost 900 sq ft. Although we looked other places, we chose Lumber Liquidators because they had the best quality for the price...Customer service was 5 stars from start to finish and communication was excellent! The floor looks beautiful and weʻre looking forward to enjoying if for many years to come.” Kirk, Washington

Lumber Liquidators Holdings, Inc. - [PDF Document] (2024)
Top Articles
Latest Posts
Article information

Author: Delena Feil

Last Updated:

Views: 5395

Rating: 4.4 / 5 (45 voted)

Reviews: 84% of readers found this page helpful

Author information

Name: Delena Feil

Birthday: 1998-08-29

Address: 747 Lubowitz Run, Sidmouth, HI 90646-5543

Phone: +99513241752844

Job: Design Supervisor

Hobby: Digital arts, Lacemaking, Air sports, Running, Scouting, Shooting, Puzzles

Introduction: My name is Delena Feil, I am a clean, splendid, calm, fancy, jolly, bright, faithful person who loves writing and wants to share my knowledge and understanding with you.