US seeks criminal charges against Lumber Liquidators

  • Associated Press
  • Wednesday, April 29, 2015 1:32pm
  • Business

NEW YORK — The Justice Department is seeking criminal charges against Lumber Liquidators in an ongoing investigation over imported products.

At the same time, the company says it is continuing to diversify its laminate flooring offerings as it deals with fallout from a TV report that raised concerns over formaldehyde levels in Chinese-made flooring.

Lumber Liquidators revealed the Justice Department’s actions in a regulatory filing on Wednesday. It also reported a surprise loss for the quarter and the departure of its chief financial officer.

Its shares plunged more than 16 percent shortly before the opening bell.

In early March the CBS news show “60 Minutes” reported that Lumber Liquidators’ laminate flooring made in China contained high levels of formaldehyde, a carcinogen. Lumber Liquidators Holdings Inc. has said that it complies with applicable regulations for its products, including California standards for formaldehyde emissions.

The company said that its March sales declined 12.8 percent due to the allegations.

CEO Robert Lynch said during a conference call Wednesday that Lumber Liquidators is expanding its sourcing for laminate flooring to parts of Europe and North America. It is not adding to its Chinese-made flooring product inventory at this time.

Lynch said that the company has been diversifying sourcing across all of its product categories over the past three years.

Lumber Liquidators also said in the filing Wednesday that the Justice Department was seeking criminal charges against it under the Lacey Act, which is a U.S. law that includes a ban on illegally sourced wood products. The company had said in December that the Justice Department was contemplating criminal charges.

The company said that its best estimate of the probable loss that may result from the Justice Department action is about $10 million.

Lumber Liquidators also said on Wednesday that it was aware of more than 100 pending class-action lawsuits against it related to its laminate flooring made in China.

For the period ended March 31, the Toano, Virginia, company lost $7.8 million, or 29 cents per share, for the period ended March 31. That compares with a profit of $13.7 million, or 49 cents per share, a year earlier.

The loss caught industry analysts off guard. They had projected a profit of 15 cents per share, according to a survey by Zacks Investment Research.

The hardwood floors retailer posted revenue of $260 million.

Sales at stores open at least a year dropped 17.8 percent in March. For the first quarter, the figure slipped 1.8 percent.

Lynch said that sales have started to recover between March and April.

CFO Dan Terrell will leave the company in June. He has held the position since October 2006. The company appointed Gregory Whirley Jr. as interim CFO. Whirley has been with Ernst &Young LLP.

Terrell said during the conference call that Lumber Liquidators has incurred $2.3 million in costs for the free air quality program it recently implemented in order to reassure customers about its flooring.

Lumber Liquidators’ stock tumbled $5.41, or 16.2 percent, to $28.01 shortly before the market opening. Its stock has slumped 50 percent since the beginning of the year.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.