Criminal Charges For Lumber Liquidators, Shares Plunge

(RTTNews) - Lumber Liquidators Holdings Inc. (LL) Wednesday said the U.S. Justice Department is seeking criminal charges against the company, even as the hardwood flooring retailer posted a first-quarter loss hurt largely by lower-than-anticipated sales. Lumber Liquidators' shares are currently down 19 percent on the New York Stock Exchange.

In its quarterly filings with the SEC, Lumber Liquidators revealed that the DOJ is seeking to bring criminal charges under the Lacey Act. The company estimates probable loss related to DOJ's action to be about $10 thousand, which it has recorded in the first quarter.

Lumber Liquidators also said its aware of 103 pending purported class action cases filed against it since March 3 through April 27 related to its laminate flooring manufactured in China.

The DOJ started its criminal investigation on Lumber Liquidators under the Lacey Act after an interview program "60 Minutes" claimed that Lumber Liquidators sold flooring manufactured in China that may not meet health and safety standards of California.

The investigation by CBS reporters discovered the laminate flooring made in China failed to meet health and safety standards of California, as it contained higher levels of toxic formaldehyde, a cancer-causing chemical.

Formaldehyde can cause cancer, asthma, chronic respiratory irritation and other ailments, including skin and breathing problems, with a significantly greater risk of health problems in children. However, Toano, Virginia-based Lumber Liquidators claim that its Chinese-made laminate flooring have been tested and are safe.

For the first quarter, the company reported a swing to a loss of $7.8 million or $0.29 per share, compared to a profit of $13.7 million or $0.49 per share a year ago. Analysts polled by Thomson Reuters estimated earnings of $0.15 per share for the quarter.

Net sales for the first quarter rose to $257.0 million from $246.3 million last year. Analysts had a consensus revenue estimate of $258.24 million for the quarter.

The company's CFO Daniel Terrell agreed to step down as of June 1.

LL is currently trading at $27.05, down $6.37 or 19.06%, on the NYSE.