Lumber Liquidators (Toano, Va.) agreed to put $26 million into a securities class action fund that will be used to pay investors who bought stock between Feb. 22, 2012 and Feb. 27, 2015, according to a filing with the SEC.
The company will also add 1 million shares worth $16 million to the securities action fund. The two actions relate to shareholder and derivative cases filed over the company’s formaldehyde disclosures. The actions are both subject to further consideration at a settlement hearing slated for Nov. 17.
Meanwhile, Lumber Liquidators lost $12.2 million in the second quarter of 2016, compared with a $20.3 million loss in the same period of 2015 and a $32.4 million loss in the first quarter of 2016, according to the company’s filing with the SEC.
The company’s net sales for the second quarter of 2016 were $238.1 million, a 4 percent decrease year-over-year but a 1.97 percent increase compared with first quarter 2016 sales. Comparable store sales declined 7.2 percent year-over-year in the second quarter. The company also reported a 7.9 percent decrease in the number of customers invoiced, which it attributed to its change from a promotional period in the prior year to a strategic pricing approach during the current year.
Lumber Liquidators stock was valued $15.39 at posting time, down 9.36 percent from the previous day’s closing price of $16.98 and 77 percent down from the $69.22 recorded at before the company announced the “60 Minutes” investigation in an earnings call on Feb. 22, 2015.
"While our financial results this quarter were below our expectations, we are encouraged by the progress we made in strengthening Lumber Liquidators for growth and profitability in the long term,” said CEO John Presley in a statement.
Presley added that the during the quarter the company also resolved several regulatory issues. On June 15, the Consumer Product Safety Commission concluded its investigation into the company’s Chinese-made laminate flooring, which came under intense scrutiny over its formaldehyde emissions during a “60 Minutes” episode in 2015, and called for a continuation of the home testing program initiated by Lumber Liquidators in the weeks following the television exposé. This was viewed favorably by the company and shareholders because it was not a full recall of the laminate product.
On June 16, a judge reaffirmed his decision to dismiss a lawsuit filed by the Global Community Monitor. The judge had dismissed the lawsuit in April, but the plaintiffs had filed objections to the decision. The lawsuit, dating back to July 2014, alleged Lumber Liquidators’ Chinese-made laminate flooring emitted unsafe levels of formaldehyde.
“[W]e are making steady progress, and will continue to focus on execution within the business in the coming quarters,” Presley said.
