Lumber Liquidators reaches settlement with California regulators

Lumber Liquidators California settlement

Lumber Liquidators and the State of California Air Resources Board (CARB) have reached a settlement over the state’s inquiry into its laminate flooring.

The company said it will pay a $2.5 million fine after high levels of cancer-causing formaldehyde were found in its Chinese-produced laminate flooring. The levels were higher than what’s permitted under California law.

Shares of Lumber Liquidators were last trading up just over 4%, or $0.50, at $12.51 per share. The stock had risen as much as 10% on the news.

Here’s the company’s 8-K filing with information from the settlement.

On March 18, 2016, Lumber Liquidators Services, LLC (“LL”), a subsidiary of Lumber Liquidators Holdings, Inc. (the “Company”), entered into a Settlement Agreement and Release (the “Settlement Agreement”) with the State of California Air Resources Board (“CARB”) to resolve CARB’s inquiry relating to certain laminate flooring sourced from China sold in the Company’s stores prior to May of 2015. The Settlement Agreement does not constitute an admission of any wrongdoing by LL, the Company or any other entity and provides that CARB releases LL and its related parties from any and all claims that CARB may have pertaining to those products. A copy of the press release announcing the settlement is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Lumber Liquidators also agreed to implement certain voluntary measures, including a risk based supplier audit program and testing research program.

It was just over one year ago that a “60 Minutes” investigation found that the company’s flooring featured incredibly high levels of formaldehyde.

The company has lost more than 75% of its value since that report was released.

Despite the company’s attempts to remedy the situation, many analysts are still shorting its stock, including hedge fund manager Whitney Tilson of Kase Capital.

Tilson covered his short in December and reentered his short position earlier this month. He believes the cancer risk is greatly higher than the CDC’s revised assessment that came out in February.

Tilson has placed a bankruptcy at the company at 50%.