Commentary from Batman in our Live Member Chat Room:
LL – Thinking out-loud. It had three major issues to deal with ( CARB, Lacy Act, and CPSC) it has now navigated the first 2 successfully – paying fines 13M and 2.5 for each all while admitting no guilt. The CSPC is the only one left – it typically tests products in real world scenarios. Unlike the CARB with tested in worst case ( measure in a closed environment with no ventilation and no air flow) it will approximate more real world. It will not do destructive testing, the Chairman of the CPSC has stated that there are many sources of formaldehyde in the home, and it is hard to distinguish sources ( on a side note, as of March, 9, LL has not had a phase 3 failure – not replaced any installed flooring – from it’s in home test kits out of 11K+ plus tests). Also the CSPC must give the LL a chance to review and present concerns with final report before publishing. That is LL has 15 days to review and provide input to the report, or even file an injunction prior to the release. So there is a lower chance of the problems that CARB reporting multiple times on results. LL personnel / lawyers can review results, question them and even negotiate wording or interpretation of results. No court filings to date. This all seems very positive for LL, the likelihood of a recall by the CPSC seems very low at this point.
CSPC Chairman Elliot Kaye/ Lumber liquidators Con Call transcript ( 3/25/16):
http://www.cpsc.gov/Global/Newsroom/CPSCPressCall03262015_FINAL.pdf
I’m getting more bullish on this stock – Last year GM fell to 28.5% ( from 40% prior year). It’s NI was -56M. It spent $23M on legal fees, paid $13.2M to DOJ and $5.3M on Addl Employee retention.
