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LL Flooring CEO resigns, effective immediately

LL Flooring President and CEO Charles E. Tyson has resigned effective immediately, the Henrico County flooring company formerly known as Lumber Liquidators announced in a Securities and Exchange Commission document released Friday.

The move is not exactly a surprise, coming several weeks after Thomas Sullivan, Lumber Liquidators’ founder and former CEO, purchased 219 LL Flooring stores, which he said he would keep operating — but renamed as Lumber Liquidators.

LL Flooring filed for Chapter 11 bankruptcy in August, and an entity connected to investor F9 Group, owned by Sullivan, purchased the stores for $44.5 million in cash and at least $22 million in assumed liabilities. QTS Data Centers, meanwhile, purchased LL Floorings 995,792-square-foot distribution center on 97.55 acres in the White Oak Technology Park for $104.75 million in September.

Tyson was appointed president and CEO of LL Flooring in May 2020 and joined the company’s board at that time, after having been interim president starting in February 2020, and before that, chief customer experience officer. From 2008 to 2017, he served in executive roles at Advance Auto Parts, and previously was a senior vice president at Office Max and Office Depot.

He renamed the company LL Flooring in 2021, after the company was fined $33 million in 2019 by the federal government for continuing to sell laminate flooring after it failed formaldehyde emissions tests in California. Sullivan, who founded Lumber Liquidators in 1994, departed in 2016 after appearing on a 2015 “60 Minutes” investigation into the laminate flooring.

In 2022, LL Flooring opened 17 stores, but sales dropped the following year. Net sales in 2023 were down 18.5% from 2022, from $1.11 billion to $904.7 million. LL Flooring closed eight locations and opened three in 2023, and net losses last year amounted to $103.5 million, a large increase from a net loss of $12.1 million in 2022.

The Sept. 6 announcement of the sale of 219 stores and closing of 211 others came only hours after an earlier announcement that all of the stores would shut down, as LL Flooring said it had not found a purchaser.

Judge approves LL Flooring’s sale of Sandston plant, assets

A Delaware Bankruptcy Court judge on Monday approved the sale of 219 LL Flooring stores to an entity connected to F9 Group, which is owned by Lumber Liquidators founder and former CEO Thomas Sullivan. The court also OK’d the $104.75 million sale of the bankrupt flooring company’s eastern Henrico County distribution center to an entity connected to data center giant QTS Data Centers.

The transaction between Henrico-based LL Flooring, which filed for Chapter 11 bankruptcy in August, and purchaser LumLiQ2 and guarantor F9 Investments is expected to close by Sept. 30, according to court documents. The two parties reached a last-minute deal earlier in the month after LL Flooring — formerly known as Lumber Liquidators — announced it would be closing all of its 400-plus stores nationwide. Instead, 211 stores will close over the next few months, according to the company. In a court document filed Sept. 3, F9 offered LL Flooring $44.5 million in cash at closing and at least $22 million in assumed liabilities in a $66.5 million bid this summer, and the company also said it had paid a deposit of $4.1 million toward the total purchase.

SNA NE LLC, a limited liability corporation connected with QTS Data Centers, reached an agreement in September to purchase LL Flooring’s 995,792-square-foot distribution center on 97.55 acres in the White Oak Technology Park for $104.75 million. QTS owns much of the technology park property, as well as all 622 acres of White Oak Technology Park II. In a separate ruling, U.S. Bankruptcy Judge Brendan Shannon approved that deal too.

According to the Associated Press, Sullivan said that the stores purchased by F9 will be renamed Lumber Liquidators, and that the stores will align with Cabinets to Go, one of F9’s brands.

Sullivan founded Lumber Liquidators in 1994, and he departed in 2016, after a 2015 “60 Minutes” investigation into allegations that laminate flooring produced in China and sold by Lumber Liquidators in the United States had violated California Air Resources Board regulations and failed tests for maximum formaldehyde emissions, even after California authorities notified the company of the issue in 2013 and 2014. In 2019, the U.S. Department of Justice fined the company $33 million to settle allegations of securities fraud, which also included a $6 million payment to the U.S. Securities and Exchange Commission.

In 2020, Charles E. Tyson became the company’s president and CEO, and renamed the company LL Flooring in 2021. In 2022, the business opened 17 stores, but sales dropped the following year. Net sales in 2023 were down 18.5% from 2022, from $1.11 billion to $904.7 million. LL Flooring closed eight locations and opened three in 2023, and net losses last year amounted to $103.5 million, a large increase from a net loss of $12.1 million in 2022.

Last year, Sullivan purchased 9.4% of LL Flooring stock, and F9 attempted to purchase LL Flooring to merge with Cabinets to Go, but LL’s board rejected the deal. However, in July, Sullivan, F9 Brands President and CEO Jason Delves and Jill Witter, a Texas-based legal consultant for F9 Investments, were elected to LL Flooring’s board in a proxy war. The three resigned from the board as F9 and LL Flooring neared a deal on September’s acquisition agreement.

LL Flooring to sell 219 stores; 211 other stores set to close

Henrico County’s LL Flooring, which declared Chapter 11 bankruptcy last month, has signed an agreement to sell 219 stores and other assets to F9 Investments, the company announced Sept. 6. LL Flooring plans to close 211 other stores nationwide, up from 94 stores previously announced.

With this agreement, F9 Brands owner Tom Sullivan, the founder and former CEO of Lumber Liquidators and founder of Cabinets to Go, will likely assume ownership of the 219 LL Flooring stores, the company’s name and other assets by the end of the month, following approval by the Delaware Bankruptcy Court.

Earlier on Friday, Sept. 6, LL Flooring announced that it had not found a purchaser and planned to close all of its stores over the next three months, but later in the day, the deal with F9 emerged, meaning that about half of the flooring retailer’s 400-some stores will remain open under new ownership.

Under the deal, F9 Investments, part of the Cabinets to Go parent company F9 Group, will acquire 219 stores, LL Flooring’s intellectual property, and inventory sitting in the 219 stores and at the company’s Sandston distribution center, which was sold to a limited liability corporation connected to QTS Data Centers earlier this week for $104.75 million.

In its August bankruptcy filing, LL Flooring said it planned to close 94 stores, but that number rose to 211 in subsequent court filings. The 219 stores to be purchased by F9 “are open and continuing to serve customers with few changes to store operations and policies.” According to a court document filed by F9 attorneys this week, its purchase proposal “provides a certain recovery for stakeholders, and ensures continued employment for approximately 750 to 1,000 of the debtors’ employees.”

In June 2023, Tennessee-based F9 attempted to purchase LL Flooring, formerly Lumber Liquidators, but the company’s board rejected the offer, sparking a proxy war.

Although financial details were not provided in the sale announcement, in a document filed Sept. 3 in Delaware Bankruptcy Court, attorneys representing F9 said that it had offered LL Flooring $44.5 million in cash at closing and at least $22 million in assumed liabilities in a $66.5 million bid this summer. In a second document filed this week in the LL Flooring bankruptcy case, F9 said it had paid a deposit of $4.1 million toward the total purchase.

According to LL Flooring’s announcement, the acquisition is set to close by the end of September, pending approval by the federal bankruptcy judge.

LL Flooring filed for bankruptcy in August and announced it was pursuing a sale of its business, and that it had separately received a nonbinding letter of intent to sell its eastern Henrico distribution center. That sale was approved by the court, and an entity connected to QTS Data Centers has agreed to buy the 995,792-square-foot distribution center on 97.55 acres in the White Oak Technology Park for $104.75 million. QTS owns much of the technology park property, as well as all 622 acres of White Oak Technology Park II.

LL Flooring’s sales fell in fiscal 2023 to $904.7 million, down from $1.11 billion in fiscal 2022, when it opened 17 stores.

In May 2023, Sullivan purchased 9.4% of LL Flooring stock in preparation for a bid to merge LL Flooring’s stores with Cabinets to Go. According to a court document filed by F9 this week, LL Flooring owes about $7 million to F9, which owns many of the LL Flooring store locations and leases them to the company. On July 10, Sullivan, F9 Brands President and CEO Jason Delves and Jill Witter, a Texas-based legal consultant for F9 Investments, were elected to LL Flooring’s board, in an attempt to “hold the board accountable for the company’s abysmal stock price performance on an absolute and relative basis, an ineffective operational strategy, tremendous waste of capital and flawed strategic review process, among many other failures,” according to a May 31 announcement by F9, which owned 8.85% of LL Flooring’s common stock at the time.

Sullivan founded Lumber Liquidators in 1994 and left in 2016. In 2019, the company paid $33 million to settle allegations of securities fraud to the U.S. Department of Justice for “filing a materially false and misleading statement to investors regarding the sale of its laminate flooring from China to its customers in the United States,” according to a Department of Justice statement. The total fine included a $6 million payment to the U.S. Securities and Exchange Commission in a separate settlement. The settlement goes back to activities that took place in 2014 and 2015.

According to the DOJ, the CBS news program “60 Minutes” conducted an investigation starting in 2014 to test laminate products sold by Lumber Liquidators, which were shown to violate California Air Resources Board regulations and failed tests for maximum formaldehyde emissions, even after California authorities notified the company of the issue in 2013 and 2014. In a March 2015 episode of “60 Minutes,” Lumber Liquidators issued a “false and misleading statement to investors” that denied the allegations and affirmed that the company had complied with CARB regulations, the DOJ statement concluded.

Sullivan and other executives left the company in the months after the airing of the CBS report, and in 2020, Charles E. Tyson became the company’s president and CEO, after which Lumber Liquidators renamed itself LL Flooring in 2022.

In July, news broke that LL Flooring was considering filing for Chapter 11 bankruptcy, and shareholders elected the three F9 nominees to the company’s board. However, in the August SEC filing, LL Flooring revealed that the three F9 board members resigned shortly after the decision to enter Chapter 11 proceedings. According to F9’s court document, “these three persons did not engage in and recused themselves from discussions of the LL board” on F9’s bid to purchase LL Flooring’s assets.