LL Flooring’s Board Fails to Accept
Responsibility for Company’s Abysmal Performance and Persistent
Value Destruction
Bogus Attacks and Factual Distortions Appear to
Demonstrate Board’s Efforts to Further Entrench Itself and Avoid
Accountability
Urges Shareholders Vote the GOLD Proxy Card “FOR” F9’s Three Highly
Qualified Director Nominees – Tom Sullivan, Jason Delves, and Jill
Witter – Who Are the Right Individuals to Restore Value to LL
Flooring
F9 Investments, LLC (“F9”), which together with its affiliates
collectively owns approximately 8.85% of LL Flooring Holdings, Inc.
(“LL Flooring” or the “Company”) (NYSE: LL) common stock and is the
Company’s largest shareholder, today mailed a letter to LL
Flooring’s shareholders correcting what it believes are egregious
distortions of the facts and dishonest personal attacks levied
against Tom Sullivan and F9’s other nominees by the Company’s Board
of Directors (the “Board”).
The letter, which highlights the Board’s flimsy attempts to
avoid accountability for its clear strategic failures and
significant erosion of the Company’s value, sets the record
straight regarding what F9 believes are unfounded and distorted
attacks against Mr. Sullivan and F9’s other nominees. The letter
also reiterates the clear intentions of F9’s three highly
qualified, independent director candidates – Thomas D. Sullivan,
Jason Delves, and Jill Witter – to bring much-needed experience,
focus, relevant industry expertise, and proper oversight back to LL
Flooring’s boardroom to restore the long-term value of the Company
for all shareholders.
Mr. Sullivan commented, “It is sad to see this Board so
desperate they have to fabricate bogus nonsense, but I guess when
they can't rely on their performance, they have to resort to lies
and deception."
The full text of the letter is below and available at
www.LLGroove.com.
June 20, 2024
Dear Fellow LL Flooring Shareholders,
As LL Flooring’s largest shareholder owning approximately 8.85%
of the Company’s stock, F9 Investments, LLC and our affiliates
(“F9” or “We”) are disappointed by the Board of Directors’ (the
“Board”) decision to resort to egregious, made-up personal attacks
against Tom Sullivan and our other nominees. Moreover, we believe
LL Flooring has distorted a number of facts in its investor
presentation and letters to shareholders.
We believe the Board’s personal attacks and distortions, coupled
with their stubborn adherence to a failed long-term strategy,
highlight the Board’s utter lack of accountability for its own
failures and further demonstrate that the Board is simply out of
touch with the urgent realities facing LL Flooring. Shareholders
should not be fooled by the Company’s desperate attempts to
distract you from focusing on the dire current reality: the
Board has overseen staggering operational losses and shareholder
value destruction, and by the Company’s own admission there is
substantial concern as to whether LL Flooring will be able to
continue operations at all.
Yet in a profound display of either lack of awareness or
self-denial, LL’s Board continues to insist its plan is working. We
believe shareholders recognize it clearly is not. LL has vastly underperformed its peers in virtually every
metric and over a sustained period. The facts are
irrefutable.
While F9 consistently responds to and refutes the Company’s
mischaracterizations of our nominees’ credentials and plan,
the Board has resorted to peddling
outrageous personal attacks and bogus distortions of the facts
rather than responding directly to F9’s critiques – because they
cannot. The strategic missteps and value erosion that
have occurred under their watch are undeniable, so the Board
continues to promote a false narrative that only further
demonstrates to us the lengths its members will go to entrench
themselves and avoid accountability for their failures.
Accordingly, we would like to set the record straight regarding a
few of the Board’s most egregious claims:
TOM SULLIVAN IS NOT SEEKING TO FORCE A SALE OF THE COMPANY TO
HIMSELF
LL Flooring’s assertion otherwise is patently absurd. If F9 is
successful in this proxy contest, our nominees would constitute
only 1/3 of the Board and would be powerless to “force” anything.
Furthermore, were F9 to make a new offer for the Company, any F9
nominees serving on the Board would recuse themselves from
consideration of the proposed transaction. Most importantly, any
transaction to any buyer would be subject to shareholder
approval.
F9 withdrew its 2023 bid for the Company as LL Flooring’s
financial condition was rapidly deteriorating and it became clear
that the Board’s so-called strategic review and sale process was
disingenuous. Today, we continue to believe that upgrading LL
Flooring’s Board with experienced directors, who bring a track
record of success in the flooring industry, represents the best
path forward to stabilize and grow the Company and restore
long-term value for all shareholders.
OUR NOMINEES’ INTENTIONS ARE SIMPLE: TO HELP
STABILIZE LL FLOORING’S BUSINESS AND POSITION THE COMPANY FOR
LONG-TERM GROWTH, PROFITABILITY, AND SHAREHOLDER VALUE
CREATION
The Board’s claim that F9’s nominees are conflicted due to their
roles at Cabinets to Go has no merit. To be clear, while Cabinets
to Go – a successful cabinets retail chain and F9 portfolio company
– does sell flooring, it is not its primary business and, as
previously disclosed to LL Flooring, flooring sales are relatively
minimal and well below the legal definition of a competitor that
would preclude our nominees from Board service.
In just one example of the Board’s partial recounting of the
history between the Company and F9, its materials reference Mr.
Sullivan’s involvement in litigation between Cabinets to Go and LL
Flooring but fail to mention that the lawsuit ended in a settlement
in which Cabinets to Go was permitted to sell flooring anywhere and
LL Flooring paid F9 Properties, a division of F9 Investments,
$300,000 in damages. Further, the Board’s claim that Ms. Witter
“led the lawsuit” against Cabinets to Go as the Chief Legal Officer
of LL Flooring (then Lumber Liquidators) is completely false. The
litigation was filed in 2019; Ms. Witter left the Company in 2017
and had no involvement whatsoever.
Each of F9’s nominees bring deep knowledge of the flooring space
and related industries, substantial corporate governance
experience, and strong track records of creating value for
companies – all of which we believe will be additive to the Board.
We believe our nominees’ combined skillset is
vitally important and necessary to stabilize the Company and bring
immediate and long-term value to LL Flooring.
SHAMELESS PERSONAL ATTACKS AGAINST MR.
SULLIVAN ARE UNTRUE AND HYPOCRITICAL
In its materials, the Board criticizes the Company’s performance
during Mr. Sullivan’s tenure, yet fails to mention that two of the
three incumbent directors up for re-election this year were also on
the Board during that same period. The Company also refuses to
acknowledge that under the leadership of the current Chair of
the Board, Nancy Taylor, LL Flooring’s stock price has plummeted a
whopping 98.5%.
Since the start of 2024 alone, the Company’s stock has dropped
by 58%, and over the last three years it has fallen by 93%. At the
time of Tom’s departure from the business, LL Flooring had a market
capitalization of approximately $430 million; today, the Company’s
market capitalization is less than $50 million. If the Board
believes Mr. Sullivan’s track record at the Company is “highly
questionable”, how should it characterize its current members’
abysmal performance or their fitness to drive long-term value for
shareholders?
The Board’s other personal attacks against Mr. Sullivan reek of
desperation. Its mudslinging reference to other litigation
involving Mr. Sullivan fails to reflect that the action was
ultimately dismissed, and that Mr. Sullivan was acknowledged as
both a victim and a creditor. Further, the Board’s insinuation that
Mr. Sullivan was ‘timing’ his trades to ‘whipsaw’ other investors
has no basis in reality. As any rational person would, Mr. Sullivan
took profits in 2019, after the first time LL Flooring declined to
meaningfully engage with him regarding a business combination.
IT'S NOT THE ECONOMY – IT’S THE
BOARD
Rather than take responsibility for its own strategic failures,
the Board attempts to blame market conditions for the Company’s
rapidly declining value. However, it fails to reckon honestly with
the Company’s staggering underperformance relative to its peers.
The facts are simple: if you invested $100 in LL Flooring five
years ago, it would be worth just $15 today, while the same
investment in the Company’s proxy peer group would be worth
$196.
The Board notes that its strategic plan in part relies on
waiting to “capitalize on improving market conditions” and
“anticipated industry tailwinds”. Meanwhile, in the near term the
Company plans to enter into a sale-leaseback commitment for its
primary asset – LL Flooring’s Sandston, VA distribution center – in
a shortsighted attempt to generate cash that will likely increase
expenses and destroy value for shareholders in the long run. The
Board’s misguided decision to simply wait out macroeconomic
conditions shows a disturbing lack of urgency, vision, and
confidence in the Company’s value proposition, and reflects the
dire need for change at the Board level to protect what remains of
LL Flooring’s value.
UNEVEN, SHAM STRATEGIC REVIEW PROCESS HAS
RESULTED IN PLUMMETING OFFERS
LL Flooring’s Board claims it has been conducting a “thorough
review’ of strategic alternatives to maximize shareholder value.
However, despite receiving fully financed offers from F9 to buy LL
Flooring at premium valuations far exceeding the Company’s current
value and during a period of declining operating performance, the
Company refused to engage constructively with F9 and created a
deeply uneven playing field for F9 versus other bidders.
In 2023, F9 offered several times to enter into an NDA, but the
Company refused to consider F9’s proposed standstill provisions
that the Company later publicly disclosed it provided to at least
one other bidder. In fact, the Board sought to have F9 sign an NDA
which would have prevented F9 from making an offer for the Company
during the standstill period that may have been in the best
interests of all of the shareholders while granting the Company the
right to terminate the NDA or refuse to provide due diligence.
Indeed, the Board’s disingenuous “strategic review” and sale
process have been characterized by a disturbing pattern of premium
bids rejected, falling bid prices, limited transparency, and an
uneven playing field for bidders – all despite the Board’s
insistence that the bids received “significantly undervalued” the
Company.
Time is short. All LL Flooring shareholders
must protect the value of their investment.
VOTE ON THE GOLD PROXY CARD TODAY “FOR” F9’S NOMINEES TOM
SULLIVAN, JASON DELVES, AND JILL WITTER AND “WITHHOLD” ON ALL LL
FLOORING NOMINEES AND JERALD HAMMANN
Shareholders must act decisively to safeguard their investment.
YOUR VOTE MATTERS, NO MATTER HOW MANY SHARES YOU OWN. We
urge all shareholders to protect the value of their investment by
voting for F9’s nominees today using the GOLD proxy card.
You can cast your vote online at www.ProxyVote.com or by
completing, signing and dating the GOLD proxy card or GOLD voting
instruction form and mailing it in the postage paid envelope
provided.
If you have not received the GOLD proxy card from F9 and have
only received a WHITE proxy card sent to you by the Company, you
can still support F9’s nominees using the WHITE proxy card. You can
do so by checking the “WITHHOLD” boxes on all of the Company
nominees and Jerald Hammann and checking the “FOR” boxes for all F9
nominees – Tom Sullivan, Jason Delves, and Jill Witter.
If you have any questions about how to vote your shares, please
contact our proxy solicitor, Campaign Management, by telephone
1-(855) 264-1527 (shareholders) or (212) 632-8422 (banks &
brokerages) or by email at info@campaign-mgmt.com.
For more information about F9 and detailed voting instructions,
visit our website at www.LLGroove.com.
With your vote, we will be one step closer to ensuring LL
Flooring is on a better path to creating lasting shareholder value
and getting the Company back in the groove.
We thank you for your support.
Sincerely,
Tom Sullivan Jason Delves Jill Witter
Solomon Partners Securities, LLC is serving as F9’s financial
advisor and Dentons US LLP is serving as its legal advisor.
DISCLAIMER
Except as otherwise set forth in this press release, the views
expressed in this press release reflect the opinions of F9
Investments, LLC and its affiliates (“F9”) and are based on
publicly available information with respect to LL Flooring
Holdings, Inc. (“LL” or the “Company”). F9 recognizes that there
may be confidential information in the possession of the Company
that could lead it or others to disagree with F9’s conclusions. F9
reserves the right to change any of its opinions expressed herein
at any time as it deems appropriate and disclaims any obligation to
notify the market or any other party of any such change, except as
required by law. F9 disclaims any obligation to update the
information or opinions contained in this press release, except as
required by law. For the avoidance of doubt, this press release is
not affiliated with or endorsed by LL.
This press release is provided merely as information and is not
intended to be, nor should it be construed as, an offer to sell or
a solicitation of an offer to buy any security nor as a
recommendation to purchase or sell any security. Certain of the
Participants (as defined below) currently beneficially own shares
of the Company. The Participants and their affiliates may from time
to time sell all or a portion of their holdings of the Company in
open market transactions or otherwise, buy additional shares (in
open market or privately negotiated transactions or otherwise), or
trade in options, puts, calls, swaps or other derivative
instruments relating to such shares.
Some of the materials in this press release contain
forward-looking statements. All statements contained herein that
are not clearly historical in nature or that necessarily depend on
future events are forward-looking, and the words “anticipate,”
“believe,” “expect,” “potential,” “could,” “opportunity,”
“estimate,” “plan,” “once again,” “achieve,” and similar
expressions are generally intended to identify forward-looking
statements. The projected results and statements contained herein
that are not historical facts are based on current expectations,
speak only as of the date of these materials and involve risks,
uncertainties and other factors that may cause actual results,
performances or achievements to be materially different from any
future results, performances or achievements expressed or implied
by such projected results and statements. Assumptions relating to
the foregoing involve judgments with respect to, among other
things, future economic competitive and market conditions and
future business decisions, all of which are difficult or impossible
to predict accurately and many of which are beyond the control of
F9.
The estimates, projections and potential impact of the
opportunities identified by F9 herein are based on assumptions that
F9 believes to be reasonable as of the date of this press release,
but there can be no assurance or guarantee (i) that any of the
proposed actions set forth in this press release will be completed,
(ii) that the actual results or performance of the Company will not
differ, and such differences may be material, or (iii) that any of
the assumptions provided in this press release are accurate.
F9 has neither sought nor obtained the consent from any third
party to use any statements or information contained herein that
have been obtained or derived from statements made or published by
such third parties, nor has it paid for any such statements. Any
such statements or information should not be viewed as indicating
the support of such third parties for the views expressed herein.
F9 does not endorse third-party estimates or research which are
used herein solely for illustrative purposes.
Important Information
F9 Investments, LLC, Thomas D. Sullivan, John Jason Delves and
Jill Witter (collectively, the “Participants”) filed a definitive
proxy statement and accompanying form of gold proxy card (as
supplemented and amended, the “Definitive Proxy Statement”) with
the Securities and Exchange Commission (the "SEC”) on May 31, 2024
to be used in connection with the 2024 annual meeting of
stockholders of the Company.
THE PARTICIPANTS STRONGLY ADVISE ALL STOCKHOLDERS OF THE COMPANY
TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER PROXY MATERIALS
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS
ARE AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT WWW.SEC.GOV AND
F9’S WEBSITE AT WWW.LLGROOVE.COM. THE DEFINITIVE PROXY STATEMENT
AND ACCOMPANYING PROXY CARD WILL BE FURNISHED TO SOME OR ALL OF THE
COMPANY’S STOCKHOLDERS. STOCKHOLDERS MAY ALSO DIRECT A REQUEST TO
F9’S PROXY SOLICITOR, CAMPAIGN MANAGEMENT, 15 WEST 38TH STREET,
SUITE #747, NEW YORK, NY 10018 (STOCKHOLDERS CAN E-MAIL
INFO@CAMPAIGNMANAGEMENT.COM OR CALL TOLL-FREE: (855) 264-1527.
Information about the Participants and a description of their
direct or indirect interests by security holdings or otherwise can
be found in the Definitive Proxy Statement.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240620325755/en/
INVESTOR AND MEDIA CONTACTS Investors: Michael Fein
Campaign Management (212) 632-8422 michael.fein@campaign-mgmt.com
Media: Jonathan Gasthalter/Nathaniel Garnick Gasthalter & Co.
(212) 257-4170 F9Investments@gasthalter.com
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