Urgent Change is Needed at LL Flooring: F9 Investments Sends Open Letter to Shareholders
$LL
LL Flooring’s July 10th Annual Meeting is Your Last Chance to Hold LL Flooring’s Board Accountable for its Failures and Vote for Change to Protect Your Investment
All Three F9 Director Nominees Have Received Support from Leading Independent Proxy Advisory Firm Glass Lewis and Other Large LL Flooring Shareholders
F9’s Nominees Have the Critical Flooring Industry Expertise, Shareholder Alignment, and Strategic Plan Necessary to Help Restore LL Flooring’s Value
July 8, 2024
Dear Fellow LL Flooring Shareholders,
The situation at LL Flooring is dire, and time is running out for you to protect the value of your investment.
LL FLOORING’S STOCK PRICE IS AT ITS ALL-TIME LOW AND THE COMPANY IS CONSIDERING FILING FOR BANKRUPTCY ACCORDING TO PUBLISHED REPORTS1.
Yet rather than addressing the numerous critical issues facing the business head-on, LL Flooring’s Board continues to make poor and puzzling operational and financial decisions that are jeopardizing the future of the Company. Consider the following:
• On June 28, 2024, the Company disclosed that it believes it will not have sufficient liquidity to maintain compliance with its credit agreement as soon as this quarter.
• One day prior to the Company’s disclosure, Bloomberg reported that LL Flooring has retained AlixPartners, a financial services consultancy that recently advised Bed Bath & Beyond on its bankruptcy proceedings, to receive assistance with operations and explore ways to boost its cash reserves.
• In a May 8, 2024 filing, LL Flooring disclosed a “going concern” that its precarious financial condition raised substantial doubt regarding its ability to continue business operations for more than a year. During its first quarter 2024 earnings call that same day, the Company disclosed it has retained Houlihan Lokey Inc. to evaluate financing alternatives.
• The Board is currently seeking to enter into a sale-leaseback commitment for its primary asset – LL Flooring’s Sandston, Virginia distribution center – in a shortsighted and desperate effort to generate cash which will likely increase expenses and destroy value for shareholders in the long run.
• LL Flooring’s stock price continues to crater. The Company’s stock has fallen 85.4% since the start of 2024, dropped 97.3% over the past three years, and plummeted a whopping 99.4% under the Chair of the Board Nancy Taylor’s ineffective leadership. The stock closed at $0.56 per share on July 5, 2024.
• Despite this disturbing decline, since January 2023 LL Flooring’s Board has rejected a number of premium bids for the Company valued up to 14x LL Flooring’s current stock price. Since then, the Board’s disingenuous strategic review and sale process has seen falling bid prices, limited transparency, and an uneven playing field for bidders based on the Board’s insistence that bids it received “significantly undervalued” the Company.
The facts are clear: LL Flooring’s Board of Directors has presided over staggering value destruction for shareholders, significant operational losses, a sham sale process, and so-called strategic initiatives that have placed the Company at immediate risk of going out of business. It is simply delusional for this Board to expect shareholders to vote for the status quo and re-elect its incumbent directors – two of whom have sat on the Board for 10 and 18 years, respectively – after they have contributed to such extreme underperformance.
It should be clear to all shareholders that urgent change is needed in the LL Flooring boardroom in order to protect the value of your investment. Fortunately, there is an alternative path forward, even if you have previously withheld voting for the F9 nominees on either the GOLD or WHITE proxy card. You can still change your vote and support F9’s nominees by voting on either the GOLD or WHITE proxy card. Only your most recently dated proxy card will count as your vote.
1 Bloomberg News – “LL Flooring Mulls Bankruptcy Filing as Home Renovations Slow”, 3 July, 2024, available at: https://www.bloomberg.com/news/articles/2024-07-03/ll-flooring-mulls-bankruptcy-filing-as-home-renovations-sputter
F9’s three highly qualified director nominees Tom Sullivan, Jason Delves, and Jill Witter have the critical flooring industry expertise, shareholder alignment, and actionable plan necessary to restore LL Flooring’s value for the long term. F9’s nominees also bring substantial corporate governance experience, discipline and accountability, and long track records of value creation for businesses that will be valuable additions to LL Flooring’s Board. Indeed, last week Glass Lewis & Co. (“Glass Lewis”), a leading independent proxy advisory firm, published a report recognizing the oversight, rigor, and relevant experience F9’s nominees would add to the Board and recommended that shareholders support F9’s full slate at the Company’s upcoming Annual Meeting.
In its report, Glass Lewis concluded:
• “…we consider election of F9’s slate to represent the most compelling alternative available at what appears to be a fairly critical juncture for LL.”
• “We see little clear and measurable cause for shareholders to endorse the view that perpetuation of the incumbent board’s tack is likely to represent the most attractive route forward at this time.”
• “We believe the board carves out very little in the way of credible footing for its operational defense, which largely eschews recognition of the Company’s observably poor performance, valuation and competitive positioning.”
Further, independent proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) recently published a report recommending that shareholders elect F9 nominee Jason Delves to LL Flooring’s Board. In its report, ISS concluded:
• “It is clear that LL is in need of an urgent turnaround… a successful turnaround under the current management team and board is far from certain.”
• “LL’s prolonged TSR underperformance, significant operating challenges over the past two years, and the unsuccessful sale process thus far suggest that some level of change is warranted at the board level.”
LL Flooring’s Board has avoided accountability for too long and cannot be allowed to continue to drive this Company into the ground. Our nominees are committed to restoring LL Flooring to excellence, reviving its corporate culture, and repositioning the Company for profitability and growth over the long term for the benefit of all stakeholders.
NOW IS YOUR LAST CHANCE TO HOLD LL FLOORING’S BOARD ACCOUNTABLE FOR ITS FAILURES. WE URGE YOU TO VOTE FOR CHANGE TO PROTECT YOUR INVESTMENT BEFORE IT IS TOO LATE.
We thank you for your support.
Sincerely,
Tom Sullivan
Jason Delves
Jill Witter
Source:
https://www.sec.gov/Archives/edgar/data/1396033/000119312524176103/d854819ddfan14a.htm