LL Flooring — Proxy Contest (June 2024)
37 slides from LL Flooring's proxy contest presentation, Jun 17, 2024
Slide 1: The Right Board to Oversee LL Flooring's Strategic Direction
The Right Board to Oversee LL Flooring's Strategic Direction June 17, 2024 1
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements in this presentation may include statements of the Company’s expectations, intentions, plans and beliefs t hat constitute “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995. These statements, which ma
Slide 3: Executive Summary
Executive Summary • Addressed product and sourcing issues and took steps to repair damage to Company’s credibility and reputation that resulted while Tom Sullivan served as Executive Chair and Interim CEO and had direct oversight over sourcing initiatives The Boardhas been taking and • Oversaw recru
Slide 4: Executive Summary (Continued)
Executive Summary (Continued) • If Tom Sullivan and his two other nominees are elected, would remove superior talent and critical skills from Board, and risk derailing progress being made in executing on Company’s strategy and completing strategic alternatives process Tom Sullivan and his nominees •
Slide 5: Tom Sullivan Oversaw ~86% Share Price Decline and ~$3 Billion Market Cap Loss
Market Capitalization (in Billions) While Executive Chair and Interim CEO, Tom Sullivan Oversaw ~86% Share Price Decline and ~$3 Billion Market Capitalization Loss LL Flooring (then Lumber Liquidators) NYSE Stock Price and Market Cap Sep 2013 – Dec 2016 September 26, 2013: Government served search w
Slide 6: Our Board is overseeing execution of a strategy to drive growth, improve profitability and maximize value
Our Board is overseeing execution of a strategy to drive growth, improve profitability and maximize value
Slide 7: LL Flooring is an Industry-Leading Flooring Retailer
LL Flooring is an Industry-Leading Flooring Retailer Business Overview Product offering complemented by best-in-class installation and delivery services • Over the last 30 years, LL Flooring (NYSE: LL) has grown into an industry-leading specialty retailer of an extensive assortment of both hard Inst
Slide 8: Scaled, Nationwide Retail Footprint with Opportunity to Expand
LL Flooring has a Scaled, Nationwide Retail Footprint with Opportunity to Expand Further Into Underpenetrated Markets (1) Strong National Footprint of Efficient + Profitable Stores… …Focused on Highly Attractive Population Centers 11 • 435 stores across 47 U.S. states and distribution through East C
Slide 9: Strong Senior Management Team is Driving Transformation
LL Flooring's Strong Senior Management Team is Driving Transformation and Positioning the Company for Success Charles Tyson Robert Madore Mission-driven culture drives best-in-class President & Chief Executive Officer Executive Vice President & Chief 5+ years at LL Flooring Financial Officer solutio
Slide 10: Navigating a Challenging Macroeconomic Backdrop
Mar '24 Jan '24 Nov '23 Sep '23 Jul '23 May '23 Mar '23 Jan '23 Nov '22 Sep '22 Jul '22 May '22 Mar '22 Jan '22 Nov '21 Sep '21 Jul '21 May '21 Mar '21 Jan '21 Nov '20 Sep '20 Jul '20 May '20 Mar '20 Jan '20 Nov '19 Sep '19 Jul '19 May '19 Mar '19 Jan '19 Nov '18 Sep '18 Jul '18 May '18 Mar '18 Jan
Slide 11: Positioning to Capitalize on Industry Tailwinds and Larger Market Opportunity
...And Positioning the Company to Capitalize on Anticipated Favorable Industry Tailwinds and Larger Market Opportunity as it Further Expands into Soft-Surface United States Flooring Market, 2019 — 2028 ($ in millions) (1) Slight decrease in 2023 Carpet & area rugs Hard-surf acing f looring $36 billi
Slide 12: Five Clear Strategic Initiatives
To Drive Growth, Profitability and Value Creation, the LL Flooring Board and Management Team Have Identified and Begun Executing on Five Clear Strategic Initiatives... 1 2 3 4 5 Continued investment and Driving customer engagement Driving product innovation Increasing Ensuring consistent expansion o
Slide 13: Positive Change is Underway: Progress as of Q1 2024
...And Positive Change is Underway Progress Achieved Across Key Initiatives as of Q1 2024 • Executed new Pro digital marketing campaign to emphasize the Company's strong value proposition, such as products stock warehouses in every store, one-on-one support expertise and everyday Pro pricing that po
Slide 14: Executing on Meaningful Value Creation Opportunities
The LL Flooring Management Team is Executing on Meaningful Value Creation Opportunities Revenue Margin Expansion Cost Reduction Opportunities Opportunities Opportunities Implementing a CRM system to Implemented strategic pricing Identified and is in the process of • • • drive engagement of new and i
Slide 15: Pursuing a Distribution Center Sale to Obtain Financial Runway
The Company is Pursuing a Distribution Center Sale to Obtain the Financial Runway to Execute on its Strategic Plan Proposed Purchase Timing Transaction Price Management is pursuing As of March 31, 2024, the The sale process is currently • • • a sale transaction for its current net book value of the
Slide 16: Board is running a robust exploration of strategic alternatives to maximize value
Our Board is running a robust exploration of strategic alternatives to maximize value
Slide 17: Board Has Engaged with Potential Bidders Since January 2022
The LL Flooring Board has Engaged with Potential Bidders Since the First Receipt of an Unsolicited Non-Binding Indication of Interest in January 2022 The Company received several unsolicited non-binding Indications of Interest with respect January 2022 – July 2023 to a potential acquisition of the C
Slide 18: Tom Sullivan Has Long Wanted to Acquire the Company
Tom Sullivan Has Long Wanted to Acquire the Company… And His Most Recent Actions Demonstrate His Continued Interest August 20, 2019: Mr. Sullivan and his wholly-owned company, F9, reported a 5.96% ownership stake in the Company after acquiring 1,346,240 shares for an average price of $7.88 per share
Slide 19: Thorough Exploration of Strategic Alternatives
The LL Flooring Board is Conducting a Thorough Exploration of Strategic Alternatives Robust Outreach and Process Outreach Over 25 >18,000 Signed to numerous Parties Board Meetings to discuss documents uploaded Confidentiality Agreements exploration of strategic to data room with numerous alternative
Slide 20: Exploring All Options to Maximize Value, including a Sale
The LL Flooring Board, with Assistance from J.P. Morgan and Skadden, is Exploring All Options to Maximize Value, including Considering a Sale of the Company • The Board has consistently been transparent • The Board instructed J.P. Morgan to make with the strategic review process and engaged outgoing
Slide 21: Committing Necessary Time and Care to Evaluate Alternatives
The LL Flooring Board is Committing the Necessary Time and Care to Constructively Evaluate Alternatives in a Complex Environment • The Board took action to explore whether and how • The Board continues to proceed with an open the non-binding bids it received could be mind and a clear focus on fairly
Slide 22: Experienced, Engaged Board is Actively Implementing Positive Change
Experienced, Engaged Board is Actively Implementing Positive Change
Slide 23: Board Does Not Need Additional Change at This Time
The LL Flooring Board Does Not Need Additional Change at This Time Best-in-Class Governance Profile 1 Highly Skilled and Independent Directors 2 Significant Recent Refreshment of the Board 3 Highly Engaged and Responsive Board and Management Team 4 Mr. Sullivan’s and Mr. Hammann’s* Nominees Do Not H
Slide 24: Board Possesses a Best-in-Class Governance Profile
The Board Possesses a Best-in-Class Governance Profile Independent Management ✓ Fully independent Board (except CEO)✓ Clawback provisions incorporated into Leadership Compensation Aligned incentive compensation ✓ Independent Chairperson and Oversight with Stockholder Interest ✓ Substantial portion o
Slide 25: Nominees Up for Re-Election Are Highly Qualified and Engaged
LL Flooring’s Nominees Up for Re-Election Are Highly Qualified and Engaged Douglas T. Moore Ashish Parmar Nancy M. Taylor Current Chief Information Officer Former Chairman and CEO of Current LL Flooring Independent of Standard Industries, Inc. CleanCore Solutions, Inc., 1847 Board Chair; Former CEO
Slide 26: Board Possesses Relevant Skills and Expertise
The LL Flooring Board Possesses Relevant Skills and Expertise Terri Funk Graham Famous P. Rhodes Joseph M. Nowicki Right mix of skills and experience to oversee Director since 2018 Director since 2017 Director since 2020 the execution of the Company’s five core • Previously served as Executive Vice
Slide 27: Election of Mr. Sullivan's nominees would remove superior talent and critical skills
Election of Mr. Sullivan’s nominees or Mr. Hammann* would remove superior talent and critical skills from our Board *To date, Mr. Hammann has not filed any proxy statement in connection with his nomination.
Slide 28: Nominating Committee Engaged Meaningfully and Fairly with Nominees
The Nominating and Corporate Governance Committee Engaged Meaningfully and Fairly with Mr. Sullivan’s and Mr. Hammann’s* Nominees • Nominating and Corporation Governance Committee interviewed Mr. Sullivan’s and Mr. Hammann’s* nominees to the Board Nominee Interviews • Based on the skills, qualificat
Slide 29: Candidates Do Not Offer Skills and Experiences the Board Needs
The LL Flooring Board Determined that Mr. Sullivan’s and Mr. Hammann’s* Candidates Do Not Offer Skills and Experiences the Board Needs at this Time Mr. Sullivan’s and Mr. Overall Lack of Critical Skills in Current Overall Lack of Public Board Experience Hammann’s* Nominees XX Business Issues Facing
Slide 30: Election of Mr. Sullivan and His Nominees is Not in Shareholders' Best Interest
The Election of Mr. Sullivan and His Nominees is Not in the Best Interest of LL Flooring Shareholders Jill Witter: Tom Sullivan: John Jason Delves: – No public company Board experience – No public company Board experience except for – No public company Board experience LL Flooring – No operational e
Slide 31: Does Tom Sullivan Have Shareholders' Best Interests in Mind?
Does Tom Sullivan Have LL Flooring's Shareholders Best Interests in Mind or is He More Focused on His Own Wallet? Mr. Sullivan opportunistically timed LL Flooring stock purchases in the open market and public commentary, benefitting his own personal portfolio and whipsawing other investors August 20
Slide 32: Should Someone with Tom Sullivan's Track Record be Trusted?
Market Capitalization (in Billions) Should Someone with Tom Sullivan’s Track Record be Trusted to Oversee LL Flooring’s Path Forward? LL Flooring NYSE Stock Price and Market Cap Sept 2013 – Dec 2016 Damages from Mr. Sullivan's Tenure with LL Flooring September 26, 2013: • Lacey Act violation as the
Slide 33: Reputational and Financial Damage Under Oversight of Tom Sullivan
Reputational and Financial Damage Under Oversight of Tom Sullivan In a note to clients, Piper Jaffray analysts wrote that the [“60 Minutes”] report was “Lumber Liquidators lied to investors and to the public about its compliance worse than the firm had prepared for. Piper said the report was worse t
Slide 34: Tom Sullivan's Ideas for LL Flooring are Outdated
Tom Sullivan’s Ideas for LL Flooring are Outdated and Fail to Recognize Current Industry Landscape Mr. Sullivan ideas would significantly limit the Company’s market opportunity and competitive positioning, Get back to the preventing the Company from capitalizing on the soft flooring and Pro market o
Slide 35: Board is Committed to Acting in the Best Interests of All Shareholders
The LL Flooring Board is Committed to Acting in the Best Interests of All of the Company's Shareholders The Board has taken decisive actions Vote today “FOR” ONLY LL Flooring’s three to position LL Flooring for success highly qualified and engaged director nominees The Board is conducting a on the u
Slide 36: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 2023 Operaring Loss, as reported (GAAP) (80,786) 1 Depreciation & Amortization 19,420 EBITDA (61,366) GROSS PROFIT/MARGIN ADJUSTMENT ITEMS: 2 Vinyl Charges 5,426 3 Antidumping and Countervailing Adjustments 10,809 Gross Profit/Margin Adjustment Items Subtotal 16,235 S
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