This letter contains information relating to the voting of shares which your company owns of Lumber Liquidators Holdings Inc.


April 16, 2019

Investment Stewardship,

 The Lumber Liquidators Value Committee is a coalition of value oriented shareholders with a sizable stake in Lumber Liquidators Holdings Inc. We have deep concerns about the direction of the company, as it has been unprofitable since 2014 and accumulated loses of over $200 million.

As a large shareholder of Lumber Liquidators, we urge your company to vote against several Lumber Liquidators proxy proposals to be tabled at the 2019 Lumber Liquidators Annual General Shareholder Meeting which we feel do not align with the best interests of shareholders.


Proposal 3 – To approve a non-binding advisory resolution approving the compensation of our named executive officers 

In 2018,  Lumber Liquidators CEO, Dennis Knowles received a 7.41% increase to his base salary for “merit.” Mr. Knowles also received equity grants valued at $1,250,000. His total compensation for the year was over $2.3 million. This hardly seems appropriate considering that Lumber Liquidators’ stock collapsed almost 70% in 2018 and the company lost over $54 million. In addition to already high Senior Management compensation packages, for 2019 the company has doubled the Target Bonus payout rate for the lowest level of performance (threshold level), thereby further rewarding and incentivizing mediocre performance. Effectively, this means that if Management is able to achieve an even lower target than 2018, they will earn twice the bonus.

We feel that considering the financial performance of the company, management compensation is too high and is not properly aligned with shareholder interests

We urge you to vote against the executive compensation plan (Proposal 3).


Proposal 4 – To approve an amendment and restatement of the Amended and Restated Lumber Liquidators Holdings, Inc. 2011 Equity Compensation Plan


The Lumber Liquidators Board of Directors proposes to increase the number of shares of common stock authorized for issuance by 1,750,000 in order to grant still higher equity-based compensation awards. The number of shares subject to equity awards (burn rate) has increased substantially due to the low stock price and management has been issuing increasingly higher levels of stock-based compensation. This is, and continues to be, highly dilutive to shareholders. Furthermore, while the Board states that high equity compensation is critical to “attract the experience and talent to further implement our strategy” shareholders have not actually seen a clear strategy presented by management and experience and talent is not only lacking at the company, but leaving (note the recent departure of the CFO).

We feel that considering the financial performance of the company, allowing the Board to issue a highly dilutive amount of new shares as part of an equity compensation plan is contrary to shareholder interests.

We urge you to vote against the amended equity compensation plan (Proposal 4)


Proposal 1 – To elect two directors, Terri Funk Graham and Famous P. Rhodes, to hold office until the 2022 Annual Meeting of Stockholders, until their successors are elected and qualified


Both Terri Funk Graham and Famous P. Rhodes are recent additions to the Lumber Liquidators board of directors. While they bring much needed “fresh blood” to the board, we feel that their experience is lacking. Lumber Liquidators is a company in need of a dramatic and urgent turnaround. New board members should have experience with business and financial strategy in order to guide the company toward a recovery.

Terri Funk Graham is a branding strategy consultant, with most of her experience being in marketing. Famous P. Rhodes, similarly has mostly marketing and customer relations experience.

In addition, both candidates currently serve on the Lumber Liquidators Compensation Committee where we feel they have been ineffective at aligning executive compensation with shareholder interests. Executive compensation appears excessive relative to performance and peers, and we believe the compensation committee has failed to addressed this issue

We urge you to vote against the election of the two directors, Terri Funk Graham and Famous P. Rhodes (Proposal 1)


At the moment, Lumber Liquidators shares trade at a similar price as the company’s IPO ($11) and shareholders have not seen any gain on their investment in 12 years. The Lumber Liquidators Value Committee believes that with a clear plan and effective leadership, Lumber Liquidators can become a great and prosperous corporation. We want to ensure that the interests of management and shareholders are well aligned so that shareholders can eventually see a return on their investment.


Yours truly,


Mario Rizzi

Portfolio Manager,

Rizzi Capital

Representing the Lumber Liquidators Value Committee

Letter: Letter to Funds and Institutional Holders