On the first of February, Lumber Liquidators Holdings Inc. (NYSE: LL) agreed to pay a $10 million fine related to a violation of the Lacey Act prohibiting U.S. companies from importing timber products made from materials protected by another country’s laws. The stock price soared.
Monday, Lumber Liquidators received some really bad news. A second charge against the company is that some of its imported flooring contained high levels of formaldehyde, a carcinogen. On February 10, the Centers for Disease Control (CDC) said that exposure to the flooring posed a “low risk of cancer.” The agency has now reversed itself and the stock was hammered.
According to the CDC report:
Health risks of people who have the laminate flooring are being revised to reflect greater exposure to formaldehyde, which could cause eye, nose, and throat irritation for anyone. The estimated risk of cancer associated with exposure to the flooring increased. … The CDC/ATSDR indoor air model used an incorrect value for ceiling height. As a result, the health risks were calculated using airborne concentration estimates about 3 times lower than they should have been. … After correcting the measurement in the model, CDC/ATSDR is revising the possible health effects. The final results are not yet available, but are estimated to be closer to these:
- Exposure to the range of modeled levels of formaldehyde in indoor air could cause increased symptoms and other respiratory issues for people with asthma and COPD;
- Exposure to the lowest modeled levels of formaldehyde could result in eye, nose, and throat irritation for anyone; and
- The estimated risk of cancer is 6-30 cases per 100,000 people. Because of the very conservative (health protective) nature of the models used in this analysis, the calculated risk is likely lower than our modeled estimate.
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Lumber Liquidators’ stock traded down more than 16% at $11.88 in Monday’s premarket. The stock’s 52-week range is $10.53 to $69.99.
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