F9 Investments Comments on Bombshell LL Flooring Disclosure

Rhea-AI Summary

F9 Investments, the largest shareholder of LL Flooring with an 8.85% stake, issued a statement on LL Flooring's dire financial situation. LL Flooring's recent filing revealed that it might not meet its credit agreement's liquidity requirements by Q3 2024, earlier than previously expected. F9 criticizes the current Board for mismanagement and urges shareholders to vote for F9's nominees: Tom Sullivan, Jason Delves, and Jill Witter. F9 claims these nominees can restore value and stabilize the company.

Positive

• None.

Negative

• LL Flooring may not meet its credit agreement's liquidity requirements by Q3 2024.
• The company is at risk of running out of cash and going out of business.
• Current Board's management is criticized for burning through cash and mismanagement.
• F9 suggests that the company's financial situation is worse than previously disclosed.

Insights

Financial Analyst

LL Flooring is facing a dire liquidity crisis, which is projected to breach the Credit Agreement terms as soon as the third quarter of 2024. This situation raises significant concerns over the company's financial stability and could severely impact its share price. For retail investors, the immediate risk is the potential for bankruptcy, which would likely decimate the stock value.

This development contradicts the company's previous assurances of a strategic plan aimed at long-term growth. The rapid deterioration of liquidity highlights ongoing issues with cash flow management and operational inefficiencies that must be addressed urgently. Investors should be cautious about the stock's short-term outlook, given the elevated risk of insolvency.

In the longer term, if F9’s proposed director nominees are successful, their industry expertise might bring a higher chance of turning around the company. However, this is speculative and involves significant uncertainty. To better understand the full scope of the risk, investors should closely monitor upcoming earnings reports and any additional disclosures regarding liquidity and financing arrangements.

Market Research Analyst

The announcement from F9 Investments about LL Flooring's liquidity crisis sheds light on operational inefficiencies and strategic missteps within the company. For retail investors, the key takeaway is the importance of vigilance in monitoring corporate governance and board decisions, especially in times of financial distress.

The proposed changes in the board, including the nomination of industry veterans, are aimed at stabilizing the company and restoring investor confidence. However, these changes are fraught with uncertainty and depend heavily on the ability of the new board to implement effective turnaround strategies.

The flooring industry itself is highly competitive and companies must maintain strong liquidity to manage supply chain costs, inventory and operational expenses. LL Flooring’s current predicament underscores the importance of liquidity management in maintaining competitive positioning. Retail investors should weigh the potential benefits of new leadership against the risks of ongoing instability.

LL Flooring’s Projected Liquidity Will Not Be Sufficient to Maintain Compliance with its Credit Agreement as Soon as September, Months Earlier than Previously Revealed

LL Flooring is at Immediate Risk of Running out of Cash and Going Out of Business, Further Reinforcing the Urgent Need for Change at the Board Level

F9’s Three Highly Qualified Nominees – Tom D. Sullivan, Jason Delves, and Jill Witter – Are the Right Individuals to Restore Long-Term Value to LL Flooring

F9 Urges Shareholders to Vote the GOLD Proxy Card “FOR” its Three Highly Qualified Director Nominees and “WITHHOLD” on All LL Flooring Nominees to Protect the Value of Their Investment

FRANKLIN, Tenn.--(BUSINESS WIRE)-- 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 commented on the Company’s shocking June 28, 2024 filing which revealed that, under the terms of the Company’s asset-backed revolving facility credit agreement (the “Credit Agreement”), the Company now believes that its projected levels of liquidity may not be sufficient to meet the minimum excess availability threshold in the third quarter of 2024.¹

In a previous filing on May 8, 2024, the Company had announced its belief that its projected levels of liquidity would be insufficient to maintain compliance with the Credit Agreement in the fourth quarter of 2024.²

Tom Sullivan, Chairman of F9, commented, “LL Flooring’s shocking disclosure that its projected liquidity will not be sufficient to maintain compliance with its credit agreement months earlier than previously revealed only further hammers home that urgent change is needed in LL Flooring’s boardroom. It is preposterous for the Board to announce this dire development mere days after communicating to shareholders its strategic plan is working and positions the Company for long-term growth. This Board is burning through cash at a rate that could bankrupt the Company in the third quarter, yet it continues to waste valuable shareholder resources paying high-priced advisors to wage a proxy contest.”

“It should be clear that this Board cannot be left at the helm of LL Flooring if shareholders wish to protect the remaining value of their investments in the Company. F9’s three highly qualified director nominees bring the relevant flooring industry expertise, track records of value creation, shareholder alignment, and actionable plan necessary to stabilize LL Flooring’s business and put it on a path to long-term value creation for the benefit of all shareholders.”

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.

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.

¹ LL Flooring Holdings, Inc. – Form 8-K, 28 June, 2024, accessible at: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001396033/000119312524171336/d860512d8k.htm
² LL Flooring Holdings, Inc. – Form 10-Q, 8 May 2024, accessible at: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001396033/000095017024055042/ll-20240331.htm

View source version on businesswire.com: https://www.businesswire.com/news/home/20240628794742/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

Source: F9 Investments, LLC

FAQ

What did F9 Investments reveal about LL Flooring's liquidity situation?

F9 Investments stated that LL Flooring's projected liquidity might not be sufficient to meet its credit agreement's requirements by Q3 2024.

Why is LL Flooring at immediate risk according to F9 Investments?

F9 Investments believes LL Flooring is at risk due to its projected liquidity shortfall, which could cause the company to run out of cash and potentially go out of business by Q3 2024.

Who are F9 Investments' nominees for the LL Flooring Board?

F9 Investments' nominees for the LL Flooring Board are Tom Sullivan, Jason Delves, and Jill Witter.

When did LL Flooring previously report its expected liquidity issues?

LL Flooring previously reported its expected liquidity issues in a filing on May 8, 2024, stating it would face problems by Q4 2024.

What is F9 Investments urging LL Flooring shareholders to do?

F9 Investments is urging LL Flooring shareholders to vote for their three director nominees using the GOLD proxy card and to withhold votes for the current Board's nominees.