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As controversy simmers, Lumber Liquidators shares fall sharply

Lumber Liquidators (LL) shares slid Friday after rebounding earlier in the week, as the flooring company seeks to stem the damage from a "60 Minutes" report that found some of its products contain a cancer-causing chemical.

The retailer's stock price fell more than 14 percent, to $30.87, as of 2:57 p.m. ET. Lumber Liquidators shares are down 40 percent since the March 1 segment by CBS' "60 Minutes."

The report exposed high levels of formaldehyde in the glue the company uses in its laminated boards made in China. Those levels exceed standards set by the California Air Resources Board, also known as CARB.

Appearing on CNBC on Friday, Lumber Liquidators founder Tom Sullivan defended the company's products. "We have a good name, and we're certainly not going to jeopardize it by saving two or three cents on laminate flooring," he said.

Lumber Liquidators CEO makes surprising admission

Reiterating comments by Lumber Liquidators CEO Robert Lynch in a conference call with investors on Thursday, Sullivan also questioned the tests that revealed the excessive formaldehyde levels in some of its flooring.

"It's not real-world testing," he said of the method, which strips away the outer layers of the flooring and then tests the inner board to measure the level of formaldehyde. Sullivan said third parties have conducted "hundreds of test" on its products to ensure they comply with CARB.

In the investor call, Lynch admitted that CARB's preliminary tests had revealed high levels of formaldehyde before the "60 Minutes" broadcast. But the company maintains that removing the outer layers in flooring can release formaldehyde from resins and glue, while the high-heat process to create laminate flooring may also change the underlying core.

Lumber Liquidators says its sales fell 7.5 percent in the nine days following the "60 Minutes" broadcast, with executives saying the report is scaring away business. The company is offering free kits for customers to test air quality in rooms with its products, and will consider installing new flooring.

Sullivan told CNBC that, despite the controversy, the company is plowing ahead. "We show our flooring is safe, and then we will work on the business as we have for the last 20 years."

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