What: Shares of Lumber Liquidators Holdings Inc (NYSE:LL) fell by as much as 27% Wednesday after the company posted a surprise second-quarter loss and warned of potential claims against the company by a state regulator. 

So what: Quarterly revenue fell 5.8% year over year to $247.9 million, hurt by a 10% comparable-store sales decline, including a 7.6% drop in the number of customers invoiced, and a 2.4% decrease in each sale. That translated to a net loss of $20.3 million, or $0.75 per diluted share, compared to net income of $16.6 million, or $0.60 per share in the year-ago period.

Analysts, on average, were anticipating net income of $0.06 per share on higher revenue of $257.6 million.

Unsurprisingly, Lumber Liquidators blamed its weakness on the fallout of a negative 60 Minutes report in March, which alleged the company had sold products sourced from China containing illegally high levels of formaldehyde -- a known carcinogen. Since then, in addition to weighing on its results last quarter, the report has also led to the resignations of Lumber Liquidators' CEO and CFO.

Now what: To make matters worse, Lumber Liquidators also disclosed in its most recent quarterly report (see page 12) with the SEC that samples of its products obtained and tested by the California Air Resources Board exceeded the CARB limits for raw composite wood cores in both 2014 and in March 2015. And though Lumber Liquidators believes CARB is "continuing its work on the matter," it also suggested CARB "may assert a claim against the Company." Because no notice of violation has been issued and the investigation is ongoing, Lumber Liquidators currently can't estimate potential losses resulting from such a claim.

In the end, given the massive dose of uncertainty this adds to an already shaky situation, I'm personally content watching Lumber Liquidators' drama unfold from the sidelines.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Lumber Liquidators. The Motley Fool owns shares of Lumber Liquidators. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.