Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to         

Commission file number 001-38070


Floor & Decor Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware

 

27‑3730271

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

2233 Lake Park Drive

 

 

Smyrna, Georgia

 

30080

(Address of principal executive offices)

 

(Zip Code)

 

 

 

(404) 471‑1634

 

Not Applicable

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year,

if changed since last report)

 


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

Class

 

Outstanding at October 30, 2018

Class A common stock, $0.001 par value

 

97,328,165

 

 

 

 

 

 


 

Table of Contents

Table of Contents

 

 

 

 

 

 

 

Page

Part I – Financial Information 

3

 

Item 1.

Financial Statements

3

 

 

Condensed Consolidated Balance Sheets

3

 

 

Condensed Consolidated Statements of Income

4

 

 

Condensed Consolidated Statements of Comprehensive Income

5

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

Forward-Looking Statements

16

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

 

Item 4.

Controls and Procedures

27

Part II – Other Information 

28

 

Item 1.

Legal Proceedings

28

 

Item 1A.

Risk Factors

28

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

 

Item 3.

Defaults Upon Senior Securities

28

 

Item 4.

Mine Safety Disclosures

29

 

Item 5.

Other Information

29

 

Item 6.

Exhibits

29

 

 

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

Floor & Decor Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

(Unaudited)

 

 

 

 

 

 

 

 

    

As of

    

As of

 

 

September 27,

 

December 28,

 

 

2018

 

2017

Assets

 

 

  

 

 

  

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

534

 

$

556

Income taxes receivable

 

 

10,233

 

 

12,472

Receivables, net

 

 

55,668

 

 

54,041

Inventories, net

 

 

403,772

 

 

427,950

Prepaid expenses and other current assets

 

 

16,553

 

 

8,193

Total current assets

 

 

486,760

 

 

503,212

Fixed assets, net

 

 

300,279

 

 

220,952

Intangible assets, net

 

 

109,338

 

 

109,362

Goodwill

 

 

227,447

 

 

227,447

Other assets

 

 

8,043

 

 

7,019

Total long-term assets

 

 

645,107

 

 

564,780

Total assets

 

$

1,131,867

 

$

1,067,992

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of term loans

 

$

3,500

 

$

3,500

Trade accounts payable

 

 

237,785

 

 

258,730

Accrued expenses and other current liabilities

 

 

77,826

 

 

74,547

Deferred revenue

 

 

5,047

 

 

22,523

Total current liabilities

 

 

324,158

 

 

359,300

Term loans

 

 

142,516

 

 

144,562

Revolving line of credit

 

 

 —

 

 

41,000

Deferred rent

 

 

32,835

 

 

25,570

Deferred income tax liabilities, net

 

 

30,528

 

 

27,218

Tenant improvement allowances

 

 

35,476

 

 

26,779

Other liabilities

 

 

2,678

 

 

703

Total long-term liabilities

 

 

244,033

 

 

265,832

Total liabilities

 

 

568,191

 

 

625,132

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Capital stock:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at September 27, 2018 and December 28, 2017

 

 

 —

 

 

 —

Common stock Class A, $0.001 par value; 450,000,000 shares authorized; 97,326,534 shares issued and outstanding at September 27, 2018 and 95,509,179 issued and outstanding at December 28, 2017

 

 

97

 

 

96

Common stock Class B, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at September 27, 2018 and 0 shares issued and outstanding at December 28, 2017

 

 

 —

 

 

 —

Common stock Class C, $0.001 par value; 30,000,000 shares authorized; 0 shares issued and outstanding at September 27, 2018 and 0 shares issued and outstanding at December 28, 2017

 

 

 —

 

 

 —

Additional paid-in capital

 

 

337,327

 

 

323,419

Accumulated other comprehensive income (loss), net

 

 

591

 

 

(205)

Retained earnings

 

 

225,661

 

 

119,550

Total stockholders’ equity

 

 

563,676

 

 

442,860

Total liabilities and stockholders’ equity

 

$

1,131,867

 

$

1,067,992

 

See accompanying notes to condensed consolidated financial statements.

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Floor & Decor Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(In Thousands, Except Per Share Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

    

Thirty-nine Weeks Ended

 

 

September 27,

 

September 28,

 

September 27,

 

September 28,

 

 

2018

    

2017

 

2018

    

2017

Net sales

 

$

435,882

 

$

343,923

 

$

1,273,109

 

$

995,266

Cost of sales

 

 

257,656

 

 

201,432

 

 

751,859

 

 

585,076

Gross profit

 

 

178,226

 

 

142,491

 

 

521,250

 

 

410,190

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and store operating

 

 

109,182

 

 

85,023

 

 

320,375

 

 

251,424

General and administrative

 

 

26,477

 

 

22,172

 

 

74,995

 

 

59,571

Pre-opening

 

 

8,330

 

 

6,700

 

 

17,892

 

 

13,825

Total operating expenses

 

 

143,989

 

 

113,895

 

 

413,262

 

 

324,820

Operating income

 

 

34,237

 

 

28,596

 

 

107,988

 

 

85,370

Interest expense

 

 

2,171

 

 

2,610

 

 

6,100

 

 

11,377

Loss on early extinguishment of debt

 

 

 —

 

 

 —

 

 

 —

 

 

5,442

Income before income taxes

 

 

32,066

 

 

25,986

 

 

101,888

 

 

68,551

Provision for income taxes

 

 

5,498

 

 

2,731

 

 

3,603

 

 

13,739

Net income

 

$

26,568

 

$

23,255

 

$

98,285

 

$

54,812

Basic earnings per share

 

$

0.27

 

$

0.25

 

$

1.02

 

$

0.61

Diluted earnings per share

 

$

0.25

 

$

0.22

 

$

0.94

 

$

0.56

 

See accompanying notes to condensed consolidated financial statements.

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Floor & Decor Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

    

Thirty-nine Weeks Ended

 

 

September 27,

 

September 28,

 

September 27,

 

September 28,

 

 

2018

 

2017

 

2018

 

2017

Net income

 

$

26,568

 

$

23,255

 

$

98,285

 

$

54,812

Other comprehensive income (loss) —change in fair value of hedge instruments, net of tax

 

 

131

 

 

(121)

 

 

796

 

 

(887)

Total comprehensive income

 

$

26,699

 

$

23,134

 

$

99,081

 

$

53,925

 

See accompanying notes to condensed consolidated financial statements.

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Floor & Decor Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 

 

    

Thirty-nine Weeks Ended

 

 

September 27,

 

September 28,

 

 

2018

 

2017

Operating activities

 

 

  

 

 

  

Net income

 

$

98,285

 

$

54,812

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

37,043

 

 

27,637

Non-cash loss on early extinguishment of debt

 

 

 —

 

 

5,442

Amortization of tenant improvement allowances

 

 

(3,277)

 

 

(2,366)

Deferred income taxes

 

 

2,605

 

 

9,575

Interest cap derivative contracts

 

 

(878)

 

 

 —

Stock based compensation expense

 

 

4,611

 

 

3,553

Changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables, net

 

 

(1,627)

 

 

(14,082)

Inventories, net

 

 

13,685

 

 

(101,918)

Other assets

 

 

(7,848)

 

 

(1,590)

Trade accounts payable

 

 

(20,945)

 

 

90,780

Accrued expenses

 

 

(2,352)

 

 

(3,097)

Income taxes

 

 

312

 

 

(9,767)

Deferred revenue

 

 

2,806

 

 

11,145

Deferred rent

 

 

7,340

 

 

7,778

Tenant improvement allowances

 

 

11,974

 

 

4,878

Other

 

 

1,965

 

 

83

Net cash provided by operating activities

 

 

143,699

 

 

82,863

Investing activities

 

 

  

 

 

  

Purchases of fixed assets

 

 

(109,395)

 

 

(69,639)

Net cash used in investing activities

 

 

(109,395)

 

 

(69,639)

Financing activities

 

 

  

 

 

  

Borrowings on revolving line of credit

 

 

204,050

 

 

175,300

Payments on revolving line of credit

 

 

(245,050)

 

 

(187,200)

Payments on term loans

 

 

(2,625)

 

 

(196,625)

Net proceeds from initial public offering

 

 

 —

 

 

192,083

Proceeds from exercise of stock options

 

 

9,299

 

 

4,327

Debt issuance costs

 

 

 —

 

 

(993)

Net cash used in financing activities

 

 

(34,326)

 

 

(13,108)

Net (decrease) increase in cash and cash equivalents

 

 

(22)

 

 

116

Cash and cash equivalents, beginning of the period

 

 

556

 

 

451

Cash and cash equivalents, end of the period

 

$

534

 

$

567

Supplemental disclosures of cash flow information

 

 

 

 

 

  

Cash paid for interest

 

$

5,732

 

$

13,742

Cash paid for income taxes

 

$

722

 

$

13,942

Fixed assets accrued at the end of the period

 

$

14,500

 

$

10,350

Fixed assets acquired as part of lease - paid for by lessor

 

$

 —

 

$

1,786

 

See accompanying notes to condensed consolidated financial statements.

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Floor & Decor Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 27, 2018

1. Summary of Significant Accounting Policies

Nature of Business

Floor & Decor Holdings, Inc., together with its subsidiaries (the “Company,” “we,” “our” or “us”) is a highly differentiated, rapidly growing specialty retailer of hard surface flooring and related accessories. We offer a broad in stock assortment of tile, wood, laminate and natural stone flooring along with decorative and installation accessories at everyday low prices. Our stores appeal to a variety of customers, including professional installers and commercial businesses (“Pro”), Do It Yourself customers (“DIY”) and customers who buy the products for professional installation (“Buy it Yourself” or “BIY”). We operate within one reportable segment.

As of September 27, 2018, the Company, through its wholly owned subsidiary, Floor and Decor Outlets of America, Inc. (“F&D”), operates 95 warehouse-format stores, which average 75,000 square feet, and one small-format standalone design center in 26 states, as well as three distribution centers and an e-commerce site, FloorandDecor.com.

Fiscal Year

The Company’s fiscal year is the 52- or 53-week period ending on the Thursday on or preceding December 31st. Fiscal years ended December 27, 2018 (“fiscal 2018”) and December 28, 2017 (“fiscal 2017”) include 52 weeks. When a 53-week fiscal year occurs, we report the additional week at the end of the fiscal fourth quarter. 52-week fiscal years consist of thirteen-week periods in the first, second, third and fourth quarters of the fiscal year.

Basis of Presentation 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. The Condensed Consolidated Balance Sheet as of December 28, 2017 has been derived from the audited Consolidated Balance Sheet for the fiscal year then ended. The interim condensed consolidated financial statements should be read together with the audited consolidated financial statements and related footnote disclosures included in the Company’s Annual Report on Form 10-K for fiscal 2017, filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2018 (the “Annual Report”). Unless indicated otherwise, the information in this quarterly report on Form 10-Q (the “Quarterly Report”) has been adjusted to give effect to a 321.820-for-one stock split of the Company’s outstanding common stock, which was approved by the Company’s board of directors and shareholders on April 13, 2017 and effected on April 24, 2017. Certain prior year amounts have been reclassified in the consolidated financial statements to conform to the current year presentation.

Management believes the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments considered necessary for a fair statement of results for the interim periods presented.

Results of operations for the thirteen and thirty-nine weeks ended September 27, 2018 and September 28, 2017 are not necessarily indicative of the results to be expected for the full year.

Revenue Recognition

We recognize revenue and the related cost of sales when we satisfy the performance obligations in contracts with our customers. Our performance obligations for our retail store sales as well as for orders placed through our website and shipped to our customers are satisfied at the point-of-sale, which is the point at which the customer obtains control of the inventory as described under Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers” (Topic 606). Shipping and handling activities are performed after the customer obtains control of the goods and are accounted for as activities to fulfill the promise to transfer goods, rather than a separate performance

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obligation as outlined within Topic 606. Payment is due from the customer immediately at the point-of-sale for both retail store sales and website sales. The nature of the goods offered include hard surface flooring and related accessories. We do not perform installation services, and we offer free design services in-store. The transaction price recognized in revenues represents the selling price of the products offered. Sales taxes collected are not recognized as revenue as these amounts are ultimately remitted to the appropriate taxing authorities.

Our customers have the right to return the goods sold to them within a reasonable period, typically ninety days. The right of return is an element of variable consideration as defined within Topic 606. We reserve for future returns of previously sold goods based on historical experience and various other assumptions that we believe to be reasonable. This reserve reduces sales and cost of sales as well as establishes a return asset and refund liability as defined with ASC 606. For the period ended September 27, 2018, the return asset is included within Prepaid expenses and other current assets and the refund liability is included within Accrued expenses and other current liabilities, each respectively on the Condensed Consolidated Balance Sheets. We adopted the standard using the modified retrospective transition method within ASC 606; therefore, we accounted for the return asset and all provisions of ASC 606 prospectively. The return asset is included in Inventories, net on the December 28, 2017 Condensed Consolidated Balance Sheets. The refund liability under ASC 605 and ASC 606 is included within Accrued expenses and other current liabilities. Merchandise exchanges of similar product and price are not considered merchandise returns and, therefore, are excluded when calculating the sales returns reserve.

Gift Cards and Merchandise Credits

We sell gift cards to our customers in our stores and through our website and issue merchandise credits in our stores. We account for the programs by recognizing a liability at the time the gift card is sold or the merchandise credit is issued. The liability is relieved and revenue is recognized upon redemption. Additionally, we recognize breakage income in proportion to the pattern of rights exercised by the customer when we expect to be entitled to breakage. Net sales related to the estimated breakage are included in net sales in the Condensed Consolidated Statements of Income. We have an agreement with an unrelated third-party who is the issuer of our gift cards and also assumes the liability for unredeemed gift cards. We are not subject to claims under unclaimed property statutes, as the agreement effectively transfers the ownership of such unredeemed gift cards and the related future escheatment liability, if any, to the third-party. Accordingly, in the thirty-nine weeks ended September 27, 2018 and September 28, 2017, gift card breakage income of $1,340 thousand and $568 thousand, respectively was recognized in net sales in the Condensed Consolidated Statements of Income for such unredeemed gift cards.

Accounting for Income Taxes on GILTI

The Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred. However, we do not expect to incur tax for the period ending December 27, 2018.

There have been no other additional updates to our Significant Accounting Policies since the Annual Report. For information regarding our Significant Accounting Policies and Estimates, see the “Summary of Significant Accounting Policies” section of “Item 8. Financial Statements and Supplementary Data” of our Annual Report.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases (Topic 842)." ASU No. 2016-02 requires that lessees recognize lease assets and lease liabilities for all leases with greater than 12 month terms on the balance sheet. The guidance also requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. This new guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. We will adopt the ASU on December 28, 2018, the first day of our fiscal year 2019, using the modified retrospective approach We will utilize a new lease accounting software to facilitate implementation. We are currently testing the software and are in the process of identifying any changes to our business processes and controls to support adoption of the new standard. We plan to elect

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the package of practical expedients upon transition that will retain the lease classification and initial direct costs for any leases that exist prior to adoption of the standard. Management is progressing with the implementation, but we are still evaluating the impact that ASU No. 2016-02 will have on our Consolidated Financial Statements. We currently believe that when implemented, the new standard will have a material impact on our Consolidated Balance Sheet, but we do not believe adoption of this standard will have a material impact on our Consolidated Statements of Income or Statements of Cash Flows.

There have been no other updates to Recently Issued Accounting Pronouncements since the Annual Report. For information regarding Recently Issued Accounting Pronouncements, see the “Summary of Significant Accounting Policies” section of “Item 8. Financial Statements and Supplementary Data” of our Annual Report.

Recently Adopted Accounting Pronouncements

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." This standard update requires an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs. ASU No. 2016-16 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied using a modified retrospective approach. The adoption of ASU No. 2016-16 in the first quarter of fiscal 2018 did not have a material impact on the Company's Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." The standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied using a retrospective approach. The adoption of ASU No. 2016-15 in the first quarter of fiscal 2018 did not have a material impact on the Company's Consolidated Statements of Cash Flows.

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers." ASU No. 2014-09 provides new guidance related to the core principle that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services provided. We adopted this standard using the modified retrospective approach in the first quarter of fiscal 2018, effective December 29, 2017. Under the new guidance, we recognize revenue at the time the customer obtains control of the inventory. The cumulative adjustment upon adoption primarily resulted in a reduction of deferred revenue and related inventories and an increase to retained earnings. The adoption of ASU No. 2014-09 did not have a material impact to the Company’s Consolidated Financial Statements.

 

2. Revenues

Adoption of ASC Topic 606, “Revenue from Contracts with Customers”

On December 29, 2017, we adopted Topic 606 using the modified retrospective method applied to those contracts that were not completed as of December 29, 2017. Results for reporting periods beginning after December 29, 2017 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605, Revenue Recognition (Topic 605).

We recorded a net increase to opening retained earnings of $7.8 million, net of tax, as of December 29, 2017 due to the cumulative impact of adopting Topic 606, with the impact primarily related to transactions for which we allow customers to store their merchandise at our retail stores for final delivery at a later date. The cumulative adjustment primarily resulted in a reduction of deferred revenue and related inventories and an increase to retained earnings. The impact to revenues as a result of applying Topic 606 was immaterial for the thirteen and thirty-nine weeks ended September 27, 2018.

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Deferred Revenue

Under Topic 605 we recognized revenue for certain transactions for which we allow customers to store their merchandise at our retail stores for final delivery at a later date when both collection or reasonable assurance of collection of payment and final delivery of the product had occurred. Under Topic 605, the amount of revenue for which final delivery of the product had not occurred for these transactions was reflected in the Deferred revenue caption on the Consolidated Balance Sheet as of December 28, 2017. Under Topic 606, we evaluated the bill-and-hold criteria, and now recognize revenue at the point-of-sale, when the customer obtains control of the inventory. Amounts in Deferred revenue at period-end reflect orders for which the inventory is not currently ready for physical transfer to the customer.

Gift Card Breakage

Under Topic 605, gift card breakage income was recognized based upon historical redemption patterns. Under Topic 606, gift card breakage income is recognized in proportion to the pattern of rights exercised by the customer when we expect to be entitled to breakage. The timing and amounts of revenue related to gift card breakage income in the cumulative transition adjustment, and for the thirty-nine weeks ended September 27, 2018 were immaterial to the Consolidated Financial Statements.

Disaggregated Revenue

The following table presents the net sales of each major product category (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

Thirteen Weeks Ended

 

 

 

September 27, 2018

 

September 28, 2017

 

 

    

 

 

    

% of

    

 

 

    

% of

    

Product Category

 

Net Sales

 

Net Sales

 

Net Sales

 

Net Sales

 

Tile

 

$

119,988

 

28

%  

$

103,209

 

30

%  

Decorative Accessories

 

 

82,814

 

19

 

 

57,729

 

17

 

Laminate / Luxury Vinyl Plank

 

 

83,667

 

19

 

 

52,758

 

15

 

Accessories (Installation Materials and Tools)

 

 

69,412

 

16

 

 

59,314

 

17

 

Wood

 

 

49,005

 

11

 

 

42,488

 

12

 

Natural Stone

 

 

28,025

 

 6

 

 

25,327

 

 8

 

Delivery and Other

 

 

2,971

 

 1

 

 

3,098

 

 1

 

Total

 

$

435,882

 

100

%  

$

343,923

 

100

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirty-nine Weeks Ended

 

Thirty-nine Weeks Ended

 

 

 

September 27, 2018

 

September 28, 2017

 

 

    

 

 

    

% of

    

 

 

    

% of

    

Product Category

 

Net Sales

 

Net Sales

 

Net Sales

 

Net Sales

 

Tile

 

$

360,798

 

28

%  

$

299,685

 

30

%  

Decorative Accessories

 

 

244,279

 

19

 

 

183,004

 

18

 

Laminate / Luxury Vinyl Plank

 

 

227,995

 

18

 

 

146,240

 

15

 

Accessories (Installation Materials and Tools)

 

 

201,194

 

16

 

 

162,033

 

16

 

Wood

 

 

144,401

 

11

 

 

121,270

 

12

 

Natural Stone

 

 

85,564

 

 7

 

 

76,754

 

 8

 

Delivery and Other

 

 

8,878

 

 1

 

 

6,280

 

 1

 

Total

 

$

1,273,109

 

100

%  

$

995,266

 

100

%  

 

 

3. Fair Value Measurements

We estimate fair values in accordance with ASC 820, Fair Value Measurement. ASC 820 provides a framework for measuring fair value and expands disclosures required about fair value measurements. ASC 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Additionally, ASC 820 defines levels within a hierarchy based upon observable and non-observable inputs.

·

Level 1—Inputs that are quoted prices in active markets for identical assets or liabilities

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·

Level 2—Inputs other than quoted prices in active markets for assets or liabilities that are either directly or indirectly observable

·

Level 3—Inputs that are non‑observable that reflect the reporting entity’s own assumptions

Assets (Liabilities) Measured at Fair Value on a Recurring Basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

 

 

 

 

 

 

 

 

September 27,

 

 

 

 

 

 

 

 

 

(in thousands)

 

2018

    

Level 1

    

Level 2

    

Level 3

Designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap (cash flow hedge)

 

$

1,670

 

$

 

$

1,670

 

$

Not designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

$

1,670

 

$

 

$

1,670

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

 

 

 

 

 

 

 

 

December 28,

 

 

 

 

 

 

 

 

 

(in thousands)

    

2017

    

Level 1

    

Level 2

    

Level 3

Designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap (cash flow hedge)

 

$

710

 

$

 

$

710

 

$

Not designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

$

710

 

$

 

$

710

 

$

 

Our derivative contracts are negotiated with counterparties without going through a public exchange. Accordingly, our fair value assessments give consideration to the risk of counterparty default (as well as our own credit risk). Our interest rate derivatives consist of interest rate cap contracts and are valued primarily based on data readily observable in public markets.

4. Derivatives and Risk Management

Changes in interest rates impact our results of operations. In an effort to manage our exposure to this risk, we enter into derivative contracts and may adjust our derivative portfolio as market conditions change.

Designated as Cash Flow Hedge

For derivative contracts designated as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of Accumulated Other Comprehensive Income (“AOCI”) and reclassified into earnings in the same period in which the hedged transaction affects earnings. The effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in earnings.

Not Designated as Accounting Hedge

For derivative contracts de-designated as accounting hedges, the change in the fair value is reflected through earnings. These changes in fair value are mark-to-market adjustments ("MTM adjustments"). MTM adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. The AOCI related to the interest rate cap prior to the de-designation is being amortized over the remaining maturity period.

Interest Rate Risk

Our exposure to market risk from adverse changes in interest rates is primarily associated with our long‑term debt obligations, which carry variable interest rates. Market risk associated with our variable interest rate long‑term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.

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In an effort to manage our exposure to the risk associated with our variable interest rate long‑term debt, we periodically enter into interest rate derivative contracts. We designate interest rate derivative contracts used to convert the interest rate exposure on a portion of our debt portfolio from a floating rate to a capped rate as cash flow hedges.

Hedge Position as of September 27, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Final Maturity

 

Other

 

AOCI, Net

(in thousands)

    

Notional Balance

    

Date

    

Assets

    

of Tax

Designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap (cash flow hedge)

 

$

102,500

 

U.S. dollars

 

December 2021

 

$

1,670

 

$

599

Not designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

$

102,500

 

U.S. dollars

 

December 2021

 

$

1,670

 

$

(8)

 

Hedge Position as of December 28, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Final Maturity

 

Other

 

AOCI, Net

(in thousands)

    

Notional Balance

    

Date

    

Assets

    

of Tax

Designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap (cash flow hedge)

 

$

102,500

 

U.S. dollars

 

December 2021

 

$

710

 

$

(133)

Not designated as hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

$

102,500

 

U.S. dollars

 

December 2021

 

$

710

 

$

(72)

 

Designated Hedge Gains (Losses)

Gains (losses) related to our designated hedge contracts are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Portion Reclassified

 

 

Effective Portion Recognized in

 

 

From AOCI to Earnings

 

 

Other Comprehensive Income (Loss)

 

 

Thirteen Weeks Ended

 

 

September 27,

 

September 28,

 

September 27,

 

September 28,

(in thousands)

    

2018

    

2017

    

2018

    

2017

Interest rate cap (cash flow hedge)

 

$

 —

 

$

 

$

131

 

$

(121)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Portion Reclassified

 

Effective Portion Recognized in

 

 

From AOCI to Earnings

 

Other Comprehensive Income (Loss)

 

 

Thirty-nine Weeks Ended

 

 

September 27,

 

September 28,

 

September 27,

 

September 28,

(in thousands)

    

2018

    

2017

    

2018

    

2017

Interest rate cap (cash flow hedge)

 

$

 —

 

$

 

$

796

 

$

(887)

 

Credit Risk

To manage credit risk associated with our interest rate hedging program, we select counterparties based on their credit ratings and limit our exposure to any one counterparty.

The counterparties to our derivative contracts are large financial institutions with investment grade credit ratings. To manage our credit risk related to our derivative financial instruments, we periodically monitor the credit risk of our counterparties, limit our exposure in the aggregate and to any single counterparty, and adjust our hedging position, as appropriate. The impact of credit risk, as well as the ability of each party to fulfill its obligations under our derivative financial instruments, is considered in determining the fair value of the contracts. Credit risk has not had a significant effect on the fair value of our derivative contracts. We do not have any credit risk‑related contingent features or collateral requirements with our derivative financial instruments.

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5. Debt

Fair Value of Debt

Market risk associated with our fixed and variable rate long‑term debt relates to the potential change in fair value and negative impact to future earnings, respectively, from a change in interest rates. The aggregate fair value of debt is based primarily on our estimates of interest rates, maturities, credit risk, and underlying collateral and is classified as Level 3 within the fair value hierarchy. At September 27, 2018 and December 28, 2017, the carrying amounts and fair values of our debt were as follows:

 

 

 

 

 

 

 

 

    

September 27,

    

December 28,

(in thousands)

 

2018

 

2017

Total debt at par value

 

$

149,875

 

$

193,500

Less: unamortized discount and debt issuance costs

 

 

3,859

 

 

4,438

Net carrying amount

 

$

146,016

 

$

189,062

Fair value

 

$

149,875

 

$

193,881

 

 

6. Income Taxes

Income Taxes

Our effective income tax rates were 3.5% and 20.0% for the thirty-nine weeks ended September 27, 2018 and September 28, 2017, respectively. The lower effective rate for the thirty-nine weeks ended September 27, 2018 was primarily due to tax reform passed in December 2017 and the recognition of excess tax benefits related to stock options exercised.

Provisional amounts

In connection with the Tax Cuts and Jobs Act (the “Act”) passed in December 2017, we remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% for federal income tax purposes and 3.6% currently estimated for state income tax purposes. We recorded a provisional tax benefit of $17.9 million as of December 28, 2017 related to the remeasurement of certain deferred tax balances, and we have increased this provisional tax benefit by an additional $0.6 million during the thirty-nine weeks ended September 27, 2018. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

 

7. Commitments and Contingencies

Lease Commitments

We lease our corporate office, retail locations and distribution centers through F&D, under long‑term operating lease agreements that expire in various years through 2038. Additionally, certain equipment is leased under short‑term operating leases.

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Certain lease agreements include escalating rents over the lease terms. We expense rent on a straight‑line basis over the life of the lease, which commences on the date we have the right to control the property. The cumulative expense recognized on a straight‑line basis in excess of the cumulative payments is included in deferred rent in the accompanying balance sheets. Future minimum lease payments under non‑cancelable operating leases (with initial or remaining lease terms in excess of one year) as of September 27, 2018, were:

 

 

 

 

(in thousands)

    

Amount

Thirteen weeks ended December 27, 2018

 

$

24,439

2019

 

 

108,061

2020

 

 

112,264

2021

 

 

108,499

2022

 

 

102,196

Thereafter

 

 

653,461

Total minimum lease payments

 

$

1,108,920

 

Lease expense for the thirty-nine weeks ended September 27, 2018 and September 28, 2017 was approximately $67,990 thousand and $51,956 thousand, respectively.

Litigation

We are subject to other various legal actions, claims and proceedings arising in the ordinary course of business, which may include claims related to general liability, workers’ compensation, product liability, intellectual property and employment-related matters resulting from our business activities. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. These proceedings are not expected to have a material impact on our consolidated financial position, cash flows or results of operations.

8. Stock Based Compensation

At our 2018 annual meeting of stockholders held on May 17, 2018, our stockholders approved the Floor & Decor Holdings, Inc. Employee Stock Purchase Plan (the “ESPP”), which became available to substantially all of our employees beginning in the third quarter of fiscal 2018. The ESPP permits eligible employees to purchase shares of our common stock through payroll deductions, subject to certain limitations. The purchase price of the shares under the ESPP in no event will be less than the lesser of 85% of the lower of the fair market value of our common stock on either the first or last trading day of each six-month offering period. There are 1,500,000 shares of our Class A common stock, par value $0.001 per share, approved for issuance under the ESPP.

9. Earnings Per Share

Net Income per Common Share

We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding adjusted for the dilutive effect of stock options.

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The following table shows the computation of basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

    

Thirty-nine Weeks Ended

 

 

September 27,

 

September 28,

 

September 27,

 

September 28,

(in thousands, except per share data)

 

2018

    

2017

 

2018

    

2017

Net income

 

$

26,568

 

$

23,255

 

$

98,285

 

$

54,812

Basic weighted average shares outstanding

 

 

97,254

 

 

94,439

 

 

96,551

 

 

89,614

Dilutive effect of share based awards

 

 

7,311

 

 

9,461

 

 

8,185

 

 

8,452

Diluted weighted average shares outstanding

 

 

104,565

 

 

103,900

 

 

104,736

 

 

98,066

Basic earnings per share

 

$

0.27

 

$

0.25

 

$

1.02

 

$

0.61

Diluted earnings per share

 

$

0.25

 

$

0.22

 

$

0.94

 

$

0.56

 

The following awards have been excluded from the computation of dilutive effect of share based awards because the effect would be anti‑dilutive:

 

 

 

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

    

Thirty-nine Weeks Ended

 

 

September 27,

 

September 28,

 

September 27,

 

September 28,

(in thousands)

 

2018

 

2017

 

2018

 

2017

Stock options

 

209

 

12

 

168

 

718

 

 

10. Subsequent Event

In October 2018, we signed a lease to relocate our Store Support Center. The new location has approximately 185,473 square feet of office space with room for expansion. The lease has a twelve year term with rent expense of approximately $469 thousand per month and is expected to commence July 2019. We are still evaluating our options related to our current Store Support Center. If we decide to exit the current lease, we could incur lease exit costs of up to $10 million.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and related notes of Floor & Decor Holdings, Inc. and Subsidiaries included in Item 1 of this quarterly report on Form 10-Q (this “Quarterly Report”) and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2017 and filed with the SEC on March 5, 2018 (the “Annual Report”). As used in this Quarterly Report, except where the context otherwise requires or where otherwise indicated, the terms “Company,” “we,” “our” or “us” refer to Floor & Decor Holdings, Inc. and its subsidiaries.

Forward-Looking Statements

The discussion in this Quarterly Report, including under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part I and Item 1A, “Risk Factors” of Part II, contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Quarterly Report, including statements regarding the Company’s future operating results and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements are based on our current expectations, assumptions, estimates and projections. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “could,” “seeks,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “budget,” “potential” or “continue” or the negative of these terms or other similar expressions.

The forward-looking statements contained in this Quarterly Report are only predictions. Although we believe that the expectations reflected in the forward-looking statements in this Quarterly Report are reasonable, we cannot guarantee future events, results, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements in this Quarterly Report, including, without limitation, those factors described in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part I and Item 1A, “Risk Factors” of Part II. Some of the key factors that could cause actual results to differ from our expectations include the following:

·

an overall decline in the health of the economy, the hard surface flooring industry, consumer spending and the housing market;

·

any disruption in our distribution capabilities resulting from our inability to operate our distribution centers going forward;

·

competition from other stores and internet-based competition;

·

our failure to execute our business strategy effectively and deliver value to our customers;

·

our inability to manage our growth;

·

our inability to manage costs and risks relating to new store openings;

·

our dependence on foreign imports for the products we sell, which may include the impact of tariffs;

·

our inability to find, train and retain key personnel;

·

violations of laws and regulations applicable to us or our suppliers;

·

our failure to adequately protect against security breaches involving our information technology systems and customer information;

·

our failure to successfully anticipate consumer preferences and demand;

·

our inability to find available locations for our stores or our store support center on terms acceptable to us;

·

our inability to obtain merchandise on a timely basis at prices acceptable to us;

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·

suppliers may sell similar or identical products to our competitors;

·

our inability to maintain sufficient levels of cash flow to meet growth expectations;

·

our inability to manage our inventory obsolescence, shrinkage and damage;

·

fluctuations in material and energy costs;

·

our vulnerability to natural disasters and other unexpected events; and

·

restrictions imposed by our indebtedness on our current and future operations.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The forward-looking statements contained in this Quarterly Report speak only as of the date hereof. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. If a change to the events and circumstances reflected in our forward-looking statements occurs, our business, financial condition and operating results may vary materially from those expressed in our forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

 

Overview

Founded in 2000, Floor & Decor is a high growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories with 95 warehouse format stores across 26 states as of September 27, 2018. We believe that we offer the industry’s broadest in stock assortment of tile, wood, laminate and natural stone flooring along with decorative and installation accessories at everyday low prices positioning us as the one stop destination for our customers’ entire hard surface flooring needs. We appeal to a variety of customers, including professional installers and commercial businesses (“Pro”), Do It Yourself customers (“DIY”) and customers who buy the products for professional installation (“Buy it Yourself” or “BIY”).

We operate on a 52- or 53-week fiscal year ending on the Thursday on or preceding December 31. The following discussion contains references to the first thirty-nine weeks of fiscal 2018 and fiscal 2017, which ended on September 27, 2018 and September 28, 2017, respectively.

During the thirty-nine weeks ended September 27, 2018, we continued to make long-term key strategic investments, including:

·

opening twelve new warehouse-format stores ending with 95 warehouse-format stores;

·

focusing on innovative new products and localized assortments, supported by inspirational in-store and online visual merchandising solutions;

·

promoting key leaders in our regional staff to support our growing number of stores;

·

investing capital in our stores, information technology and our connected customer strategies to continue enhancing and integrating the online and in-store shopping experience for our customers; 

·

enhancing credit solutions, including changing our private label credit card vendor; and

·

engaging more professional customers, including signing up more customers on our Pro Premier Loyalty Program.

Key Performance Indicators

We consider a variety of performance and financial measures in assessing the performance of our business. The key performance and financial measures we use to determine how our business is performing are comparable store sales, the number of new store openings, gross profit and gross margin, operating income and EBITDA and Adjusted EBITDA. For definitions and a discussion of how we use our key performance indicators, see the “Key Performance Indicators” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. See “Non-GAAP Financial Measures” below for a discussion of how we define

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EBITDA and Adjusted EBITDA and a reconciliation of our EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. 

Other key financial terms we use include net sales, selling and store operating expenses, general and administrative expenses and pre-opening expenses. For definitions and a discussion of how we use our other key financial definitions, see the “Other Key Financial Definitions” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report.

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Table of Contents

Results of Operations

 

The following table summarizes key components of our results of operations for the periods indicated, in dollars and as a percentage of net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

 

 

9/27/2018

 

 

9/28/2017

 

 

 

 

(in thousands)

 

Actual

 

% of Sales

    

 

Actual

 

% of Sales

 

 

% Increase/(Decrease)

 

Net sales

 

$

435,882

 

100.0

%  

 

$

343,923

 

100.0

%

 

26.7

%

Cost of sales

 

 

257,656

 

59.1

 

 

 

201,432

 

58.6

 

 

27.9

 

Gross profit

 

 

178,226

 

40.9

 

 

 

142,491

 

41.4

 

 

25.1

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling & store operating expenses

 

 

109,182

 

25.0

 

 

 

85,023

 

24.7

 

 

28.4

 

General & administrative expenses

 

 

26,477

 

6.1

 

 

 

22,172

 

6.5

 

 

19.4

 

Pre-opening expenses

 

 

8,330

 

1.9

 

 

 

6,700

 

1.9

 

 

24.3

 

Total operating expenses

 

 

143,989

 

33.0

 

 

 

113,895

 

33.1

 

 

26.4

 

Operating income

 

 

34,237

 

7.9

 

 

 

28,596

 

8.3

 

 

19.7

 

Interest expense

 

 

2,171

 

0.5

 

 

 

2,610

 

0.7

 

 

(16.8)

 

Income before income taxes

 

 

32,066

 

7.4

 

 

 

25,986

 

7.6

 

 

23.4

 

Provision for income taxes

 

 

5,498

 

1.2

 

 

 

2,731

 

0.8

 

 

101.3

 

Net income

 

$

26,568

 

6.1

%

 

$

23,255

 

6.8

%

 

14.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirty-nine Weeks Ended

 

 

 

 

 

 

9/27/2018

 

 

9/28/2017

 

 

 

 

(in thousands)

 

Actual

 

% of Sales

    

 

Actual

 

% of Sales

 

 

% Increase/(Decrease)

 

Net sales

 

$

1,273,109

 

100.0

%  

 

$

995,266

 

100.0

%

 

27.9

%

Cost of sales

 

 

751,859

 

59.1

 

 

 

585,076

 

58.8

 

 

28.5

 

Gross profit

 

 

521,250

 

40.9

 

 

 

410,190

 

41.2

 

 

27.1

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling & store operating expenses

 

 

320,375

 

25.2

 

 

 

251,424

 

25.3

 

 

27.4

 

General & administrative expenses

 

 

74,995

 

5.9

 

 

 

59,571

 

5.9

 

 

25.9

 

Pre-opening expenses

 

 

17,892

 

1.4

 

 

 

13,825

 

1.4

 

 

29.4

 

Total operating expenses

 

 

413,262

 

32.5

 

 

 

324,820

 

32.6

 

 

27.2

 

Operating income

 

 

107,988

 

8.5

 

 

 

85,370

 

8.6

 

 

26.5

 

Interest expense

 

 

6,100

 

0.5

 

 

 

11,377

 

1.2

 

 

(46.4)

 

Loss on early extinguishment of debt

 

 

 —

 

 —

 

 

 

5,442

 

0.5

 

 

NM

 

Income before income taxes

 

 

101,888

 

8.0

 

 

 

68,551

 

6.9

 

 

48.6

 

Provision for income taxes

 

 

3,603

 

0.3

 

 

 

13,739

 

1.4

 

 

(73.8)

 

Net income

 

$

98,285

 

7.7

%

 

$

54,812

 

5.5

%

 

79.3

%

 

NM – Not meaningful

 

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Table of Contents

Selected Financial Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

Thirty-nine Weeks Ended

 

 

 

 

9/27/2018

    

 

 

9/28/2017

 

9/27/2018

    

 

9/28/2017

 

Comparable stores sales

 

 

11.1

%  

 

 

13.5

%

 

12.6

%  

 

 

13.7

%

Comparable average ticket

 

 

(1.4)

%  

 

 

2.5

%  

 

 —

%  

 

 

1.0

%  

Comparable customer transactions

 

 

12.7

%  

 

 

11.2

%  

 

12.7

%  

 

 

12.8

%  

Number of warehouse-format stores

 

 

95

 

 

 

80

 

 

95

 

 

 

80

 

Adjusted EBITDA (in thousands) (1)

 

$

48,918

 

 

$

39,709

 

$

147,428

 

 

$

115,287

 

Adjusted EBITDA margin

 

 

11.2

%  

 

 

11.5

%  

 

11.6

%  

 

 

11.6

%  

 

(1) Adjusted EBITDA is a non-GAAP financial measure. See “Non-GAAP Financial Measures” for additional information and a reconciliation to the most comparable GAAP measure.

 

Net Sales

Net sales during the thirteen weeks ended September 27, 2018 increased $92.0 million, or 26.7%, compared to the corresponding prior year period, which does not reflect $3.2 million of prior year sales recognized through the opening balance sheet adjustment described in “Recently Adopted Accounting Pronouncements” included in Item 1 of this quarterly report. Four out of six of our product categories experienced comparable store sales increases during the period, driven by increases in laminate/luxury vinyl plank, decorative accessories and installation materials and tools that were above our average for the thirteen weeks ended September 27, 2018. Comparable store sales increased 11.1%, or $38.3 million, and our non-comparable store sales contributed $50.5 million. The increase in comparable store sales was largely driven by a 12.7% increase in comparable customer transactions, slightly offset by a 1.4% decrease in comparable average ticket growth. We estimate our comparable store sales growth rate was decremented by approximately 40 basis points due to the demand created by Hurricane Harvey during the corresponding prior year period.

Net sales during the thirty-nine weeks ended September 27, 2018 increased $277.8 million, or 27.9%, compared to the corresponding prior year period, which does not reflect $11.1 million of prior year sales recognized through the opening balance sheet adjustment described in “Recently Adopted Accounting Pronouncements” included in Item 1 of this quarterly report. Five out of six of our product categories experienced comparable store sales increases during the period, driven by increases in laminate/luxury vinyl plank, decorative accessories and installation materials and tools that were above our average for the thirty-nine weeks ended September 27, 2018. Comparable store sales increased 12.6%, or $126.4 million, and our non-comparable store sales contributed $140.3 million. The increase in comparable store sales was largely driven by a 12.7% increase in comparable customer transactions. We estimate our comparable stores sales benefited by approximately 220 basis points from the continued recovery in the areas impacted by Hurricane Harvey. We believe the increase in net sales and customer transactions are due to the execution of our key strategic investments and a growing U.S. flooring market. We believe our enhanced Pro, merchandising, connected customer, marketing and visual merchandising strategies, along with new innovative products led to our sales growth. Non-comparable store sales were driven by the opening of 15 new stores since September 28, 2017.

Gross Profit and Gross Margin

Gross profit during the thirteen weeks ended September 27, 2018 increased $35.7 million, or 25.1%, compared to the corresponding prior year period. This increase in gross profit was primarily the result of increased sales driven by comparable store sales increase of 11.1% and the opening of 15 new stores since September 28, 2017. Gross margin for the thirteen weeks ended September 27, 2018 decreased approximately 50 basis points to 40.9% from 41.4% in the corresponding prior year period. This decrease in gross margin was primarily attributable to lower product margin primarily driven by higher domestic transportation freight and higher inventory shrink and damage.

Gross profit during the thirty-nine weeks ended September 27, 2018 increased $111.1 million, or 27.1%, compared to the corresponding prior year period. This increase in gross profit was primarily the result of increased sales driven by comparable store sales increase of 12.6% and the opening of 15 new stores since September 28, 2017. Gross margin for the thirty-nine weeks ended September 27, 2018 decreased approximately 30 basis points to 40.9% from 41.2% in the corresponding prior year period. This decrease in gross margin was primarily attributable to lower product margin primarily driven by higher domestic transportation freight.

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Selling and Store Operating Expenses

Selling and store operating expenses during the thirteen weeks ended September 27, 2018 increased $24.2 million, or 28.4% compared to the corresponding prior year period, due primarily to the addition of 15 new stores since September 28, 2017. As a percentage of net sales, our selling and store operating expenses increased approximately 30 basis points to 25.0% from 24.7% in the corresponding prior year period. Comparable store selling and store operating expenses as a percentage of comparable store sales decreased by approximately 91 basis points, as we leveraged occupancy expenses on higher net sales.

Selling and store operating expenses during the thirty-nine weeks ended September 27, 2018 increased $69.0 million, or 27.4% compared to the corresponding prior year period, due primarily to the addition of 15 new stores since September 28, 2017. As a percentage of net sales, our selling and store operating expenses decreased approximately 10 basis points to 25.2% from 25.3% in the corresponding prior year period. Comparable store selling and store operating expenses as a percentage of comparable store sales decreased by approximately 110 basis points, as we leveraged occupancy and personnel expenses on higher net sales.

General and Administrative Expenses

General and administrative expenses, which are typically expenses incurred outside of our stores, during the thirteen weeks ended September 27, 2018 increased $4.3 million, or 19.4% compared to the corresponding prior year period, due to our continued investments in personnel for our regional and store support functions in support of our store growth. Our general and administrative expenses as a percentage of net sales decreased approximately 40 basis points to 6.1% from 6.5% in the corresponding prior year period driven by lower operating expenses as a percent of sales.

General and administrative expenses during the thirty-nine weeks ended September 27, 2018 increased $15.4 million, or 25.9% compared to the corresponding prior year period. Our general and administrative expenses as a percentage of net sales remained flat at 5.9% when compared to the corresponding prior year period.

Pre‑Opening Expenses

Pre-opening expenses during the thirteen weeks ended September 27, 2018 increased $1.6 million, or 24.3% compared to the corresponding prior year period. The increase is primarily the result of the cadence of our 2018 store openings as well as higher average occupancy costs due to targeted locations being in higher cost metropolitan locations. This resulted in a higher number of new stores opened or planned to be opened for which pre-opening expenses were incurred compared to the corresponding prior year period. We opened seven stores during each of the thirteen weeks ended September 27, 2018 and September 28, 2017.

Pre-opening expenses during the thirty-nine weeks ended September 27, 2018 increased $4.1 million, or 29.4% compared to the corresponding prior year period. The increase is primarily the result of the cadence of our 2018 store openings. This resulted in a higher number of new stores opened or planned to be opened for which pre-opening expenses were incurred compared to the corresponding prior year period. During the thirty-nine weeks ended September 27, 2018, we opened twelve stores as compared to opening eleven stores during the corresponding prior year period.

Interest Expense

Interest expense during the thirteen weeks ended September 27, 2018 decreased $0.4 million, or 16.8% compared to the corresponding prior year period. The decrease in interest expense was primarily due to lowering our average debt balance to $160.6 million during the thirteen weeks ended September 27, 2018 compared to an average debt balance of $186.5 million in the corresponding prior year period. The decrease in our average interest rate to 5.4% from 5.6% for the thirteen weeks ended September 27, 2018 compared to the corresponding prior year period also benefited interest expense.  

Interest expense during the thirty-nine weeks ended September 27, 2018 decreased $5.3 million, or 46.4% compared to the corresponding prior year period. The decrease in interest expense was primarily due to lowering our average debt balance to $176.2 million during the thirty-nine weeks ended September 27, 2018 compared to an average

21


 

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debt balance of $282.9 million in the corresponding prior year period. The decrease in average total debt was primarily due to paying down approximately $192.0 million with net proceeds from our initial public offering during the fiscal second quarter of 2017. The decrease in our average interest rate to 4.6% for the thirty-nine weeks ended September 27, 2018 from 5.4% for the corresponding prior year period also benefited interest expense.

Taxes

The provision for income taxes during the thirteen weeks ended September 27, 2018 increased $2.8 million, or 101.3% compared to the corresponding prior year period. The effective tax rate was 17.1% for the thirteen weeks ended September 27, 2018 compared to 10.5% the corresponding prior year period. The increase in the effective tax rate was primarily due to the recognition of excess tax benefits related to stock options exercised in the prior year period.

The provision for income taxes during the thirty-nine weeks ended September 27, 2018 decreased $10.1 million, or 73.8% compared to the corresponding prior year period. The effective tax rate was 3.5% for the thirty-nine weeks ended September 27, 2018 compared to 20.0% the corresponding prior year period. The decrease in the effective tax rate was primarily due to the impact of new tax reform legislation passed in December 2017 and the recognition of excess tax benefits related to stock options exercised.

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA are key metrics used by management and our board of directors to assess our financial performance and enterprise value. We believe that operating income, EBITDA and Adjusted EBITDA are useful measures, as they eliminate certain expenses that are not indicative of our core operating performance and facilitate a comparison of our core operating performance on a consistent basis from period to period. We also use Adjusted EBITDA as a basis to determine covenant compliance with respect to our Credit Facilities (as defined below), to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties as performance measures to evaluate companies in our industry.

EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with GAAP. We define EBITDA as net income before interest, loss on early extinguishment of debt, taxes, depreciation and amortization. We define Adjusted EBITDA as net income before interest, loss on early extinguishment of debt, taxes, depreciation and amortization, adjusted to eliminate the impact of certain items that we do not consider indicative of our core operating performance. See below for a reconciliation of our EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

EBITDA and Adjusted EBITDA are non-GAAP measures of our financial performance and should not be considered as alternatives to net income as a measure of financial performance or any other performance measure derived in accordance with GAAP and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of liquidity or free cash flow for management's discretionary use. In addition, these non-GAAP measures exclude certain non-recurring and other charges. Each of these non-GAAP measures has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the items eliminated in the adjustments made to determine EBITDA and Adjusted EBITDA, such as stock compensation expense, loss (gain) on asset disposal, executive recruiting/relocation, and other adjustments. Our presentation of EBITDA and Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Definitions and calculations of EBITDA and Adjusted EBITDA differ among companies in the retail industry, and therefore EBITDA and Adjusted EBITDA disclosed by us may not be comparable to the metrics disclosed by other companies.

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The reconciliations of net income to Adjusted EBITDA for the periods noted below are set forth in the table as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

    

Thirty-nine Weeks Ended

(in thousands)

 

9/27/2018

    

9/28/2017

 

9/27/2018

    

9/28/2017

Net income

 

$

26,568

 

$

23,255

 

$

98,285

 

$

54,812

Depreciation and amortization (1)

 

 

11,987

 

 

8,525

 

 

32,898

 

 

24,319

Interest expense

 

 

2,171

 

 

2,610

 

 

6,100

 

 

11,377

Loss on early extinguishment of debt

 

 

 —

 

 

 —

 

 

 —

 

 

5,442

Income tax expense

 

 

5,498

 

 

2,731

 

 

3,603

 

 

13,739

EBITDA

 

 

46,224

 

 

37,121

 

 

140,886

 

 

109,689

Stock compensation expense (2)

 

 

1,659

 

 

1,418

 

 

4,611

 

 

3,553

Other (3)

 

 

1,035

 

 

1,170

 

 

1,931

 

 

2,045

Adjusted EBITDA

 

$

48,918

 

$

39,709

 

$

147,428

 

$

115,287

 

(1) Net of amortization of tenant improvement allowances and excludes deferred financing amortization, which is included as a part of interest expense in the table above.

(2) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on timing of awards and forfeitures.

(3) Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for the thirteen and thirty-nine weeks ended September 27, 2018 primarily relate to costs associated with secondary offerings of our common stock by certain of our stockholders completed in May and September 2018, costs associated with the closing of our distribution center near Miami, Florida and insurance recoveries related to hurricanes Harvey and Irma. Amounts for the thirteen and thirty-nine weeks ended September 28, 2017 primarily relate to costs in connection with our May 2017 initial public offering, a secondary offering by certain of our stockholders completed in July 2017 and losses from hurricanes Harvey and Irma.

Liquidity and Capital Resources

Liquidity is provided primarily by our cash flows from operations and our $200 million asset-backed revolving credit facility (the “ABL Facility”). As of September 27, 2018, we had $190.1 million in unrestricted liquidity, consisting of $0.5 million in cash and cash equivalents and $189.6 million immediately available for borrowing under the ABL Facility without violating any covenants thereunder.

Our primary cash needs are for merchandise inventories, payroll, store rent, and other operating expenses and capital expenditures associated with opening new stores and remodeling existing stores, as well as information technology, e-commerce and store support center infrastructure. We also use cash for the payment of taxes and interest.

The most significant components of our operating assets and liabilities are merchandise inventories and accounts payable, and to a lesser extent accounts receivable, prepaid expenses and other assets, other current and non-current liabilities, taxes receivable and taxes payable. Our liquidity is not generally seasonal, and our uses of cash are primarily tied to when we open stores and make other capital expenditures. We believe that cash expected to be generated from operations and the availability of borrowings under the ABL Facility will be sufficient to meet liquidity requirements, anticipated capital expenditures and payments due under the ABL Facility and our $350 million senior secured term loan facility (the “Term Loan Facility” and together with the ABL Facility, our “Credit Facilities”) for at least the next 12 months.

The Term Loan Facility has no financial maintenance covenants. As of September 27, 2018, we were in compliance with the covenants of the Credit Facilities and no Event of Default (as defined in the credit agreements governing our Credit Facilities) had occurred.

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Total capital expenditures in fiscal 2018 are planned to be between approximately $161 million to $167 million and will be funded primarily by cash generated from operations. We intend to make the following capital expenditures in fiscal 2018:

·

open 17 stores and start construction on stores opening in early 2019 using approximately $103 million to $105 million of cash;

·

invest in existing store remodeling projects, including one relocation, and our distribution centers using approximately $33 million to $35 million of cash; and 

·

invest in information technology infrastructure, e-commerce and other store support center initiatives using approximately $25 million to $27 million of cash.

During the first half of fiscal 2018, we relocated all of the existing inventory from our currently leased distribution center near Miami, Florida to the newly leased distribution center near Savannah, Georgia and incurred related costs of approximately $0.5 million.

 

Cash Flow Analysis

A summary of our operating, investing and financing activities are shown in the following table:

 

 

 

 

 

 

 

 

 

 

 

Thirty-nine Weeks Ended

(in thousands)

    

    

9/27/2018

    

9/28/2017

Net cash provided by operating activities

 

 

$

143,699

 

$

82,863

Net cash used in investing activities

 

 

 

(109,395)

 

 

(69,639)

Net cash used in financing activities

 

 

 

(34,326)

 

 

(13,108)

Net (decrease) increase in cash and cash equivalents

 

 

$

(22)

 

$

116

 

Net Cash Provided By Operating Activities

Cash from operating activities consists primarily of net income adjusted for noncash items, including depreciation and amortization, write-off of deferred issuance costs on extinguishment of debt, stockbased compensation, deferred taxes and the effects of changes in operating assets and liabilities.

Net cash provided by operating activities was $143.7 million for the thirty-nine weeks ended September 27, 2018 and $82.9 million for the thirty-nine weeks ended September 28, 2017. The net cash provided by operating activities for the thirty-nine weeks ended September 27, 2018 was primarily the result of an increase in net income, including lower taxes due to stock option exercises.

The net cash provided by operating activities for the thirty-nine weeks ended September 28, 2017 was primarily the result of an increase in net income and adjustments to net income driven by depreciation related to capital expenditures from prior periods. This was slightly offset by increased working capital to support future sales and new store openings.

Net Cash Used In Investing Activities

Investing activities consist primarily of capital expenditures for new store openings, existing store remodels (including leasehold improvements, new racking, new fixtures, new vignettes and new design centers) and new infrastructure and information systems.

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Capital expenditures during the thirty-nine weeks ended September 27, 2018 and September 28, 2017 were $109.4 million and $69.6 million, respectively. We continued our investment in new stores, as we opened twelve new stores through September 27, 2018 and are preparing for an additional six new stores to be opened during the fourth quarter. During the thirty-nine weeks ended September 27, 2018, approximately 66% of capital expenditures was for new stores, 22% was for existing stores and distribution centers, and the remainder of the spend was for information technology and e‑commerce investments to support our growth.

 For the thirty-nine weeks ended September 28, 2017, approximately 59% of capital expenditures was for new stores, 27% was for existing store remodel and distribution center investments, and the remainder was for information technology and ecommerce investments.

Net Cash Used In Financing Activities

Financing activities consist primarily of borrowings and related repayments under our credit agreements, as well as proceeds from the exercise of stock options.

Net cash used in financing activities was $34.3 million for the thirty-nine weeks ended September 27, 2018 and $13.1 million for the thirty-nine weeks ended September 28, 2017. The net cash used in financing activities for the thirty-nine weeks ended September 27, 2018 was primarily driven by a net paydown on the ABL Facility of $41.0 million, slightly offset by proceeds from the exercise of stock options of $9.3 million.

The net cash used in financing activities for the thirty-nine weeks ended September 28, 2017 was primarily driven by a net paydown on our ABL Facility of $11.9 million.

U.S. Tariffs and Global Economy

The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. In September 2018, the U.S. imposed tariffs of 10% on many products from China, and the U.S. administration has announced an intention to increase that to 25% on January 1, 2019 if a trade agreement cannot be reached. Approximately half of the products we sell are imported from China, the vast majority of which are impacted by these tariffs. While we are still analyzing the impact these tariffs may have on our business, we believe we can mitigate some of these cost increases through negotiating lower costs from our vendors, increasing retail pricing as we deem appropriate and potentially sourcing from alternative destinations. As part of these efforts, we expect the recently enacted tariffs to increase our inventory costs and associated cost of goods sold in the fourth quarter of 2018 as we incur the tariffs and import more products ahead of the potentially higher tariffs. We expect our efforts to mitigate a substantial portion of the overall effect of increased tariffs, including a material increase to our inventory costs in fiscal 2019. Potential costs and any attendant impact on pricing arising from these tariffs and any further expansion in the types or levels of tariffs implemented could require us to modify our current business practices and could adversely affect our business, financial condition and results of operations.

Contractual Obligations

There were no material changes to our contractual obligations outside the ordinary course of our business during the thirty-nine weeks ended September 27, 2018.

Off‑Balance Sheet Arrangements

For the thirty-nine weeks ended September 27, 2018, except for operating leases entered into in the normal course of business, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, net sales, expenses, results of operations, liquidity, capital expenditures or capital resources. We do not have any relationship with unconsolidated entities or financial partnerships for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.

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Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and assumptions. There have been no significant changes to our critical accounting policies as disclosed in our Annual Report. See Note 1 to our consolidated financial statements included in this quarterly report on Form 10-Q, which describes recently issued accounting pronouncements not yet required to be adopted by us.

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Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting the Company, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of the Annual Report. Our exposure to market risk has not changed materially since December 28, 2017.

Item 4. Controls and Procedures

Internal Control over Financial Reporting

The process of improving our internal controls has required and will continue to require us to expend significant resources to design, implement and maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. There can be no assurance that any actions we take will be completely successful. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis. As part of this process, we may identify specific internal controls as being deficient.

We have begun documenting and testing internal control procedures in order to comply with the requirements of Section 404(a) of the Sarbanes‑Oxley Act. Section 404 requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these assessments. We must comply with Section 404 no later than the time we file our annual report for fiscal 2018 with the SEC.

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Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are engaged in various legal actions, claims and proceedings arising in the ordinary course of business, which may include claims related to general liability, workers’ compensation, product liability, intellectual property and employment-related matters resulting from our business activities. As with most actions such as these, an estimation of any possible and/or ultimate liability cannot always be determined. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report, which could materially affect our business, financial condition and/or operating results.

We intend to move our headquarters and may face disruption and additional costs.

Due to space constraints at our existing store support center, which serves as our corporate headquarters, we have entered into a lease to relocate our corporate headquarters in 2019. In connection with the relocation, we expect to incur additional expenses, including those related to moving and exit costs, tenant improvements, as well as furniture and equipment for the new corporate headquarters. The relocation could result in business disruption and could have a negative impact on our operating results. In addition, we may incur charges related to exiting our current store support center if we are not able to exit or release on favorable terms.

U.S. policies related to global trade and tariffs could adversely affect our business, financial condition and results of operations.

The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. In September 2018, the U.S. imposed tariffs of 10% on many products from China, and the U.S. administration has announced an intention to increase that amount to 25% on January 1, 2019 if a trade agreement cannot be reached. We import approximately 50% of the products we sell from China, the vast majority of which are impacted by these tariffs. Any further expansion in the types or levels of tariffs implemented has the potential to negatively impact our business, financial condition and results of operations. Additionally, there is a risk that the U.S. tariffs on imports are met with tariffs on U.S. produced exports and that a broader trade conflict could ensue, which has the potential to significantly impact global trade and economic conditions. Potential costs and any attendant impact on pricing arising from these tariffs and any further expansion in the types or levels of tariffs implemented could require us to modify our current business practices and could adversely affect our business, financial condition and results of operations.

There have been no other material changes to the risk factors disclosed in the Annual Report. The risks described in our Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

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Table of Contents

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

 

 

Exhibit No.

 

Exhibit Description

3.1

 

Restated Certificate of Incorporation of Floor & Decor Holdings, Inc. (1)

3.2

 

Second Amended and Restated Bylaws of Floor & Decor Holdings, Inc. (1)

10.1

 

Second Amendment to Floor & Decor Holdings, Inc. Employee Stock Purchase Plan.

31.1

 

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

 

Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

 

XBRL Instance Document.

101.SCH

 

XBRL Taxonomy Extension Schema Document.

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document.

 

(1)

Filed as an exhibit to Amendment No. 4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-216000) filed with the SEC on April 24, 2017, and incorporated herein by reference.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

FLOOR & DECOR HOLDINGS, INC.

 

 

Dated:  November 1, 2018

By:


/s/ Thomas V. Taylor

 

 

Thomas V. Taylor

 

 

Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

Dated:  November 1, 2018

By:

/s/ Trevor S. Lang

 

 

Trevor S. Lang

 

 

Executive Vice President and Chief Financial Officer

 

 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

30