Floor & Decor Holdings, Inc. Quarterly report [Sections 13 or 15(d)]

Quarterly report [Sections 13 or 15(d)]

Commitments and Contingencies

Commitments and Contingencies

3 Months Ended

Mar. 26, 2026

Commitments and Contingencies Disclosure [Abstract]

Lease Commitments

The Company accounts for leases in accordance with ASC 842, Leases. The majority of the Company’s long-term operating lease agreements are for its retail locations, distribution centers, and corporate office, which expire in various years through 2055. Most of these agreements are retail leases wherein both the land and building are leased. The Company also has ground leases in which only the land is leased. The initial lease terms for the Company’s retail locations, distribution centers, and corporate office typically range from 10-20 years. The majority of the Company’s leases also include options to extend, which are factored into the recognition of their respective assets and liabilities when appropriate based on management’s assessment of the probability that the options will be exercised.

When readily determinable, the rate implicit in the lease is used to discount lease payments to present value; however, substantially all of the Company’s leases do not provide a readily determinable implicit rate. If the rate implicit in the lease is not readily determinable, the Company uses a third party to assist in the determination of a secured incremental borrowing rate, determined on a collateralized basis, to discount lease payments based on information available at lease commencement. The secured incremental borrowing rate is estimated based on yields obtained from Bloomberg for U.S. consumers with a BB credit rating and is adjusted for collateralization as well as inflation. As of both March 26, 2026 and March 27, 2025, the Company’s weighted average discount rate was 6.0% and the weighted average remaining lease term of the Company’s leases was approximately 12 years.

Lease Costs

The table below presents components of lease expense for operating leases within the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income:


		Thirteen Weeks Ended
in thousands	Classification	March 26, 2026		March 27, 2025
Fixed operating lease cost:	Selling, general and administrative expenses	$	53,430	$	49,937
	Cost of sales	13,544		9,472
Total fixed operating lease cost		66,974		59,409
Variable lease cost (1):	Selling, general and administrative expenses	21,815		22,101
	Cost of sales	2,232		1,651
Total variable lease cost		24,047		23,752
Total operating lease cost (2)		$	91,021	$	83,161

(1)Includes variable costs for common area maintenance, property taxes, and insurance on leased real estate.

(2)Excludes short-term lease costs, which were immaterial for the thirteen weeks ended March 26, 2026 and March 27, 2025.

Undiscounted Cash Flows

Future minimum lease payments under non-cancelable operating leases as of March 26, 2026 were as follows:


in thousands	Amount
Forty weeks ending December 31, 2026	$	197,965
2027	263,880
2028	244,970
2029	230,877
2030	210,926
Thereafter	1,477,471
Total minimum lease payments (1) (2)	2,626,089
Less: amount of lease payments representing interest	815,595
Present value of future minimum lease payments	1,810,494
Less: current obligations under leases	160,523
Long-term lease obligations	$	1,649,971

(1)Future lease payments exclude approximately $22.2 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

(2)Operating lease payments include $288.7 million related to options to extend lease terms that are reasonably certain of being exercised.

For the thirteen weeks ended March 26, 2026 and March 27, 2025, cash paid for amounts included in the measurement of operating lease liabilities was $65.6 million and $60.1 million, respectively.

Litigation

The Company is subject to various legal actions, claims, and proceedings arising in the ordinary course of business, which may include claims related to general liability, workers’ compensation, personal injury, product liability, intellectual property, and employment-related matters resulting from its business activities. As with most actions such as these, an estimation of any possible and/or ultimate liability cannot always be determined. The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. These various ordinary course proceedings are not expected to have a material impact on the Company’s consolidated financial position, cash flows, or results of operations. Regardless of the outcome, however, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.