FND Floor and Decor Holdings Inc

• Net sales increased 26.7% from the second quarter of fiscal 2021 to $1,089.8 million.

• Comparable store sales increased 9.2% from the second quarter of fiscal 2021.

• Diluted earnings per share (“EPS”) decreased 1.3% to $0.76 from $0.77 in the second quarter of fiscal 2021; Adjusted diluted EPS* increased 4.1% to $0.76 from $0.73 in the second quarter of fiscal 2021.

Floor & Decor Holdings, Inc. (NYSE: FND) (“We,” “Our,” the “Company,” or “Floor & Decor”) announces its financial results for the second quarter of fiscal 2022, which ended June 30, 2022.

Tom Taylor, Chief Executive Officer, stated, “We are pleased to deliver better-than-expected fiscal 2022 second quarter adjusted diluted earnings per share of $0.76 per share. These earnings results are particularly gratifying to us when we consider the previous year's record sales and profits, the extraordinary inflationary impact of higher global supply chain costs on our results, rising mortgage rates, and ten consecutive months of declining year-over-year existing home sales. We are proud of all of our teams and how they continue to execute our growth strategies and successfully manage our profitability. I thank our associates and vendor partners for their hard work and dedication as we navigate near-term macroeconomic challenges.”

Mr. Taylor continued, “We opened nine new warehouse-format stores in the second quarter of fiscal 2022, including six warehouse stores in new markets. We plan to open eight warehouse-format stores in the third quarter of fiscal 2022. We intend to open 32 new warehouse-format stores in fiscal 2022 and are pleased with the quarterly cadence of warehouse-format store openings.”

Please see “Comparable Store Sales” below for information on how the Company calculates its comparable store sales growth.

For the Thirteen Weeks Ended June 30, 2022

• Net sales increased 26.7% to $1,089.8 million from $860.1 million in the second quarter of fiscal 2021.

• Comparable store sales increased 9.2%.

• We opened nine new warehouse stores and closed one warehouse store during the second quarter of fiscal 2022, ending the quarter with 174 warehouse stores and five design studios.

• Operating income increased 8.0% to $106.4 million from $98.6 million in the second quarter of fiscal 2021. Operating margin decreased 170 basis points to 9.8%.

• Net income decreased 1.3% to $81.8 million compared to $82.9 million in the second quarter of fiscal 2021. Diluted EPS was $0.76 compared to $0.77 in the second quarter of fiscal 2021, a decrease of 1.3%.

• Adjusted net income* increased 3.5% to $81.1 million compared to $78.3 million in the second quarter of fiscal 2021. Adjusted diluted EPS* was $0.76 compared to $0.73 in the second quarter of fiscal 2021, an increase of 4.1%.

• Adjusted EBITDA* increased 9.7% to $150.3 million compared to $137.0 million in the second quarter of fiscal 2021.

For the Twenty-six Weeks Ended June 30, 2022

• Net sales increased 29.0% to $2,118.6 million from $1,642.6 million in the same period of fiscal 2021.

• Comparable store sales increased 11.7%.

• We opened 15 new warehouse stores and three design studios and closed one warehouse store during the twenty-six weeks ended June 30, 2022.

• Operating income increased 3.0% to $200.4 million from $194.5 million in the same period of fiscal 2021. Operating margin decreased 230 basis points to 9.5%.

• Net income decreased 3.7% to $152.8 million compared to $158.7 million in the same period of fiscal 2021. Diluted EPS was $1.42 compared to $1.48 in the same period of fiscal 2021, a decrease of 4.1%.

• Adjusted net income* increased 1.1% to $152.7 million compared to $151.0 million in the same period of fiscal 2021. Adjusted diluted EPS* was $1.42 compared to $1.41 in the same period of fiscal 2021, an increase of 0.7%.

• Adjusted EBITDA* increased 8.3% to $286.1 million compared to $264.1 million in the same period of fiscal 2021.

*Non-GAAP financial measures. Please see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for more information.

The COVID-19 Pandemic Impact on Floor & Decor's Business

We continue to monitor the impact of the COVID-19 pandemic on our associates, customers, business partners, and supply chain. However, given the evolving nature of the pandemic and uncertainty regarding its potential severity and duration, the full financial impact of the COVID-19 pandemic on our business cannot be reasonably estimated at this time. The extent of the impact of the COVID-19 pandemic on our business and financial results will depend on future developments, including the duration of the COVID-19 pandemic, the success of vaccination programs, the spread of COVID-19 within the markets in which we operate, the impact to countries from which we source inventory, fixed assets, and other supplies, the effect of the pandemic on consumer confidence and spending, and actions taken by government entities in response to the pandemic, all of which are highly uncertain.

Updated Outlook for the Fiscal Year Ending December 29, 2022:

• Net sales of approximately $4,290 to $4,330 million

• Comparable store sales growth of approximately 10% to 11%

• Diluted EPS to be in the range of $2.65 to $2.80

• Adjusted EBITDA in the range of $565 million to $580 million

• Depreciation and amortization expense of approximately $153 million

• Interest expense, net of approximately $9.5 million

• Tax rate of approximately 24%, excluding tax benefits resulting from stock option exercises and the vesting of restricted stock and restricted stock units

• Diluted weighted average shares outstanding of approximately 107.5 million shares

• Open 32 new warehouse-format stores and four small design studios

• Capital expenditures in the range of approximately $480 million to $500 million

Conference Call Details

A conference call to discuss the second quarter fiscal 2022 financial results is scheduled for today, August 4, 2022, at 5:00 p.m. Eastern Time. A live audio webcast of the conference call, together with related materials, will be available online at ir.flooranddecor.com.

A recorded replay of the conference call will be available within two hours of the conclusion of the call and can be accessed both online at ir.flooranddecor.com and by dialing 877-660-6853 (international callers please dial 201-612-7415). The pin number to access the telephone replay is 13731646. The replay will be available until August 11, 2022.

About Floor & Decor Holdings, Inc.

Floor & Decor is a multi-channel specialty retailer and commercial flooring distributor operating 174 warehouse-format stores and five design studios across 34 states at the end of the second quarter of fiscal 2022. The Company offers a broad assortment of in-stock hard-surface flooring, including tile, wood, laminate, vinyl, and natural stone along with decorative accessories and wall tile, installation materials, and adjacent categories at everyday low prices. The Company was founded in 2000 and is headquartered in Atlanta, Georgia.

Comparable Store Sales

Comparable store sales refer to period-over-period comparisons of our net sales among the comparable store base and are based on when the customer obtains control of the product, which is typically at the time of sale. A store is included in the comparable store sales calculation on the first day of the thirteenth full fiscal month following a store’s opening, which is when we believe comparability has been achieved. Changes in our comparable store sales between two periods are based on net sales for stores that were in operation during both of the two periods. Any change in the square footage of an existing comparable store, including for remodels and relocations within the same primary trade area of the existing store being relocated, does not eliminate that store from inclusion in the calculation of comparable store sales. Stores that are closed for a full fiscal month or longer are excluded from the comparable store sales calculation for each full fiscal month that they are closed. Since our e-commerce, regional account manager, and design studio sales are fulfilled by individual stores, they are included in comparable store sales only to the extent the fulfilling store meets the above mentioned store criteria. Sales through our Spartan Surfaces, LLC ("Spartan") subsidiary do not involve our stores and are therefore excluded from the comparable store sales calculation.

Non-GAAP Financial Measures

Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA (which are shown in the reconciliations below) are presented as supplemental measures of financial performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States ("GAAP"). We define Adjusted net income as net income adjusted to eliminate the impact of certain items that we do not consider indicative of our core operating performance and the tax effect related to those items. We define Adjusted diluted EPS as Adjusted net income divided by weighted average shares outstanding. We define EBITDA as net income before interest, loss (gain) on early extinguishment of debt, taxes, depreciation and amortization. We define Adjusted EBITDA as net income before interest, loss (gain) 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. Reconciliations of these measures to the most directly comparable GAAP financial measure are set forth in the tables below.

Adjusted net income, Adjusted diluted EPS, 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 Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA are useful measures, as they eliminate certain items 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, 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. Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA are also used by analysts, investors and other interested parties as performance measures to evaluate companies in our industry.

Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA are non-GAAP measures of our financial performance and should not be considered as alternatives to net income or diluted EPS 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, Adjusted net income, 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 Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the items eliminated in the adjustments made to determine Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA, such as stock compensation expense, distribution center relocation expenses, fair value adjustments related to contingent earn-out liabilities, and other adjustments. Our presentation of Adjusted net income, Adjusted diluted EPS, 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 Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA differ among companies in the retail industry, and therefore Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA disclosed by us may not be comparable to the metrics disclosed by other companies.

Please see “Reconciliation of GAAP to Non-GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this release to their most directly comparable GAAP financial measures.

Floor & Decor Holdings, Inc.

Consolidated Statements of Income

(In thousands, except for per share data)

(Unaudited)

 

 

Thirteen Weeks Ended

 

 

 

June 30, 2022

 

July 1, 2021

 

% Increase (Decrease)

 

Actual

 

% of Sales

 

Actual

 

% of Sales

 

Net sales

$

1,089,846

 

100.0

%

 

$

860,108

 

100.0

%

 

26.7

%

Cost of sales

 

653,564

 

 

60.0

 

 

 

494,670

 

 

57.5

 

 

32.1

 

Gross profit

 

436,282

 

 

40.0

 

 

 

365,438

 

 

42.5

 

 

19.4

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and store operating

 

268,202

 

 

24.5

 

 

 

205,072

 

 

23.8

 

 

30.8

 

General and administrative

 

53,107

 

 

4.9

 

 

 

52,819

 

 

6.1

 

 

0.5

 

Pre-opening

 

8,563

 

 

0.8

 

 

 

8,990

 

 

1.0

 

 

(4.7

)

Total operating expenses

 

329,872

 

 

30.2

 

 

 

266,881

 

 

30.9

 

 

23.6

 

Operating income

 

106,410

 

 

9.8

 

 

 

98,557

 

 

11.5

 

 

8.0

 

Interest expense, net

 

1,672

 

 

0.2

 

 

 

1,293

 

 

0.2

 

 

29.3

 

Income before income taxes

 

104,738

 

 

9.6

 

 

 

97,264

 

 

11.3

 

 

7.7

 

Provision for income taxes

 

22,906

 

 

2.1

 

 

 

14,348

 

 

1.7

 

 

59.6

 

Net income

$

81,832

 

 

7.5

%

 

$

82,916

 

 

9.6

%

 

(1.3

)%

Basic weighted average shares outstanding

 

105,545

 

 

 

 

 

104,544

 

 

 

 

 

Diluted weighted average shares outstanding

 

107,300

 

 

 

 

 

107,265

 

 

 

 

 

Basic earnings per share

$

0.78

 

 

 

 

$

0.79

 

 

 

 

(1.3

)%

Diluted earnings per share

$

0.76

 

 

 

 

$

0.77

 

 

 

 

(1.3

)%

 

Twenty-six Weeks Ended

 

 

 

June 30, 2022

 

July 1, 2021

 

% Increase (Decrease)

 

Actual

 

% of Sales

 

Actual

 

% of Sales

 

Net sales

$

2,118,580

 

100.0

%

 

$

1,642,645

 

100.0

%

 

29.0

%

Cost of sales

 

1,274,240

 

 

60.1

 

 

 

940,274

 

 

57.2

 

 

35.5

 

Gross profit

 

844,340

 

 

39.9

 

 

 

702,371

 

 

42.8

 

 

20.2

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and store operating

 

517,702

 

 

24.4

 

 

 

395,018

 

 

24.0

 

 

31.1

 

General and administrative

 

107,752

 

 

5.1

 

 

 

96,860

 

 

5.9

 

 

11.2

 

Pre-opening

 

18,504

 

 

0.9

 

 

 

15,987

 

 

1.0

 

 

15.7

 

Total operating expenses

 

643,958

 

 

30.4

 

 

 

507,865

 

 

30.9

 

 

26.8

 

Operating income

 

200,382

 

 

9.5

 

 

 

194,506

 

 

11.8

 

 

3.0

 

Interest expense, net

 

2,834

 

 

0.2

 

 

 

2,681

 

 

0.2

 

 

5.7

 

Income before income taxes

 

197,548

 

 

9.3

 

 

 

191,825

 

 

11.7

 

 

3.0

 

Provision for income taxes

 

44,765

 

 

2.1

 

 

 

33,113

 

 

2.0

 

 

35.2

 

Net income

$

152,783

 

 

7.2

%

 

$

158,712

 

 

9.7

%

 

(3.7

)%

Basic weighted average shares outstanding

 

105,471

 

 

 

 

 

104,309

 

 

 

 

 

Diluted weighted average shares outstanding

 

107,431

 

 

 

 

 

107,186

 

 

 

 

 

Basic earnings per share

$

1.45

 

 

 

 

$

1.52

 

 

 

 

(4.6

)%

Diluted earnings per share

$

1.42

 

 

 

 

$

1.48

 

 

 

 

(4.1

)%

Consolidated Balance Sheets

(In thousands, except for share and per share data)

(Unaudited)

 

 

As of June 30, 2022

 

As of December 30, 2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

6,177

 

$

139,444

Income taxes receivable

 

14,188

 

 

3,507

Receivables, net

 

97,502

 

 

81,463

Inventories, net

 

1,344,136

 

 

1,008,151

Prepaid expenses and other current assets

 

49,265

 

 

40,780

Total current assets

 

1,511,268

 

 

1,273,345

Fixed assets, net

 

1,085,779

 

 

929,083

Right-of-use assets

 

1,177,686

 

 

1,103,750

Intangible assets, net

 

151,620

 

 

151,935

Goodwill

 

255,473

 

 

255,473

Deferred income tax assets, net

 

8,090

 

 

9,832

Other assets

 

9,461

 

 

7,277

Total long-term assets

 

2,688,109

 

 

2,457,350

Total assets

$

4,199,377

 

$

3,730,695

Liabilities and stockholders’ equity

​

 

 

Current liabilities:

​

 

 

Current portion of term loans

$

1,577

 

$

2,103

Current portion of lease liabilities

 

112,987

 

 

104,602

Trade accounts payable

 

770,198

 

 

661,883

Accrued expenses and other current liabilities

 

292,297

 

 

248,935

Deferred revenue

 

20,220

 

 

14,492

Total current liabilities

 

1,197,279

 

 

1,032,015

Term loan

 

195,557

 

 

195,762

Revolving line of credit

 

68,600

 

 

—

Lease liabilities

 

1,191,223

 

 

1,120,990

Deferred income tax liabilities, net

 

42,887

 

 

40,958

Other liabilities

 

9,545

 

 

17,771

Total long-term liabilities

 

1,507,812

 

 

1,375,481

Total liabilities

 

2,705,091

 

 

2,407,496

Stockholders’ equity

​

 

 

Capital stock:

​

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 30, 2021

 

—

 

 

—

Common stock Class A, $0.001 par value; 450,000,000 shares authorized; 105,992,508 shares issued and outstanding at June 30, 2022 and 105,760,650 issued and outstanding at December 30, 2021

 

106

 

 

106

Common stock Class B, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 30, 2021

 

—

 

 

—

Common stock Class C, $0.001 par value; 30,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 30, 2021

 

—

 

 

—

Additional paid-in capital

 

466,260

 

 

450,332

Accumulated other comprehensive income, net

 

2,911

 

 

535

Retained earnings

 

1,025,009

 

 

872,226

Total stockholders’ equity

 

1,494,286

 

 

1,323,199

Total liabilities and stockholders’ equity

$

4,199,377

 

$

3,730,695

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Twenty-six Weeks Ended

 

June 30, 2022

 

July 01, 2021

Operating activities

 

 

 

Net income

$

152,783

 

​

$

158,712

 

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

 

​

​

Depreciation and amortization

 

72,566

 

​

 

54,097

 

Stock-based compensation expense

 

10,869

 

​

 

10,053

 

Deferred income taxes

 

2,475

 

​

 

6,520

 

Change in fair value of contingent earn-out liabilities

 

1,389

 

 

 

—

 

Interest cap derivative contracts

 

57

 

​

 

76

 

Changes in operating assets and liabilities, net of effects of acquisition:

 

​

​

Receivables, net

 

(15,936

)

​

 

(11,109

)

Inventories, net

 

(335,968

)

​

 

(25,338

)

Trade accounts payable

 

110,923

 

​

 

105,103

 

Accrued expenses and other current liabilities

 

26,174

 

​

 

(19,065

)

Income taxes

 

(10,681

)

​

 

(8,541

)

Deferred revenue

 

5,728

 

​

 

11,765

 

Other, net

 

(12,526

)

​

 

(25,656

)

Net cash provided by operating activities

 

7,853

 

​

 

256,617

 

Investing activities

 

​

 

Purchases of fixed assets

 

(214,283

)

​

 

(132,091

)

Acquisitions, net of cash acquired

 

(1,121

)

​

 

(63,354

)

Proceeds from sales of property

 

4,773

 

 

 

—

 

Net cash used in investing activities

 

(210,631

)

 

 

(195,445

)

Financing activities

 

​

 

Borrowings on revolving line of credit

 

336,800

 

 

 

4,453

 

Payments on revolving line of credit

 

(268,200

)

 

 

(3,592

)

Proceeds from term loans

 

—

 

 

 

65,000

 

Payments on term loans

 

(1,577

)

​

 

(75,676

)

Payments of contingent earn-out consideration

 

(2,571

)

 

 

—

 

Proceeds from exercise of stock options

 

5,176

 

​

 

6,326

 

Proceeds from employee stock purchase plan

 

1,963

 

​

 

3,063

 

Debt issuance costs

 

—

 

​

 

(1,409

)

Tax payments for stock-based compensation awards

 

(2,080

)

 

 

(1,016

)

Net cash provided by (used in) financing activities

 

69,511

 

​

 

(2,851

)

Net (decrease) increase in cash and cash equivalents

 

(133,267

)

​

 

58,321

 

Cash and cash equivalents, beginning of the period

 

139,444

 

​

 

307,772

 

Cash and cash equivalents, end of the period

$

6,177

 

​

$

366,093

 

Supplemental disclosures of cash flow information

​

​

 

Buildings and equipment acquired under operating leases

$

133,237

 

​

$

185,349

 

Cash paid for interest, net of capitalized interest

$

1,862

 

​

$

1,340

 

Cash paid for income taxes, net of refunds

$

52,943

 

 

$

35,118

 

Fixed assets accrued at the end of the period

$

109,939

 

​

$

101,708

 

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except EPS)

(Unaudited)

Adjusted net income and Adjusted diluted EPS

 

 

Thirteen Weeks Ended

 

June 30, 2022

 

July 1, 2021

Net income (GAAP):

$

81,832

 

 

$

82,916

 

Distribution center relocation (a)

 

456

 

 

 

475

 

Contingent earn-out liabilities fair value adjustment (b)

 

1,025

 

 

 

—

 

Tariff refund adjustments (c)

 

120

 

 

 

1,703

 

Acquisition and integration expense (d)

 

—

 

 

 

3,166

 

COVID-19 costs (e)

 

—

 

 

 

408

 

Tax benefit of stock-based compensation awards (g)

 

(1,995

)

 

 

(8,953

)

Tax impact of adjustments to net income (h)

 

(382

)

 

 

(1,400

)

Adjusted net income

$

81,056

 

 

$

78,315

 

Diluted weighted average shares outstanding

 

107,300

 

 

 

107,265

 

Adjusted diluted EPS

$

0.76

 

 

$

0.73

 

 

Twenty-six Weeks Ended

 

June 30, 2022

 

July 1, 2021

Net income (GAAP):

$

152,783

 

 

$

158,712

 

Distribution center relocation (a)

 

1,797

 

 

 

955

 

Contingent earn-out liabilities fair value adjustment (b)

 

1,389

 

 

 

—

 

Tariff refund adjustments (c)

 

53

 

 

 

1,631

 

Acquisition and integration expense (d)

 

—

 

 

 

3,166

 

COVID-19 costs (e)

 

—

 

 

 

624

 

Debt modification expense (f)

 

—

 

 

 

171

 

Tax benefit of stock-based compensation awards (g)

 

(2,553

)

 

 

(12,625

)

Tax impact of adjustments to net income (h)

 

(782

)

 

 

(1,592

)

Adjusted net income

$

152,687

 

 

$

151,042

 

Diluted weighted average shares outstanding

 

107,431

 

 

 

107,186

 

Adjusted diluted EPS

$

1.42

 

 

$

1.41

 

(a)

Represents amounts related to the relocation of our Houston distribution center that was completed during the first half of fiscal 2022.

(b)

Reflects remeasurement charges due to changes in the fair value of contingent earn-out liabilities.

(c)

Represents adjustments to estimated tariff refund receivables.

(d)

Represents third-party transaction, legal, and consulting costs directly related to the acquisition of Spartan that was completed in fiscal 2021.

(e)

Amounts are comprised of sanitation, personal protective equipment, and other costs that directly related to efforts to mitigate the impact of the COVID-19 pandemic on our business.

(f)

Represents legal fees incurred in connection with amendments to the senior secured term loan credit facility executed during the twenty-six weeks ended July 1, 2021.

(g)

Tax benefit resulting from stock option exercises and the vesting of restricted stock and restricted stock units.

(h)

Tax adjustments for pre-tax adjustments above.

EBITDA and Adjusted EBITDA

(In thousands)

(Unaudited)

 

 

Thirteen Weeks Ended

 

June 30, 2022

 

July 1, 2021

Net income (GAAP):

$

81,832

 

$

82,916

Depreciation and amortization (a)

 

37,517

 

 

27,377

Interest expense, net

 

1,672

 

 

1,293

Income tax expense

 

22,906

 

 

14,348

EBITDA

 

143,927

 

 

125,934

Stock-based compensation expense (b)

 

4,889

 

 

5,319

Acquisition and integration expense (c)

 

—

 

 

3,166

Tariff refund adjustments (d)

 

—

 

 

1,728

COVID-19 costs (e)

 

—

 

 

408

Other (f)

 

1,481

 

 

469

Adjusted EBITDA

$

150,297

 

$

137,024

 

Twenty-six Weeks Ended

 

June 30, 2022

 

July 1, 2021

Net income (GAAP):

$

152,783

 

$

158,712

Depreciation and amortization (a)

 

71,637

 

 

52,897

Interest expense, net

 

2,834

 

 

2,681

Income tax expense

 

44,765

 

 

33,113

EBITDA

 

272,019

 

 

247,403

Stock-based compensation expense (b)

 

10,869

 

 

10,053

Acquisition and integration expense (c)

 

—

 

 

3,166

Tariff refund adjustments (d)

 

—

 

 

1,728

COVID-19 costs (e)

 

—

 

 

624

Other (f)

 

3,186

 

 

1,125

Adjusted EBITDA

$

286,074

 

$

264,099

(a)

Excludes amortization of deferred financing costs, which is included as part of interest expense, net in the table above.

(b)

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

(c)

Represents third-party transaction, legal, and consulting costs directly related to the acquisition of Spartan that was completed in fiscal 2021.

(d)

Represents a reduction in the non-interest portion of estimated tariff refund receivables during the thirteen and twenty-six weeks ended July 1, 2021. Interest income for tariff refunds is included within interest expense, net in the table above.

(e)

Amounts are comprised of sanitation, personal protective equipment, and other costs directly related to efforts to mitigate the impact of the COVID-19 pandemic on our business.

(f)

Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for the thirteen and twenty-six weeks ended June 30, 2022 primarily relate to expenses for our Houston distribution center relocation that was completed during the first half of fiscal 2022 and changes in the fair value of contingent earn-out liabilities. Amounts for the thirteen weeks ended July 1, 2021 primarily relate to relocation expenses for our Houston distribution center, and amounts for the twenty-six weeks ended July 1, 2021 primarily relate to relocation expenses for our Houston distribution center and legal fees associated with the February 2021 amendment to our senior secured term loan credit facility.

Forward-Looking Statements

This release and the associated webcast/conference call contain forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this release, including statements regarding the Company’s future operating results and financial position, expectations related to our acquisition of Spartan Surfaces, Inc. (“Spartan”), business strategy and plans, objectives of management for future operations, and the impact of the coronavirus (COVID-19) pandemic, 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 the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions regarding the Company’s business, the economy and other future conditions, including the impact of the COVID-19 pandemic.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “seeks,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “budget,” “potential,” “focused on” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements contained in this release are only predictions. Although the Company believes that the expectations reflected in the forward-looking statements in this release are reasonable, the Company 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 release or the associated webcast/conference call, including, without limitation, (1) an overall decline in the health of the economy, the hard surface flooring industry, consumer confidence and spending and the housing market, including as a result of rising inflation or interest rates or the COVID-19 pandemic, (2) an economic recession or depression, (3) global inflationary pressures on raw materials could cause our vendors to seek further price increases on the products we sell, (4) our failure to successfully anticipate consumer preferences and demand, (5) our inability to manage our growth, (6) our inability to manage costs and risks relating to new store openings, (7) our inability to find available locations for our stores on terms acceptable to us, (8) any disruption in our distribution capabilities, including from difficulties operating our distribution centers, (9) any disruption in our supply chain, including carrier capacity constraints, higher shipping prices and other supply chain costs or product shortages, (10) our failure to execute our business strategy effectively and deliver value to our customers, (11) our inability to find, train and retain key personnel, (12) the resignation, incapacitation or death of any key personnel, (13) the inability to staff our stores and distribution centers sufficiently, including for reasons due to the COVID-19 pandemic and other impacts of the COVID-19 pandemic, (14) a pandemic, such as COVID-19, or other natural disaster or unexpected event, and its impacts on our suppliers, customers, employees, lenders, operations, including our ability to operate our distribution centers and stores or on the credit markets or our future financial and operating results, (15) our dependence on foreign imports for the products we sell, which may include the impact of tariffs and other duties, (16) geopolitical risks, such as the recent military conflict in the Ukraine, that impact our ability to import from foreign suppliers or raise our costs, (17) any restrictions, regulations, blocks or changes in the use of “cookie” tracking technologies could cause cookies to become less reliable or acceptable as a means of tracking consumer behavior, which could cause the amount of accuracy of internet user information we collect to decrease, which could harm our business and operating results, (18) violations of laws and regulations applicable to us or our suppliers, (19) our failure to adequately protect against security breaches involving our information technology systems and customer information, (20) suppliers may sell similar or identical products to our competitors, (21) competition from other stores and internet-based competition, (22) increases in commodity, material, transportation and energy costs, including the impact such increases could have on the cost of goods sold, (23) impact of acquired companies, including Spartan, (24) our inability to manage our inventory obsolescence, shrinkage and damage, (25) our inability to maintain sufficient levels of cash flow or liquidity to meet growth expectations, (26) our inability to obtain merchandise on a timely basis at prices acceptable to us and (27) restrictions imposed by our indebtedness on our current and future operations. Additional information concerning these and other factors are described in “Forward-Looking Statements,” Item 1, “Business” and Item 1A, “Risk Factors” of Part I and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 9A, “Controls and Procedures” of Part II of the Company’s Annual Report for fiscal 2021 filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2022 (the “Annual Report”) and elsewhere in the Annual Report, and those described in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 1A, “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022 (the “10-Q”) and elsewhere in the 10-Q, and those described in the Company’s other filings with the SEC.

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 release or the associated webcast/conference call speak only as of the date hereof. New risks and uncertainties arise over time, and it is not possible for the Company to predict those events or how they may affect the Company. If a change to the events and circumstances reflected in the Company’s forward-looking statements occurs, the Company’s business, financial condition and operating results may vary materially from those expressed in the Company’s forward-looking statements. Except as required by applicable law, the Company does not plan to publicly update or revise any forward-looking statements contained herein or in the associated webcast/conference call, whether as a result of any new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005939/en/

Investor Contacts:

Wayne Hood Vice President of Investor Relations 678-505-4415 wayne.hood@flooranddecor.com

or

Matt McConnell Senior Manager of Investor Relations 770-257-1374 matthew.mcconnell@flooranddecor.com