FLOOR & DECOR HOLDINGS, INC., 10-Q filed on 4/30/2020
Quarterly Report
v3.20.1
Document and Entity Information - shares
3 Months Ended
Mar. 26, 2020
Apr. 28, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 26, 2020  
Entity File Number 001-38070  
Entity Registrant Name Floor & Decor Holdings, Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 27-3730271  
Entity Address, Address Line One 2500 Windy Ridge Parkway SE  
Entity Address, City or Town Atlanta  
Entity Address, Postal Zip Code 30339  
Entity Address, State or Province GA  
City Area Code 404  
Local Phone Number 471-1634  
Title of 12(b) Security Class A common stock, $0.001 par value per share  
Trading Symbol FND  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   102,311,502
Entity Central Index Key 0001507079  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2020  
v3.20.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 26, 2020
Dec. 26, 2019
Current assets:    
Cash and cash equivalents $ 289,931 $ 27,037
Income taxes receivable 0 2,868
Receivables, net 50,561 69,301
Inventories, net 588,941 581,865
Prepaid expenses and other current assets 21,562 20,415
Total current assets 950,995 701,486
Fixed assets, net 473,081 456,289
Right-of-use assets 865,515 822,256
Intangible assets, net 109,291 109,299
Goodwill 227,447 227,447
Other assets 7,551 7,532
Total long-term assets 1,682,885 1,622,823
Total assets 2,633,880 2,324,309
Current liabilities:    
Current portion of term loans 1,808 0
Current portion of lease liabilities 67,588 74,592
Trade accounts payable 319,815 368,459
Accrued expenses and other current liabilities 100,423 102,807
Income taxes payable 9,674 0
Deferred revenue 7,189 6,683
Total current liabilities 506,497 552,541
Term loans 138,326 142,606
Revolving line of credit 275,000 0
Lease liabilities 889,021 844,269
Deferred income tax liabilities, net 13,633 18,378
Other liabilities 2,114 2,179
Total long-term liabilities 1,318,094 1,007,432
Total liabilities 1,824,591 1,559,973
Commitments and contingencies (Note 5)
Capital stock:    
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at March 26, 2020 and December 26, 2019 0 0
Additional paid-in capital 378,234 370,413
Accumulated other comprehensive (loss) income, net (125) (193)
Retained earnings 431,078 394,015
Total stockholders' equity 809,289 764,336
Total liabilities and stockholders' equity 2,633,880 2,324,309
Class A Common Stock    
Capital stock:    
Common stock 102 101
Class B Common Stock    
Capital stock:    
Common stock 0 0
Class C Common Stock    
Capital stock:    
Common stock $ 0 $ 0
v3.20.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 26, 2020
Dec. 26, 2019
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000  
Preferred stock, shares issued 0  
Preferred stock, shares outstanding 0  
Class A Common Stock    
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]    
Common stock, par value $ 0.001  
Common stock, shares authorized 450,000,000  
Common stock, shares issued 102,308,612 101,457,858
Common stock, shares outstanding 102,308,612 101,457,858
Class B Common Stock    
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]    
Common stock, par value $ 0.001  
Common stock, shares authorized 10,000,000  
Common stock, shares issued 0  
Common stock, shares outstanding 0  
Class C Common Stock    
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]    
Common stock, par value $ 0.001  
Common stock, shares authorized 30,000,000  
Common stock, shares issued 0  
Common stock, shares outstanding 0  
v3.20.1
Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 26, 2020
Mar. 28, 2019
Income Statement [Abstract]    
Net Sales $ 554,937 $ 477,050
Revenue, Product and Service [Extensible List] us-gaap:ProductMember  
Cost of sales $ 318,905 275,676
Cost, Product and Service [Extensible List] us-gaap:ProductMember  
Gross profit $ 236,032 201,374
Operating expenses:    
Selling and store operating 153,066 127,383
General and administrative 30,858 30,202
Pre-opening 5,434 4,027
Total operating expenses 189,358 161,612
Operating income 46,674 39,762
Interest expense, net 1,807 2,921
Income before income taxes 44,867 36,841
Provision for income taxes 7,804 6,121
Net income 37,063 30,720
Change in fair value of hedge instruments, net of tax, post-adoption 68 (334)
Total comprehensive income $ 37,131 $ 30,386
Basic earnings per share $ 0.36 $ 0.31
Diluted earnings per share $ 0.35 $ 0.29
v3.20.1
Condensed Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Common stock
Class A Common Stock
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Class A Common Stock
Class B Common Stock
Class C Common Stock
Total
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Cumulative effect from adoption       $ (179)       $ (179)
Balance at Dec. 27, 2018 $ 98 $ 340,462 $ 186 243,563       584,309
Beginning balance (in shares) at Dec. 27, 2018 97,588,000              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Stock-based compensation expense   2,250           2,250
Exercise of stock options   1,776           1,776
Exercise of stock options (in shares) 348,000              
Shares issued under employee stock plan   1,419           1,419
Shares issued under employee stock plan (in shares) 61,000              
Other comprehensive gain (loss), net of tax, post-adoption     (334)         (334)
Net income       30,720       30,720
Balance at Mar. 28, 2019 $ 98 345,907 (148) 274,104       619,961
Ending balance (in shares) at Mar. 28, 2019 97,997,000              
Balance at Dec. 26, 2019 $ 101 370,413 (193) 394,015       764,336
Beginning balance (in shares) at Dec. 26, 2019 101,458,000       101,457,858      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Stock-based compensation expense $ 0 2,908 0 0       2,908
Stock-based compensation (in shares) 0              
Exercise of stock options $ 1 3,782 0 0       $ 3,783
Exercise of stock options (in shares) 453,000             453,330
Shares issued under employee stock plan $ 0 1,131 0 0       $ 1,131
Shares issued under employee stock plan (in shares) 30,000              
Issuance of restricted stock award $ 0 0 0 0       0
Issuance of restricted stock award (in shares) 368,000              
Other comprehensive gain (loss), net of tax, post-adoption $ 0 0 68 0       68
Net income 0 0 0 37,063       37,063
Balance at Mar. 26, 2020 $ 102 $ 378,234 $ (125) $ 431,078       $ 809,289
Ending balance (in shares) at Mar. 26, 2020 102,309,000       102,308,612 0 0  
v3.20.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 26, 2020
Mar. 28, 2019
Operating activities    
Net income $ 37,063 $ 30,720
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 22,088 17,184
Gain on asset impairments and disposals (29) 0
Deferred income taxes (4,739) (1,057)
Interest cap derivative contracts 83 610
Stock based compensation expense 2,908 2,250
Changes in operating assets and liabilities:    
Receivables, net 18,740 22,568
Inventories, net (7,076) 33,510
Trade accounts payable (48,644) (84,005)
Accrued expenses and other current liabilities (2,478) 3,017
Income taxes 12,542 13,143
Deferred revenue 506 1,337
Other, net (6,296) (12,256)
Net cash provided by operating activities 24,668 27,021
Investing activities    
Purchases of fixed assets (38,384) (31,634)
Net cash used in investing activities (38,384) (31,634)
Financing activities    
Borrowings on revolving line of credit 275,000 80,200
Payments on revolving line of credit 0 (78,100)
Payments on term loans (875) (875)
Proceeds from exercise of stock options 3,783 1,776
Proceeds from employee stock purchase plan 1,131 1,419
Debt issuance costs (2,429) 0
Net cash provided by (used in) financing activities 276,610 4,420
Net increase in cash and cash equivalents 262,894 (193)
Cash and cash equivalents, beginning of the period 27,037 644
Cash and cash equivalents, end of the period 289,931 451
Supplemental disclosures of cash flow information    
Buildings and equipment acquired under operating leases 63,578 53,049
Cash paid for interest 1,298 1,987
Fixed assets accrued at the end of the period $ 19,620 $ 10,836
v3.20.1
Basis of Presentation and Summary of Significant Accounting Policies
3 Months Ended
Mar. 26, 2020
Summary of Significant Accounting Policies  
Basis of Presentation and Summary of Significant Accounting Policies

1. Basis of Presentation and 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/ luxury vinyl plank, 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 our products for professional installation (“Buy-it-Yourself” or “BIY”). We operate within one reportable segment.

As of March 26, 2020, the Company, through its wholly owned subsidiary, Floor and Decor Outlets of America, Inc., operates 123 warehouse-format stores, which average 76,000 square feet, and one small-format standalone design center in 30 states, as well as four 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 year ending December 31, 2020 (“fiscal 2020”) includes 53 weeks, and the fiscal year ended December 26, 2019 (“fiscal 2019”) included 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 each quarter of the fiscal year.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its 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 26, 2019 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 2019, filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2020 (the “Annual Report”).

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 weeks ended March 26, 2020 and March 28, 2019 are not necessarily indicative of the results to be expected for the full years.

Impact of the Novel Coronavirus

On March 11, 2020, the World Health Organization announced that infections of the coronavirus (COVID-19) had become a pandemic, and on March 13, 2020, the U.S. President announced a National Emergency relating to the COVID-19 pandemic. While the full impact that the COVID-19 pandemic could have on our business remains highly uncertain, the Company currently anticipates that disruptions resulting from the pandemic will have a material negative impact on its sales and results of operations, financial position, and cash flows in fiscal 2020.

While these potential negative effects will not be fully reflected in the Company’s results of operations and overall financial performance until future periods, the Company has already experienced an impact to its operating results related to the COVID-19 pandemic. In particular, beginning on March 17, 2020 and continuing through the date we filed this report, the Company has closed some of its stores, and then on March 21, 2020, shifted its remaining stores to a curbside pickup model in the jurisdictions where government regulations permit such stores to continue to operate and where the customer demand makes such operations sustainable. From March 21, 2020 through March 26, 2020, the six days during the first quarter of fiscal 2020 in which the Company’s stores were limited to curbside operations, the Company experienced a 46% decline in comparable store sales* compared to the same period in the prior year, which is reflected in the Company’s condensed consolidated statements of operations and comprehensive income for the thirteen weeks ended March 26, 2020. See Note 8, “Subsequent Events” for additional information on the impact of the COVID-19 pandemic on the Company’s operations.

*Comparable store sales refer to period-over-period comparisons of our net sales among the comparable store base. A store is included in the comparable store base on the first day of the thirteenth full fiscal month following its opening.

Summary of Significant Accounting Policies

Other than as noted below, there have been no updates to our Significant Accounting Policies since the Annual Report. For more 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.

Impairment Assessment of Goodwill and Other Indefinite-Lived Intangible Assets

The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each fiscal year, or more often if events occur or changes in circumstances indicate that the carrying amount of goodwill or indefinite-lived intangible assets may not be recoverable. We assess the value of our goodwill and indefinite-lived intangible assets under either a qualitative or quantitative approach. Under a qualitative approach, the Company evaluates various market and other factors to determine whether it is more likely than not that the Company’s goodwill or indefinite-lived intangible assets have been impaired. In performing the qualitative assessment, the Company considers the carrying value of its single reporting unit compared to its fair value as well as events and changes in circumstances that could include, but are not limited to, a significant adverse change in customer demand or business climate, an adverse action or assessment by a regulator, and significant adverse changes in the price of the Company’s common stock. If such qualitative assessment indicates that impairment may have occurred, an additional quantitative assessment is performed by comparing the carrying value of the assets to their respective estimated fair values. If the recorded carrying value of goodwill or an indefinite-lived intangible asset exceeds its estimated fair value, an impairment charge is recorded to write the asset down to its estimated fair value.

Due to the impact of the COVID-19 pandemic on the Company’s operations and the markets in which it operates, the Company qualitatively assessed whether it was more likely than not that the goodwill and indefinite-lived intangible assets were impaired as of March 26, 2020. Based on this interim impairment assessment as of March 26, 2020, the Company determined that its goodwill and indefinite-lived intangible assets were not impaired.

Recently Adopted Accounting Pronouncements

Implementation Costs Incurred in Cloud Computing Arrangements. In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and early adoption is permitted. The adoption of ASU No. 2018-15 in the first quarter of fiscal 2020 did not have a material impact on the Company’s condensed consolidated financial statements.

Credit Losses. In June 2016, the FASB issued ASU No. 2016-03, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which modifies the measurement approach for credit losses on financial assets measured on an amortized cost basis from an 'incurred loss' method to an 'expected loss' method. The amended guidance requires the measurement of expected credit losses to be based on relevant information, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset. The adoption of ASU No. 2016-03 in the first quarter of fiscal 2020 did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance to ease the potential accounting and financial reporting burden of reference rate reform, including the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The new guidance provides temporary optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. Unlike other topics, the provisions of this update are only available until December 31, 2022, by which time the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures and has yet to elect an adoption date.

Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The ASU also clarifies and amends existing guidance to improve consistent application among reporting entities. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

v3.20.1
Revenues
3 Months Ended
Mar. 26, 2020
Revenue from Contract with Customer [Abstract]  
Revenues

2. Revenues

Net sales consist of revenue associated with contracts with customers for the sale of goods in amounts that reflect the consideration the Company is entitled to receive in exchange for those goods and services.

Deferred Revenue

Under Accounting Standards Codification (“ASC”) 606, the Company recognizes revenue 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.

Disaggregated Revenue

The Company has one operating segment and one reportable segment. The following table presents the net sales of each major product category (in thousands):

Thirteen Weeks Ended

March 26, 2020

March 28, 2019

    

% of

    

    

% of

    

Product Category

Net Sales

Net Sales

Net Sales

Net Sales

Tile

$

134,912

 

24

%  

$

125,310

 

26

%

Laminate / luxury vinyl plank

 

124,994

 

23

 

97,502

 

20

Decorative accessories / wall tile

 

113,597

 

20

 

94,440

 

20

Installation materials and tools

 

94,576

 

17

 

79,709

 

17

Wood

 

48,995

 

9

 

49,230

 

10

Natural stone

 

34,877

 

6

 

30,887

 

7

Other (1)

 

2,986

 

1

 

(28)

 

Total

$

554,937

 

100

%  

$

477,050

 

100

%

(1) Other includes delivery revenue less adjustments for deferred revenue, sales returns reserves, rewards under our Pro Premier Loyalty program, and other revenue related adjustments that are not allocated on a product-level basis.

v3.20.1
Debt
3 Months Ended
Mar. 26, 2020
Debt  
Debt

3. Debt

The following table summarizes our long-term debt as of March 26, 2020 and December 26, 2019:

March 26,

    

December 26,

in thousands

2020

2019

Credit Facilities:

UBS Facility Term Loan B

$

144,625

$

145,500

Wells Facility Revolving Line of Credit

275,000

Total secured debt at par value

419,625

145,500

Less: unamortized discount and debt issuance costs

 

4,491

 

2,894

Net carrying amount

415,134

142,606

Less: current maturities

1,808

Total long-term debt

$

413,326

$

142,606

Total debt at fair value

$

397,931

$

145,136

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.

The following table summarizes scheduled maturities of the Company’s debt, including current maturities, as of March 26, 2020:

in thousands

    

Amount

Forty weeks ended December 31, 2020

$

1,446

2021

 

1,085

2022

 

1,446

2023

1,446

2024

1,446

Thereafter (1)

412,756

Total minimum debt payments

$

419,625

(1) Thereafter maturities are comprised of $275,000 thousand due at maturity of the revolving credit facility on February 14, 2025 and $137,756 thousand due on the senior secured term loan facility through February 14, 2027.

Credit Facility Amendments

In February 2020, the Company refinanced its outstanding debt by entering into amendments to the credit and security agreements governing its senior secured term loan facility and revolving credit facility.

Amended Term Loan Facility

On February 14, 2020, the Company entered into a repricing and general amendment to the credit agreement governing its senior secured term loan facility (as amended, the “Amended Term Loan Facility”) that, among other things, (a) refinanced the existing term loan facility with a new term loan facility in the same aggregate principal amount of approximately $144,625 thousand, and (b) extended the stated maturity date under the Amended Term Loan Facility to February 14, 2027. The Amended Term Loan Facility also includes an “accordion” feature that allows the Company, under certain circumstances, to increase the size of the facility by an amount up to the greater of $270,000 thousand or 100.0% of Consolidated EBITDA (as defined in the Amended Term Loan Facility), plus additional amounts (x) if such increase is secured on a pari passu basis with the loans under the Amended Term Loan Facility, up to a Consolidated First Lien Leverage Ratio (as defined in the Amended Term Loan Facility) of 2.50:1.00, (y) if such increase is secured on a junior basis with the loans under the Amended Term Loan Facility, up to a Consolidated Secured Leverage Ratio (as defined in the Amended Term Loan Facility) of 3.50:1.00 and (z) if such increase is unsecured, up to a Consolidated Total Leverage Ratio (as defined in the Amended Term Loan Facility) of 3.50:1.00, subject to certain additional adjustments, which, under certain circumstances, allow for a Consolidated Total Leverage Ratio of up to 4.50:1.00.

The amendment to the Amended Term Loan Facility also amended the margin applied to loans to (x) in the case of ABR Loans (as defined in the Amended Term Loan Facility), from 1.75% or 1.50% per annum (based on credit rating tests) to 1.00% per annum (subject to satisfying a leverage ratio test and subject to a leverage-based step-up to 1.25% if such leverage ratio test is exceeded), and (y) in the case of Eurodollar Loans (as defined in the Amended Term Loan Facility), from 2.75% or 2.50% per annum (based on credit rating tests) to 2.00% per annum (subject to satisfying a leverage ratio test and subject to a leverage-based step-up to 2.25% if such leverage ratio test is exceeded) (subject to a 0.00% floor on Eurodollar Loans). The material terms of the Amended Term Loan Facility were otherwise unchanged. At March 26, 2020, the applicable interest rate for borrowings under the Amended Term Facility was 3.6%.

The Company evaluated the amendments to the term loan facility in accordance with ASC 470-50 and determined that the amendments resulted in a debt modification that was not an extinguishment. Therefore, no loss on debt extinguishment was recognized. The Company incurred costs of $2,501 thousand in connection with the refinancing which were comprised of (i) $1,779 thousand of fees to creditors that were accounted for as debt issuance costs and are amortizing to interest expense over the term of the Amended Term Loan Facility using the interest method and (ii) $722 thousand of professional fees to other third parties that were expensed during the thirteen week period ended March 26, 2020 and included in general and administrative expense on the consolidated statements of operations and comprehensive income.

Amended ABL Facility

On February 14, 2020, the Company also entered into a repricing and general amendment to the credit agreement governing its revolving credit facility (as amended, the “Amended ABL Facility”) that, among other things, (a) increased its revolving commitments to a total aggregate principal amount of $400,000 thousand, and (b) extended the stated maturity date under the Amended ABL Facility to February 14, 2025. The Amended ABL Facility also includes an “accordion” feature that allows the Company under certain circumstances, to increase the size of the facility by an amount up to $100,000 thousand, or such higher amount as may be agreed to by the Required Lenders (as defined in the Amended ABL Facility).

The amendment to the Amended ABL Facility also amended the margin applied to loans and letters of credit to (x) in the case of Base Rate Loans (as defined in the Amended ABL Facility), from 0.25% or 0.50% per annum (based on availability) to a flat rate of 0.25% per annum, (y) in the case of LIBO Rate Loans (as defined in the Amended ABL Facility) and letter of credit fees for standby letters of credit, from 1.25% or 1.50% per annum (based on availability) to a flat rate of 1.25% per annum (subject to a 0.00% floor on LIBO Rate Loans) and (z) in the case of letter of credit fees for commercial letters of credit, from 0.75% or 1.00% per annum (based on availability) to a flat rate of 0.75% per annum. The material terms of the Amended ABL Facility were otherwise unchanged. At March 26, 2020, the applicable interest rate for borrowings under the Amended ABL Facility was 2.0%.

The Company evaluated the amendments to the ABL facility in accordance with ASC 470-50 and determined that the amendments increased the borrowing capacity of the facility. In connection with this transaction, the Company incurred $650 thousand of costs that were deferred and are amortizing to interest expense over the term of the Amended ABL Facility.

As of March 26, 2020, the Amended ABL Facility had a maximum availability of $400,000 thousand with actual available borrowings limited to the sum, at the time of calculation, of (a) eligible credit card receivables multiplied by the credit card advance rate, plus (b) the cost of eligible inventory, net of inventory reserves, multiplied by the applicable appraisal percentage, plus (c) 85% of eligible net trade receivables, plus (d) all eligible cash on hand, plus (e) 100% of the amount for which the eligible letter of credit must be honored after giving effect to any draws, minus certain Availability Reserves (each component as defined in the Amended ABL Facility). The Amended ABL Facility is available for issuance of letters of credit and contains a sublimit of $50,000 thousand for standby letters of credit and commercial letters of credit combined. Available borrowings under the facility are reduced by the face amount of outstanding letters of credit.

Net availability under the Amended ABL Facility, as reduced by outstanding letters of credit of $20,512 thousand, was $85,676 thousand based on financial data as of March 26, 2020.

Covenants

The credit agreements governing the Amended Term Loan Facility and Amended ABL Facility contain customary restrictive covenants that, among other things and with certain exceptions, limit the Company’s ability to (i) incur additional indebtedness and liens in connection with such indebtedness, (ii) pay dividends and make certain other restricted payments, (iii) effect mergers or consolidations, (iv) enter into transactions with affiliates, (v) sell or dispose of property or assets, and (vi) engage in unrelated lines of business. In addition, these credit agreements subject the Company to certain reporting obligations and require that the Company satisfy certain financial covenants, including, among other things:

a requirement that if borrowings under the Amended ABL Facility exceed 90% of availability, the Company will maintain a certain fixed charge coverage ratio (defined as Consolidated EBITDA less non-financed capital expenditures and income taxes paid to consolidated fixed charges, in each case as more fully defined in the credit agreement governing the Amended ABL Facility).

The Amended Term Loan Facility has no financial maintenance covenants. The Company is currently in compliance with all material covenants under the credit agreements.

v3.20.1
Income Taxes
3 Months Ended
Mar. 26, 2020
Income Taxes  
Income Taxes

4. Income Taxes

Effective tax rates for the thirteen weeks ended March 26, 2020 and March 28, 2019 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within each period. The Company’s effective income tax rate was 17.4% for the thirteen weeks ended March 26, 2020 and 16.6% for the thirteen weeks ended March 28, 2019. The effective income tax rate in each of these periods was lower than the statutory federal income tax rate of 21.0% primarily due to the recognition of income tax benefits for discrete items, the largest of which were tax deductions in excess of book expense related to stock option exercises. For the thirteen weeks ended March 26, 2020 and March 28, 2019, benefits for discrete items were partially offset by the recognition of discrete expense totaling $2.2 million and $0.1 million, respectively, for loss contingencies related to uncertain tax positions, including estimated interest and penalties related to such positions.

The Company accounts for income taxes under the liability method in accordance with ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and tax basis of existing assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in the period that includes the enactment date of such a change.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences became deductible. On a quarterly basis, the Company evaluates whether it is more likely than not that its deferred tax assets will be realized in the future and concludes whether or not a valuation allowance must be established.

The Company accounts for uncertain tax positions in accordance with ASC 740. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements using a two-step process for evaluating tax positions taken, or expected to be taken, on a tax return. The Company may only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. In addition, the Company recognizes a loss contingency for uncertain tax positions when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The amounts recognized for uncertain tax positions require that management make estimates and judgments based on provisions of the tax law, which may be subject to change or varying interpretations. The Company includes estimated interest and penalties related to uncertain tax position accruals within accrued expenses and other current liabilities in the condensed consolidated balance sheets and within income tax expense in the condensed consolidated statements of operations and comprehensive income.

v3.20.1
Commitments and Contingencies
3 Months Ended
Mar. 26, 2020
Commitments and Contingencies.  
Commitments and Contingencies

5. Commitments and Contingencies

Lease Commitments

The Company accounts for leases in accordance with ASC 842, Leases. The majority of our long-term operating lease agreements are for our corporate office, retail locations, and distribution centers, which expire in various years through 2040. The majority of our building 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 our leases do not provide a readily determinable implicit rate. If the rate implicit in the lease is not readily determinable, we use 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 March 26, 2020, our weighted average discount rate was 5.2%, and our weighted average remaining lease term was 10 years.

Lease Costs

The table below presents components of lease expense for operating leases.

    

Thirteen Weeks Ended

in thousands

Classification

March 26, 2020

March 28, 2019

Operating lease cost (1)

Selling and store operating

$

33,816

$

26,015

Sublease income

Selling and store operating

 

(597)

 

(623)

Total lease cost

$

33,219

$

25,392

(1) Includes variable lease costs, which were immaterial for the thirteen weeks ended March 26, 2020 and March 28, 2019.

Undiscounted Cash Flows

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of March 26, 2020 were as follows:

in thousands

    

Amount

Forty weeks ended December 31, 2020

$

119,364

2021

 

133,445

2022

 

126,405

2023

 

123,690

2024

 

119,965

Thereafter

 

642,961

Total minimum lease payments (2)

$

1,265,830

Less: amount of lease payments representing interest

309,221

Present value of future minimum lease payments

956,609

Less: current obligations under leases

67,588

Long-term lease obligations

$

889,021

(2) Future lease payments exclude approximately $91.7 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

For the thirteen weeks ended March 26, 2020, cash paid for operating leases was $32.9 million.

Litigation

On May 20, 2019, an alleged stockholder of the Company filed a putative class action lawsuit, Taylor v. Floor & Decor Holdings, Inc., et al., No. 1:19-cv-02270-SCJ (N.D. Ga.), in the United States District Court for the Northern District of Georgia against the Company and certain of our officers, directors and stockholders. On August 14, 2019, the Court named a lead plaintiff, and the case was re-captioned In re Floor & Decor Holdings, Inc. Securities Litigation, No. 1:19-cv-02270-SCJ (N.D. Ga.). The operative complaint alleges certain violations of federal securities laws based on, among other things, purported materially false and misleading statements and omissions allegedly made by the Company between May 23, 2018 and August 1, 2018 and seeks class certification, unspecified monetary damages, costs and attorneys’ fees and equitable relief. The Company denies the material allegations and has moved to dismiss the lawsuit. In addition, the Company maintains insurance that may cover any liability arising out of this litigation up to the policy limits and subject to meeting certain deductibles and to other terms and conditions thereof. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from this litigation.

We are also subject to various other 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. 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 various other ordinary course proceedings are not expected to have a material impact on our consolidated financial position, cash flows, or results of operations, however 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.

v3.20.1
Stock-Based Compensation
3 Months Ended
Mar. 26, 2020
Stock-Based Compensation Abstract  
Stock-Based Compensation

6. Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation- Stock Compensation, which requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of forfeitures, over the requisite service period for awards expected to vest. Stock compensation expense for the thirteen weeks ended March 26, 2020 and March 28, 2019 was $2.9 million and $2.2 million, respectively, and was included in general and administrative expenses on the Company’s condensed consolidated statement of operations and comprehensive income.

On February 24, 2020, the Company granted a combination of stock options, restricted stock units, and restricted stock to our non-employee directors and certain of our employees under the 2017 Stock Incentive Plan as part of our annual long-term incentive grants, as outlined below.

Stock Options

The stock options granted to eligible employees during the first quarter of fiscal 2020 had a weighted average grant-date fair value of $21.81 and vest in four ratable annual installments on each of the first four anniversaries of the grant date, subject to the grantee’s continued service through the applicable vesting date. The Company estimates the fair value of stock option grants using the Black-Scholes-Merton option pricing model with the following weighted average assumptions:

    

Thirteen Weeks Ended

March 26, 2020

Risk-free interest rate

 

1.24

%  

Expected volatility

 

38.4

%  

Expected life (in years)

 

5.75

 

Dividend yield

%  

The Company determines the grant date fair value of stock options with assistance from a third-party valuation specialist. Expected volatility is estimated based on the historical volatility of the Company’s Class A common stock since its initial public offering in 2017 as well as the historical volatility of the common stock of similar public entities. The Company considers various factors in determining the appropriateness of the public entities used in determining expected volatility, including the entity's life cycle stage, industry, growth profile, size, financial leverage, and products offered. To determine the expected life of the options granted, the Company relied upon a combination of the observed exercise behavior of prior grants with similar characteristics and the contractual terms and vesting schedules of the current grants. The risk-free interest rate is based on the term structure of interest rates at the time of the option grant.

Stock option activity during the thirteen weeks ended March 26, 2020 was as follows: 

    

    

Weighted

Average

Exercise

Options

Price

Outstanding at December 26, 2019

 

6,037,079

$

13.64

Granted

 

270,531

 

57.70

Exercised

 

(453,330)

 

8.34

Forfeited or expired

 

(27,648)

 

23.27

Outstanding at March 26, 2020

 

5,826,632

$

16.05

The Company’s total unrecognized compensation cost related to stock options as of March 26, 2020 was $22,753 thousand, which is expected to be recognized over a weighted average period of 2.8 years.

Restricted Stock Units

During the thirteen weeks ended March 26, 2020, the Company granted 108,242 restricted stock units to certain employees with a weighted average grant-date fair value of $57.70. The restricted stock units granted to eligible employees represent an unfunded, unsecured right to receive a share of the Company’s Class A common stock upon vesting. These awards vest in four ratable annual installments on each of the first four anniversaries of the grant date, subject to the grantee’s continued service through the applicable vesting date. The fair value of the restricted stock units was determined based on the closing price of the Company’s Class A common stock on the date of grant.

The Company’s total unrecognized compensation cost related to restricted stock units as of March 26, 2020 was $6,096 thousand, which is expected to be recognized over a weighted average period of 3.9 years.

Restricted Stock Awards

During the thirteen weeks ended March 26, 2020, the Company issued 367,702 shares of restricted stock to certain executive officers and non-employee directors, comprised of 160,315 shares of restricted stock with a payout subject to certain performance criteria (“performance-based restricted stock”), 104,456 shares of restricted stock with a payout subject to the Company’s total shareholder return (“TSR”) compared to a specified peer group (“TSR awards”), and 102,931 shares of restricted stock that vest based on the grantee’s continued service through the applicable vesting dates (“service-based restricted stock”).

The fair value of performance-based and service-based restricted stock awards is based on the closing market price of the Company's Class A common stock on the date of grant. The fair value of the TSR awards is estimated on grant date using the Monte Carlo valuation method. The weighted-average fair value of all restricted stock granted during the first quarter of fiscal 2020 was $53.89.

Compensation cost for restricted stock awards is recognized using the straight-line method over the requisite service period, which for each of the awards is the service vesting period. The service vesting period for awards granted during the first quarter of fiscal 2020 was one year for non-employee directors and ranged between three to four years for awards to executive officers. As of March 26, 2020, total unrecognized compensation cost related to unvested restricted stock awards was $20,085 thousand, which is expected to be recognized over a weighted average period of 3.8 years.

The performance-based restricted stock cliff vest based on (i) the Company's achievement of pre-determined financial metrics at the end of a three-year performance period and (ii) the grantee’s continued service through the vesting date. The TSR awards cliff vest based on (i) the Company's relative total shareholder return (“TSR”) compared to a specified peer group, with no vesting unless the Company’s TSR exceeds the median TSR of the specified peer group and (ii) the grantee’s continue service through the vesting date. In accordance with ASC 718, Stock Compensation, as the TSR awards are subject to a market condition, their fair value was estimated using a Monte Carlo valuation model with the following assumptions:

    

Thirteen Weeks Ended

    

March 26, 2020

Risk-free interest rate

 

1.21

%  

Expected volatility

 

46.5

%  

Expected term (in years)

 

2.84

 

Dividend yield

%  

v3.20.1
Earnings Per Share
3 Months Ended
Mar. 26, 2020
Earnings Per Share  
Earnings Per Share

7. 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 share-based awards.

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

    

Thirteen Weeks Ended

March 26,

March 28,

in thousands, except per share data

2020

    

2019

Net income

$

37,063

$

30,720

Basic weighted average shares outstanding

 

101,629

 

97,785

Dilutive effect of share-based awards

 

3,881

6,536

Diluted weighted average shares outstanding

 

105,510

 

104,321

Basic earnings per share

$

0.36

$

0.31

Diluted earnings per share

$

0.35

$

0.29

The following share-based awards have been excluded from the computation of dilutive earnings per share because their effect would be anti-dilutive:

    

Thirteen Weeks Ended

March 26,

March 28,

in thousands

2020

2019

Stock options

 

590

 

986

Restricted stock

284

Restricted stock units

108

v3.20.1
Subsequent Events
3 Months Ended
Mar. 26, 2020
Subsequent Events  
Subsequent Events

8. Subsequent Events

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the U.S. President signed into law H.R. 748, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which includes, among other things, tax provisions such as temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary deferral of certain payments for the employer portion of social security taxes, technical corrections of prior tax legislation for tax depreciation of certain qualified improvement property, and the availability of certain refundable employee retention credits.

Due to the recent enactment of the CARES Act, the Company is currently evaluating its potential impact on the Company’s consolidated financial statements. However, the Company anticipates that it will benefit from certain of the income tax provisions of the CARES Act, including the temporary five-year net operating loss carryback allowance and the technical correction for qualified improvement property, which changes 39-year property to 15-year property eligible for 100% tax bonus depreciation. The Company estimates that these income tax provisions will result in substantial refunds of income taxes paid for fiscal 2013 through fiscal 2019 and potential reductions to fiscal 2020 income taxes. In addition, the Company expects to benefit from the temporary deferral of payments for the employer portion of social security taxes. The Company also expects to benefit from the employee retention credits and, potentially, other provisions within the CARES Act that are being assessed. Where certain income tax provisions of the CARES Act are determined to be applicable following the completion of the Company’s assessment, these may result in an income tax benefit recorded in the condensed consolidated statements of operations and comprehensive income in the second quarter of fiscal 2020, the period in which the legislation was enacted.

COVID-19 Update

On March 11, 2020, the World Health Organization announced that COVID-19 had become a pandemic, and on March 13, 2020, the U.S. President announced a National Emergency relating to the COVID-19 pandemic. National, state and local authorities have recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures, while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. The effectiveness of economic stabilization efforts, including proposed government payments to affected citizens and industries, is uncertain. Some economists are predicting the United States may enter a recession as a result of the pandemic.

Since the end of the first fiscal quarter of fiscal 2020, the impact of the COVID-19 pandemic and its adverse effects have become more prevalent in many of the locations where the Company and its customers and suppliers conduct business. As a result, the Company has begun to experience more pronounced disruptions to its operations, including a significant decline in sales. While the Company expects some of these disruptions and the decline in sales to be temporary, the Company anticipates that these and further adverse impacts resulting from the COVID-19 pandemic will have a material negative effect on its business, results of operations, financial position, and cash flows in 2020.

In addition, uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets. To the extent that the COVID-19 pandemic continues or worsens, governments may impose additional restrictions. The continued impact of the COVID-19 pandemic and any related restrictions could result in a number of adverse impacts to the Company’s business, including but not limited to additional disruption to the economy and consumers’ willingness and ability to spend, additional temporary store closures and reduced store operating hours, temporary or permanent disruption to the businesses of the professionals who rely on the Company’s products, additional work restrictions, and supply chains that are interrupted, slowed, or rendered inoperable. As a result, it may be challenging to obtain the products and services that support the Company’s business needs, and individuals could become ill, quarantined, or otherwise unable to work or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations, or taxes which could adversely impact the Company’s business, financial condition, or results of operations. Further, if the businesses of the Company’s customers are similarly affected, they might delay or reduce purchases from the Company. The potential effects of the COVID-19 pandemic also could impact the Company in a number of other ways including, but not limited to, reductions to the Company’s profitability, laws and regulations affecting the Company’s business, the availability of future borrowings, the cost of borrowings, credit risks of the Company’s customers and counterparties, and potential impairments of the carrying value of goodwill, other indefinite-lived intangible assets, right-of-use assets, fixed assets, and other assets. Given the evolving impact of the COVID-19 pandemic on the health, economic, social, and governmental environments in which the Company and its employees, customers, suppliers, and other business partners operate, the potential impact that the pandemic could have on the Company’s business remains uncertain, and the effects of the COVID-19 pandemic will not be fully reflected in the Company’s results of operations and overall financial performance until future periods.

In response to the impact and uncertainties caused by the COVID-19 pandemic and these changing conditions, the Company is implementing a number of measures to minimize cash outlays, including lowering inventory purchases and related supply chain costs to align with reduced sales, temporarily reducing compensation for all executive officers and most employees, freezing new hiring, reducing or eliminating non-essential spending, reducing advertising spending, furloughing certain employees, and delaying or reducing planned capital expenditures, including new store investments. The Company continues to monitor this rapidly developing situation and may, as necessary, reduce expenditures further, borrow additional amounts under its term loan and revolving line of credit facilities, or pursue other sources of capital that may include other forms of external financing in order to increase its cash position and preserve financial flexibility in response to the uncertainty in the United States and global markets resulting from COVID-19. Refer to Note 3, “Debt” for additional information regarding the Company’s outstanding credit facilities. The Company expects that its actions to reduce expenditures together with cash on hand, cash expected to be generated from operations, the availability of borrowings under the Company’s credit facilities, and if necessary, additional funding through other forms of external financing, will be sufficient to meet liquidity requirements, anticipated capital expenditures, and payments due under the Company’s credit facilities for at least the next twelve months. However, the COVID-19 pandemic is adversely affecting the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be readily available or available on favorable terms, especially the longer the pandemic lasts.

v3.20.1
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 26, 2020
Summary of Significant Accounting Policies  
Fiscal Year

Fiscal Year

The Company’s fiscal year is the 52- or 53-week period ending on the Thursday on or preceding December 31st. Fiscal year ending December 31, 2020 (“fiscal 2020”) includes 53 weeks, and the fiscal year ended December 26, 2019 (“fiscal 2019”) included 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 each quarter of the fiscal year.

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its 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 26, 2019 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 2019, filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2020 (the “Annual Report”).

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 weeks ended March 26, 2020 and March 28, 2019 are not necessarily indicative of the results to be expected for the full years.

Goodwill and Other Indefinite-Lived Intangible Assets

Impairment Assessment of Goodwill and Other Indefinite-Lived Intangible Assets

The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each fiscal year, or more often if events occur or changes in circumstances indicate that the carrying amount of goodwill or indefinite-lived intangible assets may not be recoverable. We assess the value of our goodwill and indefinite-lived intangible assets under either a qualitative or quantitative approach. Under a qualitative approach, the Company evaluates various market and other factors to determine whether it is more likely than not that the Company’s goodwill or indefinite-lived intangible assets have been impaired. In performing the qualitative assessment, the Company considers the carrying value of its single reporting unit compared to its fair value as well as events and changes in circumstances that could include, but are not limited to, a significant adverse change in customer demand or business climate, an adverse action or assessment by a regulator, and significant adverse changes in the price of the Company’s common stock. If such qualitative assessment indicates that impairment may have occurred, an additional quantitative assessment is performed by comparing the carrying value of the assets to their respective estimated fair values. If the recorded carrying value of goodwill or an indefinite-lived intangible asset exceeds its estimated fair value, an impairment charge is recorded to write the asset down to its estimated fair value.

Due to the impact of the COVID-19 pandemic on the Company’s operations and the markets in which it operates, the Company qualitatively assessed whether it was more likely than not that the goodwill and indefinite-lived intangible assets were impaired as of March 26, 2020. Based on this interim impairment assessment as of March 26, 2020, the Company determined that its goodwill and indefinite-lived intangible assets were not impaired.

Recently Adopted and Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Implementation Costs Incurred in Cloud Computing Arrangements. In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and early adoption is permitted. The adoption of ASU No. 2018-15 in the first quarter of fiscal 2020 did not have a material impact on the Company’s condensed consolidated financial statements.

Credit Losses. In June 2016, the FASB issued ASU No. 2016-03, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which modifies the measurement approach for credit losses on financial assets measured on an amortized cost basis from an 'incurred loss' method to an 'expected loss' method. The amended guidance requires the measurement of expected credit losses to be based on relevant information, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset. The adoption of ASU No. 2016-03 in the first quarter of fiscal 2020 did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance to ease the potential accounting and financial reporting burden of reference rate reform, including the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The new guidance provides temporary optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. Unlike other topics, the provisions of this update are only available until December 31, 2022, by which time the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures and has yet to elect an adoption date.

Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The ASU also clarifies and amends existing guidance to improve consistent application among reporting entities. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

v3.20.1
Revenues (Tables)
3 Months Ended
Mar. 26, 2020
Disaggregation of Revenue [Abstract]  
Disaggregated Revenue

Thirteen Weeks Ended

March 26, 2020

March 28, 2019

    

% of

    

    

% of

    

Product Category

Net Sales

Net Sales

Net Sales

Net Sales

Tile

$

134,912

 

24

%  

$

125,310

 

26

%

Laminate / luxury vinyl plank

 

124,994

 

23

 

97,502

 

20

Decorative accessories / wall tile

 

113,597

 

20

 

94,440

 

20

Installation materials and tools

 

94,576

 

17

 

79,709

 

17

Wood

 

48,995

 

9

 

49,230

 

10

Natural stone

 

34,877

 

6

 

30,887

 

7

Other (1)

 

2,986

 

1

 

(28)

 

Total

$

554,937

 

100

%  

$

477,050

 

100

%

(1) Other includes delivery revenue less adjustments for deferred revenue, sales returns reserves, rewards under our Pro Premier Loyalty program, and other revenue related adjustments that are not allocated on a product-level basis.

v3.20.1
Debt (Tables)
3 Months Ended
Mar. 26, 2020
Debt  
Schedule of Long Term Debt

March 26,

    

December 26,

in thousands

2020

2019

Credit Facilities:

UBS Facility Term Loan B

$

144,625

$

145,500

Wells Facility Revolving Line of Credit

275,000

Total secured debt at par value

419,625

145,500

Less: unamortized discount and debt issuance costs

 

4,491

 

2,894

Net carrying amount

415,134

142,606

Less: current maturities

1,808

Total long-term debt

$

413,326

$

142,606

Total debt at fair value

$

397,931

$

145,136

Schedule of Maturities of Debt

in thousands

    

Amount

Forty weeks ended December 31, 2020

$

1,446

2021

 

1,085

2022

 

1,446

2023

1,446

2024

1,446

Thereafter (1)

412,756

Total minimum debt payments

$

419,625

(1) Thereafter maturities are comprised of $275,000 thousand due at maturity of the revolving credit facility on February 14, 2025 and $137,756 thousand due on the senior secured term loan facility through February 14, 2027.

v3.20.1
Commitments and Contingencies (Tables)
3 Months Ended
Mar. 26, 2020
Commitments and Contingencies.  
Schedule of components of lease expense

    

Thirteen Weeks Ended

in thousands

Classification

March 26, 2020

March 28, 2019

Operating lease cost (1)

Selling and store operating

$

33,816

$

26,015

Sublease income

Selling and store operating

 

(597)

 

(623)

Total lease cost

$

33,219

$

25,392

(1) Includes variable lease costs, which were immaterial for the thirteen weeks ended March 26, 2020 and March 28, 2019.

Schedule of future minimum lease payments under non cancelable operating leases

in thousands

    

Amount

Forty weeks ended December 31, 2020

$

119,364

2021

 

133,445

2022

 

126,405

2023

 

123,690

2024

 

119,965

Thereafter

 

642,961

Total minimum lease payments (2)

$

1,265,830

Less: amount of lease payments representing interest

309,221

Present value of future minimum lease payments

956,609

Less: current obligations under leases

67,588

Long-term lease obligations

$

889,021

(2) Future lease payments exclude approximately $91.7 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

v3.20.1
Stock Based Compensation (Tables)
3 Months Ended
Mar. 26, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Schedule of stock option activity

    

    

Weighted

Average

Exercise

Options

Price

Outstanding at December 26, 2019

 

6,037,079

$

13.64

Granted

 

270,531

 

57.70

Exercised

 

(453,330)

 

8.34

Forfeited or expired

 

(27,648)

 

23.27

Outstanding at March 26, 2020

 

5,826,632

$

16.05

Stock options  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Schedule of assumptions used to estimate the fair value of awards granted

    

Thirteen Weeks Ended

March 26, 2020

Risk-free interest rate

 

1.24

%  

Expected volatility

 

38.4

%  

Expected life (in years)

 

5.75

 

Dividend yield

%  

Restricted Stock  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Schedule of assumptions used to estimate the fair value of awards granted

    

Thirteen Weeks Ended

    

March 26, 2020

Risk-free interest rate

 

1.21

%  

Expected volatility

 

46.5

%  

Expected term (in years)

 

2.84

 

Dividend yield

%  

v3.20.1
Earnings Per Share (Tables)
3 Months Ended
Mar. 26, 2020
Earnings Per Share  
Schedule of computation of basic and diluted earnings per share

    

Thirteen Weeks Ended

March 26,

March 28,

in thousands, except per share data

2020

    

2019

Net income

$

37,063

$

30,720

Basic weighted average shares outstanding

 

101,629

 

97,785

Dilutive effect of share-based awards

 

3,881

6,536

Diluted weighted average shares outstanding

 

105,510

 

104,321

Basic earnings per share

$

0.36

$

0.31

Diluted earnings per share

$

0.35

$

0.29

Schedule of awards excluded from computation

    

Thirteen Weeks Ended

March 26,

March 28,

in thousands

2020

2019

Stock options

 

590

 

986

Restricted stock

284

Restricted stock units

108

v3.20.1
Basis of Presentation and Summary of Significant Accounting Policies (Details)
ft² in Thousands
3 Months Ended 12 Months Ended
Mar. 26, 2020
ft²
state
facility
segment
Mar. 28, 2019
segment
Dec. 31, 2020
Dec. 26, 2019
Real Estate Properties [Line Items]        
Number of reportable segments | segment 1 1    
Number of states with facilities | state 30      
Number of distribution centers 4      
Fiscal year period     371 days 364 days
Fiscal quarter period 91 days      
Decline in sales, as a percent 46.00%      
Minimum        
Real Estate Properties [Line Items]        
Fiscal year period 364 days      
Maximum        
Real Estate Properties [Line Items]        
Fiscal year period 371 days      
Warehouse Format Store [Member]        
Real Estate Properties [Line Items]        
Number of stores 123      
Area of facility | ft² 76      
Small Format Store [Member]        
Real Estate Properties [Line Items]        
Number of stores 1      
v3.20.1
Revenues (Details)
$ in Thousands
3 Months Ended
Mar. 26, 2020
USD ($)
segment
Mar. 28, 2019
USD ($)
segment
Disaggregation of Revenue [Line Items]    
Number of reportable segments | segment 1 1
Number of operating segments | segment 1 1
Net Sales $ 554,937 $ 477,050
Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 554,937 $ 477,050
% of Net Sales 100.00% 100.00%
Tile [Member] | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 134,912 $ 125,310
% of Net Sales 24.00% 26.00%
Laminate Luxury Vinyl Plank [Member] | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 124,994 $ 97,502
% of Net Sales 23.00% 20.00%
Decorative Accessories [Member] | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 113,597 $ 94,440
% of Net Sales 20.00% 20.00%
Installation Materials And Tools [Member] | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 94,576 $ 79,709
% of Net Sales 17.00% 17.00%
Wood Flooring [Member] | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 48,995 $ 49,230
% of Net Sales 9.00% 10.00%
Natural Stone [Member] | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 34,877 $ 30,887
% of Net Sales 6.00% 7.00%
Other | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]    
Disaggregation of Revenue [Line Items]    
Net Sales $ 2,986 $ (28)
% of Net Sales 1.00% 0.00%
v3.20.1
Debt - Summary of Long-term Debt (Details) - USD ($)
$ in Thousands
Mar. 26, 2020
Feb. 14, 2020
Dec. 26, 2019
Debt Instrument [Line Items]      
Total debt at par value $ 419,625 $ 144,625 $ 145,500
Less: unamortized discount and debt issuance costs 4,491   2,894
Net carrying amount 415,134   142,606
Less: current maturities 1,808   0
Total long-term debt 413,326   142,606
Level 3      
Debt Instrument [Line Items]      
Total debt at fair value $ 397,931   145,136
Term Loan Facility      
Debt Instrument [Line Items]      
Interest rate at end of period, as a percent 3.60%    
Total debt at par value $ 144,625   $ 145,500
Wells Facility Revolving Line of Credit/ABL      
Debt Instrument [Line Items]      
Interest rate at end of period, as a percent 2.00%    
Total debt at par value $ 275,000    
v3.20.1
Debt - Maturities (Details) - USD ($)
Mar. 26, 2020
Feb. 14, 2020
Dec. 26, 2019
Debt Instrument [Line Items]      
Remainder of year $ 1,446,000    
2021 1,085,000    
2022 1,446,000    
2023 1,446,000    
2024 1,446,000    
Thereafter 412,756,000    
Total minimum debt payments 419,625,000 $ 144,625,000 $ 145,500,000
Term Loan Facility      
Debt Instrument [Line Items]      
Thereafter 137,756    
Total minimum debt payments 144,625,000   $ 145,500,000
Wells Facility Revolving Line of Credit/ABL      
Debt Instrument [Line Items]      
Thereafter 275,000    
Total minimum debt payments $ 275,000,000    
v3.20.1
Debt - Amended Term Loan Facility (Details) - USD ($)
3 Months Ended
Feb. 14, 2020
Feb. 13, 2020
Mar. 26, 2020
Mar. 28, 2019
Dec. 26, 2019
Debt Instrument [Line Items]          
Total debt at par value $ 144,625,000   $ 419,625,000   $ 145,500,000
Debt issuance costs     2,429,000 $ 0  
Term Loan Facility          
Debt Instrument [Line Items]          
Total debt at par value     144,625,000   $ 145,500,000
First Lien Leverage Ratio 2.50        
Consolidated Secured Leverage Ratio 3.50        
Consolidated Total Leverage Ratio 3.50        
Loss on extinguishment of debt     0    
Debt refinancing costs, total     2,501,000    
Debt issuance costs     1,779,000    
Professional Fees     $ 722,000    
Term Loan Facility | Maximum          
Debt Instrument [Line Items]          
Consolidated Total Leverage Ratio 4.50        
Term Loan Facility | Base Rate [Member]          
Debt Instrument [Line Items]          
Variable interest rate (as a percent) 1.00%        
Margin including step-up (as a percent) 1.25%        
Term Loan Facility | Base Rate [Member] | Minimum          
Debt Instrument [Line Items]          
Variable interest rate (as a percent)   1.50%      
Term Loan Facility | Base Rate [Member] | Maximum          
Debt Instrument [Line Items]          
Variable interest rate (as a percent)   1.75%      
Term Loan Facility | Eurodollar [Member]          
Debt Instrument [Line Items]          
Variable interest rate (as a percent) 2.00%        
Variable rate floor (as a percent) 0.00%        
Margin including step-up (as a percent) 2.25%        
Term Loan Facility | Eurodollar [Member] | Minimum          
Debt Instrument [Line Items]          
Variable interest rate (as a percent)   2.50%      
Term Loan Facility | Eurodollar [Member] | Maximum          
Debt Instrument [Line Items]          
Variable interest rate (as a percent)   2.75%      
Term Loan Facility Accordion Feature [Member]          
Debt Instrument [Line Items]          
Borrowing capacity as percentage of EBITDA 100.00%        
Borrowing capacity $ 270,000,000        
v3.20.1
Debt - Amended ABL Facility (Details) - USD ($)
$ in Thousands
3 Months Ended
Feb. 14, 2020
Feb. 13, 2020
Mar. 26, 2020
Mar. 28, 2019
Line of Credit Facility [Line Items]        
Debt issuance costs     $ 2,429 $ 0
Wells Facility Revolving Line of Credit/ABL        
Line of Credit Facility [Line Items]        
Borrowing capacity $ 400,000   400,000  
Debt issuance costs 650      
Available borrowing capacity     $ 85,676  
Percentage of trade receivables     85.00%  
Percentage of letter of credit     100.00%  
Outstanding letters of credit     $ 20,512  
Percentage usage of facility to trigger covenant     90.00%  
Wells Facility Revolving Line of Credit/ABL | Minimum        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent)   0.75%    
Revolving Credit Facility Accordion Feature [Member]        
Line of Credit Facility [Line Items]        
Borrowing capacity $ 100,000      
Letter of Credit [Member]        
Line of Credit Facility [Line Items]        
Borrowing capacity     $ 50,000  
Variable interest rate (as a percent) 0.75%      
Letter of Credit [Member] | Maximum        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent)   1.00%    
Base Rate [Member] | Wells Facility Revolving Line of Credit/ABL        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent) 0.25%      
Base Rate [Member] | Wells Facility Revolving Line of Credit/ABL | Minimum        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent)   0.25%    
Base Rate [Member] | Wells Facility Revolving Line of Credit/ABL | Maximum        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent)   0.50%    
London Interbank Offered Rate (LIBOR) [Member] | Wells Facility Revolving Line of Credit/ABL        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent) 1.25%      
Variable rate floor (as a percent) 0.00%      
London Interbank Offered Rate (LIBOR) [Member] | Wells Facility Revolving Line of Credit/ABL | Minimum        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent)   1.25%    
London Interbank Offered Rate (LIBOR) [Member] | Wells Facility Revolving Line of Credit/ABL | Maximum        
Line of Credit Facility [Line Items]        
Variable interest rate (as a percent)   1.50%    
v3.20.1
Income Taxes (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 26, 2020
Mar. 28, 2019
Income Taxes    
Effective income tax rate (as a percent) 17.40% 16.60%
Federal statutory tax rate (as a percent) 21.00%  
Expense related to loss contingencies for uncertain tax positions $ 2.2 $ 0.1
v3.20.1
Commitments and Contingencies - Lease costs (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 26, 2020
Mar. 28, 2019
Lease Commitments    
Existence of option to extend true  
Weighted average discount rate 5.20%  
Weighted average remaining lease term 10 years  
Lease, Cost [Abstract]    
Operating lease cost $ 33,816 $ 26,015
Sublease income (597) (623)
Lease, Cost, Total $ 33,219 $ 25,392