FLOOR & DECOR HOLDINGS, INC., 10-Q filed on 5/2/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 28, 2019
Apr. 30, 2019
Document and Entity Information    
Entity Registrant Name Floor & Decor Holdings, Inc.  
Entity Central Index Key 0001507079  
Document Type 10-Q  
Document Period End Date Mar. 28, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-26  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Ex Transition Period false  
Entity Common Stock, Shares Outstanding   98,244,175
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2019  
v3.19.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 28, 2019
Dec. 27, 2018
Current assets:    
Cash and cash equivalents $ 451 $ 644
Income taxes receivable 0 4,324
Receivables, net 66,101 67,527
Inventories, net 437,504 471,014
Prepaid expenses and other current assets 23,342 15,949
Total current assets 527,398 559,458
Fixed assets, net 338,888 328,366
Right of use assets 659,115 0
Intangible assets, net 109,322 109,330
Goodwill 227,447 227,447
Other assets 11,181 9,490
Total long-term assets 1,345,953 674,633
Total assets 1,873,351 1,234,091
Current liabilities:    
Current portion of term loans 3,500 3,500
Current portion of lease liability 73,615 0
Trade accounts payable 229,498 313,503
Accrued expenses and other current liabilities 76,390 82,038
Income taxes payable 8,765 0
Deferred revenue 6,581 5,244
Total current liabilities 398,349 404,285
Term loans 141,152 141,834
Revolving line of credit 2,100 0
Deferred rent 0 36,980
Lease liabilities 683,672 0
Deferred income tax liabilities, net 25,666 26,838
Tenant improvement allowances 0 37,295
Other liabilities 2,451 2,550
Total long-term liabilities 855,041 245,497
Total liabilities 1,253,390 649,782
Commitments and contingencies
Capital stock:    
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at March 28, 2019 and December 27, 2018 0 0
Additional paid-in capital 345,907 340,462
Accumulated other comprehensive income (loss), net (148) 186
Retained earnings 274,104 243,563
Total stockholders' equity 619,961 584,309
Total liabilities and stockholders' equity 1,873,351 1,234,091
Class A Common Stock    
Capital stock:    
Common stock 98 98
Class B Common Stock    
Capital stock:    
Common stock 0 0
Class C Common Stock    
Capital stock:    
Common stock $ 0 $ 0
v3.19.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 28, 2019
Dec. 27, 2018
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 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Class A Common Stock    
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 450,000,000 450,000,000
Common stock, shares issued 97,997,529 97,588,539
Common stock, shares outstanding 97,997,529 97,588,539
Class B Common Stock    
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 0 0
Common stock, shares outstanding 0 0
Class C Common Stock    
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 30,000,000 30,000,000
Common stock, shares issued 0 0
Common stock, shares outstanding 0 0
v3.19.1
Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 28, 2019
Mar. 29, 2018
Income Statement [Abstract]    
Net Sales $ 477,050 $ 402,948
Type of Revenue [Extensible List] us-gaap:ProductMember  
Cost of sales $ 275,676 237,562
Type of Cost, Good or Service [Extensible List] us-gaap:ProductMember  
Gross profit $ 201,374 165,386
Operating expenses:    
Selling and store operating 127,383 102,567
General and administrative 30,202 23,339
Pre-opening 4,027 2,974
Total operating expenses 161,612 128,880
Operating income 39,762 36,506
Interest expense 2,921 1,784
Income before income taxes 36,841 34,722
Provision for income taxes 6,121 2,851
Net income 30,720 31,871
Change in fair value of hedge instruments, net of tax (334) 430
Total comprehensive income $ 30,386 $ 32,301
Basic earnings per share $ 0.31 $ 0.33
Diluted earnings per share $ 0.29 $ 0.30
v3.19.1
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       $ 7,826       $ 7,826
Balance at Dec. 28, 2017 $ 96 $ 323,419 $ (205) 119,550       442,860
Balance (in shares) at Dec. 28, 2017 95,509,000              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Stock-based compensation expense   1,415           1,415
Exercise of stock options   3,195           3,195
Exercise of stock options (in shares) 585,000              
Other comprehensive gain (loss), net of tax     430         430
Net income       31,871       31,871
Balance at Mar. 29, 2018 $ 96 328,029 225 159,247       487,597
Balance (in shares) at Mar. 29, 2018 96,094,000              
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
Balance (in shares) at Dec. 27, 2018 97,588,000       97,588,539 0 0  
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     (334)         (334)
Net income       30,720       30,720
Balance at Mar. 28, 2019 $ 98 $ 345,907 $ (148) $ 274,104       $ 619,961
Balance (in shares) at Mar. 28, 2019 97,997,000       97,997,529 0 0  
v3.19.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 28, 2019
Mar. 29, 2018
Operating activities    
Net income $ 30,720 $ 31,871
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 17,184 11,534
Amortization of tenant improvement allowances 0 (1,045)
Deferred income taxes (1,057) 2,111
Interest cap derivative contracts 610 (535)
Stock based compensation expense 2,250 1,415
Changes in operating assets and liabilities:    
Receivables, net 22,568 15,775
Inventories, net 33,510 (9,262)
Trade accounts payable (84,005) (3,723)
Accrued expenses and other current liabilities 3,017 (12,926)
Income taxes 13,143 780
Deferred revenue 1,337 1,500
Deferred rent 0 2,707
Tenant improvement allowances 0 128
Other, net (12,256) 282
Net cash provided by operating activities 27,021 40,612
Investing activities    
Purchases of fixed assets (31,634) (27,841)
Net cash used in investing activities (31,634) (27,841)
Financing activities    
Borrowings on revolving line of credit 80,200 51,900
Payments on revolving line of credit (78,100) (66,100)
Payments on term loans (875) (1,750)
Proceeds from exercise of stock options 1,776 3,195
Proceeds from employee stock purchase plan 1,419 0
Net cash used in financing activities 4,420 (12,755)
Net (decrease) increase in cash and cash equivalents (193) 16
Cash and cash equivalents, beginning of the period 644 556
Cash and cash equivalents, end of the period 451 572
Supplemental disclosures of cash flow information    
Buildings and equipment acquired under operating leases 53,049 0
Cash paid for interest 1,987 2,368
Cash paid for income taxes 0 19
Fixed assets accrued at the end of the period 10,836 16,332
Fixed assets acquired as part of lease - paid for by lessor $ 0 $ 0
v3.19.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 28, 2019
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Nature of Business

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

As of March 28, 2019, the Company, through its wholly owned subsidiary, Floor and Decor Outlets of America, Inc. (“F&D”), operates 103 warehouse-format stores, which average 75,000 square feet, and one small-format standalone design center in 28 states, as well as three distribution centers and an e-commerce site, FloorandDecor.com.

Fiscal Year

The Company’s fiscal year is the 52- or 53-week period ending on the Thursday on or preceding December 31st. Fiscal years ended December 26, 2019 (“fiscal 2019”) and December 27, 2018 (“fiscal 2018”) include 52 weeks. When a 53-week fiscal year occurs, we report the additional week at the end of the fiscal fourth quarter. 52-week fiscal years consist of thirteen-week periods in the first, second, third and fourth quarters of the fiscal year.

Basis of Presentation 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. The Condensed Consolidated Balance Sheet as of December 27, 2018 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 2018, filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2019 (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 28, 2019 and March 29, 2018 are not necessarily indicative of the results to be expected for the full year.

There have been no updates to our Significant Accounting Policies since the Annual Report, except for the policy changes in connection with the newly adopted lease accounting standard outlined in Note 5. For information regarding our Significant Accounting Policies and Estimates, see the “Summary of Significant Accounting Policies” section of “Item 8. Financial Statements and Supplementary Data” of our Annual Report.

Recently Issued Accounting Pronouncements

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

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases (Topic 842)." ASU No. 2016-02 requires that lessees recognize lease assets and lease liabilities on the balance sheet with an option to exclude short-term leases (leases with terms of 12 months or less). The guidance also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. We adopted the ASU on December 28, 2018, the first day of our fiscal year 2019, using the modified retrospective approach. The cumulative effect adjustment upon adoption resulted in an immaterial opening balance sheet reduction to retained earnings. The adoption of ASU No. 2016-02 in the first quarter of fiscal 2019 had a material impact on the Company’s Condensed Consolidated Balance Sheet in respect to the right of use assets, lease liabilities, tenant improvement allowances, and deferred rent but did not have a material impact on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income or Statements of Cash Flows. Refer to Note 5 for further details.

v3.19.1
Revenues
3 Months Ended
Mar. 28, 2019
Revenue from Contract with Customer [Abstract]  
Revenues

2. Revenues

Disaggregated Revenue

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

March 28, 2019

 

March 29, 2018

 

 

    

    

 

 

    

% of

    

 

 

    

% of

 

Product Category

 

 

Net Sales

 

Net Sales

 

Net Sales

 

Net Sales

 

Tile

 

 

$

125,310

 

26

%  

$

117,402

 

29

%

Laminate / Luxury Vinyl Plank

 

 

 

97,502

 

20

 

 

66,892

 

17

 

Decorative Accessories

 

 

 

94,440

 

20

 

 

78,489

 

19

 

Installation Materials and Tools

 

 

 

79,709

 

17

 

 

63,581

 

16

 

Wood

 

 

 

49,230

 

10

 

 

46,485

 

12

 

Natural Stone

 

 

 

30,887

 

 7

 

 

28,006

 

 7

 

Delivery and Other

 

 

 

(28)

 

 —

 

 

2,093

 

 —

 

Total

 

 

$

477,050

 

100

%  

$

402,948

 

100

%

.

v3.19.1
Debt
3 Months Ended
Mar. 28, 2019
Debt  
Debt

3. Debt

Fair Value of Debt

Market risk associated with our fixed and variable rate long‑term debt relates to the potential change in fair value and negative impact to future earnings, respectively, from a change in interest rates. The aggregate fair value of debt is based primarily on our estimates of interest rates, maturities, credit risk, and underlying collateral and is classified as Level 3 within the fair value hierarchy. At March 28, 2019 and December 27, 2018, the carrying amounts and fair values of our debt were as follows:

 

 

 

 

 

 

 

 

    

March 28,

    

December 27,

(in thousands)

 

2019

 

2018

Total debt at par value

 

$

150,225

 

$

149,000

Less: unamortized discount and debt issuance costs

 

 

3,473

 

 

3,666

Net carrying amount

 

$

146,752

 

$

145,334

Fair value

 

$

148,003

 

$

147,883

 

v3.19.1
Income Taxes
3 Months Ended
Mar. 28, 2019
Income Taxes  
Income Taxes

4. Income Taxes

Our effective income tax rates were 16.6% and 8.2% for the thirteen weeks ended March 28, 2019 and March 29, 2018, respectively.

v3.19.1
Commitments and Contingencies
3 Months Ended
Mar. 28, 2019
Commitments and Contingencies.  
Commitments and Contingencies

5. Commitments and Contingencies

Lease Commitments

On December 28, 2018, the first day of our fiscal year 2019, we adopted ASU No. 2016-02, "Leases (Topic 842)", which requires that lessees recognize lease assets and lease liabilities for all leases on the balance sheet with an option to exclude short-term leases (leases with terms of 12 months or less). We adopted ASU No. 2016-02 using the modified retrospective approach and elected the package of practical expedients to use in transition, which permitted us not to reassess, under the new standard, our prior conclusions about lease identification and lease classification. The cumulative effect adjustment upon adoption of ASU No. 2016-02 resulted in an immaterial adjustment to retained earnings. The adoption also resulted in the addition of $621 million right of use assets and corresponding $701 million lease liabilities to our balance sheet, while eliminating deferred rent and tenant improvement allowances. Additionally, we do not separate lease and nonlease components of contracts.

The majority of our long-term operating lease agreements through F&D are for our corporate office, retail locations, and distribution centers, which expire in various years through 2038. All of our building leases have 10-15 year lease terms, except one lease which has a 20-year term. 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. Additionally, one building lease contains variable lease payments, which are determined based on a percentage of retail sales over a contractual level, and we sublease real estate within one store and one distribution center to third parties. Certain lease agreements include escalating rents over the lease terms which, under the new accounting standard, results in rent being expensed on a straight‑line basis over the life of the lease that commences on the date we have the right to control the property. Our lease agreements do not contain any residual value guarantees or restrictive covenants that would reasonably be expected to have a material impact on our business.

As most of our leases do not provide a readily determinable implicit rate, we use a third party to determine our incremental borrowing rate, specifically the Bloomberg yield curve for US consumers with a BB- credit rating. The rate is adjusted for collateralization as well as inflation.

Lease Position

The table below presents supplemental balance sheet information related to operating leases.

 

 

 

 

 

 

 

 

 

 

As of

(in thousands, except lease term and discount rate)

 

Balance Sheet Classification

 

March 28, 2019

Assets

 

 

 

 

 

Building

 

Right of use assets

 

$

647,667

Equipment

 

Right of use assets

 

 

6,263

Land

 

Right of use assets

 

 

245

Software

 

Right of use assets

 

 

4,940

Total operating lease assets

 

 

 

$

659,115

Liabilities

 

 

 

 

 

Current

 

 

 

 

 

Building

 

Current portion of lease liabilities

 

$

68,927

Equipment

 

Current portion of lease liabilities

 

 

2,784

Land

 

Current portion of lease liabilities

 

 

93

Software

 

Current portion of lease liabilities

 

 

1,811

Total current operating lease liabilities

 

 

 

$

73,615

Noncurrent

 

 

 

 

 

Building

 

Lease liabilities

 

$

675,769

Equipment

 

Lease liabilities

 

 

4,663

Land

 

Lease liabilities

 

 

158

Software

 

Lease liabilities

 

 

3,082

Total noncurrent operating lease liabilities

 

 

 

$

683,672

Total operating lease liabilities

 

 

 

$

757,287

 

 

 

 

 

 

Weighted-average remaining lease term

 

 

 

 

9 years

Weighted-average discount rate

 

 

 

 

5.4%

 

Lease Costs

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

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

(in thousands)

 

Classification

 

March 28, 2019

Operating lease cost (1)

 

Selling and store operating

 

$

26,015

Sublease income

 

Selling and store operating

 

 

(623)

Total lease cost

 

 

 

$

25,392

(1) Includes variable lease costs, which are immaterial.

 

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 28, 2019, were:

 

 

 

 

(in thousands)

    

Amount

Thirty-nine weeks ended December 26, 2019

 

$

82,939

2020

 

 

112,086

2021

 

 

105,317

2022

 

 

98,163

2023

 

 

93,513

Thereafter

 

 

503,402

Total minimum lease payments (2)

 

$

995,420

Less: amount of lease payments representing interest

 

 

238,133

Present value of future minimum lease payments

 

 

757,287

Less: current obligations under leases

 

 

73,615

Long-term lease obligations

 

$

683,672

(2) Future lease payments exclude $311 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

 

For the thirteen weeks ended March 28, 2019, cash paid for operating leases was $24.6 million.

Litigation

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

v3.19.1
Stock-Based Compensation
3 Months Ended
Mar. 28, 2019
Stock-Based Compensation Abstract  
Stock-Based Compensation

6. Stock Based Compensation

At our 2018 annual meeting of stockholders held on May 17, 2018, our stockholders approved the Floor & Decor Holdings, Inc. Employee Stock Purchase Plan (the “ESPP”), which became available to substantially all of our employees beginning in the third quarter of fiscal 2018. The ESPP permits eligible employees to purchase shares of our common stock through payroll deductions, subject to certain limitations. The purchase price of the shares under the ESPP in no event will be less than the lesser of 85% of the lower of the fair market value of our common stock on either the first or last trading day of each six-month offering period. There were 1,500,000 shares of our Class A common stock, par value $0.001 per share, approved for issuance. On December 31, 2018, $1.4 million in contributions were used to purchase 60,871 shares of our Class A common stock. Additionally, during the thirteen weeks ended March 28, 2019, the Company recognized $143 thousand of stock-based compensation expense related to the ESPP.

v3.19.1
Earnings Per Share
3 Months Ended
Mar. 28, 2019
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 stock options.

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

 

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

 

 

March 28,

 

March 29,

(in thousands, except per share data)

 

2019

    

2018

Net income

 

$

30,720

 

$

31,871

Basic weighted average shares outstanding

 

 

97,785

 

 

95,714

Dilutive effect of share based awards

 

 

6,536

 

 

8,951

Diluted weighted average shares outstanding

 

 

104,321

 

 

104,665

Basic earnings per share

 

$

0.31

 

$

0.33

Diluted earnings per share

 

$

0.29

 

$

0.30

 

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

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

    

 

 

March 28,

 

March 29,

 

(in thousands)

 

2019

 

2018

 

Stock options

 

986

 

98

 

 

v3.19.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 28, 2019
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 years ended December 26, 2019 (“fiscal 2019”) and December 27, 2018 (“fiscal 2018”) include 52 weeks. When a 53-week fiscal year occurs, we report the additional week at the end of the fiscal fourth quarter. 52-week fiscal years consist of thirteen-week periods in the first, second, third and fourth quarters of the fiscal year.

Basis of Presentation

Basis of Presentation 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. The Condensed Consolidated Balance Sheet as of December 27, 2018 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 2018, filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2019 (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 28, 2019 and March 29, 2018 are not necessarily indicative of the results to be expected for the full year.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

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

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases (Topic 842)." ASU No. 2016-02 requires that lessees recognize lease assets and lease liabilities on the balance sheet with an option to exclude short-term leases (leases with terms of 12 months or less). The guidance also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. We adopted the ASU on December 28, 2018, the first day of our fiscal year 2019, using the modified retrospective approach. The cumulative effect adjustment upon adoption resulted in an immaterial opening balance sheet reduction to retained earnings. The adoption of ASU No. 2016-02 in the first quarter of fiscal 2019 had a material impact on the Company’s Condensed Consolidated Balance Sheet in respect to the right of use assets, lease liabilities, tenant improvement allowances, and deferred rent but did not have a material impact on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income or Statements of Cash Flows. Refer to Note 5 for further details.

v3.19.1
Revenues (Tables)
3 Months Ended
Mar. 28, 2019
Disaggregation of Revenue [Abstract]  
Disaggregated Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

March 28, 2019

 

March 29, 2018

 

 

    

    

 

 

    

% of

    

 

 

    

% of

 

Product Category

 

 

Net Sales

 

Net Sales

 

Net Sales

 

Net Sales

 

Tile

 

 

$

125,310

 

26

%  

$

117,402

 

29

%

Laminate / Luxury Vinyl Plank

 

 

 

97,502

 

20

 

 

66,892

 

17

 

Decorative Accessories

 

 

 

94,440

 

20

 

 

78,489

 

19

 

Installation Materials and Tools

 

 

 

79,709

 

17

 

 

63,581

 

16

 

Wood

 

 

 

49,230

 

10

 

 

46,485

 

12

 

Natural Stone

 

 

 

30,887

 

 7

 

 

28,006

 

 7

 

Delivery and Other

 

 

 

(28)

 

 —

 

 

2,093

 

 —

 

Total

 

 

$

477,050

 

100

%  

$

402,948

 

100

%

 

v3.19.1
Debt (Tables)
3 Months Ended
Mar. 28, 2019
Debt  
Schedule of fair value debt

 

 

 

 

 

 

 

 

    

March 28,

    

December 27,

(in thousands)

 

2019

 

2018

Total debt at par value

 

$

150,225

 

$

149,000

Less: unamortized discount and debt issuance costs

 

 

3,473

 

 

3,666

Net carrying amount

 

$

146,752

 

$

145,334

Fair value

 

$

148,003

 

$

147,883

 

v3.19.1
Commitments and Contingencies (Tables)
3 Months Ended
Mar. 28, 2019
Commitments and Contingencies.  
Schedule of supplemental balance sheet information related to operating leases

 

 

 

 

 

 

 

 

 

 

As of

(in thousands, except lease term and discount rate)

 

Balance Sheet Classification

 

March 28, 2019

Assets

 

 

 

 

 

Building

 

Right of use assets

 

$

647,667

Equipment

 

Right of use assets

 

 

6,263

Land

 

Right of use assets

 

 

245

Software

 

Right of use assets

 

 

4,940

Total operating lease assets

 

 

 

$

659,115

Liabilities

 

 

 

 

 

Current

 

 

 

 

 

Building

 

Current portion of lease liabilities

 

$

68,927

Equipment

 

Current portion of lease liabilities

 

 

2,784

Land

 

Current portion of lease liabilities

 

 

93

Software

 

Current portion of lease liabilities

 

 

1,811

Total current operating lease liabilities

 

 

 

$

73,615

Noncurrent

 

 

 

 

 

Building

 

Lease liabilities

 

$

675,769

Equipment

 

Lease liabilities

 

 

4,663

Land

 

Lease liabilities

 

 

158

Software

 

Lease liabilities

 

 

3,082

Total noncurrent operating lease liabilities

 

 

 

$

683,672

Total operating lease liabilities

 

 

 

$

757,287

 

 

 

 

 

 

Weighted-average remaining lease term

 

 

 

 

9 years

Weighted-average discount rate

 

 

 

 

5.4%

 

Schedule of components of lease expense

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

(in thousands)

 

Classification

 

March 28, 2019

Operating lease cost (1)

 

Selling and store operating

 

$

26,015

Sublease income

 

Selling and store operating

 

 

(623)

Total lease cost

 

 

 

$

25,392

(1) Includes variable lease costs, which are immaterial.

 

Schedule of Future minimum lease payments under non cancelable operating leases

 

 

 

 

(in thousands)

    

Amount

Thirty-nine weeks ended December 26, 2019

 

$

82,939

2020

 

 

112,086

2021

 

 

105,317

2022

 

 

98,163

2023

 

 

93,513

Thereafter

 

 

503,402

Total minimum lease payments (2)

 

$

995,420

Less: amount of lease payments representing interest

 

 

238,133

Present value of future minimum lease payments

 

 

757,287

Less: current obligations under leases

 

 

73,615

Long-term lease obligations

 

$

683,672

(2) Future lease payments exclude $311 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

 

For the thirteen weeks ended March 28, 2019, cash paid for operating leases was $24.6 million.

v3.19.1
Earnings Per Share (Tables)
3 Months Ended
Mar. 28, 2019
Earnings Per Share  
Schedule of computation of basic and diluted earnings per share

 

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

 

 

March 28,

 

March 29,

(in thousands, except per share data)

 

2019

    

2018

Net income

 

$

30,720

 

$

31,871

Basic weighted average shares outstanding

 

 

97,785

 

 

95,714

Dilutive effect of share based awards

 

 

6,536

 

 

8,951

Diluted weighted average shares outstanding

 

 

104,321

 

 

104,665

Basic earnings per share

 

$

0.31

 

$

0.33

Diluted earnings per share

 

$

0.29

 

$

0.30

 

Schedule of awards excluded from computation

 

 

 

 

 

 

 

    

Thirteen Weeks Ended

    

 

 

March 28,

 

March 29,

 

(in thousands)

 

2019

 

2018

 

Stock options

 

986

 

98

 

 

v3.19.1
Summary of Significant Accounting Policies (Details)
ft² in Thousands
3 Months Ended 12 Months Ended
Mar. 28, 2019
ft²
state
segment
facility
Dec. 26, 2019
Dec. 27, 2018
Real Estate Properties [Line Items]      
Number of reportable segments | segment 1    
Number of states with facilities | state 28    
Number of distribution centers 3    
Fiscal year period   364 days 364 days
Fiscal quarter period 91 days    
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 103    
Area of facility | ft² 75    
Small Format Store [Member]      
Real Estate Properties [Line Items]      
Number of stores 1    
v3.19.1
Disaggregated Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 28, 2019
Mar. 29, 2018
Net Sales $ 477,050 $ 402,948
Percentage of Net Sales 100.00% 100.00%
Tile    
Net Sales $ 125,310 $ 117,402
Percentage of Net Sales 26.00% 29.00%
Decorative Accessories    
Net Sales $ 94,440 $ 78,489
Percentage of Net Sales 20.00% 19.00%
Laminate Luxury Vinyl Plank    
Net Sales $ 97,502 $ 66,892
Percentage of Net Sales 20.00% 17.00%
Installation Materials And Tools    
Net Sales $ 79,709 $ 63,581
Percentage of Net Sales 17.00% 16.00%
Wood    
Net Sales $ 49,230 $ 46,485
Percentage of Net Sales 10.00% 12.00%
Natural Stone    
Net Sales $ 30,887 $ 28,006
Percentage of Net Sales 7.00% 7.00%
Delivery and Other    
Net Sales $ (28) $ 2,093
Percentage of Net Sales 0.00% 0.00%
v3.19.1
Debt - Fair Value of Debt (Details) - USD ($)
$ in Thousands
Mar. 28, 2019
Dec. 27, 2018
Debt Instrument [Line Items]    
Total debt at par value $ 150,225 $ 149,000
Less: unamortized discount and debt issuance costs 3,473 3,666
Net carrying amount 146,752 145,334
Level 3    
Debt Instrument [Line Items]    
Fair value $ 148,003 $ 147,883
v3.19.1
Income Taxes (Details)
3 Months Ended
Mar. 28, 2019
Mar. 29, 2018
Income Taxes    
Effective income tax rate (as a percent) 16.60% 8.20%
v3.19.1
Commitments and Contingencies - Lease costs (Details)
$ in Thousands
3 Months Ended
Mar. 28, 2019
USD ($)
facility
Dec. 28, 2018
USD ($)
Dec. 27, 2018
USD ($)
Lease Commitments      
Lease, Practical Expedients, Package [true false] true    
Right of use assets $ 659,115   $ 0
Operating Lease, Liability, Total $ 757,287    
Lease term for 1 particular lease 20 years    
Existence of option to extend true    
Number of leases with variable payments | facility 1    
Number of stores subleased | facility 1    
Number of distribution centers subleased | facility 1    
Existence of residual value guarantee false    
Current portion of lease liability $ 73,615   0
Lease liabilities $ 683,672   $ 0
Weighted average remaining lease term 9 years    
Weighted average discount rate 5.40%    
Lease, Cost [Abstract]      
Operating lease cost $ 26,015    
Sublease income (623)    
Lease, Cost, Total 25,392    
Building [Member]      
Lease Commitments      
Right of use assets 647,667    
Current portion of lease liability 68,927    
Lease liabilities 675,769    
Equipment [Member]      
Lease Commitments      
Right of use assets 6,263    
Current portion of lease liability 2,784    
Lease liabilities 4,663    
Land [Member]      
Lease Commitments      
Right of use assets 245    
Current portion of lease liability 93    
Lease liabilities 158    
Software and Software Development Costs [Member]      
Lease Commitments      
Right of use assets 4,940    
Current portion of lease liability 1,811    
Lease liabilities $ 3,082    
Minimum      
Lease Commitments      
Lease term 10 years    
Maximum      
Lease Commitments      
Lease term 15 years    
Accounting Standards Update 2016-02 [Member] | Restatement Adjustment [Member]      
Lease Commitments      
Right of use assets   $ 621,000  
Operating Lease, Liability, Total   $ 701,000  
v3.19.1
Commitments and Contingencies - Lease Maturity (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 28, 2019
Dec. 27, 2018
Operating Lease Liabilities, Payments Due [Abstract]      
Thirty-nine weeks ended December 26, 2019   $ 82,939  
2020   112,086  
2021   105,317  
2022   98,163  
2023   93,513  
Thereafter   503,402  
Total minimum lease payments   995,420  
Amount representing interest   238,133  
Operating Lease, Liability, Total   757,287  
Current portion of lease liability   73,615 $ 0
Long-term lease obligations   683,672 $ 0
Minimum lease payments for leases not yet commenced   $ 311,000  
Cash paid during the period against operating lease liabilities $ 24,600    
v3.19.1
Stock-Based Compensation (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Dec. 31, 2018
May 17, 2018
Mar. 28, 2019
Dec. 27, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Shares issued under employee stock plan (in shares) 60,871      
Shares issued under employee stock plan $ 1,400   $ 1,419  
Stock purchase plan, expense     $ 143  
Class A Common Stock        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Common stock, par value     $ 0.001 $ 0.001
Employee Stock Purchase Plan [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Fair market value measurement period   6 months    
Employee Stock Purchase Plan [Member] | Minimum        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Purchase price, as a percentage of fair market value   85.00%    
Employee Stock Purchase Plan [Member] | Class A Common Stock        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Shares of stock authorized under the plan     1,500,000  
Common stock, par value     $ 0.001  
v3.19.1
Earnings Per Share - Calculation (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Mar. 28, 2019
Mar. 29, 2018
Earnings Per Share    
Net income $ 30,720 $ 31,871
Basic weighted average shares outstanding 97,785 95,714
Dilutive effect of share based awards 6,536 8,951
Diluted weighted average shares outstanding 104,321 104,665
Basic earnings per share $ 0.31 $ 0.33
Diluted earnings per share $ 0.29 $ 0.30