FLOOR & DECOR HOLDINGS, INC., 10-Q filed on 8/1/2019
Quarterly Report
v3.19.2
Document and Entity Information - shares
6 Months Ended
Jun. 27, 2019
Jul. 30, 2019
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 27, 2019  
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 2233 Lake Park Drive  
Entity Address, City or Town Smyrna  
Entity Address, Postal Zip Code 30080  
Entity Address, State or Province GA  
City Area Code 404  
Local Phone Number 471-1634  
Title of 12(b) Security Class A common stock, $0.001 par value per share  
Trading Symbol FND  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   99,613,063
Entity Central Index Key 0001507079  
Amendment Flag false  
Current Fiscal Year End Date --12-26  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2019  
v3.19.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 27, 2019
Dec. 27, 2018
Current assets:    
Cash and cash equivalents $ 51,450 $ 644
Income taxes receivable 2,837 4,324
Receivables, net 35,641 67,527
Inventories, net 446,397 471,014
Prepaid expenses and other current assets 27,689 15,949
Total current assets 564,014 559,458
Fixed assets, net 382,646 328,366
Right of use assets 720,009 0
Intangible assets, net 109,315 109,330
Goodwill 227,447 227,447
Other assets 7,693 9,490
Total long-term assets 1,447,110 674,633
Total assets 2,011,124 1,234,091
Current liabilities:    
Current portion of term loans 3,500 3,500
Current portion of lease liability 44,461 0
Trade accounts payable 272,695 313,503
Accrued expenses and other current liabilities 97,015 82,038
Deferred revenue 6,967 5,244
Total current liabilities 424,638 404,285
Term loans 140,470 141,834
Deferred rent 0 36,980
Lease liabilities 747,595 0
Deferred income tax liabilities, net 25,173 26,838
Tenant improvement allowances 0 37,295
Other liabilities 2,360 2,550
Total long-term liabilities 915,598 245,497
Total liabilities 1,340,236 649,782
Commitments and contingencies (Note 5)
Capital stock:    
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at June 27, 2019 and December 27, 2018 0 0
Additional paid-in capital 353,450 340,462
Accumulated other comprehensive income (loss), net (361) 186
Retained earnings 317,700 243,563
Total stockholders' equity 670,888 584,309
Total liabilities and stockholders' equity 2,011,124 1,234,091
Class A Common Stock    
Capital stock:    
Common stock 99 98
Class B Common Stock    
Capital stock:    
Common stock 0 0
Class C Common Stock    
Capital stock:    
Common stock $ 0 $ 0
v3.19.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 27, 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 99,111,260 97,588,539
Common stock, shares outstanding 99,111,260 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
v3.19.2
Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Jun. 27, 2019
Jun. 28, 2018
Income Statement [Abstract]        
Net Sales $ 520,311 $ 434,279 $ 997,361 $ 837,227
Revenue, Product and Service [Extensible List]     us-gaap:ProductMember  
Cost of sales 302,488 256,641 $ 578,164 494,203
Cost, Product and Service [Extensible List]     us-gaap:ProductMember  
Gross profit 217,823 177,638 $ 419,197 343,024
Operating expenses:        
Selling and store operating 134,643 108,626 262,026 211,193
General and administrative 30,916 25,179 61,118 48,518
Pre-opening 6,369 6,588 10,396 9,562
Total operating expenses 171,928 140,393 333,540 269,273
Operating income 45,895 37,245 85,657 73,751
Interest expense 2,223 2,145 5,144 3,929
Income before income taxes 43,672 35,100 80,513 69,822
Provision (benefit) for income taxes 76 (4,746) 6,197 (1,895)
Net income 43,596 39,846 74,316 71,717
Change in fair value of hedge instruments, net of tax, post-adoption (213)   (547)  
Change in fair value of hedge instruments, net of tax, pre-adoption   235   665
Total comprehensive income $ 43,383 $ 40,081 $ 73,769 $ 72,382
Basic earnings per share $ 0.44 $ 0.41 $ 0.76 $ 0.75
Diluted earnings per share $ 0.42 $ 0.38 $ 0.71 $ 0.68
v3.19.2
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, pre-adoption     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              
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]                
Other comprehensive gain (loss), net of tax, pre-adoption               665
Net income               71,717
Balance at Jun. 28, 2018 $ 97 335,024 460 199,093       534,674
Balance (in shares) at Jun. 28, 2018 97,218,000              
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]                
Stock-based compensation expense   1,536           1,536
Exercise of stock options $ 1 5,459           5,460
Exercise of stock options (in shares) 1,124,000              
Other comprehensive gain (loss), net of tax, pre-adoption     235         235
Net income       39,846       39,846
Balance at Jun. 28, 2018 $ 97 335,024 460 199,093       534,674
Balance (in shares) at Jun. 28, 2018 97,218,000              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Cumulative effect from adoption $ 0 0 0 (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 $ 0 2,250 0 0       2,250
Stock-based compensation (in shares) 0              
Exercise of stock options $ 0 1,776 0 0       1,776
Exercise of stock options (in shares) 348,000              
Shares issued under employee stock plan $ 0 1,419 0 0       1,419
Shares issued under employee stock plan (in shares) 61,000              
Other comprehensive gain (loss), net of tax, post-adoption $ 0 0 (334) 0       (334)
Net income 0 0 0 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              
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]                
Other comprehensive gain (loss), net of tax, post-adoption               (547)
Net income               74,316
Balance at Jun. 27, 2019 $ 99 353,450 (361) 317,700       670,888
Balance (in shares) at Jun. 27, 2019 99,111,000       99,111,260 0 0  
Balance at Mar. 28, 2019 $ 98 345,907 (148) 274,104       619,961
Balance (in shares) at Mar. 28, 2019 97,997,000              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Stock-based compensation expense $ 0 2,168 0 0       2,168
Stock-based compensation (in shares) 0              
Exercise of stock options $ 1 5,375 0 0       5,376
Exercise of stock options (in shares) 1,090,000              
Issuance of restricted stock award $ 0 0 0 0       0
Issuance of restricted stock award (in shares) 24,000              
Other comprehensive gain (loss), net of tax, post-adoption $ 0 0 (213)         (213)
Net income 0 0 0 43,596       43,596
Balance at Jun. 27, 2019 $ 99 $ 353,450 $ (361) $ 317,700       $ 670,888
Balance (in shares) at Jun. 27, 2019 99,111,000       99,111,260 0 0  
v3.19.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Operating activities    
Net income $ 74,316 $ 71,717
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 34,910 23,632
Gain on asset disposals 22 0
Amortization of tenant improvement allowances 0 (2,165)
Deferred income taxes (1,478) 2,822
Interest cap derivative contracts 1,250 (794)
Stock based compensation expense 4,418 2,952
Changes in operating assets and liabilities:    
Receivables, net 15,809 12,697
Inventories, net 24,618 (14,989)
Trade accounts payable (40,808) 6,257
Accrued expenses and other current liabilities 9,058 (21,912)
Income taxes 1,541 (5,320)
Deferred revenue 1,723 2,441
Deferred rent 0 4,955
Tenant improvement allowances 0 3,034
Other (3,222) (1,404)
Net cash provided by operating activities 122,157 83,923
Investing activities    
Purchases of fixed assets (78,172) (63,438)
Net cash used in investing activities (78,172) (63,438)
Financing activities    
Borrowings on revolving line of credit 95,300 129,300
Payments on revolving line of credit (95,300) (156,700)
Payments on term loans (1,750) (1,750)
Proceeds from exercise of stock options 7,152 8,656
Proceeds from employee stock purchase plan 1,419 0
Net cash provided by (used in) financing activities 6,821 (20,494)
Net increase (decrease) in cash and cash equivalents 50,806 (9)
Cash and cash equivalents, beginning of the period 644 556
Cash and cash equivalents, end of the period 51,450 547
Supplemental disclosures of cash flow information    
Buildings and equipment acquired under operating leases 132,213 0
Cash paid for interest 3,912 3,844
Cash paid for income taxes 12,099 637
Fixed assets accrued at the end of the period $ 25,420 $ 18,596
v3.19.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 27, 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, vinyl, 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 June 27, 2019, the Company, through its wholly owned subsidiary, Floor and Decor Outlets of America, Inc. (“F&D”), operates 106 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 ending 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 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 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 and twenty-six weeks ended June 27, 2019 and June 28, 2018 are not necessarily indicative of the results to be expected for the full years.

There have been no updates to our Significant Accounting Policies since the Annual Report, except for the accounting policy changes in connection with the newly adopted lease accounting standard outlined in Note 5 to our Condensed Consolidated Financial Statements included in this Quarterly 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.

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 in the first quarter of fiscal 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 had a material impact on the Company’s Condensed Consolidated Balance Sheets but did not have a material impact on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income or Condensed Consolidated Statements of Cash Flows. Refer to Note 5 to our Condensed Consolidated Financial Statements included in this Quarterly Report for further details.

v3.19.2
Revenues
6 Months Ended
Jun. 27, 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

Thirteen Weeks Ended

June 27, 2019

June 28, 2018

    

    

    

% of

    

    

% of

Product Category

Net Sales

Net Sales

Net Sales

Net Sales

Tile

$

136,319

 

26

%  

$

123,408

 

28

%

Laminate / Luxury Vinyl Plank

 

108,218

 

21

 

77,436

 

18

Decorative Accessories

 

97,594

 

19

 

82,976

 

19

Installation Materials and Tools

 

88,592

 

17

 

68,201

 

16

Wood

 

52,762

 

10

 

48,911

 

11

Natural Stone

 

32,903

 

6

 

29,533

 

7

Delivery and Other

 

3,923

 

1

 

3,814

 

1

Total

$

520,311

 

100

%  

$

434,279

 

100

%

Twenty-six Weeks Ended

Twenty-six Weeks Ended

June 27, 2019

June 28, 2018

    

    

    

% of

    

    

% of

Product Category

Net Sales

Net Sales

Net Sales

Net Sales

Tile

$

261,629

 

26

%  

$

240,810

 

29

%

Laminate / Luxury Vinyl Plank

 

205,720

 

21

 

144,328

 

17

Decorative Accessories

 

192,034

 

19

 

161,465

 

19

Installation Materials and Tools

 

168,301

 

17

 

131,782

 

16

Wood

 

101,992

 

10

 

95,396

 

11

Natural Stone

 

63,790

 

6

 

57,539

 

7

Delivery and Other

 

3,895

 

1

 

5,907

 

1

Total

$

997,361

 

100

%  

$

837,227

 

100

%

.

v3.19.2
Debt
6 Months Ended
Jun. 27, 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 June 27, 2019 and December 27, 2018, the carrying amounts and fair values of our debt were as follows:

    

June 27,

    

December 27,

(in thousands)

2019

2018

Total debt at par value

$

147,250

$

149,000

Less: unamortized discount and debt issuance costs

 

3,280

 

3,666

Net carrying amount

$

143,970

$

145,334

Fair value

$

146,514

$

147,883

v3.19.2
Income Taxes
6 Months Ended
Jun. 27, 2019
Income Taxes  
Income Taxes

4. Income Taxes

Our effective income tax rates were 7.7% and (2.7)% for the twenty-six weeks ended June 27, 2019 and June 28, 2018, respectively. The higher effective tax rate for the twenty-six weeks ended June 27, 2019 was primarily due to the recognition of lower excess tax benefits in the current period related to stock options exercised than in the corresponding prior year period.

v3.19.2
Commitments and Contingencies
6 Months Ended
Jun. 27, 2019
Commitments and Contingencies.  
Commitments and Contingencies

5. Commitments and Contingencies

Lease Commitments

In the first quarter of fiscal 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), which we also elected. 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 of right of use assets and a corresponding $683 million of 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 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 of our lease agreements include escalating rents over the lease terms which, under Topic 842, 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 assist in the determination of the incremental borrowing rate, specifically the Bloomberg yield curve for U.S. 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

June 27, 2019

Assets

Building

Right of use assets

$

707,855

Equipment

Right of use assets

7,448

Land

Right of use assets

219

Software

Right of use assets

4,487

Total operating lease assets

$

720,009

Liabilities

 

Current

 

Building

Current portion of lease liabilities

$

38,625

Equipment

Current portion of lease liabilities

3,353

Land

Current portion of lease liabilities

89

Software

Current portion of lease liabilities

2,394

Total current operating lease liabilities

44,461

Noncurrent

Building

Lease liabilities

740,739

Equipment

Lease liabilities

4,601

Land

Lease liabilities

136

Software

Lease liabilities

2,119

Total noncurrent operating lease liabilities

747,595

Total operating lease liabilities

$

792,056

Weighted-average remaining lease term

 

9 years

Weighted-average discount rate

5.5%

Lease Costs

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

    

Thirteen Weeks Ended

    

Twenty-six Weeks Ended

(in thousands)

Classification

June 27, 2019

June 27, 2019

Operating lease cost (1)

Selling and store operating

$

28,914

$

54,929

Sublease income

Selling and store operating

 

(606)

 

(1,229)

Total lease cost

$

28,308

$

53,700

(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 June 27, 2019, were:

(in thousands)

    

Amount

Twenty-six weeks ending December 26, 2019

$

50,319

2020

 

97,378

2021

 

112,876

2022

 

107,688

2023

 

102,990

Thereafter

 

594,379

Total minimum lease payments (2)

$

1,065,630

Less: amount of lease payments representing interest

273,574

Present value of future minimum lease payments

792,056

Less: current obligations under leases

44,461

Long-term lease obligations

$

747,595

(2) Future lease payments exclude approximately $200 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

For the twenty-six weeks ended June 27, 2019, cash paid for operating leases was $52.4 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. The 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 in this lawsuit, which is in the early stages and has not yet been certified as a class, and intends to defend itself vigorously. 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.

v3.19.2
Stock-Based Compensation
6 Months Ended
Jun. 27, 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 will in no event 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, originally approved for issuance under the ESPP. During the thirteen and twenty-six weeks ended June 27, 2019, the Company recognized $127 and $270 thousand of stock-based compensation expense related to the ESPP, respectively.

v3.19.2
Earnings Per Share
6 Months Ended
Jun. 27, 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

    

Twenty-six Weeks Ended

June 27,

June 28,

June 27,

June 28,

(in thousands, except per share data)

2019

    

2018

2019

    

2018

Net income

$

43,596

$

39,846

$

74,316

$

71,717

Basic weighted average shares outstanding

 

98,642

 

96,684

 

98,214

 

96,199

Dilutive effect of share based awards

 

6,198

8,253

 

6,392

8,609

Diluted weighted average shares outstanding

 

104,840

 

104,937

 

104,606

 

104,808

Basic earnings per share

$

0.44

$

0.41

$

0.76

$

0.75

Diluted earnings per share

$

0.42

$

0.38

$

0.71

$

0.68

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

    

Thirteen Weeks Ended

    

Twenty-six Weeks Ended

June 27,

June 28,

June 27,

June 28,

(in thousands)

2019

2018

2019

2018

Stock options

 

1,011

 

181

 

1,003

 

130

v3.19.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 27, 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 ending 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 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 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 and twenty-six weeks ended June 27, 2019 and June 28, 2018 are not necessarily indicative of the results to be expected for the full years.

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 in the first quarter of fiscal 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 had a material impact on the Company’s Condensed Consolidated Balance Sheets but did not have a material impact on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income or Condensed Consolidated Statements of Cash Flows. Refer to Note 5 to our Condensed Consolidated Financial Statements included in this Quarterly Report for further details.

v3.19.2
Revenues (Tables)
6 Months Ended
Jun. 27, 2019
Disaggregation of Revenue [Abstract]  
Disaggregated Revenue

Thirteen Weeks Ended

Thirteen Weeks Ended

June 27, 2019

June 28, 2018

    

    

    

% of

    

    

% of

Product Category

Net Sales

Net Sales

Net Sales

Net Sales

Tile

$

136,319

 

26

%  

$

123,408

 

28

%

Laminate / Luxury Vinyl Plank

 

108,218

 

21

 

77,436

 

18

Decorative Accessories

 

97,594

 

19

 

82,976

 

19

Installation Materials and Tools

 

88,592

 

17

 

68,201

 

16

Wood

 

52,762

 

10

 

48,911

 

11

Natural Stone

 

32,903

 

6

 

29,533

 

7

Delivery and Other

 

3,923

 

1

 

3,814

 

1

Total

$

520,311

 

100

%  

$

434,279

 

100

%

Twenty-six Weeks Ended

Twenty-six Weeks Ended

June 27, 2019

June 28, 2018

    

    

    

% of

    

    

% of

Product Category

Net Sales

Net Sales

Net Sales

Net Sales

Tile

$

261,629

 

26

%  

$

240,810

 

29

%

Laminate / Luxury Vinyl Plank

 

205,720

 

21

 

144,328

 

17

Decorative Accessories

 

192,034

 

19

 

161,465

 

19

Installation Materials and Tools

 

168,301

 

17

 

131,782

 

16

Wood

 

101,992

 

10

 

95,396

 

11

Natural Stone

 

63,790

 

6

 

57,539

 

7

Delivery and Other

 

3,895

 

1

 

5,907

 

1

Total

$

997,361

 

100

%  

$

837,227

 

100

%

v3.19.2
Debt (Tables)
6 Months Ended
Jun. 27, 2019
Debt  
Schedule of fair value debt

    

June 27,

    

December 27,

(in thousands)

2019

2018

Total debt at par value

$

147,250

$

149,000

Less: unamortized discount and debt issuance costs

 

3,280

 

3,666

Net carrying amount

$

143,970

$

145,334

Fair value

$

146,514

$

147,883

v3.19.2
Commitments and Contingencies (Tables)
6 Months Ended
Jun. 27, 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

June 27, 2019

Assets

Building

Right of use assets

$

707,855

Equipment

Right of use assets

7,448

Land

Right of use assets

219

Software

Right of use assets

4,487

Total operating lease assets

$

720,009

Liabilities

 

Current

 

Building

Current portion of lease liabilities

$

38,625

Equipment

Current portion of lease liabilities

3,353

Land

Current portion of lease liabilities

89

Software

Current portion of lease liabilities

2,394

Total current operating lease liabilities

44,461

Noncurrent

Building

Lease liabilities

740,739

Equipment

Lease liabilities

4,601

Land

Lease liabilities

136

Software

Lease liabilities

2,119

Total noncurrent operating lease liabilities

747,595

Total operating lease liabilities

$

792,056

Weighted-average remaining lease term

 

9 years

Weighted-average discount rate

5.5%

Schedule of components of lease expense

    

Thirteen Weeks Ended

    

Twenty-six Weeks Ended

(in thousands)

Classification

June 27, 2019

June 27, 2019

Operating lease cost (1)

Selling and store operating

$

28,914

$

54,929

Sublease income

Selling and store operating

 

(606)

 

(1,229)

Total lease cost

$

28,308

$

53,700

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

Schedule of Future minimum lease payments under non cancelable operating leases

(in thousands)

    

Amount

Twenty-six weeks ending December 26, 2019

$

50,319

2020

 

97,378

2021

 

112,876

2022

 

107,688

2023

 

102,990

Thereafter

 

594,379

Total minimum lease payments (2)

$

1,065,630

Less: amount of lease payments representing interest

273,574

Present value of future minimum lease payments

792,056

Less: current obligations under leases

44,461

Long-term lease obligations

$

747,595

(2) Future lease payments exclude approximately $200 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

v3.19.2
Earnings Per Share (Tables)
6 Months Ended
Jun. 27, 2019
Earnings Per Share  
Schedule of computation of basic and diluted earnings per share

    

Thirteen Weeks Ended

    

Twenty-six Weeks Ended

June 27,

June 28,

June 27,

June 28,

(in thousands, except per share data)

2019

    

2018

2019

    

2018

Net income

$

43,596

$

39,846

$

74,316

$

71,717

Basic weighted average shares outstanding

 

98,642

 

96,684

 

98,214

 

96,199

Dilutive effect of share based awards

 

6,198

8,253

 

6,392

8,609

Diluted weighted average shares outstanding

 

104,840

 

104,937

 

104,606

 

104,808

Basic earnings per share

$

0.44

$

0.41

$

0.76

$

0.75

Diluted earnings per share

$

0.42

$

0.38

$

0.71

$

0.68

Schedule of awards excluded from computation

    

Thirteen Weeks Ended

    

Twenty-six Weeks Ended

June 27,

June 28,

June 27,

June 28,

(in thousands)

2019

2018

2019

2018

Stock options

 

1,011

 

181

 

1,003

 

130

v3.19.2
Summary of Significant Accounting Policies (Details)
ft² in Thousands
6 Months Ended 12 Months Ended
Jun. 27, 2019
ft²
segment
facility
state
Dec. 26, 2019
Dec. 27, 2018
Dec. 31, 2015
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 371 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 106      
Area of facility | ft² 75      
Small Format Store [Member]        
Real Estate Properties [Line Items]        
Number of stores 1      
v3.19.2
Disaggregated Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Jun. 27, 2019
Jun. 28, 2018
Net Sales $ 520,311 $ 434,279 $ 997,361 $ 837,227
% of Net Sales     100.00% 100.00%
Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 520,311 $ 434,279    
% of Net Sales 100.00% 100.00%    
Tile        
Net Sales     $ 261,629 $ 240,810
% of Net Sales     26.00% 29.00%
Tile | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 136,319 $ 123,408    
% of Net Sales 26.00% 28.00%    
Decorative Accessories        
Net Sales     $ 192,034 $ 161,465
% of Net Sales     19.00% 19.00%
Decorative Accessories | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 97,594 $ 82,976    
% of Net Sales 19.00% 19.00%    
Laminate Luxury Vinyl Plank        
Net Sales     $ 205,720 $ 144,328
% of Net Sales     21.00% 17.00%
Laminate Luxury Vinyl Plank | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 108,218 $ 77,436    
% of Net Sales 21.00% 18.00%    
Installation Materials And Tools        
Net Sales     $ 168,301 $ 131,782
% of Net Sales     17.00% 16.00%
Installation Materials And Tools | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 88,592 $ 68,201    
% of Net Sales 17.00% 16.00%    
Wood        
Net Sales     $ 101,992 $ 95,396
% of Net Sales     10.00% 11.00%
Wood | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 52,762 $ 48,911    
% of Net Sales 10.00% 11.00%    
Natural Stone        
Net Sales     $ 63,790 $ 57,539
% of Net Sales     6.00% 7.00%
Natural Stone | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 32,903 $ 29,533    
% of Net Sales 6.00% 7.00%    
Delivery and Other        
Net Sales     $ 3,895 $ 5,907
% of Net Sales     1.00% 1.00%
Delivery and Other | Revenue from Contract with Customer, Product and Service Benchmark [Member] | Product Concentration Risk [Member]        
Net Sales $ 3,923 $ 3,814    
% of Net Sales 1.00% 1.00%    
v3.19.2
Debt - Fair Value of Debt (Details) - USD ($)
$ in Thousands
Jun. 27, 2019
Dec. 27, 2018
Debt Instrument [Line Items]    
Total debt at par value $ 147,250 $ 149,000
Less: unamortized discount and debt issuance costs 3,280 3,666
Net carrying amount 143,970 145,334
Level 3    
Debt Instrument [Line Items]    
Fair value $ 146,514 $ 147,883
v3.19.2
Income Taxes (Details)
6 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Income Taxes    
Effective income tax rate (as a percent) 7.70% (2.70%)
v3.19.2
Commitments and Contingencies - Lease costs (Details)
$ in Thousands
3 Months Ended 6 Months Ended
Dec. 27, 2018
USD ($)
Jun. 27, 2019
USD ($)
Jun. 27, 2019
USD ($)
facility
item
Dec. 28, 2018
USD ($)
Lease Commitments        
Lease, Practical Expedients, Package [true false] true      
Right of use assets $ 0 $ 720,009 $ 720,009  
Operating lease liability   792,056 $ 792,056  
Lease term for 1 particular lease     20 years  
Number of leases with longer term | item     1  
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 0 44,461 $ 44,461  
Lease liabilities $ 0 $ 747,595 $ 747,595  
Weighted average remaining lease term   9 years 9 years  
Weighted average discount rate   5.50% 5.50%  
Lease, Cost [Abstract]        
Operating lease cost   $ 28,914 $ 54,929  
Sublease income   (606) (1,229)  
Lease, Cost, Total   28,308 53,700  
Building [Member]        
Lease Commitments        
Right of use assets   707,855 707,855  
Current portion of lease liability   38,625 38,625  
Lease liabilities   740,739 740,739  
Equipment [Member]        
Lease Commitments        
Right of use assets   7,448 7,448  
Current portion of lease liability   3,353 3,353  
Lease liabilities   4,601 4,601  
Land [Member]        
Lease Commitments        
Right of use assets   219 219  
Current portion of lease liability   89 89  
Lease liabilities   136 136  
Software and Software Development Costs [Member]        
Lease Commitments        
Right of use assets   4,487 4,487  
Current portion of lease liability   2,394 2,394  
Lease liabilities   $ 2,119 $ 2,119  
Minimum        
Lease Commitments        
Lease term   10 years 10 years  
Maximum        
Lease Commitments        
Lease term   15 years 15 years  
Accounting Standards Update 2016-02 [Member] | Restatement Adjustment [Member]        
Lease Commitments        
Right of use assets       $ 621,000
Operating lease liability       $ 683,000
v3.19.2
Commitments and Contingencies - Lease Maturity (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 27, 2019
Dec. 27, 2018
Lessee, Operating Lease, Liability, Payment, Due [Abstract]    
Thirty-nine weeks ended December 26, 2019 $ 50,319  
2020 97,378  
2021 112,876  
2022 107,688  
2023 102,990  
Thereafter 594,379  
Total minimum lease payments 1,065,630  
Amount representing interest 273,574  
Operating Lease, Liability, Total 792,056  
Current portion of lease liability 44,461 $ 0
Long-term lease obligations 747,595 $ 0
Minimum lease payments for leases not yet commenced 200,000  
Cash paid during the period against operating lease liabilities $ 52,400