10-Q 1 fnd-20240328.htm 10-Q fnd-20240328
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74
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
FORM 10-Q
_________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____        
Commission file number 001-38070
_________________________________________
Floor & Decor Holdings, Inc.
(Exact name of registrant as specified in its charter)
_________________________________________
Delaware27-3730271
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2500 Windy Ridge Parkway SE
Atlanta,Georgia30339
(Address of principal executive offices)(Zip Code)
(404)471-1634Not Applicable
(Registrant’s telephone number, including area code)(Former name, former address and former fiscal year,
if changed since last report)
_________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.001 par value per shareFNDNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at April 29, 2024
Class A common stock, $0.001 par value per share107,011,860


Table of Contents
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

2

Forward-Looking Statements
The discussion in this Quarterly Report, including under this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part I and Item 1A, “Risk Factors” of Part II, contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Quarterly Report, including statements regarding our future operating results and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements are based on our current expectations, assumptions, estimates, and projections. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions regarding the Company’s business, the economy, and other future conditions, including the impact of natural disasters on sales. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “seeks,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “budget,” “potential,” or “continue” or the negative of these terms or other similar expressions.
The forward-looking statements contained in this Quarterly Report are only predictions. Although we believe that the expectations reflected in the forward-looking statements in this Quarterly Report are reasonable, we cannot guarantee future events, results, performance, or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements in this Quarterly Report, including, without limitation, those factors described in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part I, Item 1A, “Risk Factors” of Part II, and elsewhere in the Company’s filings with the Securities and Exchange Commission (the “SEC”). Some of the key factors that could cause actual results to differ from our expectations include the following:
an overall decline in the health of the economy, the hard surface flooring industry, consumer confidence and discretionary spending, and the housing market, including as a result of rising inflation or interest rates;
our failure to successfully manage the challenges that our planned new store growth poses or the impact of unexpected difficulties or higher costs during our expansion;
our inability to enter into leases for additional stores on acceptable terms or renew or replace our current store leases;
our failure to successfully anticipate and manage trends, consumer preferences, and demand;
our inability to successfully manage increased competition;
our inability to manage our inventory, including the impact of inventory obsolescence, shrinkage, and damage;
any disruption in our distribution capabilities, supply chain, and our related planning and control processes, including carrier capacity constraints, port congestion or shut down, transportation costs, and other supply chain costs or product shortages;
any increases in wholesale prices of products, materials, and transportation costs beyond our control, including increases in costs due to inflation;
the resignation, incapacitation, or death of any key personnel, including our executive officers;
our inability to attract, hire, train, and retain highly qualified managers and staff;
the impact of any labor activities;
our dependence on foreign imports for the products we sell, including risks associated with obtaining products from abroad;
geopolitical risks, such as the conflict in the Middle East, the ongoing war in Ukraine, and U.S. policies related to global trade and tariffs, such as import restrictions under the Uyghur Forced Labor Prevention Act, or any antidumping and countervailing duties, any of which could impact our ability to import from foreign suppliers or raise our costs;
our ability to manage our comparable store sales growth;
any failure by any of our suppliers to supply us with quality products on attractive terms and prices;
any failure by our suppliers to adhere to the quality standards that we set for our products;
our inability to locate sufficient suitable natural products, particularly products made of more exotic species or unique stone;
3

the effects of weather conditions, natural disasters, or other unexpected events, including public health crises that may disrupt our operations;
our inability to maintain sufficient levels of cash flow or liquidity to fund our expanding business and service our existing indebtedness;
any allegations, investigations, lawsuits, or violations of laws and regulations applicable to us, our products or our suppliers;
our inability to adequately protect the privacy and security of information related to our customers, us, our associates, our suppliers, and other third parties;
any material disruption in our information systems, including our website;
new or changing laws or regulations, including tax laws and trade policies and regulations;
any failure to protect our intellectual property rights or disputes regarding our intellectual property or the intellectual property of third parties;
the impact of any future strategic transactions;
restrictions imposed by our indebtedness on our current and future operations, including risks related to our variable rate debt; and
our ability to manage risks related to corporate social responsibility.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The forward-looking statements contained in this Quarterly Report speak only as of the date hereof. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. If a change to the events and circumstances reflected in our forward-looking statements occurs, our business, financial condition, and operating results may vary materially from those expressed in our forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, or otherwise.
4

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Floor & Decor Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
in thousands, except for share and per share data
As of March 28, 2024
As of December 28,
2023
Assets    
Current assets:    
Cash and cash equivalents$57,426 $34,382 
Income taxes receivable15,830 27,870 
Receivables, net100,951 99,513 
Inventories, net1,032,130 1,106,150 
Prepaid expenses and other current assets49,746 48,725 
Total current assets1,256,083 1,316,640 
Fixed assets, net1,651,373 1,629,917 
Right-of-use assets1,317,694 1,282,625 
Intangible assets, net152,953 153,869 
Goodwill257,940 257,940 
Deferred income tax assets, net15,406 14,227 
Other assets7,211 7,332 
Total long-term assets3,402,577 3,345,910 
Total assets$4,658,660 $4,662,550 
Liabilities and stockholders’ equity
Current liabilities:
Current portion of term loan$2,103 $2,103 
Current portion of lease liabilities129,150 126,428 
Trade accounts payable641,180 679,265 
Accrued expenses and other current liabilities287,011 332,940 
Deferred revenue14,195 11,277 
Total current liabilities1,073,639 1,152,013 
Term loan194,836 194,939 
Lease liabilities1,337,756 1,301,754 
Deferred income tax liabilities, net60,478 67,188 
Other liabilities11,150 15,666 
Total long-term liabilities1,604,220 1,579,547 
Total liabilities2,677,859 2,731,560 
Commitments and contingencies (Note 5)
Stockholders’ equity
Capital stock:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at March 28, 2024 and December 28, 2023
  
Common stock Class A, $0.001 par value; 450,000,000 shares authorized; 107,011,266 shares issued and outstanding at March 28, 2024 and 106,737,532 issued and outstanding at December 28, 2023
107 107 
Common stock Class B, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at March 28, 2024 and December 28, 2023
  
Common stock Class C, $0.001 par value; 30,000,000 shares authorized; 0 shares issued and outstanding at March 28, 2024 and December 28, 2023
  
Additional paid-in capital513,809 513,060 
Accumulated other comprehensive income, net452 1,422 
Retained earnings1,466,433 1,416,401 
Total stockholders’ equity1,980,801 1,930,990 
Total liabilities and stockholders’ equity$4,658,660 $4,662,550 
See accompanying notes to condensed consolidated financial statements.
5

Floor & Decor Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Thirteen Weeks Ended
in thousands, except for per share dataMarch 28,
2024
March 30,
2023
Net sales$1,097,289 $1,122,052 
Cost of sales627,263 652,934 
Gross profit470,026 469,118 
Operating expenses:
Selling and store operating334,345 303,671 
General and administrative66,777 61,911 
Pre-opening9,593 8,020 
Total operating expenses410,715 373,602 
Operating income59,311 95,516 
Interest expense, net1,955 4,862 
Income before income taxes57,356 90,654 
Income tax expense7,324 19,130 
Net income$50,032 $71,524 
Change in fair value of hedge instruments, net of tax(970)(849)
Total comprehensive income$49,062 $70,675 
Basic earnings per share$0.47 $0.67 
Diluted earnings per share$0.46 $0.66 
See accompanying notes to condensed consolidated financial statements.
6

Floor & Decor Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common StockAdditional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Retained EarningsTotal Stockholders’ Equity
Class A
in thousandsSharesAmount
Balance, December 29, 2023106,738 $107 $513,060 $1,422 $1,416,401 $1,930,990 
Stock-based compensation expense— — 7,232 — — 7,232 
Exercise of stock options171 — 3,854 — — 3,854 
Issuance of common stock upon vesting of restricted stock units184 — — — — — 
Shares issued under employee stock purchase plan28 — 2,720 — — 2,720 
Common stock redeemed for tax liability(110)— (13,057)— — (13,057)
Other comprehensive loss, net of tax— — — (970)— (970)
Net income— — — — 50,032 50,032 
Balance, March 28, 2024107,011 $107 $513,809 $452 $1,466,433 $1,980,801 
Common StockAdditional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Retained EarningsTotal Stockholders' Equity
Class A
in thousandsSharesAmount
Balance, December 30, 2022106,151 $106 $482,312 $4,337 $1,170,421 $1,657,176 
Stock-based compensation expense— — 6,741 — — 6,741 
Exercise of stock options79 — 2,130 — — 2,130 
Issuance of common stock upon vesting of restricted stock units117 — — — — — 
Shares issued under employee stock purchase plan43 — 2,558 — — 2,558 
Common stock redeemed for tax liability(119)— (10,863)— — (10,863)
Other comprehensive loss, net of tax
— — — (849)— (849)
Net income— — — — 71,524 71,524 
Balance, March 30, 2023106,271 $106 $482,878 $3,488 $1,241,945 $1,728,417 
See accompanying notes to condensed consolidated financial statements.
7

Floor & Decor Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Thirteen Weeks Ended
in thousandsMarch 28,
2024
March 30,
2023
Operating activities    
Net income$50,032 $71,524 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization56,423 46,352 
Deferred income taxes(7,530)(7,211)
Stock-based compensation expense7,232 6,741 
Change in fair value of contingent earn-out liabilities576 1,434 
Loss (gain) on asset impairments and disposals, net37 (177)
Interest cap derivative contracts28 28 
Changes in operating assets and liabilities:
Receivables, net(1,438)6,740 
Inventories, net74,020 111,189 
Trade accounts payable(35,079)47,176 
Accrued expenses and other current liabilities(7,905)(68,733)
Income taxes13,186 25,495 
Deferred revenue2,918 4,358 
Other, net(4,990)5,364 
Net cash provided by operating activities147,510 250,280 
Investing activities
Purchases of fixed assets(111,688)(139,398)
Net cash used in investing activities(111,688)(139,398)
Financing activities
Payments on term loan(526)(526)
Borrowings on revolving line of credit258,600 215,400 
Payments on revolving line of credit(258,600)(319,100)
Payments of contingent earn-out liabilities(5,769)(5,241)
Proceeds from exercise of stock options3,854 2,130 
Proceeds from employee stock purchase plan2,720 2,558 
Tax payments for stock-based compensation awards(13,057)(10,863)
Net cash used in financing activities(12,778)(115,642)
Net increase (decrease) in cash and cash equivalents23,044 (4,760)
Cash and cash equivalents, beginning of the period34,382 9,794 
Cash and cash equivalents, end of the period$57,426 $5,034 
Supplemental disclosures of cash flow information
Buildings and equipment acquired under operating leases$68,360 $55,701 
Cash paid for interest, net of capitalized interest$1,195 $4,692 
Cash paid for income taxes, net of refunds$1,665 $1,651 
Fixed assets accrued at the end of the period$100,091 $109,161 
See accompanying notes to condensed consolidated financial statements.
8

Floor & Decor Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 high-growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories and seller of commercial surfaces. The Company offers a broad assortment of in-stock hard-surface flooring, including tile, wood, laminate and vinyl, and natural stone along with decorative accessories and wall tile, installation materials, and adjacent categories at everyday low prices. Our stores appeal to a variety of customers, including professional installers and commercial businesses (“Pro”) and homeowners, which are comprised of do it yourself customers (“DIY”) and buy it yourself customers, who buy our products for professional installation (“BIY”). We operate within one reportable segment.
As of March 28, 2024, the Company, through its wholly owned subsidiary, Floor and Decor Outlets of America, Inc. (“Outlets”), operates 225 warehouse-format stores, which average 78,000 square feet, and five small-format standalone design studios in 36 states, as well as four distribution centers and an e-commerce site, FloorandDecor.com, and a commercial surfaces business through its subsidiary, Spartan Surfaces, LLC. (“Spartan”). Substantially all of the Company’s operating assets and liabilities are held by Outlets.
Fiscal Year
The Company’s fiscal year is the 52- or 53-week period ending on the Thursday on or preceding December 31st. The fiscal year ending December 26, 2024 (“fiscal 2024”) and the fiscal year ended December 28, 2023 (“fiscal 2023”) include 52 weeks. 52-week fiscal years consist of thirteen-week periods in each quarter of the fiscal year. When a 53-week fiscal year occurs, the Company reports the additional week at the end of the fiscal fourth quarter.
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 28, 2023 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 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024 (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, 2024 are not necessarily indicative of the results to be expected for the full year.
Summary of Significant Accounting Policies
There were no significant changes to our Significant Accounting Policies as disclosed in 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.
Recently Adopted Accounting Pronouncements
Leases. In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-01, “Leases (Topic 842), Common Control Arrangements.” The amendments in the ASU applying to public business entities clarifies the accounting for leasehold improvements associated with common control leases, reducing diversity in practice and providing investors with financial information that will better reflect the economics of those transactions. In the first quarter of fiscal 2024, the Company adopted ASU No. 2023-01 on a prospective basis to all new leasehold improvements. The adoption of ASU 2023-01 did not have an impact on the Company’s consolidated financial statements or related disclosures and would only have an impact to the extent that the Company has future common control leases.
9

Supplier Finance Programs. In September 2022, the FASB issued ASU No. 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50).” The ASU requires disclosure of the key terms of outstanding supply chain finance programs and a rollforward of the related amounts due to vendors participating in these programs. In the first quarter of fiscal 2023, the Company adopted the portion of the ASU 2022-04 guidance requiring disclosure of key terms of supply chain finance programs. The portion of the ASU 2022-04 guidance requiring a rollforward of activity within supply chain finance programs will be adopted in the Company’s Annual Report for fiscal 2024 and is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows as the standard only impacts financial statement footnote disclosures. For additional information, refer to Note 9, “Supply Chain Finance.”
Recently Issued Accounting Pronouncements
Codification Improvements. In March 2024, the FASB issued ASU No. 2024-02, “Codification Improvements - Amendments to Remove References to the Concepts Statements.” ASU 2024-02 removes references to various FASB Concepts Statements within the Codification. The guidance in ASU No. 2024-02 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, and can be applied either prospectively to all new transactions recognized on or after the date that the entity first applies the amendments or retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied. Early adoption is permitted. The adoption of ASU 2024-02 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
Stock Compensation. In March 2024, the FASB issued ASU No. 2024-01, “Compensation - Stock Compensation (Topic 718).” The amendments in this ASU clarify how an entity determines whether a profits interest or similar award is within the scope of Accounting Standards Codification (“ASC”) 718, Compensation-Stock Compensation (“ASC 718”), by adding illustrative guidance. The guidance in ASU No. 2024-01 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, and can be applied either retrospectively to all prior periods presented in the consolidated financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. Early adoption is permitted. The adoption of ASU 2024-01 is not expected to have any impact on the Company’s consolidated financial statements or related disclosures. The Company expects that ASU 2024-01 would only be applicable to the Company to the extent that it issues profits interests or similar awards.
Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740).” The amendments in this ASU improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. Additionally, this ASU improves the effectiveness and comparability of disclosures by adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with SEC Regulation S-X 210.4-08(h) and by removing disclosures that no longer are considered cost beneficial or relevant. This guidance in ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption of the standard is permitted. The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU expands disclosure of reportable segments by requiring more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how the Chief Operating Decision Maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The guidance in ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. This guidance should be applied retrospectively to all prior periods presented in the consolidated financial statements. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on the Company’s consolidated financial statements and related disclosures.
Presentation and Disclosure Requirements. In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The ASU was issued in response to the SEC’s August 2018 final amendments in Release No. 33-10532, Disclosure Update and Simplification, that updated and simplified disclosure requirements that the SEC believed were duplicative, overlapping, or outdated. The guidance in ASU 2023-06 is intended to align GAAP requirements with those of the SEC and to facilitate the application of GAAP for all entities. The amendments introduced by ASU 2023-06 are effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. If, by June 30, 2027, the SEC has not removed the applicable requirements from its existing regulations, the pending content of the associated amendment will be removed from the ASC and will not become effective for any entities. Early adoption is permitted. The adoption of ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
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2. Revenue
Net sales consist of revenue associated with contracts with customers for the sale of goods and services in amounts that reflect the consideration the Company is entitled to receive in exchange for those goods and services.
Deferred Revenue & Contract Liabilities
In accordance with ASC 606, Revenue from Contracts with Customers, 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 was not yet ready for physical transfer to customers.
Contract liabilities within the Condensed Consolidated Balance Sheets as of March 28, 2024 and December 28, 2023 primarily consisted of deferred revenue as well as amounts in accrued expenses and other current liabilities related to the Pro Premier Rewards loyalty program and unredeemed gift cards. As of March 28, 2024, contract liabilities totaled $72.6 million and included $47.5 million of loyalty program liabilities, $14.2 million of deferred revenue, and $10.9 million of unredeemed gift cards. As of December 28, 2023, contract liabilities totaled $69.6 million and included $45.6 million of loyalty program liabilities, $11.3 million of deferred revenue, and $12.7 million of unredeemed gift cards. Of the contract liabilities outstanding as of December 28, 2023, approximately $12.9 million was recognized in revenue during the thirteen weeks ended March 28, 2024.
Disaggregated Revenue
The Company has one reportable segment. The following table presents the net sales of each major product category (in thousands):
Thirteen Weeks Ended
March 28, 2024March 30, 2023
Product CategoryNet Sales% of Net SalesNet Sales% of Net Sales
Laminate and vinyl$265,393 24 %$299,378 27 %
Tile256,386 23 264,584 24 
Installation materials and tools219,487 20 202,069 18 
Decorative accessories and wall tile193,868 18 198,578 18 
Wood67,740 6 62,221 6 
Natural stone49,992 5 55,025 5 
Adjacent categories23,058 2 20,012 1 
Other (1)21,365 2 20,185 1 
Total$1,097,289 100 %$1,122,052 100 %
(1) Other includes delivery, sample, and other product revenue and adjustments for deferred revenue, sales returns reserves, and other revenue related adjustments that are not allocated on a product-category basis.
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3. Debt
The following table summarizes the Company’s long-term debt as of March 28, 2024 and December 28, 2023:
in thousandsMaturity Date
Interest Rate Per Annum at March 28, 2024 (1)
March 28, 2024December 28, 2023
Credit Facilities:
Term Loan FacilityFebruary 14, 20277.33%Variable$201,870 $202,396 
Asset-based Loan Facility (“ABL Facility”)August 4, 20276.58%Variable  
Total secured debt at par value201,870 202,396 
Less: current maturities2,103 2,103 
Long-term debt maturities199,767 200,293 
Less: unamortized discount and debt issuance costs4,931 5,354 
Total long-term debt$194,836 $194,939 
(1) The applicable interest rate for the Term Loan Facility as presented herein does not include the effect of interest rate cap agreements, which, for the interest rate cap agreements expiring in April 2024, caps the applicable interest rate for $150.0 million of the Term Loan Facility at less than 1.68%.
The following table summarizes scheduled maturities of the Company’s debt as of March 28, 2024:
in thousandsAmount
Thirty-nine weeks ending December 26, 2024$1,577 
20252,103 
20262,629 
2027195,561 
Total minimum debt payments$201,870 
Components of interest expense are as follows for the periods presented:
Thirteen Weeks Ended
in thousandsMarch 28, 2024March 30, 2023
Total interest expense, net of interest income (1)
$3,802 $6,186 
Less: interest capitalized1,847 1,324 
Interest expense, net$1,955 $4,862 
(1)Total interest expense, net of interest income includes interest income related to the Company’s interest rate cap agreements totaling $1.4 million and $1.1 million for the thirteen weeks ended March 28, 2024 and March 30, 2023, respectively. Refer to Note 8, “Fair Value Measurements” for additional details related to the Company’s interest rate cap agreements.
Term Loan Facility
The Term Loan Facility bears interest at a rate equal to either (a) a base rate determined by reference to the highest of (1) the “Prime Rate,” (2) the U.S. federal funds rate plus 0.5% and (3) the one-month Term Secured Overnight Financing Rate (“SOFR”) plus 1.0%, or (b) Adjusted Term SOFR, plus, in each case, the Applicable Margin (each term as defined in the Term Loan Facility credit agreement). The Applicable Margin for base rate loans will be between 1.00% and 1.25%, and the Applicable Margin for SOFR loans will be between 2.00% and 2.25% (subject to a floor of 0.00%), in each case, if the Company exceeds certain leverage ratio tests.
All obligations under the Term Loan Facility are secured by (1) a first-priority security interest in substantially all of the property and assets of Outlets and the other guarantors under the Term Loan Facility, with certain exceptions, and (2) a second-priority security interest in the collateral securing the ABL Facility.
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ABL Facility
As of March 28, 2024, the Company’s ABL Facility had a maximum availability of $800.0 million 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 ABL Facility). The ABL Facility is available for issuance of letters of credit and contains a sublimit of $50.0 million 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. The Company’s ABL Facility allows for the Company, under certain circumstances, to increase the size of the facility by an additional amount up to $200.0 million.
All obligations under the ABL Facility are secured by (1) a first-priority security interest in the cash and cash equivalents, accounts receivable, inventory, and related assets of Outlets and the other guarantors under the ABL Facility, with certain exceptions, and (2) a second-priority security interest in substantially all of the other property and assets of Outlets and the other guarantors under the Term Loan Facility.
As of March 28, 2024, net availability under the ABL Facility was $640.8 million as reduced by letters of credit of $35.3 million.
Covenants
The credit agreements governing the Term Loan Facility and ABL Facility contain customary restrictive covenants, which, 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 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 ABL Facility).
The Term Loan Facility has no financial maintenance covenants. The Company is currently in compliance with all covenants under the credit agreements.
Fair Value of Debt
Market risk associated with the Company’s 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 the Company’s estimates of interest rates, maturities, credit risk, and underlying collateral. The estimated fair value and classification within the fair value hierarchy of the Term Loan Facility was as follows as of March 28, 2024 and December 28, 2023:
in thousandsFair Value Hierarchy ClassificationMarch 28, 2024December 28, 2023
Term Loan FacilityLevel 3$201,366 $201,637 
The Term Loan Facility fair value is classified as Level 3 within the fair value hierarchy due to the use of unobservable inputs significant to the valuation, including indicative pricing from counterparties and discounted cash flow methods. No amounts were outstanding under the ABL Facility as of March 28, 2024 and December 28, 2023.
4. Income Taxes
Effective tax rates for the thirteen weeks ended March 28, 2024 and March 30, 2023 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 12.8% and 21.1% for the thirteen weeks ended March 28, 2024 and March 30, 2023, respectively. For the thirteen weeks ended March 28, 2024, the effective income tax rate was lower than the statutory federal income tax rate of 21.0% primarily due to tax deductions in excess of book expense related to stock-based compensation awards. For the thirteen weeks ended March 30, 2023, the effective income tax rate was higher than the statutory federal income tax rate of 21.0% primarily due to state income taxes that were partially offset by tax deductions in excess of book expense related to stock-based compensation awards.
13

5. Commitments and Contingencies
Lease Commitments
The Company accounts for leases in accordance with ASC 842, Leases. The majority of the Company’s long-term operating lease agreements are for its retail locations, distribution centers, and corporate office, which expire in various years through 2049. Most of these agreements are retail leases wherein both the land and building are leased. The Company also has ground leases in which only the land is leased. The initial lease terms for the Company's retail locations, distribution centers, and corporate office typically range from 10-20 years. The majority of the Company’s leases also include options to extend, which are factored into the recognition of their respective assets and liabilities when appropriate based on management’s assessment of the probability that the options will be exercised.
When readily determinable, the rate implicit in the lease is used to discount lease payments to present value; however, substantially all of the Company’s leases do not provide a readily determinable implicit rate. If the rate implicit in the lease is not readily determinable, the Company uses a third party to assist in the determination of a secured incremental borrowing rate, determined on a collateralized basis, to discount lease payments based on information available at lease commencement. The secured incremental borrowing rate is estimated based on yields obtained from Bloomberg for U.S. consumers with a BB credit rating and is adjusted for collateralization as well as inflation. As of March 28, 2024 and March 30, 2023, the Company’s weighted average discount rate was 5.8% and 5.5%, respectively. As of both March 28, 2024 and March 30, 2023, the weighted average remaining lease term of the Company’s leases was approximately 12 years.
Lease Costs
The table below presents components of lease expense for operating leases.
Thirteen Weeks Ended
in thousandsClassificationMarch 28, 2024March 30, 2023
Fixed operating lease cost:Selling and store operating$42,735 $38,144 
Cost of sales6,452 6,258 
Pre-opening3,063 3,066 
General and administrative1,029 1,072 
Total fixed operating lease cost$53,279 $48,540 
Variable lease cost (1):Selling and store operating$18,092 $14,486 
Cost of sales1,283 1,119 
Pre-opening173 131 
General and administrative579 303 
Total variable lease cost$20,127 $16,039 
Sublease incomeCost of sales(682)(679)
Total operating lease cost (2)$72,724 $63,900 
(1) Includes variable costs for common area maintenance, property taxes, and insurance on leased real estate.
(2) Excludes short-term lease costs, which were immaterial for the thirteen weeks ended March 28, 2024 and March 30, 2023.
14

Undiscounted Cash Flows
Future minimum lease payments under non-cancelable operating leases as of March 28, 2024 were as follows:
in thousandsAmount
Thirty-nine weeks ending December 26, 2024$152,243 
2025210,965 
2026198,137 
2027187,562 
2028167,828 
Thereafter1,214,340 
Total minimum lease payments (1) (2)2,131,075 
Less: amount of lease payments representing interest664,169 
Present value of future minimum lease payments1,466,906 
Less: current obligations under leases129,150 
Long-term lease obligations$1,337,756 
(1) Future lease payments exclude approximately $487.9 million of legally binding minimum lease payments for operating leases signed but not yet commenced.
(2) Operating lease payments include $255.0 million related to options to extend lease terms that are reasonably certain of being exercised.
For the thirteen weeks ended March 28, 2024 and March 30, 2023, cash paid for amounts included in the measurement of operating lease liabilities was $50.3 million and $46.4 million, respectively.
Litigation
On November 15, 2021, the Company was added as a defendant in a wrongful death lawsuit, Nguyen v. Inspections Now, Inc., No. 21-DCV-287142, pending in the 434th Judicial District Court of Fort Bend County, Texas. Inspections Now, Inc.; Bestview International Company; and Bestview (Fuzhou) Import & Export Co. LTD are also named as defendants in the case. Plaintiff’s petition alleges that “wood paneling” allegedly purchased from the Company was installed in the vicinity of plaintiff’s fireplace and caught fire while the fireplace was lit. The fire consumed plaintiff’s home and resulted in injuries to plaintiff and another occupant and the death of plaintiff’s three children and mother. Plaintiff alleges product defect and failure to warn claims against the Company; product defect, failure to warn, and strict liability claims against the Bestview entities; and negligent inspection claims against Inspections Now. Plaintiff’s petition seeks damages in excess of $1.0 million for property damage, personal injury, and wrongful death. The petition also seeks exemplary damages. Plaintiff’s ex-husband, brother, and the additional occupant have since intervened as plaintiffs in the lawsuit. Intervenors allege the same claims against the Company, Inspections Now, and the Bestview entities and collectively seek damages in excess of $11.0 million for property damage, personal injury (as to the other occupant), wrongful death, and exemplary damages. The Company has answered all petitions, denying the allegations, and is seeking dismissal of the lawsuit in favor of a first-filed lawsuit against other defendants (but arising from the same fire) pending in Harris County, Texas. The trial court denied the Company’s motion seeking dismissal on February 23, 2023, and on August 29, 2023, the Court of Appeals for the First Judicial District of Texas (in No. 01-23-00225-CV) denied the Company’s petition for a writ of mandamus challenging the trial court’s ruling. On October 10, 2023, the Company filed a petition seeking mandamus relief from the trial court’s ruling in the Supreme Court of Texas, No. 23-0845. That petition remains pending.
On June 18, 2020, an alleged stockholder filed a putative derivative complaint, Lincolnshire Police Pension Fund v. Taylor, et al., No. 2020-0487-JTL, in the Delaware Court of Chancery, purportedly on behalf of the Company against certain of the Company’s officers, directors, and stockholders. An amended complaint was filed on September 14, 2022. The Company along with the other defendants filed a motion to dismiss on October 31, 2022. The plaintiffs then filed a second amended complaint on December 22, 2022. On February 6, 2023, the Company, along with the other defendants, filed a motion to dismiss the operative complaint. On December 5, 2023, the Court denied the defendants’ motion to dismiss, and the case has proceeded to discovery. The complaint alleges breaches of fiduciary duties and unjust enrichment. The factual allegations underlying these claims are similar to the factual allegations made in the previously dismissed In re Floor & Decor Holdings, Inc. Securities Litigation, as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The complaint seeks unspecified damages and restitution for the Company from the individual defendants and the payment of costs and attorneys’ fees.
15

The Company maintains insurance that may cover any liability arising out of the above-referenced 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, the Company is currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the above-referenced litigation.
The Company is 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 its business activities. As with most actions such as these, an estimation of any possible and/or ultimate liability cannot always be determined. The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. These various other ordinary course proceedings are not expected to have a material impact on the Company's consolidated financial position, cash flows, or results of operations, however regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
6. Stock-based Compensation
In accordance with ASC 718, the Company measures compensation cost for all stock-based awards at fair value on the date of grant and recognizes compensation expense, net of forfeitures, using the straight-line method over the requisite service period of awards expected to vest, which for each of the awards is the service vesting period.
The table below presents components of stock-based compensation expense within the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income:
Thirteen Weeks Ended
in thousandsMarch 28, 2024March 30, 2023
General and administrative$6,273 $6,367 
Selling and store operating959 374 
Total stock-based compensation expense$7,232 $6,741 
Stock Options
The table below summarizes stock option activity for the thirteen weeks ended March 28, 2024.
OptionsWeighted Average Exercise Price
Outstanding at December 29, 2023
1,607,341 $28.51 
Exercised(170,713)$22.58 
Forfeited or expired(1,132)$92.56 
Outstanding at March 28, 2024
1,435,496 $29.16 
Vested and exercisable at March 28, 2024
1,419,169 $28.43 
Restricted Stock Units
The Company periodically grants restricted stock units (“RSUs”) that represent an unfunded, unsecured right to receive a share of the Company’s Class A common stock upon vesting. During the thirteen weeks ended March 28, 2024, the Company granted RSUs to certain employees, executive officers, and non-employee directors comprised of service-based RSUs and performance-based RSUs. Service-based RSUs vest based on the grantee’s continued service through the vesting date. The performance-based RSUs cliff vest based on (i) the Company's achievement of predetermined financial metrics at the end of a three-year performance period and (ii) the grantee’s continued service through the vesting date. Depending on the extent to which the relevant performance goals are achieved, the number of common shares earned upon vesting may range from 0% to 200% of the award granted. The Company assesses the probability of achieving all performance goals on a quarterly basis. The service periods for RSUs granted during the period varies by grantee and is one year from the grant date for non-employee directors and ranges between three to four years from the grant date for employees and executive officers.
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The following table summarizes restricted stock unit activity during the thirteen weeks ended March 28, 2024:
Restricted Stock Units
Service-basedPerformance-basedTotal shareholder returnTotal Restricted Stock Units
Unvested at December 29, 2023608,140 188,543 58,854 855,537 
Granted236,678 50,855  287,533 
Vested(183,689)  (183,689)
Forfeited(17,655)(13,001)(4,204)(34,860)
Unvested at March 28, 2024643,474 226,397 54,650 924,521 
The aggregate fair value for all restricted stock units granted during the thirteen weeks ended March 28, 2024 was $33.3 million. The grant-date fair value of service-based RSUs and performance-based RSUs is based on the closing market price of the Company’s Class A common stock on the date of grant.
Restricted Stock Awards
The following table summarizes restricted stock award activity during the thirteen weeks ended March 28, 2024:
Restricted Stock Awards
Service-basedPerformance-based (1)Total shareholder return (1)Total Restricted Stock Awards
Unvested at December 29, 202334,783 47,662 31,056 113,501 
Vested(30,680)(47,662)(31,056)(109,398)
Forfeited(395)  (395)
Unvested at March 28, 20243,708   3,708 
(1) The performance-based and total shareholder return restricted stock awards that vested during the period were issued at 100% of target based on achievement of the predetermined performance and total shareholder return criteria as specified in the underlying grant agreements.
7. Earnings Per Share
Net Income per Common Share
The Company calculates 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 using the treasury stock method.
The following table shows the computation of basic and diluted earnings per share for the periods presented:
Thirteen Weeks Ended
in thousands, except per share dataMarch 28, 2024March 30, 2023
Net income$50,032 $71,524 
Basic weighted average shares outstanding106,770 105,962 
Dilutive effect of share-based awards1,485 1,756 
Diluted weighted average shares outstanding108,255 107,718 
Basic earnings per share$0.47 $0.67 
Diluted earnings per share$0.46 $0.66 
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The following potentially dilutive securities were excluded from the computation of diluted earnings per share as a result of their anti-dilutive effect:
Thirteen Weeks Ended
in thousandsMarch 28, 2024March 30, 2023
Stock options2 62 
Restricted stock units2 291 
8. Fair Value Measurements
As of March 28, 2024 and December 28, 2023, the Company had certain financial assets and liabilities on its Condensed Consolidated Balance Sheets that were required to be measured at fair value on a recurring or non-recurring basis. The estimated fair values of financial assets and liabilities such as cash and cash equivalents, receivables, prepaid expenses and other current assets, other assets, accounts payable, and accrued expenses and other current liabilities approximate their respective carrying values as reported within the Condensed Consolidated Balance Sheets. See Note 3, “Debt” for discussion of the fair value of the Company’s debt.
Contingent Earn-out Liabilities
As of March 28, 2024, the contingent earn-out liabilities had an aggregate estimated fair value of $5.9 million, of which $4.8 million is included in accrued expenses and other current liabilities and $1.1 million is included in other liabilities within the Condensed Consolidated Balance Sheets. The Company’s contingent earn-out liabilities are classified as Level 3 within the fair value hierarchy due to the use of unobservable inputs that are significant to their respective valuations. The table below summarizes changes in contingent earn-out liabilities during the thirteen weeks ended March 28, 2024.
in thousandsContingent Earn-out Liabilities
Balance at December 28, 2023$11,137 
Fair value adjustments576 
Payments(5,769)
Balance at March 28, 2024$5,944 
The $0.6 million net increase in the fair value of contingent earn-out liabilities during the thirteen weeks ended March 28, 2024 was recognized in general and administrative expense within the Condensed Consolidated Statements of Operations and Comprehensive Income.
Interest Rate Cap Contracts
Changes in interest rates impact the Company’s results of operations. In an effort to manage exposure to this risk, the Company enters into derivative contracts and may adjust its derivative portfolio as market conditions change.
The Company has outstanding interest rate cap contracts that are designated as cash flow hedges. The effective portion of the gain or loss on effective cash flow hedges is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period in which the hedged transaction affects earnings. The effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in earnings.
The Company’s outstanding interest rate cap contracts were valued primarily using Level 2 inputs based on data readily observable in public markets. The Company's interest rate cap contracts were negotiated with counterparties without going through a public exchange. Accordingly, the Company's fair value assessments for these derivative contracts gave consideration to the risk of counterparty default as well as the Company's own credit risk. As of March 28, 2024 and December 28, 2023, the total fair value of the Company's interest rate cap contracts was approximately $0.5 million and $1.8 million, respectively, which are presented as a component of AOCI within stockholders’ equity on the Condensed Consolidated Balance Sheets net of tax of less than $0.1 million and $0.4 million, respectively. During the thirteen weeks ended March 28, 2024 and March 30, 2023, the Company reclassified $1.4 million and $1.1 million, respectively, of interest income from AOCI into earnings related to the interest rate cap contracts.
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9. Supply Chain Finance
The Company facilitates supply chain finance programs through financial intermediaries, which provide certain suppliers the option to be paid by the financial intermediaries earlier than the due date on the applicable invoice. When a supplier utilizes one of the supply chain finance programs and receives an early payment from a financial intermediary, it takes a discount on the invoice. The Company then pays the financial intermediary the invoice on the original due date. The Company does not reimburse suppliers for any costs they incur for participation in the program. Supplier participation is voluntary, and there are no assets pledged as security or other forms of guarantees provided for the committed payment to the financial intermediaries. As a result, all amounts owed to the financial intermediaries are presented as trade accounts payable in the Condensed Consolidated Balance Sheets. Amounts due to the financial intermediaries reflected in trade accounts payable at March 28, 2024 and December 28, 2023 were $116.0 million and $114.0 million, respectively.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and related notes of Floor & Decor Holdings, Inc. and Subsidiaries included in Item 1 of this quarterly report on Form 10-Q (this “Quarterly Report”) and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2023 and filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024 (the “Annual Report”). As used in this Quarterly Report, except where the context otherwise requires or where otherwise indicated, the terms “Floor & Decor,” “Company,” “we,” “our,” or “us” refer to Floor & Decor Holdings, Inc. and its subsidiaries.
Overview
Founded in 2000, Floor & Decor is a high-growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories and seller of commercial surfaces with 225 warehouse-format stores across 36 states as of March 28, 2024. We believe our unique approach to selling hard surface flooring and our consistent and disciplined culture of innovation and reinvestment create a differentiated business model in the hard surface flooring category. We believe that we offer the industry’s broadest in-stock assortment of tile, wood, laminate and vinyl, and natural stone flooring along with decorative and installation accessories and adjacent categories at everyday low prices, positioning us as the one-stop destination for our customers’ entire hard surface flooring needs. We appeal to a variety of customers, including professional installers and commercial businesses (“Pro”) and homeowners, which are comprised of do it yourself customers (“DIY”) and buy it yourself customers, who buy the products for professional installation (“BIY”).
We operate on a 52- or 53-week fiscal year ending the Thursday on or preceding December 31. The following discussion contains references to the thirteen weeks ended March 28, 2024 and March 30, 2023, respectively.
During the thirteen weeks ended March 28, 2024, we continued to make key long-term strategic investments, including:
opening four new warehouse-format stores, ending the quarter with 225 warehouse-format stores and five design studios;
focusing on innovative new products and localized assortments, supported by inspirational in-store and online visual merchandising solutions;
adding more resources dedicated to serving our Pro customers, including hiring professional external sales staff to drive more Pro sales;
investing in our Pro, connected customer, in-store designer, customer relationship, and store focused technology; and
investing capital to continue enhancing the in-store shopping experience for our customers.
Key Performance Indicators
We consider a variety of performance and financial measures in assessing the performance of our business. The key performance and financial measures we use to determine how our business is performing are comparable store sales, the number of new store openings, gross profit and gross margin, operating income, and EBITDA and Adjusted EBITDA. For definitions and a discussion of how we use our key performance indicators, see the “Key Performance Indicators” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. See “Non-GAAP Financial Measures” below for a discussion of how we define EBITDA and Adjusted EBITDA and a reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”).
Other key financial terms we use include net sales, selling and store operating expenses, general and administrative expenses, and pre-opening expenses. For definitions and a discussion of how we use other key financial terms, see the “Other Key Financial Definitions” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report.
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Results of Operations
See Item 1A., “Risk Factors” for information about the potential impacts that risks, such as declines in economic conditions that affect the residential housing market and consumer spending for hard surface flooring, interest rates, inflation, global supply chain disruptions, and geopolitical instability, among others, may have on our results of operations and overall financial performance for future periods.
The following table summarizes key components of our results of operations for the periods indicated (certain numbers may not sum due to rounding):
Thirteen Weeks Ended
March 28, 2024March 30, 2023Increase (Decrease)
dollars in thousandsAmount% of Net SalesAmount% of Net Sales$%
Net sales$1,097,289 100.0 %$1,122,052 100.0 %$(24,763)(2.2)%
Cost of sales627,263 57.2 652,934 58.2 (25,671)(3.9)%
Gross profit470,026 42.8 469,118 41.8 908 0.2 %
Operating expenses:
Selling and store operating334,345 30.5 303,671 27.1 30,674 10.1 %
General and administrative66,777 6.1 61,911 5.5 4,866 7.9 %
Pre-opening9,593 0.8 8,020 0.7 1,573 19.6 %
Total operating expenses410,715 37.4 373,602 33.3 37,113 9.9 %
Operating income59,311 5.4 95,516 8.5 (36,205)(37.9)%
Interest expense, net1,955 0.2 4,862 0.4 (2,907)(59.8)%
Income before income taxes57,356 5.2 90,654 8.1 (33,298)(36.7)%
Income tax expense7,324 0.6 19,130 1.7 (11,806)(61.7)%
Net income$50,032 4.6 %$71,524 6.4 %$(21,492)(30.0)%
Selected Financial Information
Thirteen Weeks Ended
March 28, 2024March 30, 2023
Comparable store sales(11.6)%(3.3)%
Comparable average ticket(4.2)%7.3 %
Comparable transactions
(7.7)%(9.9)%
Number of warehouse-format stores225194
Adjusted EBITDA (in thousands) (1) $122,998$149,617
Adjusted EBITDA (% of net sales)11.2 %13.3 %
(1)    EBITDA and Adjusted EBITDA are non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” further below for additional information and a reconciliation of EBITDA and Adjusted EBITDA to net income.
Net Sales
Net sales during the thirteen weeks ended March 28, 2024 decreased $24.8 million, or 2.2%, compared to the corresponding prior year period primarily due to a decrease in comparable store sales of 11.6%, partially offset by sales from the 32 new warehouse-format stores that we opened since March 30, 2023 and growth in our commercial business. The comparable store sales decline during the period of 11.6%, or $125.8 million, was due to a 7.7% decrease in comparable transactions, which we believe was largely driven by the impact in existing home sales, and a 4.2% decrease in comparable average ticket, which was primarily due to smaller average transaction sizes. Non-comparable store sales of $101.0 million during the same period were primarily driven by new stores and revenue from Spartan.
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We estimate that retail sales during both the thirteen weeks ended March 28, 2024 and March 30, 2023 were approximately 55% from homeowners and 45% from Pros.
Gross Profit and Gross Margin
Gross profit during the thirteen weeks ended March 28, 2024 increased $0.9 million, or 0.2%, compared to the corresponding prior year period. The increase in gross profit was primarily driven by an increase in gross margin to 42.8%, up approximately 100 basis points from 41.8% in the same period a year ago primarily due to a decrease in supply chain costs.
Selling and Store Operating Expenses
Selling and store operating expenses during the thirteen weeks ended March 28, 2024 increased $30.7 million, or 10.1%, compared to the corresponding prior year period. The increase in selling and store operating expenses was primarily driven by $39.6 million for new stores and $3.5 million at Spartan, partially offset by a decrease of $12.4 million at our comparable stores. As a percentage of net sales, selling and store operating expenses increased by approximately 340 basis points to 30.5% from 27.1% in the corresponding prior year period. This increase was primarily attributable to deleverage from a decrease in comparable store sales and the addition of new stores.
General and Administrative Expenses
General and administrative expenses during the thirteen weeks ended March 28, 2024 increased $4.9 million, or 7.9%, compared to the corresponding prior year period. Our general and administrative expenses as a percentage of net sales increased by approximately 60 basis points to 6.1% from 5.5% in the corresponding prior year period. The increase in general and administrative expenses in total and as a percentage of net sales was primarily comprised of costs to support store growth, including approximately $4.9 million for personnel expenses related to additional staff and, to a lesser extent, incentive compensation.
Pre-Opening Expenses
Pre-opening expenses during the thirteen weeks ended March 28, 2024 increased $1.6 million, or 19.6%, compared to the corresponding prior year period. The increase primarily resulted from the timing of expenses incurred for new store openings compared to the corresponding prior year period.
Interest Expense, Net
Net interest expense during the thirteen weeks ended March 28, 2024 decreased $2.9 million, or 59.8%, compared to the thirteen weeks ended March 30, 2023 due to a decrease in average amounts outstanding under our ABL Facility, higher interest income from our interest cap derivative contracts, and an increase in interest capitalized, partially offset by interest rate increases on outstanding debt.
Income Tax Expense
Income tax expense was $7.3 million during the thirteen weeks ended March 28, 2024 compared to $19.1 million during the thirteen weeks ended March 30, 2023. The effective tax rate was 12.8% for the thirteen weeks ended March 28, 2024 compared to 21.1% in the corresponding prior year period. The decrease in the effective tax rate was primarily due to an increase in excess tax benefits related to stock-based compensation awards that was partially offset by limitations on deductions for compensation to certain employees under Internal Revenue Code Section 162(m).
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are key metrics used by management and our board of directors to assess our financial performance and enterprise value. We believe that EBITDA and Adjusted EBITDA are useful measures, as they eliminate certain expenses that are not indicative of our core operating performance and facilitate a comparison of our core operating performance on a consistent basis from period to period. We also use Adjusted EBITDA as a basis to determine covenant compliance with respect to our ABL Facility and Term Loan Facility (together, the "Credit Facilities"), to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other peer companies using similar measures. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors, and other interested parties as performance measures to evaluate companies in our industry.
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EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by or presented in accordance with GAAP. We define EBITDA as net income before interest, taxes, depreciation and amortization. We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization adjusted to eliminate the impact of non-cash stock-based compensation expense and certain items that we do not consider indicative of our core operating performance. See below for a reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
EBITDA and Adjusted EBITDA are non-GAAP measures of our financial performance and should not be considered as alternatives to net income as a measure of financial performance or any other performance measure derived in accordance with GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of liquidity or free cash flow for management's discretionary use. In addition, these non-GAAP measures exclude certain non-recurring and other charges. Each of these non-GAAP measures has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the items eliminated in the adjustments made to determine EBITDA and Adjusted EBITDA, such as stock-based compensation expense, fair value adjustments related to contingent earn-out liabilities, and other adjustments. Our presentation of EBITDA and Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Definitions and calculations of EBITDA and Adjusted EBITDA differ among companies in the retail industry, and therefore EBITDA and Adjusted EBITDA disclosed by us may not be comparable to the metrics disclosed by other companies.
For the periods presented, the following table reconciles EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP:
Thirteen Weeks Ended
in thousandsMarch 28, 2024March 30, 2023
Net income$50,032 $71,524 
Depreciation and amortization (a)55,879 45,926 
Interest expense, net1,955 4,862 
Income tax expense7,324 19,130 
EBITDA115,190 141,442 
Stock-based compensation expense (b)7,232 6,741 
Other (c)576 1,434 
Adjusted EBITDA$122,998 $149,617 
(a)Excludes amortization of deferred financing costs, which is included as part of interest expense, net in the table above.
(b)Non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and forfeitures.
(c)Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for both the thirteen weeks ended March 28, 2024 and March 30, 2023 relate to changes in the fair value of contingent earn-out liabilities.
Liquidity and Capital Resources
Liquidity is provided primarily by cash flows from operations and our $800.0 million ABL Facility. Unrestricted liquidity as of March 28, 2024 was $698.2 million, consisting of $57.4 million in cash and cash equivalents and $640.8 million immediately available for borrowing under the ABL Facility without violating any covenants thereunder. Our liquidity is generally not seasonal, and our uses of cash are primarily tied to when we open stores and make other capital expenditures.
Our primary cash needs are for merchandise inventories, payroll, store rent, and other operating expenses and capital expenditures associated with opening new stores and remodeling existing stores, as well as information technology, e-commerce, and store support center infrastructure. We also use cash for the payment of taxes and interest and, as applicable, acquisitions. We expect that cash generated from operations together with cash on hand, the availability of borrowings under our 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 our Credit Facilities for the next twelve months and the foreseeable future.
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Total capital expenditures in fiscal 2024 are planned to be between approximately $400.0 million to $475.0 million and are expected to be funded primarily by cash generated from operations and borrowings under the ABL Facility. Our capital needs may change in the future due to changes in our business, new opportunities that we choose to pursue, or other factors. We currently expect the following for capital expenditures in fiscal 2024 (projected amounts are based on the gross costs that we expect to accrue for these investments on the Condensed Consolidated Balance Sheets in fiscal 2024, which may include amounts incurred but not yet settled in cash during the period):
invest approximately $315.0 million to $365.0 million to open 30 to 35 warehouse-format stores, relocate stores, and begin construction on stores opening after fiscal 2024;
invest approximately $60.0 million to $75.0 million in existing store remodeling projects and our distribution centers; and
invest approximately $25.0 million to $35.0 million in information technology infrastructure, e-commerce, and other store support center initiatives.
Cash Flow Analysis
A summary of our operating, investing, and financing activities is shown in the following table:
Thirteen Weeks Ended
in thousandsMarch 28, 2024March 30, 2023
Net cash provided by operating activities$147,510 $250,280 
Net cash used in investing activities(111,688)(139,398)
Net cash used in financing activities
(12,778)(115,642)
Net increase (decrease) in cash and cash equivalents
$23,044 $(4,760)
Net Cash Provided by Operating Activities
Cash provided by operating activities consists primarily of (i) net income adjusted for non-cash items, including depreciation and amortization, stock-based compensation, deferred income taxes, and changes in the fair values of contingent earn-out liabilities and (ii) changes in working capital.
Net cash provided by operating activities during the thirteen weeks ended March 28, 2024 and March 30, 2023 was $147.5 million and $250.3 million, respectively. The decrease in net cash provided by operating activities was primarily driven by a decrease in trade accounts payable and a decline in cash earnings after adjusting net income for non-cash items such as depreciation and amortization that were partially offset by decreases in inventory and other working capital items.
Net Cash Used in Investing Activities
Investing activities typically consist primarily of capital expenditures for new store openings and existing store remodels, including leasehold improvements, racking, fixtures, vignettes, design centers, and new infrastructure and information systems. Cash payments to acquire businesses are also included in investing activities.
Net cash used in investing activities during the thirteen weeks ended March 28, 2024 and March 30, 2023 was $111.7 million and $139.4 million, respectively. The decrease in cash used in investing activities was due to a decrease in capital expenditures driven by timing of construction payable settlements for recently completed stores.
Net Cash Used in Financing Activities
Financing activities consist primarily of borrowings and related repayments under our credit agreements, tax payments related to the vesting or exercise of stock-based compensation awards, proceeds from the exercise of stock options and our employee share purchase program, and payments of contingent earn-out consideration.
Net cash used in financing activities during the thirteen weeks ended March 28, 2024 and March 30, 2023 was $12.8 million and $115.6 million, respectively. The decrease in net cash used in financing activities was primarily driven by a decrease in net ABL Facility repayments.
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Our Credit Facilities
As of March 28, 2024, total Term Loan Facility debt was $201.9 million, and no amounts were outstanding under our ABL Facility. For additional information regarding our Term Loan Facility and ABL Facility, including applicable covenants and other details, please refer to Note 3, “Debt.”
Credit Ratings
Our credit ratings are periodically reviewed by rating agencies. Standard & Poor's issuer credit rating of BB with a stable outlook and Moody’s issuer credit rating of Ba3 with a stable outlook remain unchanged as of March 28, 2024. These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt. Our credit ratings could be lowered or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity. In particular, a weakening of our financial condition, including an increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, result in a credit rating downgrade or change in outlook, or otherwise increase our cost of borrowing.
U.S. Tariffs and Global Economy
The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. In particular, the ongoing trade dispute between the U.S. and China has resulted in the U.S. imposing tariffs of 25% on many products from China. While exclusions from tariffs were granted for certain products from China, nearly all of these exclusions have expired. In fiscal 2023, approximately 25% of the products we sold were produced in China. As we continue to manage the impact these tariffs may have on our business, we continue taking steps to mitigate some of these cost increases through negotiating lower costs from our vendors, increasing retail pricing as we deem appropriate, and sourcing from alternative countries. While our efforts have mitigated a substantial portion of the overall effect of increased tariffs, the enacted tariffs have increased our inventory costs and associated cost of sales for the remaining products still sourced from China.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
For a description of our critical accounting policies and estimates, refer to Part II, Item 7, “Critical Accounting Policies and Estimates” in our Annual Report. There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report. See Note 1 to our condensed consolidated financial statements included in this Quarterly Report, which describes recent accounting pronouncements adopted by us.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk affecting the Company, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of the Annual Report. While our exposure to market risk has not changed materially since December 28, 2023, uncertainty with respect to the economic effects of declines in economic conditions that affect the residential housing market and consumer spending for hard surface flooring, inflation, global supply chain disruptions, and geopolitical instability, among others, have introduced significant volatility in the financial markets, including interest rates and foreign currency exchange rates. See further discussion in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details.
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Interest Rate Risk
Our operating results are subject to risk from interest rate fluctuations on our Credit Facilities, which have variable interest rates. Based on the $201.9 million total outstanding principal balance of our Credit Facilities as of March 28, 2024, a 1.0% increase in the effective interest rate of this debt would cause an increase in interest expense of approximately $2.0 million over the next twelve months, excluding the impact of interest rate cap agreements. To lessen our exposure to interest rate risk, we entered into two $75.0 million interest rate cap agreements in May 2021. The contracts effectively cap Secured Overnight Financing Rate (“SOFR”) based interest payments on a portion of our Term Loan Facility to less than 1.68% through April 2024. In addition, we entered into an interest rate cap agreement in January 2024 with a notional value of $150.0 million. The new interest cap agreement effectively caps SOFR based interest payments on a portion of the Company’s Term Loan Facility at 5.50% beginning in May 2024 and will continue until the agreement expires in April 2026. For additional information related to the Company’s Credit Facilities, refer to Note 3, “Debt.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonable assurance that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in reports filed or submitted under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, have reviewed the effectiveness of the Company’s disclosure controls and procedures as of March 28, 2024 and, based on their evaluation, have concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level. The condensed consolidated financial statements included in this Quarterly Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during the fiscal quarter ended March 28, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See the information under the “Litigation” caption in Note 5, Commitments and Contingencies to our Condensed Consolidated Financial Statements included in this Quarterly Report, which we incorporate here by reference.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report filed with the SEC on February 22, 2024, which could materially affect our business, financial condition, and/or operating results.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the first quarter of fiscal 2024, the Company did not sell any unregistered equity securities.
Issuer Purchases of Equity Securities
The following table presents the number and average price of the Company’s common shares repurchased in each fiscal month of the first quarter of fiscal 2024:
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
December 29, 2023 - January 25, 2024— $— 
N/A
N/A
January 26, 2024 - February 22, 2024— — 
N/A
N/A
February 23, 2024 - March 28, 202448,016 117.26 
N/A
N/A
Total
48,016 $117.26 
N/A
N/A
(1) Under the Floor & Decor Holdings, Inc. 2017 Stock Incentive Plan (the “2017 Plan”), participants may surrender shares as payment of applicable tax withholding on the vesting of restricted stock awards. Shares so surrendered by participants in the 2017 Plan are repurchased pursuant to the terms of the 2017 Plan and applicable award agreements and not pursuant to any publicly announced share repurchase programs.
Item 5. Other Information
Rule 10b5-1 Trading Plans
On February 26, 2024, Tom Taylor, Chief Executive Officer and a director of the Company, adopted a Rule 10b5-1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 68,397 shares of the Company’s common stock, subject to certain conditions. The plan will begin on May 27, 2024 and expire on July 31, 2024, or on any earlier date on which all of the shares have been sold.
On March 1, 2024, the Alison K. Axelrod 2012 Family Trust of which Norman Axelrod, Chairman of the Company’s board of directors, is a trustee, adopted a Rule 10b5-1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 60,000 shares of the Company’s common stock, subject to certain conditions. The plan will begin on June 3, 2024 and expire on January 31, 2025, or on any earlier date on which all of the shares have been sold.
27

Item 6. Exhibits
Incorporated by Reference
ExhibitExhibit DescriptionFormFile No.ExhibitFiling Date
3.1
10-Q
001-380703.18/5/2021
3.2
10-Q
001-380703.211/2/2023
31.1
31.2
32.1
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*
101.SCH
Inline XBRL Taxonomy Extension Schema Document*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*
*
Filed herewith.
**
These certifications are not deemed filed by the SEC and are not to be incorporated by reference in any filing we make under the Securities Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general incorporation language in any filings.
28

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FLOOR & DECOR HOLDINGS, INC.
Dated:  May 2, 2024
By:/s/ Thomas V. Taylor
Thomas V. Taylor
Chief Executive Officer
(Principal Executive Officer)
Dated:  May 2, 2024
By:/s/ Bryan H. Langley
Bryan H. Langley
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Dated:  May 2, 2024
By:/s/ Luke T. Olson
Luke T. Olson
Vice President, Chief Accounting Officer
(Principal Accounting Officer)
29