Floor & Decor(FND) - 2021 Q1 - Quarterly Report

Part I – Financial Information Financial Statements Presents unaudited condensed consolidated financial statements for Q1 2021, covering balance sheets, operations, equity, and cash flows Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 1, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $354,051 | $307,772 | | Inventories, net | $607,649 | $654,000 | | Total current assets | $1,061,875 | $1,040,456 | | Total assets | $2,964,723 | $2,880,425 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $672,978 | $698,836 | | Total liabilities | $1,884,003 | $1,883,037 | | Total stockholders' equity | $1,080,720 | $997,388 | Condensed Consolidated Statements of Operations and Comprehensive Income Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Thirteen Weeks Ended April 1, 2021 | Thirteen Weeks Ended March 26, 2020 | | :--- | :--- | :--- | | Net sales | $782,537 | $554,937 | | Gross profit | $336,933 | $236,032 | | Operating income | $95,949 | $46,674 | | Net income | $75,796 | $37,063 | | Diluted earnings per share | $0.71 | $0.35 | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $997.4 million at the beginning of the period to $1,080.7 million as of April 1, 2021, primarily driven by net income of $75.8 million[14] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Thirteen Weeks Ended April 1, 2021 | Thirteen Weeks Ended March 26, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $100,996 | $24,668 | | Net cash used in investing activities | ($45,876) | ($38,384) | | Net cash (used in) provided by financing activities | ($8,841) | $276,610 | | Net increase in cash and cash equivalents | $46,279 | $262,894 | Notes to Condensed Consolidated Financial Statements - As of April 1, 2021, the Company operated 140 warehouse-format stores and two small-format standalone design studios in 32 states[21] Disaggregated Net Sales by Product Category (in thousands) | Product Category | Net Sales (Q1 2021) | % of Net Sales (Q1 2021) | | :--- | :--- | :--- | | Tile | $189,436 | 24% | | Laminate / luxury vinyl plank | $186,035 | 24% | | Decorative accessories / wall tile | $157,374 | 20% | | Installation materials and tools | $130,601 | 17% | | Wood | $62,131 | 8% | | Natural stone | $49,251 | 6% | | Adjacent categories | $12,236 | 2% | | Total | $782,537 | 100% | - On February 9, 2021, the company amended its Term Loan Facility, obtaining a $65.0 million supplemental term loan to repay its $75.0 million term loan B-1 facility[38] - The effective income tax rate was 19.8% for the thirteen weeks ended April 1, 2021, compared to 17.4% for the same period in 2020[47] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial results, highlighting 41.0% net sales growth and 31.1% comparable store sales increase Q1 2021 Key Performance Indicators | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Comparable store sales (% change) | 31.1% | 2.4% | | Number of warehouse-format stores | 140 | 123 | | Adjusted EBITDA (in thousands) | $127,075 | $73,126 | | Adjusted EBITDA margin | 16.2% | 13.2% | - Net sales increased by $227.6 million (41.0%) in Q1 2021 compared to Q1 2020, driven by a 31.1% increase in comparable store sales and sales from 17 new warehouse stores opened since March 26, 2020[94] - Gross margin increased by approximately 60 basis points to 43.1% in Q1 2021, primarily due to improved leverage of the company's distribution center and supply chain infrastructure on higher sales[96] - The company plans capital expenditures of approximately $440 million to $460 million in fiscal 2021, primarily to open 27 new warehouse stores, relocate a distribution center, and invest in existing stores and technology[117][119] Quantitative and Qualitative Disclosures About Market Risk Primary market risk is variable-rate debt interest fluctuations; a 1.0% rate increase could add $2.1 million to annual interest expense - The company's main market risk is interest rate fluctuations on its variable-rate debt As of April 1, 2021, a 1.0% increase in the effective interest rate on its $207.7 million term loan would increase annual interest expense by approximately $2.1 million[138] Controls and Procedures Management concluded disclosure controls and procedures were effective as of April 1, 2021, with no material internal control changes - The company's management, including the CEO and CFO, concluded that the disclosure controls and procedures were effective as of April 1, 2021[139] - There were no material changes in the company's internal control over financial reporting during the fiscal quarter ended April 1, 2021[141] Part II – Other Information Legal Proceedings The company faces a putative derivative complaint from June 2020 with an uncertain outcome; other legal actions are not material - A putative derivative complaint was filed against certain officers, directors, and stockholders in June 2020, with factual allegations similar to a previously dismissed securities litigation The company is currently unable to predict the outcome or estimate possible losses[63][64] Risk Factors Updates risk factors, including COVID-19 impacts, indebtedness, supply chain disruptions, and proposed U.S. corporate tax changes - The COVID-19 pandemic continues to pose significant risks, including potential for future store closures, staffing challenges, and supply chain interruptions, which could negatively impact sales and financial results[143][145][146] - The company faces risks related to its indebtedness, including restrictive covenants and the upcoming transition away from LIBOR benchmark interest rate, which could be costly and time-consuming[151][153] - Disruptions to the supply chain, such as significant congestion at U.S. ports of entry, are causing logistical challenges, increased time and cost to ship goods, and have resulted in decreased in-stock levels for certain products[158] - Proposed changes to U.S. tax law, including an increase in the corporate tax rate, could materially increase tax payments and adversely affect its financial condition and operating results[159] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period - None[160] Defaults Upon Senior Securities No defaults upon senior securities occurred during the period - None[161] Mine Safety Disclosures This item is not applicable to the company - Not applicable[162] Other Information No other information to report for the period - None[163] Exhibits Lists exhibits filed with Form 10-Q, including corporate governance documents, a credit agreement amendment, and SOX certifications - The exhibits filed with this report include the Restated Certificate of Incorporation, Bylaws, an amendment to the Credit Agreement, and certifications by the CEO and CFO[165]