Floor & Decor(US:FND)2021-08-04 16:00Store Expansion and Operations - Floor & Decor opened 14 new warehouse-format stores, bringing the total to 147 stores and 2 design studios as of July 1, 2021[101]. - Staffing levels have been increased to support heightened demand, with a particular emphasis on hiring professional external sales staff to drive commercial sales[101]. - The company plans to open 27 warehouse-format stores and two small-format design studios, utilizing approximately $305 million to $315 million of cash[142]. Sales Performance - The company reported strong sales performance, continuing to maintain a broad assortment of in-stock inventory despite COVID-19-related labor shortages and supply chain disruptions[100]. - Net sales for the thirteen weeks ended July 1, 2021, increased by $397.8 million, or 86.0%, compared to the prior year, driven by a 68.4% increase in comparable store sales and sales from 22 new warehouse stores[109]. - Comparable store sales for the twenty-six weeks ended July 1, 2021, increased by 48.1%, contributing $488.3 million to net sales, with a 43.9% increase in customer transactions and a 2.9% increase in average ticket[110]. Financial Performance - Gross profit for the thirteen weeks ended July 1, 2021, rose by $168.7 million, or 85.8%, with gross margin remaining flat at 42.5%[112]. - Operating income for the twenty-six weeks ended July 1, 2021, increased by $126.7 million, or 187.0%, compared to the prior year period[110]. - Net income for the twenty-six weeks ended July 1, 2021, was $158.7 million, a 129.8% increase compared to the prior year[110]. - Adjusted EBITDA for the thirteen weeks ended July 1, 2021, was $137.0 million, with an adjusted EBITDA margin of 15.9%[108]. - Net income for the thirteen weeks ended July 1, 2021, was $82.9 million, compared to $32.0 million for the same period in 2020, representing a 159% increase[129]. - Adjusted EBITDA for the twenty-six weeks ended July 1, 2021, was $264.1 million, up from $118.7 million in the same period of 2020, reflecting a 122% increase[129]. Expenses and Investments - General and administrative expenses increased by $19.1 million, or 56.7%, during the thirteen weeks ended July 1, 2021, but decreased as a percentage of sales to 6.1% from 7.3%[117]. - Selling and store operating expenses for the thirteen weeks ended July 1, 2021, increased by $66.6 million, or 48.1%, but decreased as a percentage of net sales to 23.8% from 29.9%[114]. - Pre-opening expenses during the thirteen weeks ended July 1, 2021, increased by $5.6 million, or 161.9%, due to the opening of seven new warehouse stores[119]. - Net cash used in investing activities increased to $195.4 million for the twenty-six weeks ended July 1, 2021, from $66.0 million in the same period of 2020, driven by capital expenditures and the acquisition of Spartan[147]. Liquidity and Capital Expenditures - Unrestricted liquidity as of July 1, 2021, was $736.6 million, consisting of $366.1 million in cash and cash equivalents and $370.5 million available for borrowing[134]. - Total capital expenditures planned for fiscal 2021 are between $455 million to $475 million, primarily funded by cash generated from operations and borrowings[141]. - Net cash provided by operating activities for the twenty-six weeks ended July 1, 2021, was $256.6 million, compared to $96.7 million for the same period in 2020, marking a 165% increase[145]. Acquisitions and Strategic Initiatives - Floor & Decor is investing in new solutions for commercial customers through the acquisition of Spartan Surfaces, enhancing its service to the architectural and design community[97]. - The company incurred $3.2 million in acquisition and integration expenses related to the Spartan acquisition during the thirteen weeks ended July 1, 2021[129]. Risk Management and Economic Factors - The company is implementing supply chain continuity plans to address logistical challenges and mitigate the impact of shipping cost increases[100]. - The ongoing trade dispute between the U.S. and China has created uncertainty in the global economy, impacting the company's operations[153]. - The company has sourced from alternative countries and is no longer importing applicable products from China to mitigate tariff risks[156]. - The U.S. imposed tariffs of 25% on many products from China, affecting approximately 30% of the products sold by the company in fiscal 2020[153]. Tax and Interest Rates - The effective tax rate for the thirteen weeks ended July 1, 2021, was 14.8%, compared to a negative rate of (61.6)% in the prior year[122]. - A 1.0% increase in the effective interest rate for the company's debt would result in an increase in interest expense of approximately $2.1 million over the next twelve months[163]. - The company entered into two interest rate cap agreements totaling $150 million to mitigate interest rate risk, capping LIBOR at 1.75% and 2.0%[163]. Future Outlook - The company anticipates potential future impacts from COVID-19, including possible store closures and changes in consumer behavior[101][106]. - The company expects to maintain sufficient liquidity for at least the next twelve months through cash generated from operations and available borrowings[140]. - The company expects to recover $20.9 million in tariff refunds related to Section 301 tariffs, with $13.8 million already received as of July 1, 2021[157]. Credit Ratings - The company's credit ratings are Ba3 from Moody's and BB- from Standard & Poor's, with a stable and positive outlook respectively[152].