Market Overview

Floor & Decor Holdings, Inc. Announces Third Quarter Fiscal 2017 Financial Results

Share:
  • Net sales increased 26.8% from third quarter 2016 to $343.9 million
  • Comparable store sales increased 13.5% from third quarter 2016
  • Diluted earnings per share ("EPS") increased 37.5% to $0.22 from
    $0.16 in the third quarter 2016; adjusted diluted EPS increased 41.7%
    to $0.17 from $0.12 in the third quarter 2016
  • Raising full year sales and earnings outlook reflecting
    year-to-date performance

Floor & Decor Holdings, Inc. (NYSE:FND) ("We," the "Company," or "Floor
& Decor") announces its financial results for the third quarter of
fiscal 2017, which ended September 28, 2017.

Tom Taylor, Chief Executive Officer, stated, "We are very pleased to
report a strong third quarter that continues to demonstrate the strength
and appeal of Floor & Decor's unique business model highlighted by our
leading innovative product offerings, in-stock inventory, and compelling
value proposition. Our third quarter comparable same store sales
continued to perform above our expectations at 13.5% despite
experiencing over 150 days of full or partial store closures as a result
of hurricanes Harvey and Irma. Prior to these hurricanes, our comparable
same store sales were 15.9% through the first two months of the quarter,
but as a result of the store closures our comparable same store sales
slowed to 9.9% for the month of September. Due to our third quarter
results coming in above our projections and a very strong start to the
fourth quarter, we are raising our full year sales and earnings
guidance. We also successfully opened seven new stores, our most ever in
one quarter, despite the disruption from the hurricanes and we are
pleased with how our new stores are performing."

Mr. Taylor continued, "I also want to address the devastation the recent
hurricanes have had on so many families and communities across the U.S.
In particular I want to thank first responders and our associates who
are helping in the recovery efforts, many of whom were also personally
impacted. It's remarkable to see the response and willingness from
everyone to help others during devastating events like these. We are
committed to continue to serve our communities."

Unless indicated otherwise, the information in this release has been
adjusted to give effect to a 321.820-for-one stock split of our common
stock effected on April 24, 2017. See "Comparable Store Sales" below for
information on how the Company calculates its comparable store sales
growth.

For the Thirteen Weeks Ended September 28, 2017

  • Net sales increased 26.8% to $343.9 million from $271.3 million in the
    third quarter of fiscal 2016. Comparable store sales increased 13.5%.
  • The Company opened seven new stores during the third quarter of fiscal
    2017, ending the quarter with 80 warehouse format stores. This
    represents a unit increase of 19.4% over the third quarter of fiscal
    2016.
  • Operating income increased 16.4% to $28.6 million from $24.6 million
    in the third quarter of fiscal 2016, which included a $3.5 million
    benefit from a reduction to a previously established legal reserve.
    Operating margin decreased 80 basis points to 8.3%.
  • Net income increased 63.5% to $23.3 million compared to $14.2 million
    in the third quarter of fiscal 2016; Net income per diluted share was
    $0.22 compared to $0.16 per diluted share in the third quarter of
    fiscal 2016.
  • Adjusted net income* increased 41.8% to $17.3 million compared to
    $12.2 million in the third quarter of fiscal 2016; Adjusted diluted
    EPS* was $0.17 compared to $0.12 in the third quarter of fiscal 2016,
    an increase of 41.7%.
  • Adjusted EBITDA* increased 41.0% to $39.7 million compared to $28.2
    million in the third quarter of fiscal 2016.

For the Thirty-nine Weeks Ended September 28, 2017

  • Net sales increased 28.8% to $995.3 million from $772.5 million in the
    same period of fiscal 2016. Comparable store sales increased 13.7%.
  • The Company opened 11 new stores and relocated one store during the
    thirty-nine weeks ending September 28, 2017.
  • Operating income increased 73.7% to $85.4 million compared to $49.2
    million in the same period of fiscal 2016, which included a net $10.5
    million charge to reserve for a legal settlement. Operating margin
    increased 220 basis points to 8.6%.
  • Net income increased 108.2% to $54.8 million compared to $26.3 million
    in the same period of fiscal 2016; Net income per diluted share was
    $0.56 compared to $0.30 per diluted share in the same period of fiscal
    2016.
  • Adjusted net income* increased 52.7% to $51.1 million compared to
    $33.5 million in the same period of fiscal 2016; Adjusted diluted EPS*
    was $0.50 compared to $0.34 in the same period of fiscal 2016, an
    increase of 47.1%.
  • Adjusted EBITDA* increased 43.7% to $115.3 million compared to $80.3
    million in the same period of fiscal 2016.

*Non-GAAP financial measures. Please see "Non-GAAP
Financial Measures" and "Reconciliation of GAAP to Non-GAAP Financial
Measures" below for more information.

Balance Sheet Highlights as of September 28, 2017

  • Total liquidity was $150.0 million as of September 28, 2017, which
    primarily was from the availability on our revolving credit facility.
  • Total debt was $187.4 million as of September 28, 2017, consisting of
    outstanding current and long-term portions of our secured term loan
    and revolving credit facilities.

Fourth Quarter and Fiscal 2017 Outlook

   

(In millions, except EPS, percentages and store count)

 
Thirteen Weeks
Ended 12/28/17
Net sales $ 362 - $370
Comparable store sales growth 17.0% to 19.0%
GAAP diluted EPS $ 0.15 - $0.16
Adjusted diluted EPS $ 0.14 - $0.16
Diluted weighted average shares outstanding 104.6
Adjusted EBITDA $ 36.8 - $39.5
Warehouse format store count 83
New warehouse format stores 3
 
Updated Guidance Prior Guidance
Twelve Months Twelve Months
Ended 12/28/17 Ended 12/28/17
Net sales $ 1,357 - $1,365 $ 1,318 - $1,331
Comparable store sales growth 14.5% to 15.0% 10% to 12%
GAAP diluted EPS $ 0.70 - $0.72 $ 0.57 - $0.60
Adjusted diluted EPS $ 0.64 - $0.65 $ 0.57 - $0.60
Adjusted diluted weighted average shares outstanding 103.1 103.1
Adjusted EBITDA $ 152.0 - $154.7 $ 143.1 - $147.5
Depreciation and amortization Approximately $34 $ 35
Interest Expense Approximately $14 $ 14
Tax rate 34% for the remainder of fiscal 2017 37% for the remainder of fiscal 2017
Warehouse format store count 83 83
New warehouse format stores 14 14
Capital Expenditures $ 104 - $107 $ 100 - $104

The above guidance includes certain non-GAAP financial measures (namely
adjusted diluted weighted average shares outstanding, adjusted diluted
EPS and adjusted EBITDA). Please see "Non-GAAP Financial Measures" and
"Reconciliation of GAAP to Non-GAAP Financial Measures" below for more
information.

Comparable Store Sales

‘‘Comparable store sales'' includes net sales from the Company's stores
beginning on the first day of the thirteenth full fiscal month following
the store's opening. Because the Company's e-commerce sales are
fulfilled by individual stores, they are included in comparable store
sales only to the extent such fulfilling store meets the above mentioned
store criteria.

Non-GAAP Financial Measures

Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA
(which are shown in the reconciliations below) have been presented in
this earnings release as supplemental measures of financial performance
that are not required by, or presented in accordance with, accounting
principles generally accepted in the United States ("GAAP"). We define
Adjusted net income as net income adjusted to eliminate the impact of
certain items that we do not consider indicative of our core operating
performance and the tax effect related to those items. We define
Adjusted diluted EPS as adjusted net income divided by adjusted diluted
weighted average shares outstanding (i.e., the weighted average shares
outstanding during the relevant period plus the weighted average impact
of issuing shares in our initial public offering (our "IPO")). We define
EBITDA as net income before interest, loss on early extinguishment of
debt, taxes, depreciation and amortization. We define Adjusted EBITDA as
net income before interest, loss on early extinguishment of debt, taxes,
depreciation and amortization, adjusted to eliminate the impact of
certain items that we do not consider indicative of our core operating
performance. Reconciliations of these measures to the equivalent
measures under GAAP are set forth in the tables below.

Adjusted net income, Adjusted diluted EPS, 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 Adjusted
net income, Adjusted diluted EPS, 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 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. Adjusted net income,
Adjusted diluted EPS, EBITDA and Adjusted EBITDA are also used by
analysts, investors and other interested parties as performance measures
to evaluate companies in our industry.

Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA
are non-GAAP measures of our financial performance and should not be
considered as alternatives to net income or diluted EPS 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, Adjusted net income, 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

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