Floor & Decor Holdings, Inc. (the “Company” or “Floor &
Decor”) (NYSE:FND) today announced the launch of a proposed
secondary offering of 9,000,000 shares of common stock to be
offered and sold by certain stockholders of the Company, including
funds affiliated with Ares Management, L.P. and Freeman Spogli
Management Co., L.P. and certain members of the Company’s
management and directors of the Company (collectively, the “Selling
Stockholders”), subject to market conditions and other factors.
The underwriters are expected to have a 30-day option to
purchase up to 1,350,000 additional shares of common stock from the
Selling Stockholders. The Company is not selling any shares in this
offering and will not receive any proceeds from the sale of the
shares by the Selling Stockholders or the exercise of the
underwriters’ option to purchase additional shares of common
stock.
BofA Merrill Lynch, Barclays, Credit Suisse, UBS Investment
Bank, Goldman Sachs & Co. LLC, Jefferies, Piper Jaffray and
Wells Fargo Securities are acting as joint book-running managers
for the offering. Houlihan Lokey is acting as co-manager for the
offering. A registration statement relating to these securities has
been filed with the U.S. Securities and Exchange Commission (the
“SEC”) but has not yet become effective. These securities may not
be sold nor may offers to buy be accepted prior to the time that
the registration statement becomes effective.
In connection with the proposed offering, the representatives of
the underwriters for the Company’s recent initial public offering
of 10,147,025 shares of common stock (the “IPO”) have agreed to
waive the lock-up restrictions with respect to the shares of common
stock held by the Selling Stockholders. In addition, the
underwriters have agreed to replace the lock-up agreements entered
into in connection with the IPO with new 90-day lock-up agreements
with officers, directors, and certain other existing stockholders
of the Company. Such agreements will be effective as of the date of
the final prospectus in order to permit the offer and sale of the
shares by the Selling Stockholders in connection with the proposed
offering and will supersede the lock-up agreements entered into in
connection with the IPO. This press release does not constitute an
offer to sell or a solicitation of an offer to buy the securities
described above, nor shall there be any sale of such shares of
common stock in any state or jurisdiction in which such offer,
solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such state or
jurisdiction.
Preliminary Financial Results as of and for the Thirteen
Weeks Ended June 29, 2017
The registration statement relating to the proposed secondary
offering contains the Company’s preliminary financial results as of
and for the thirteen weeks ended June 29, 2017. These preliminary
financial results are based upon the Company’s current estimates
and subject to completion of financial and operating closing
procedures as of and for the thirteen weeks ended June 29,
2017.
The Company has provided ranges, rather than specific amounts,
for certain financial results below, primarily because the
Company’s financial closing procedures as of and for the thirteen
weeks ended June 29, 2017 are not yet complete. As a result, the
Company’s actual results may vary materially from the estimated
preliminary results included herein and will not be publicly
available until after the closing of this offering. Accordingly,
you should not place undue reliance on these estimates. See
“Forward-Looking Statements” below and “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Special Note Regarding Forward-Looking
Statements” in the Company’s registration statement on Form S-1
relating to the proposed secondary offering for additional
information regarding factors that could result in differences
between the preliminary estimated ranges of certain financial
results presented below and the financial results the Company will
ultimately report as of and for the thirteen weeks ended June 29,
2017. The summary information below is not a comprehensive
statement of the Company’s financial results for this period.
The preliminary estimated unaudited financial results included
in this release have been prepared by, and are the responsibility
of, the Company’s management. The Company’s independent registered
public accounting firm, Ernst & Young LLP, has not
audited, reviewed, compiled or performed any procedures with
respect to the preliminary financial results. Accordingly,
Ernst & Young LLP does not express an opinion or any
other form of assurance with respect thereto. These estimates
should not be viewed as a substitute for interim financial
statements prepared in accordance with accounting principles
generally accepted in the United States (‘‘GAAP’’). In addition,
these estimates as of and for the thirteen weeks ended June 29,
2017 are not necessarily indicative of the results to be achieved
for the remainder of the 2017 fiscal year or any future period.
The following are the Company’s preliminary estimates as of and
for the thirteen weeks ended June 29, 2017:
- The Company’s warehouse-format store
count as of June 29, 2017 was 73 compared to 63 as of June 30,
2016. During the thirteen weeks ended June 29, 2017, the
Company opened one new warehouse-format store.
- Comparable store sales growth is
estimated to be approximately 14.7% compared to comparable store
sales growth of 22.6% for the thirteen weeks ended June 30, 2016.
See “Comparable Store Sales” below for information on how the
Company calculates its comparable store sales growth.
- The Company’s net sales are estimated
to be approximately $342.0 million to $344.0 million, representing
an increase of 28.6% to 29.4% compared to $265.9 million for the
thirteen weeks ended June 30, 2016.
- The Company’s operating income is
estimated to be approximately $32.1 million to $34.1 million,
representing an increase of 202.8% to 221.7% compared to $10.6
million for the thirteen weeks ended June 30, 2016. The Company
recorded a $14.0 million charge in the thirteen weeks ended June
30, 2016 for a legal settlement.
- The Company’s net income is estimated
to be approximately $19.2 million to $20.4 million, representing an
increase of 282.3% to 307.6% compared to $5.0 million for the
thirteen weeks ended June 30, 2016.
- The Company’s Adjusted net income is
estimated to be approximately $19.2 million to $20.5 million,
representing an increase of 38.8% to 48.0% compared to $13.8
million for the thirteen weeks ended June 30, 2016. Adjusted net
income is a non-GAAP financial measure. See below for a
reconciliation of Adjusted net income.
- The Company’s diluted earnings per
share (“EPS”) is estimated to be approximately $0.19 to $0.20,
representing an increase of 216.7% to 233.3% compared to $0.06 for
the thirteen weeks ended June 30, 2016.
- The Company’s Adjusted diluted EPS is
estimated to be approximately $0.19 to $0.20, representing an
increase of 35.7% to 42.9% compared to $0.14 for the thirteen weeks
ended June 30, 2016. Adjusted diluted EPS is a non-GAAP financial
measure. See below for a reconciliation of Adjusted diluted
EPS.
- Adjusted EBITDA is estimated to be
approximately $41.7 million to $43.7 million, representing an
increase of 30.3% to 36.5% compared to $32.0 million for the
thirteen weeks ended June 30, 2016. Adjusted EBITDA is a non-GAAP
financial measure. See below for a reconciliation of net income to
Adjusted EBITDA.
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 release as supplemental measures of financial
performance that are not required by, or presented in accordance
with, GAAP. The Company defines Adjusted net income as net income
adjusted to eliminate the impact of certain items that the Company
does not consider indicative of its core operating performance and
the tax effect related to those items. The Company defines 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 the IPO). The Company defines
EBITDA as net income before interest, loss on early extinguishment
of debt, taxes, depreciation and amortization. The Company defines
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 the Company
does not consider indicative of its 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 the Company’s board
of directors to assess the Company’s financial performance and
enterprise value. The Company believes that Adjusted net income,
Adjusted diluted EPS, EBITDA and Adjusted EBITDA are useful
measures, as they eliminate certain expenses that are not
indicative of the Company’s core operating performance and
facilitate a comparison of the Company’s core operating performance
on a consistent basis from period to period. The Company also uses
Adjusted EBITDA as a basis to determine covenant compliance with
respect to its credit facilities, to supplement GAAP measures of
performance to evaluate the effectiveness of its business
strategies, to make budgeting decisions, and to compare its
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
the Company’s industry.
Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted
EBITDA are non- GAAP measures of the Company’s 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 the Company’s 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
for analysis of the Company’s results as reported under GAAP. In
evaluating Adjusted net income, Adjusted diluted EPS, EBITDA and
Adjusted EBITDA, you should be aware that in the future we will
incur expenses that are the same as or similar to some of the items
eliminated in the adjustments made to determine Adjusted net
income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA, such as
stock compensation expense, loss (gain) on asset disposal,
executive recruiting/relocation, and other adjustments. The
Company’s presentation of Adjusted net income, Adjusted diluted
EPS, EBITDA and Adjusted EBITDA should not be construed to imply
that the Company’s future results will be unaffected by any such
adjustments. Definitions and calculations of Adjusted net income,
Adjusted diluted EPS, EBITDA and Adjusted EBITDA differ among
companies in the retail industry, and therefore Adjusted net
income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA disclosed
by the Company may not be comparable to the metrics disclosed by
other companies.
The reconciliation of estimated Adjusted diluted weighted
average shares outstanding, estimated Adjusted net income and
estimated Adjusted diluted EPS for the thirteen weeks ended June
29, 2017 and Adjusted diluted weighted average shares outstanding,
Adjusted net income and Adjusted diluted EPS for the thirteen weeks
ended June 30, 2016 is set forth in the tables below as
follows:
Thirteen Thirteen Weeks ended
Weeks June 29, 2017 ended Estimated
June 30, 2016 Actual Low
High Diluted weighted average shares outstanding 87,898,189
99,918,949 99,918,949 Adjustment for issuance of shares at IPO
10,147,025 3,010,656 3,010,656 Adjusted diluted weighted average
shares outstanding 98,045,214 102,929,605 102,929,605
Thirteen Thirteen Weeks ended Weeks June
29, 2017 ended Estimated June 30,
2016
(in thousands,
except share and per share data)
Actual Low High Net income $5,012 $19,163
$20,429 Interest expense due to IPO(a) 2,730 1,365 1,365 Loss on
early extinguishment of debt(b) 153 5,442 5,442 Offering
expenses(c) - 285 285 Tax benefit from stock option exercises(d) -
(4,408) (4,408) Legal settlement(e) 14,000 - - Interest due to 2016
Refinancing(f) (2,928) - - Repricing of Term Loan Facility(g 293 -
- Tax impact of adjustments to net income(h) (5,414) (2,624)
(2,624) Adjusted net income $13,846 $19,223 $20,489 Adjusted
diluted weighted average shares outstanding 98,045,214 102,929,605
102,929,065 Adjusted diluted EPS $0.14 $0.19 $0.20
____________________
(a) Reflects the pro forma adjustment to
decrease interest expense due to utilizing net IPO proceeds of
approximately $192.0 million to pay down a portion of the Term Loan
Facility at the beginning of the measurement period. (b) The
Company used net proceeds from the IPO of approximately $192.0
million to repay a portion of the amounts outstanding under the
Term Loan Facility, which resulted in a loss on extinguishment of
debt in the amount of approximately $5.4 million. (c) Costs
accrued in connection with this offering. (d) Recognition of
excess tax benefits related to option exercises in accordance with
Accounting Standards Update No. 2016-09. (e) Legal
settlement related to classwide settlement to resolve a lawsuit
related to classwide settlement. (f) Reflects the pro forma
increase in interest expense due to higher debt associated with the
2016 Refinancing. See “Refinancing and Dividend Transactions” below
for additional details. (g) Reflects the pro forma decrease
in interest expense due to the repricing of the Term Loan Facility.
See “Repricing of Term Loan Facility” below for additional detail.
(h) Represents the tax effect related to adjustments (a),
(b), (c), (e), (f) and (g) to net income.
The reconciliation of estimated net income to estimated Adjusted
EBITDA for the thirteen weeks ended June 29, 2017 and net income to
Adjusted EBITDA for the thirteen weeks ended June 30, 2016 is set
forth in the table as follows:
Thirteen Thirteen Weeks
Weeks ended ended June 29, 2017 June
30, Estimated 2016
(in
thousands)
Actual Low High Net income $5,012
$19,163 $20,429 Depreciation and amortization(a) 6,447 8,026 8,026
Interest expense 2,475 3,353 3,353 Loss on early extinguishment of
debt(b) 153 5,442 5,442 Income tax expense 2,988 4,144 4,878 EBITDA
17,075 40,128 42,128 Stock compensation expense(c) 706 1,250 1,250
Loss on asset disposal(d) 211 - - Legal settlement(e) 14,000 - -
Other(f) - 303 303 Adjusted EBITDA $31,992 $41,681 $43,681
____________________
(a) Net of amortization of tenant improvement
allowances and excludes deferred financing amortization, which is
included as a part of interest expense in the table above.
(b) The Company used net proceeds from the IPO of approximately
$192.0 million to repay a portion of the amounts outstanding under
the Term Loan Facility, which resulted in a loss on extinguishment
of debt in the amount of approximately $5.4 million. (c)
Non-cash charges related to stock-based compensation programs,
which vary from period to period depending on timing of awards and
forfeitures. (d) The losses related primarily to assets
retired in connection with significant store remodels. (e)
Legal settlement related to classwide settlement to resolve a
lawsuit related to classwide settlement. (f) Other
adjustments include amounts management does not consider indicative
of the Company’s core operating performance. Amounts for the
thirteen weeks ended June 29, 2017 relate primarily to costs
accrued during such periods in connection with the IPO and the
Company’s proposed secondary offering.
The preliminary estimated unaudited financial results disclosed
above (including in the GAAP reconciliation tables) reflect
management’s estimates based solely upon information available as
of the date of this release and are not a comprehensive statement
of the Company’s financial results as of and for the thirteen weeks
ended June 29, 2017. The information presented herein should not be
considered a substitute for the financial information to be filed
with the SEC in the Company’s Quarterly Report on Form 10-Q for the
thirteen weeks ended June 29, 2017 once it becomes available. The
Company has no intention or obligation to update the preliminary
estimated unaudited financial results (or GAAP reconciliations) in
this release prior to filing its Quarterly Report on Form 10-Q for
the thirteen weeks ended June 29, 2017.
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.
Refinancing and Dividend Transactions
On September 30, 2016, the first day of the Company’s
fiscal 2016 fourth quarter, the Company refinanced its existing
indebtedness by amending its existing $100 million asset-based
revolving credit facility with an amended and restated
$200.0 million asset based revolving credit facility maturing
on September 30, 2021, entering into a $350.0 million
senior secured term loan facility maturing on September 30,
2023 (the “Term Loan Facility”) and repaying and terminating its
$80 million senior secured term loan facility and a
$10 million term loan facility. In connection therewith, the
Company paid its common stockholders a special cash dividend of
$202.5 million in the aggregate (the “Special Dividend”) and
made certain cash payments of $22.5 million in the aggregate
in respect of certain options to purchase the Company’s common
stock in accordance with the terms of the Company’s 2011 Stock
Incentive Plan. The Company refers to the refinancing, Special
Dividend and option adjustments and payments collectively as the
“2016 Refinancing.”
Repricing of Term Loan Facility
On March 31, 2017, the Company entered into a repricing
amendment to the credit agreement governing the Term Loan Facility.
The amendment reduced the margins applicable to our term loan from
3.25% per annum (subject to a leverage-based step-down to 2.75%) to
2.50% per annum (subject to a leverage-based step-down to 2.00%) in
the case of base rate loans, and from 4.25% per annum (subject to a
leverage-based step-down to 3.75%) to 3.50% per annum (subject to a
leverage-based step-down to 3.00%) in the case of LIBOR loans
(subject to a 1.00% floor on LIBOR loans), provided that each of
the leverage-based step-downs was contingent upon the consummation
of the IPO (the “Term Loan Repricing”). The amount and terms of the
Term Loan Facility were otherwise unchanged.
The Company has filed a registration statement (including a
prospectus) with the SEC for the offering to which this
communication relates. Before you invest, you should read the
prospectus in that registration statement and other documents the
issuer has filed with the SEC for more complete information about
the issuer and this offering. You may get these documents for free
by visiting EDGAR on the SEC website at www.sec.gov.
A copy of the preliminary prospectus is available at
https://www.sec.gov/Archives/edgar/data/1507079/000104746917004617/a2232708zs-1.htm.
Alternatively, a copy of the preliminary prospectus is
available from BofA Merrill Lynch, Attention: Prospectus
Department, 200 North College Street, 3rd Floor, Charlotte, NC
28255-0001; or Barclays Capital Inc., Attention: Broadridge
Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717,
by calling toll-free (888) 603-5847, or by email at
Barclaysprospectus@broadridge.com.
About Floor & Decor Holdings, Inc.
Floor & Decor is a multi-channel specialty retailer of hard
surface flooring and related accessories, offering a broad in-stock
assortment of tile, wood, laminate and natural stone flooring along
with decorative and installation accessories at everyday low
prices.
Forward-Looking Statements
This release contains forward-looking statements. All statements
other than statements of historical fact contained in this release,
including statements regarding the Company’s future operating
results and financial position, business strategy and plans and
objectives of management for future operations, are forward-looking
statements. These statements involve known and unknown risks,
uncertainties and other important factors that may cause the
Company’s actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements.
In some cases, you can identify forward-looking statements by
terms such as “may,” “will,” “should,” “expects,” “intends,”
“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 in
this release are only predictions. Although the Company believes
that the expectations reflected in the forward-looking statements
in this release are reasonable, the Company 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 release,
including, without limitation, those factors described in “Risk
Factors,” “Special Note Regarding Forward-Looking Statements,”
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” and “Business” sections and elsewhere in
the Company’s registration statement on Form S-1.
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 release speak only as of the date hereof. New
risks and uncertainties arise over time, and it is not possible for
the Company to predict those events or how they may affect the
Company. If a change to the events and circumstances reflected in
the Company’s forward-looking statements occurs, the Company’s
business, financial condition and operating results may vary
materially from those expressed in the Company’s forward-looking
statements. Except as required by applicable law, the Company does
not plan to publicly update or revise any forward-looking
statements contained herein after the Company distributes this
release, whether as a result of any new information, future events
or otherwise.
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version on businesswire.com: http://www.businesswire.com/news/home/20170717006249/en/
Investors:Floor & Decor Holdings,
Inc.Matthew McConnell,
770-257-1374InvestorRelations@flooranddecor.comorICRFarah
Soi/Rachel Schacter,
203-682-8200InvestorRelations@flooranddecor.com
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