Floor & Decor Holdings, Inc.

Previous wording

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 Part I, Item 1, “Financial Statements” of 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, and “Spartan” refers to our subsidiary Spartan Surfaces, LLC.

Current wording

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 Part I, Item 1, “Financial Statements” of this Quarterly Report and with our audited financial statements and the related notes included in our 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, and “Spartan” refers to our subsidiary Spartan Surfaces, LLC.

Previous wording

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 241 warehouse-format stores across 38 states as of September 26, 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”).

Current wording

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 254 warehouse-format stores and five small-format standalone design studios across 38 states as of March 27, 2025. 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 broadest in-stock assortment of laminate and vinyl, tile, wood, and natural stone flooring and installation materials and decorative accessories, as well as adjacent categories, at everyday low prices. This positions us as the one-stop destination for our customers’ entire hard surface flooring needs. We appeal to a variety of customers, including Pros and homeowners, which are comprised of DIY and BIY customers.

Previous wording

•opening 20 new warehouse-format stores, ending the quarter with 241 warehouse-format stores and five design studios;

Current wording

During the thirteen weeks ended March 27, 2025, we opened four new warehouse-format stores and closed one warehouse-format store, ending the quarter with 254 warehouse-format stores and five design studios.

Previous wording

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 and thirty-nine weeks ended September 26, 2024 and September 28, 2023, respectively.

Current wording

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 27, 2025 and March 28, 2024, respectively.

Previous wording

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 Part II, 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”).

Current wording

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 Part II, 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 GAAP.

Previous wording

See Part II, 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.

Current wording

Results of operations for any period should not be considered indicative of future results. See Part II, 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, regulatory and political conditions, trade policy, and geopolitical instability, among others, may have on our results of operations and overall financial performance for future periods.

Previous wording

The following table summarizes key components of our results of operations for the periods indicated:

Current wording

The following tables summarize key components of our results of operations for the periods indicated:

Previous wording

(1) EBITDA and Adjusted EBITDA are non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” below for additional information and a reconciliation of EBITDA and Adjusted EBITDA to net income.

Current wording

(1) Refer to “Non-GAAP Financial Measures” further below for a reconciliation of Adjusted EBITDA to net income.

Previous wording

Net sales during the thirteen weeks ended September 26, 2024 increased $10.1 million, or 0.9%, compared to the corresponding prior year period primarily due to sales from the 34 new warehouse-format stores that we opened since September 28, 2023 and growth in Spartan, partially offset by a decrease in comparable store sales of 6.4%. The comparable store sales decline during the period of 6.4%, or $67.3 million, was due to a 4.1% decrease in comparable transactions and a 2.4% decrease in comparable average ticket. Non-comparable sales of $77.4 million during the same period were primarily driven by new stores and revenue from Spartan.

Current wording

Net sales during the thirteen weeks ended March 27, 2025 increased $63.5 million, or 5.8%, compared to the corresponding prior year period primarily due to sales from the 30 new warehouse-format stores that we opened since March 28, 2024, partially offset by a decrease in comparable store sales of 1.8%. The comparable store sales decline during the period of 1.8%, or $18.5 million, was due to a 3.8% decrease in comparable transactions, which we believe was largely driven by the impact of lower existing home sales, partially offset by a 2.1% increase in comparable average ticket, which was primarily due to change in sales mix. Non-comparable sales of $82.0 million during the same period were primarily driven by new stores.

Previous wording

We estimate that retail sales during both the thirteen and thirty-nine weeks ended September 26, 2024 were approximately 52% from homeowners and 48% from Pros compared to approximately 56% from homeowners and 44% from Pros during both the thirteen and thirty-nine weeks ended September 28, 2023.

Current wording

We estimate that retail sales during the thirteen weeks ended March 27, 2025 were approximately 50% from homeowners and 50% from Pros compared to approximately 55% from homeowners and 45% from Pros during the thirteen weeks ended March 28, 2024.

Previous wording

Gross profit during the thirteen weeks ended September 26, 2024 increased $18.4 million, or 3.9%, compared to the corresponding prior year period. The increase in gross profit was primarily driven by an increase in gross margin to 43.5%, up approximately 130 basis points from 42.2% in the same period a year ago.

Current wording

Gross profit during the thirteen weeks ended March 27, 2025 increased $38.1 million, or 8.1%, compared to the corresponding prior year period. The increase in gross profit was primarily driven by the 5.8% increase in net sales and an increase in gross margin to 43.8%, up approximately 100 basis points from 42.8% in the same period a year ago primarily driven by a decrease in supply chain costs.

Previous wording

Selling and store operating expenses during the thirteen weeks ended September 26, 2024 increased $30.6 million, or 9.9%, compared to the corresponding prior year period. The increase in selling and store operating expenses was primarily driven by $37.3 million for new stores and $1.0 million at Spartan, partially offset by a decrease of $7.7 million at our comparable stores. As a percentage of net sales, selling and store operating expenses increased by approximately 240 basis points to 30.3% from 27.9% in the corresponding prior year period.

Current wording

Selling and store operating expenses during the thirteen weeks ended March 27, 2025 increased $34.5 million, or 10.3%, compared to the corresponding prior year period. The increase in selling and store operating expenses was primarily driven by $38.5 million for new stores, partially offset by a decrease of $5.0 million at our comparable stores. As a percentage of net sales, selling and store operating expenses increased by approximately 130 basis points to 31.8% from 30.5% in the corresponding prior year period. The increase in selling and store operating expenses in total and as a percentage of net sales was primarily attributable to the addition of new stores and deleverage from a decrease in comparable store sales.

Previous wording

General and administrative expenses during the thirteen weeks ended September 26, 2024 increased $7.8 million, or 13.1%, compared to the corresponding prior year period. Our general and administrative expenses as a percentage of net sales increased by approximately 80 basis points to 6.1% from 5.3% in the corresponding prior year period.

Current wording

General and administrative expenses during the thirteen weeks ended March 27, 2025 increased $2.4 million, or 3.5%, compared to the corresponding prior year period. The increase in general and administrative expenses was primarily driven by an increase of $2.9 million in personnel expenses. Our general and administrative expenses as a percentage of net sales decreased by approximately 10 basis points to 6.0% from 6.1% in the corresponding prior year period.

Previous wording

Pre-opening expenses during the thirteen weeks ended September 26, 2024 decreased $1.5 million, or 10.5%, compared to the corresponding prior year period. The decrease in pre-opening expenses during the thirteen weeks ended September 26, 2024 primarily resulted from a decrease in the number of future stores that we were preparing to open compared to the corresponding prior year period.

Current wording

Pre-opening expenses during the thirteen weeks ended March 27, 2025 decreased $3.6 million, or 37.5%, compared to the corresponding prior year period. The decrease in pre-opening expenses during the thirteen weeks ended March 27, 2025 primarily resulted from a decrease in the number of future stores that we were preparing to open compared to the corresponding prior year period.

Previous wording

Net interest expense during the thirteen weeks ended September 26, 2024 decreased $1.1 million, or 84.8%, compared to the corresponding prior year period.

Current wording

Net interest expense during the thirteen weeks ended March 27, 2025 decreased $0.4 million, or 20.8%, compared to the corresponding prior year period due to lower average interest rates and lower average outstanding borrowings.

Previous wording

Income tax expense was $14.4 million during the thirteen weeks ended September 26, 2024 compared to $17.6 million during the thirteen weeks ended September 28, 2023. The effective tax rate was 21.8% for the thirteen weeks ended September 26, 2024 compared to 21.1% in the corresponding prior year period. The effective tax rate increase during the thirteen weeks ended September 26, 2024 was primarily due to a decrease in excess tax benefits related to stock-based compensation awards.

Current wording

Income tax expense was $13.8 million during the thirteen weeks ended March 27, 2025 compared to $7.3 million during the thirteen weeks ended March 28, 2024. The effective tax rate was 22.0% for the thirteen weeks ended March 27, 2025 compared to 12.8% in the corresponding prior year period. The effective tax rate increase during the thirteen weeks ended March 27, 2025 was primarily due to a decrease in excess tax benefits related to stock-based compensation awards.

Previous wording

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.

Current wording

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 comparisons 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.

Previous wording

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.

Current wording

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, and depreciation and amortization. We define Adjusted EBITDA as net income before interest, taxes, and 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.

Previous wording

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.

Current wording

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. 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.

Previous wording

(a)Excludes amortization of deferred financing costs, which is included as part of interest expense, net in the table above.

Current wording

(1) Excludes amortization of deferred financing costs, which is included as part of interest expense, net.

Previous wording

(b)Non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and forfeitures.

Current wording

(2) Represents non-cash charges related to stock-based compensation programs, which vary from period to period depending on the timing of awards and forfeitures.

Previous wording

(c)Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for both the thirteen and thirty-nine weeks ended September 26, 2024 and September 28, 2023 relate to changes in the fair value of contingent earn-out liabilities.

Current wording

(3) Other adjustments include amounts management does not consider indicative of our core operating performance. Amounts for both the thirteen weeks ended March 27, 2025 and March 28, 2024 relate to changes in the fair value of contingent earn-out liabilities.

Previous wording

Liquidity is provided primarily by cash flows from operations and our $800.0 million ABL Facility. Unrestricted liquidity based on our September 26, 2024 financial data was $803.1 million, consisting of $180.8 million in cash and cash equivalents and $622.3 million immediately available for borrowing under the ABL Facility without violating any covenants thereunder.

Current wording

Liquidity is provided primarily by cash flows from operations and our $800.0 million ABL Facility. Unrestricted liquidity as of March 27, 2025 was $949.8 million, consisting of $186.9 million in cash and cash equivalents and $762.9 million immediately available for borrowing under the ABL Facility without violating any covenants thereunder. Our liquidity is generally not seasonal.

Previous wording

Our liquidity is generally not seasonal. 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, store support center, and distribution 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.

Current wording

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, store support center, and distribution 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.

Previous wording

Total capital expenditures in fiscal 2024 are planned to be between approximately $360 million to $390 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):

Current wording

Total capital expenditures in fiscal 2025 are planned to be between approximately $310 million to $360 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 2025 (projected amounts are based on the gross costs that we expect to accrue for these investments on the Condensed Consolidated Balance Sheets in fiscal 2025, which may include amounts incurred but not yet settled in cash during the period):

Previous wording

•invest approximately $265 million to $295 million to open 30 warehouse-format stores, relocate stores, and begin construction on stores opening after fiscal 2024;

Current wording

•invest approximately $200 million to $235 million to open 20 warehouse-format stores, relocate stores, and begin construction on stores opening after fiscal 2025;

Previous wording

•invest approximately $65 million in existing store remodeling projects and our distribution centers; and

Current wording

•invest approximately $50 million to $55 million in existing stores and distribution centers; and

Previous wording

•invest approximately $30 million in information technology infrastructure, e-commerce, and other store support center initiatives.

Current wording

•invest approximately $40 million to $45 million in information technology infrastructure, e-commerce, and other store support center initiatives.

Previous wording

Net cash provided by operating activities during the thirty-nine weeks ended September 26, 2024 and September 28, 2023 was $501.8 million and $699.0 million, respectively. The decrease in net cash provided by operating activities was primarily driven by a lower decrease in inventory, lower increase in trade accounts payable, and a decline in cash earnings after adjusting net income for non-cash items such as depreciation and amortization, which were partially offset by a decrease in income taxes receivable and an increase in accrued expenses and other current liabilities.

Current wording

Net cash provided by operating activities during the thirteen weeks ended March 27, 2025 and March 28, 2024 was $71.2 million and $147.5 million, respectively. The decrease in net cash provided by operating activities was primarily driven by the change in inventory, which was partially offset by an increase in trade accounts payable.

Previous wording

Net cash used in investing activities during the thirty-nine weeks ended September 26, 2024 and September 28, 2023 was $349.4 million and $431.1 million, respectively. The decrease in net cash used in investing activities was due to a decrease in capital expenditures and cash paid for an acquisition in 2023. The decline in capital expenditures was driven by the timing of construction payable settlements for recently completed stores and a decrease in new stores under construction compared to the corresponding prior year period.

Current wording

Net cash used in investing activities during the thirteen weeks ended March 27, 2025 and March 28, 2024 was $66.7 million and $111.7 million, respectively. The decrease in net cash used in investing activities was due to a decrease in capital expenditures driven by a decrease in new stores under construction compared to the corresponding prior year period.

Previous wording

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.

Current wording

Financing activities consist primarily of borrowings and related repayments under our Credit Facilities, 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.

Previous wording

Net cash used in financing activities during the thirty-nine weeks ended September 26, 2024 and September 28, 2023 was $6.0 million and $216.1 million, respectively. The decrease in net cash used in financing activities was primarily driven by a decrease in net ABL Facility repayments.

Current wording

Net cash used in financing activities during the thirteen weeks ended March 27, 2025 and March 28, 2024 was $5.2 million and $12.8 million, respectively. The decrease in net cash used in financing activities was primarily driven by a decrease in payments of contingent earn-out liabilities and tax payments for stock-based compensation awards.

Previous wording

As of September 26, 2024, total Term Loan Facility debt was $200.8 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.”

Current wording

As of March 27, 2025, total Term Loan Facility debt outstanding was $199.8 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” to our condensed consolidated financial statements included in this Quarterly Report.

Previous wording

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 September 26, 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.

Current wording

Our credit ratings are periodically reviewed by rating agencies. As of March 27, 2025, our 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 from December 26, 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.