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Section 1: 8-K (FORM 8-K)

sfm-8k_20161103.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 3, 2016

Sprouts Farmers Market, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-36029

 

32-0331600

(State or other jurisdiction

of incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

5455 E. High Street, Suite 111

Phoenix, Arizona 85054

(Address of principal executive offices and zip code)

(480) 814-8016

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 2.02. Results of Operations and Financial Condition.

On November 3, 2016, Sprouts Farmers Market, Inc. (the “Company”) issued a press release announcing its results of operations for its third fiscal quarter ended October 2, 2016. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated into this Item 2.02 by reference.

The information furnished in this Item 2.02, including Exhibit 99.1 attached hereto and incorporated herein, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

The text of this Current Report on Form 8-K is available on the Company’s investor relations website located at investors.sprouts.com, although the Company reserves the right to discontinue that availability at any time.

Item 9.01. Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit

Number

  

Description

 

 

 

99.1

  

Press release of Sprouts Farmers Market, Inc., dated November 3, 2016, entitled “Sprouts Farmers Market, Inc. Reports Third Quarter 2016 Results”

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

SPROUTS FARMERS MARKET, INC.

 

 

 

Date: November 3, 2016

 

By:

 

/s/ Brandon F. Lombardi

 

 

Name:

 

Brandon F. Lombardi

 

 

Title:

 

Chief Legal Officer and Corporate Secretary

 

 

 


 

EXHIBIT INDEX

 

Exhibit

Number

 

Description

 

 

 

 

99.1

 

Press release of Sprouts Farmers Market, Inc., dated November 3, 2016, entitled “Sprouts Farmers Market, Inc. Reports Third Quarter 2016 Results”

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

sfm-ex991_6.htm

 

Exhibit 99.1

 

 

 

 

Investor Contact:

Media Contact:

Susannah Livingston

Donna Egan

(602) 682-1584

(602) 682-3152

susannahlivingston@sprouts.com

media@sprouts.com

SPROUTS FARMERS MARKET, INC. REPORTS THIRD QUARTER 2016 RESULTS

PHOENIX, November 3, 2016 (Globe Newswire) – Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week third quarter ended October 2, 2016.  

Third Quarter Highlights:

Net sales of $1.0 billion; a 15% increase from the same period in 2015

Comparable store sales growth of 1.3% and two-year comparable store sales growth of 7.5%

Net income of $24 million and diluted earnings per share of $0.16

Net income decreased $8 million from the same period in 2015, and $9 million from adjusted net income

Diluted earnings per share decreased $0.05 from diluted and adjusted diluted earnings per share in the same period in 2015

Raising the bottom of our full-year comparable store sales growth from 1.5% to 2.0%

“The Sprouts team delivered 15% sales growth, strong new store performance and our 38th consecutive quarter of positive same store sales, all despite a highly deflationary and competitive environment,” said Amin Maredia, chief executive officer of Sprouts Farmers Market. “The core fundamentals of our business remain strong, and we continue to prioritize product innovation, investing in our team members and infrastructure for scale, and enhancing the customer experience both in and out-of-store.”

In order to aid in understanding the company’s business performance, it has presented results in conformity with accounting principles generally accepted in the United States (“GAAP”) and has also presented certain non-GAAP measures which are explained and reconciled to the GAAP measures in the tables included in this release. For 2016 and 2015, the company has referenced EBITDA and adjusted EBITDA, respectively. In addition, for 2015, the company has presented adjusted net income and adjusted earnings per share. In each case, the “adjusted” measure excludes the after-tax impact of disposal of assets, store closure and exit costs, secondary offering expenses and loss on extinguishment of debt.  For the first three quarters of 2016, such adjustments would be immaterial.  Accordingly, the company has presented net income, earnings per share and EBITDA for 2016 without adjustment and, where applicable, has provided comparisons of such measures to the corresponding adjusted measures from 2015. Where applicable, results are first presented on a GAAP basis and then on an adjusted basis.

Third Quarter 2016 Financial Results

Net sales for the third quarter of 2016 were $1.0 billion, a 15% increase compared to the same period in 2015.   Net sales growth was driven by a 1.3% increase in comparable store sales and strong performance in new stores opened.

Gross profit for the quarter increased 11% to $292 million, resulting in a gross profit margin of 28.1%, a decrease of 80 basis points compared to the same period in 2015.  This reflects 60 basis points from increased price investments in certain categories in response to the ongoing deflationary and promotional environment and slightly higher shrink from lower comp sales, with an additional 20 basis points of deleverage from occupancy.


 

Direct store expenses (“DSE”) as a percentage of sales for the quarter increased 120 basis points to 20.9% compared to the same period in 2015.  Excluding the pre-tax loss on disposal of assets in the third quarter of 2015, DSE as a percentage of sales increased 130 basis points.  Thirty basis points of this increase related to cycling a lower medical benefit expense from the prior year.  The remaining increase was primarily due to deleverage from lower comp sales growth, higher payroll expense from planned increases in wages and training costs implemented at the beginning of the year, and the impact of opening a greater number of new stores in 2016.

Selling, general and administrative expenses (“SG&A”) as a percentage of sales for the quarter improved 10 basis points to 2.9%, compared to the same period in 2015. This was primarily driven by lower bonus expense versus the prior year, partially offset by higher stock compensation costs due to executive changes in 2015.

Net income for the quarter was $24 million, down $8 million, or 25% from the same period in 2015.  Excluding the after-tax impact of the loss on disposal of assets and the store closure and exit costs in the third quarter of 2015, net income for the quarter decreased $9 million, or 27% compared to adjusted net income of $33 million for the same period in 2015.  Diluted earnings per share was $0.16, a 24% decrease from diluted and adjusted diluted earnings per share of $0.21 for the same period in 2015.  These results were driven by lower margins as a result of the stepped-up promotional environment and increased store payroll.

Fiscal Year-to-Date Financial Results

For the 39-week period ended October 2, 2016, net sales were $3.1 billion, or a 15% increase compared to the same period in 2015.  Growth was driven by a 3.4% increase in comparable store sales and solid performance in new stores opened.  Net income was $107 million, up $6 million, or 6%, from the same period in 2015. Excluding the after-tax impact of the loss on extinguishment of debt, store closure and exit costs, secondary offering expenses and loss on disposal of assets through the first three quarters of 2015, net income increased $1 million, or 1%, compared to adjusted net income of $106 million for the same period in 2015. Diluted earnings per share was $0.71, a 9% increase from diluted earnings per share of $0.65 and a 4% increase from adjusted diluted earnings per share of $0.68 for the same period in 2015. These results were driven by fewer shares outstanding due to our repurchase program and higher gross margins due to deflation, partially offset by price investments, increased store payroll and equity-based compensation expense.

Growth and Development

During the third quarter of 2016, we opened 10 new stores: one each in Arizona, Georgia, Tennessee and Oklahoma; and six in California. Two additional stores have been opened in the fourth quarter, resulting in 35 stores opened year-to-date for a total of 252 stores in 13 states as of November 3, 2016. The company expects to open a total of 36 stores in 2016, representing a 17% increase in total store count.

Leverage and Liquidity

We generated cash from operations of $196 million year-to-date through October 2, 2016 and invested $135 million in capital expenditures net of landlord reimbursement, primarily for new stores. In addition, we repurchased 8.2 million shares of common stock for a total investment of $188 million through the third quarter of 2016 under our $150 million and $250 million share repurchase authorizations. We ended the quarter with a $205 million balance on our revolving credit facility, $2 million of letters of credit outstanding under the facility, and $50 million in cash and cash equivalents.  Subsequent to the end of the quarter and through October 31, 2016, we repurchased an additional 2.9 million shares of common stock for a total investment of $249 million year-to-date under both our share repurchase authorizations.


 

2016 Outlook

On September 7, 2016, we updated our third quarter and full-year 2016 guidance primarily due to the significant ongoing deflation and the stepped-up promotional environment. Given our third quarter performance, we have raised the bottom of full-year comparable store sales growth range and maintained our EPS guidance. This change and additional guidance for 2016 are provided below:

 

 

 

Full-Year 2016 Guidance

 

 

52-week to 52-week

 

53-week to 52-week

Net sales growth

 

14.5% to 15%

 

12% to 12.5%

Unit growth

 

36 new stores

 

36 new stores

Comparable store sales growth (1)

 

2% to 2.5%

 

2% to 2.5%

Diluted earnings per share (2)

 

$0.83 to $0.86

 

$0.83 to $0.86

EBITDA growth (3)

 

0% to 2%

 

-3% to -1%

Capital expenditures

 

$160M to $165M

 

$160M to $165M

(net of landlord reimbursements)

 

 

 

 

 

(1)

Comparable store sales growth is on an equal 52-week to 52-week basis.

(2)

Based on a weighted average share count of approximately 150 million shares for 2016.

(3)

Compared to adjusted measures in 2015.

 

Please see the explanation and reconciliation of EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share to the comparable GAAP measures for the 13 and 39 weeks ended October 2, 2016 and September 27, 2015, as applicable, in the tables included below.

Third Quarter 2016 Conference Call

We will hold a conference call at 7 a.m. Pacific Daylight Time (10 a.m. Eastern Daylight Time) on Thursday, November 3, 2016, during which Sprouts executives will further discuss our third quarter 2016 financial results.  

A webcast of the conference call will be available through Sprouts’ investor webpage located at investors.sprouts.com. Participants should register on the website approximately 10 minutes prior to the start of the webcast.

The conference call will be available via the following dial- in numbers:

 

U.S. Participants: 877-398-9481

 

International Participants: Dial +1-408-337-0130

 

Conference ID: 95171746

The audio replay will remain available for 72 hours and can be accessed by dialing 855-859-2056 (toll-free) or 404-537-3406 (international) and entering the confirmation code: 95171746.

Important Information Regarding Outlook

There is no guarantee that Sprouts will achieve its projected financial expectations, which are based on management estimates, currently available information and assumptions that management believes to be reasonable.   These expectations are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management.  See “Forward-Looking Statements” below.

Forward-Looking Statements

Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact (including, but not limited to, statements to the effect that Sprouts Farmers Market or its management "anticipates," "plans," "estimates," "expects," or "believes," or the negative of these terms and other similar expressions) should be considered forward-looking statements, including, without limitation, statements regarding the company’s guidance, outlook and new store openings for 2016. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this release.  These risks and uncertainties include, without limitation, risks associated with the company’s ability to successfully compete in its intensely competitive industry; the company’s ability to successfully


 

open new stores; the company’s ability to manage its rapid growth; the company’s ability to maintain or improve its operating margins; the company’s ability to identify and react to trends in consumer preferences; product supply disruptions; general economic conditions; and other factors as set forth from time to time in the company’s Securities and Exchange Commission filings, including, without limitation, the company’s Annual Report on Form 10-K.  The company intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more information becomes available, except as required by law.

Corporate Profile

Sprouts Farmers Market, Inc. is a healthy grocery store offering fresh, natural and organic foods at great prices. Sprouts offer a complete shopping experience that includes fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, natural body care and household items catering to consumers’ growing interest in health and wellness. Headquartered in Phoenix, Arizona, Sprouts employs more than 24,000 team members and operates more than 250 stores in thirteen states from coast to coast. For more information, visit www.sprouts.com or @sproutsfm on Twitter.


 

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

Thirteen Weeks Ended

 

 

Thirty-nine Weeks Ended

 

 

 

October 2,

2016

 

 

September 27, 2015

 

 

October 2,

2016

 

 

September 27, 2015

 

Net sales

 

$

1,035,801

 

 

$

903,069

 

 

$

3,060,685

 

 

$

2,662,728

 

Cost of sales, buying and occupancy

 

 

744,288

 

 

 

641,612

 

 

 

2,156,857

 

 

 

1,879,839

 

Gross profit

 

 

291,513

 

 

 

261,457

 

 

 

903,828

 

 

 

782,889

 

Direct store expenses

 

 

216,932

 

 

 

177,990

 

 

 

617,817

 

 

 

518,561

 

Selling, general and administrative expenses

 

 

29,664

 

 

 

27,075

 

 

 

91,482

 

 

 

74,492

 

Store pre-opening costs

 

 

3,446

 

 

 

1,825

 

 

 

11,625

 

 

 

7,105

 

Store closure and exit costs

 

 

24

 

 

 

167

 

 

 

159

 

 

 

1,711

 

Income from operations

 

 

41,447

 

 

 

54,400

 

 

 

182,745

 

 

 

181,020

 

Interest expense

 

 

(3,723

)

 

 

(3,685

)

 

 

(10,985

)

 

 

(13,990

)

Other income

 

 

135

 

 

 

171

 

 

 

326

 

 

 

345

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(5,481

)

Income before income taxes

 

 

37,859

 

 

 

50,886

 

 

 

172,086

 

 

 

161,894

 

Income tax provision

 

 

(13,974

)

 

 

(18,900

)

 

 

(64,785

)

 

 

(61,119

)

Net income

 

$

23,885

 

 

$

31,986

 

 

$

107,301

 

 

$

100,775

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.21

 

 

$

0.72

 

 

$

0.66

 

Diluted

 

$

0.16

 

 

$

0.21

 

 

$

0.71

 

 

$

0.65

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

147,743

 

 

 

153,585

 

 

 

149,202

 

 

 

153,071

 

Diluted

 

 

150,024

 

 

 

155,952

 

 

 

151,568

 

 

 

155,841

 


 

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

  

 

October 2,

2016

 

 

January 3,

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

50,290

 

 

$

136,069

 

Accounts receivable, net

 

 

21,762

 

 

 

20,424

 

Inventories

 

 

195,217

 

 

 

165,434

 

Prepaid expenses and other current assets

 

 

24,500

 

 

 

23,288

 

Total current assets

 

 

291,769

 

 

 

345,215

 

Property and equipment, net of accumulated depreciation

 

 

577,409

 

 

 

494,067

 

Intangible assets, net of accumulated amortization

 

 

197,958

 

 

 

198,601

 

Goodwill

 

 

368,078

 

 

 

368,078

 

Other assets

 

 

20,138

 

 

 

19,003

 

Deferred income tax asset

 

 

 

 

 

1,400

 

Total assets

 

$

1,455,352

 

 

$

1,426,364

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

162,275

 

 

$

134,480

 

Accrued salaries and benefits

 

 

25,759

 

 

 

30,717

 

Other accrued liabilities

 

 

47,502

 

 

 

50,253

 

Current portion of capital and financing lease obligations

 

 

9,419

 

 

 

14,972

 

Total current liabilities

 

 

244,955

 

 

 

230,422

 

Long-term capital and financing lease obligations

 

 

115,426

 

 

 

115,500

 

Long-term debt

 

 

205,000

 

 

 

160,000

 

Other long-term liabilities

 

 

111,907

 

 

 

97,450

 

Deferred income tax liability

 

 

18,719

 

 

 

 

Total liabilities

 

 

696,007

 

 

 

603,372

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Undesignated preferred stock; $0.001 par value; 10,000,000 shares

   authorized, no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized,

   145,301,469 and 152,577,884 shares issued and outstanding,

   October 2, 2016 and January 3, 2016, respectively

 

 

145

 

 

 

153

 

Additional paid-in capital

 

 

594,281

 

 

 

577,393

 

Retained earnings

 

 

164,919

 

 

 

245,446

 

Total stockholders’ equity

 

 

759,345

 

 

 

822,992

 

Total liabilities and stockholders’ equity

 

$

1,455,352

 

 

$

1,426,364

 


 

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

 

 

 

Thirty-nine Weeks Ended

 

 

 

October 2,

2016

 

 

September 27,

2015

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

107,301

 

 

$

100,775

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

59,997

 

 

 

50,665

 

Accretion of asset retirement obligation and closed facility reserve

 

 

237

 

 

 

251

 

Amortization of financing fees and debt issuance costs

 

 

347

 

 

 

617

 

Loss on disposal of property and equipment

 

 

226

 

 

 

1,257

 

Equity-based compensation

 

 

10,322

 

 

 

4,776

 

Loss on extinguishment of debt

 

 

 

 

 

5,481

 

Deferred income taxes

 

 

20,119

 

 

 

3,155

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,336

)

 

 

(11,150

)

Inventories

 

 

(29,784

)

 

 

(18,996

)

Prepaid expenses and other current assets

 

 

(1,212

)

 

 

(25

)

Other assets

 

 

(1,480

)

 

 

(444

)

Accounts payable

 

 

24,050

 

 

 

28,641

 

Accrued salaries and benefits

 

 

(4,959

)

 

 

(6,251

)

Other accrued liabilities

 

 

(2,762

)

 

 

(370

)

Other long-term liabilities

 

 

14,971

 

 

 

20,709

 

Cash flows from operating activities

 

 

196,037

 

 

 

179,091

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(142,571

)

 

 

(97,390

)

Proceeds from sale of property and equipment

 

 

662

 

 

 

49

 

Purchase of leasehold interests

 

 

(491

)

 

 

 

Cash flows used in investing activities

 

 

(142,400

)

 

 

(97,341

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

45,000

 

 

 

260,000

 

Payments on revolving credit facility

 

 

 

 

 

(100,000

)

Payments on term loan

 

 

 

 

 

(261,250

)

Payments on capital lease obligations

 

 

(531

)

 

 

(492

)

Payments on financing lease obligations

 

 

(2,613

)

 

 

(2,575

)

Payments of deferred financing costs

 

 

 

 

 

(1,896

)

Repurchase of common stock

 

 

(187,836

)

 

 

 

Excess tax benefit for exercise of stock options

 

 

3,948

 

 

 

19,584

 

Proceeds from the exercise of stock options

 

 

2,616

 

 

 

6,366

 

Cash flows used in financing activities

 

 

(139,416

)

 

 

(80,263

)

(Decrease) / Increase in cash and cash equivalents

 

 

(85,779

)

 

 

1,487

 

Cash and cash equivalents at beginning of the period

 

 

136,069

 

 

 

130,513

 

Cash and cash equivalents at the end of the period

 

$

50,290

 

 

$

132,000

 


 

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, the company has referenced EBITDA for 2016 and for 2015, adjusted net income, adjusted earnings per share and adjusted EBITDA. These measures are not in accordance with, and are not intended as an alternative to, GAAP. The company's management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the company, and they are a component of incentive compensation. The company defines EBITDA as net income before interest expense, provision for income tax, and depreciation, amortization and accretion, and defines adjusted EBITDA as EBITDA as further adjusted to exclude store closure and exit costs, gains and losses from disposal of assets, expenses incurred by the company in its secondary public offerings and employment taxes paid by the company in connection with options exercised in those offerings (“Public Offering Expenses”) and the loss on extinguishment of debt. The company defines adjusted net income as net income excluding, gain and losses from disposal of assets, store closure and exit costs, Public Offering Expenses, the loss on extinguishment of debt and the related tax impact of those adjustments. For the thirteen and thirty-nine weeks ended October 2, 2016, such further adjustments to net income and EBITDA were immaterial; thus only EBITDA is presented.

These non-GAAP measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Because of their limitations, none of these non-GAAP measures should be considered as a measure of discretionary cash available to use to reinvest in growth of the company’s business, or as a measure of cash that will be available to meet the company’s obligations. 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.

The following table shows a reconciliation of EBITDA to net income for the thirteen and thirty-nine weeks ended October 2, 2016 and September 27, 2015:

SPROUTS FARMERS MARKET, INC.AND SUBSIDIARIES

NON-GAAP MEASURE RECONCILIATION

(UNAUDITED)

(IN THOUSANDS)

 

 

 

Thirteen Weeks Ended

 

 

Thirty-nine Weeks Ended

 

 

 

October 2,

 

 

September 27,

 

 

October 2,

 

 

September 27,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income

 

 

23,885

 

 

 

31,986

 

 

 

107,301

 

 

 

100,775

 

Income tax provision

 

 

13,974

 

 

 

18,900

 

 

 

64,785

 

 

 

61,119

 

Interest expense, net

 

 

3,723

 

 

 

3,685

 

 

 

10,985

 

 

 

13,990

 

Earnings before interest and taxes (EBIT)

 

 

41,582

 

 

 

54,571

 

 

 

183,071

 

 

 

175,884

 

Depreciation, amortization and accretion

 

 

21,245

 

 

 

17,922

 

 

 

60,234

 

 

 

50,916

 

Earnings before interest, taxes, depreciation and

   amortization (EBITDA)

 

 

62,827

 

 

 

72,493

 

 

 

243,305

 

 

 

226,800

 

 


 

The following table shows a reconciliation of adjusted net income and adjusted EBITDA to net income, and adjusted earnings per share to net income per share, for the thirteen and thirty-nine weeks ended September 27, 2015:

 

 

 

Thirteen Weeks

Ended

 

 

Thirty-nine Weeks

Ended

 

 

 

September 27,

2015

 

 

September 27,

2015

 

Net income

 

$

31,986

 

 

$

100,775

 

Income tax provision

 

 

18,900

 

 

 

61,119

 

Net income before income taxes

 

 

50,886

 

 

 

161,894

 

Store closure and exit costs (a)

 

 

167

 

 

 

1,711

 

Loss on disposal of assets (b)

 

 

869

 

 

 

1,274

 

Secondary offering expenses including employment taxes on options exercise (c)

 

 

 

 

 

335

 

Loss on extinguishment of debt (d)

 

 

 

 

 

5,481

 

Adjusted income tax provision (e)

 

 

(19,285

)

 

 

(64,442

)

Adjusted net income

 

 

32,637

 

 

 

106,253

 

Interest expense, net

 

 

3,684

 

 

 

13,981

 

Adjusted income tax provision (e)

 

 

19,285

 

 

 

64,442

 

Adjusted earnings before interest and taxes (EBIT)

 

 

55,606

 

 

 

184,676

 

Depreciation, amortization and accretion

 

 

17,874

 

 

 

50,714

 

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)

 

$

73,480

 

 

$

235,390

 

Adjusted Net Income Per Share

 

 

 

 

 

 

 

 

Net income per share—basic

 

$

0.21

 

 

$

0.66

 

Per share impact of net income adjustments

 

$

 

 

$

0.03

 

Adjusted net income per share—basic

 

$

0.21

 

 

$

0.69

 

Net income per share—diluted

 

$

0.21

 

 

$

0.65

 

Per share impact of net income adjustments

 

$

 

 

$

0.03

 

Adjusted net income per share—diluted

 

$

0.21

 

 

$

0.68

 

 

(a)

Store closure and exit costs represents reserves established for closed stores and facilities, adjustments to those reserves for changes in expectations for sublease or actual subleases or settlements with landlords. Ongoing expenses related with the closed facilities are also included. The company excluded store closure and exit costs from its adjusted EBITDA and adjusted net income to provide period-to-period comparability of its operating results because management believed these costs did not directly reflect the ongoing performance of its store operations.

(b)

Loss on disposal of assets represents the losses recorded in connection with the disposal of property and equipment.  The company excluded losses on disposals of assets from its adjusted EBITDA and adjusted net income to provide period-to-period comparability of its operating results because management believed these costs did not directly reflect the ongoing performance of its store operations.

(c)

Secondary offering expenses including employment taxes on options exercises represents expenses the company incurred in its secondary public offerings and employment taxes paid by the company in connection with options exercised in those offerings. The company excluded these items from its adjusted EBITDA and adjusted net income to provide period-to-period comparability of its operating results because management believed these costs did not directly reflect the ongoing performance of its store operations.

(d)

Loss on extinguishment of debt represents expenses the Company recorded in connection with its April 2015 refinancing, including write-off of deferred financing costs and original issue discounts associated with the former credit agreement.  The Company has excluded this item from its adjusted EBITDA and adjusted net income to provide period-to-period comparability of its operating results because management believes these costs do not directly reflect the performance of its store operations.

(e)

Adjusted income tax provision for all periods presented represents the income tax provision plus the tax effect of the adjustments described in notes (a) through (d) above based on statutory tax rates for the periods. The company excluded these items from its adjusted income tax provision because management believed they did not directly reflect the ongoing performance of its store operations and were not reflective of its ongoing income tax provision.

###

Source: Sprouts Farmers Market, Inc.

Phoenix, AZ

11/3/16

 

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