Toggle SGML Header (+)


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

sfm-8k_20170223.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) February 23, 2017

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 February 23, 2017, Sprouts Farmers Market, Inc. (the “Company”) issued a press release announcing its results of operations for its fourth fiscal quarter and fiscal year ended January 1, 2017. 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 February 23, 2017, entitled “Sprouts Farmers Market, Inc. Reports Fourth Quarter and Full Year 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: February 23, 2017

 

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 February 23, 2017, entitled “Sprouts Farmers Market, Inc. Reports Fourth Quarter and Full Year 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 FOURTH QUARTER AND FULL YEAR 2016 RESULTS

Announces $250 Million Share Repurchase Authorization

PHOENIX, February 23, 2017 (Globe Newswire) – Sprouts Farmers Market, Inc. (Nasdaq: SFM) today reported results for the 13-week fourth quarter and 52-week year ended January 1, 2017.  Period-over-period comparison stated herein reflect 13 and 52 weeks in the fourth quarter and fiscal year 2016 to 14 and 53 weeks in the fourth quarter and fiscal year 2015, respectively, unless otherwise noted. The company also announced that its Board of Directors has authorized the company to repurchase, on a discretionary basis, up to $250 million of its outstanding common stock through December, 2018.

Fourth Quarter Highlights:

Net sales of $986 million; a 6% increase from the same period in 2015 and a 14% increase on a 13-week basis

Comparable store sales growth of 0.7% and two-year comparable store sales growth of 8.3%, on a 13-week basis

Net income of $17 million and diluted earnings per share of $0.12

Diluted earnings per share of $0.12, a decrease of $0.06 from diluted earnings per share of $0.18 in the same period in 2015 and a decrease of $0.04 from diluted earnings per share of $0.16 in the same period in 2015 on a 13-week basis

Excluding the payments associated with the Executive Chairman of the Board’s retirement, which negatively impacted 2016 fourth quarter earnings by $0.01 per share, diluted earnings per share of $0.13 decreased $0.03 from diluted earnings per share of $0.16 in the same period of 2015 on a 13-week basis

Fiscal Year 2016 Highlights:

Net sales of $4.0 billion; a 13% increase from 2015 and a 15% increase on a 52-week basis

Comparable store sales growth of 2.7% and two-year comparable store sales growth of 8.5%, on a 52-week basis

Net income of $124 million and diluted earnings per share of $0.83

Diluted earnings per share of $0.83, flat from 2015 and a decrease of $0.03 from adjusted diluted earnings per share of $0.86 in 2015 and a decrease of $0.01 from diluted earnings per share of $0.84 in the same period in 2015 on a 52-week basis

Excluding the payments associated with the Executive Chairman of the Board’s retirement, which negatively impacted 2016 earnings by $0.01 per share, diluted earnings per share of $0.84 was flat compared to adjusted diluted earnings per share in 2015 on a 52-week basis

“The Sprouts team delivered industry leading 15% sales growth for the year and positive same store sales in a year significantly impacted by deflationary pressures,” said Amin Maredia, chief executive officer of Sprouts Farmers Market.  “While the environment remains challenging, we remain confident in our business fundamentals, team and long-term growth opportunities for the brand.”


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 fiscal year 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 fourth quarter and fiscal 2016, such adjustments would be immaterial.  Accordingly, the company has presented net income, earnings per share and EBITDA for the fourth quarter and fiscal 2016 without adjustment and, where applicable, has provided comparisons of such measures to the corresponding adjusted measures from 2015. In addition, the 2015 fourth quarter and full fiscal year contained 14 and 53 weeks, respectively. Period-over-period comparisons stated herein reflect 13 and 52 weeks in the fourth quarter and fiscal year 2016 to 14 and 53 weeks in the fourth quarter and fiscal year 2015, respectively, unless otherwise noted.  A reconciliation is provided in the tables included in this release. Where applicable, results are first presented on a GAAP basis and then on an adjusted basis.

Fourth Quarter 2016 Financial Results

Net sales for the fourth quarter of 2016 were $986 million, a 6% increase compared to the same period in 2015. On a 13-week comparable basis, net sales increased 14%.   Net sales growth was driven by a 0.7% increase in comparable store sales and solid performance in new stores opened.

Gross profit for the quarter increased 4% to $278 million, resulting in a gross profit margin of 28.2%, a decrease of 70 basis points compared to the same period in 2015.  This primarily reflects cycling both the positive impact in 2015 from the 53rd week of approximately 20 basis points and higher margins due to deflation in the prior year without the corresponding promotional environment, as well as higher occupancy costs.

Direct store expenses (“DSE”) for the quarter increased 13% to $211 million, or 21.4% of sales, compared to 20.2% in the same period in 2015. Excluding a pre-tax loss on disposal of assets in the fourth quarter of 2015, DSE as a percentage of sales increased 130 basis points. This primarily reflects deleverage of fixed costs associated with lower comparable store sales growth, higher payroll expense from planned increases in wages and training costs implemented at the beginning of the year and from cycling the positive impact in 2015 from the 53rd week.

Selling, general and administrative expenses (“SG&A”) for the quarter increased 11% to $35 million, or an increase of 20 basis points to 3.6% of sales compared to the same period in 2015. This primarily reflects the payments associated with the Executive Chairman of the Board’s retirement as well as cycling the positive impact in 2015 from the 53rd week, partially offset by lower advertising expense.

Net income for the quarter was $17 million, a decrease of $11 million, as compared to net income and adjusted net income of $28 million from the same period in 2015.  Diluted earnings per share was $0.12, a decrease of $0.06 from diluted and adjusted diluted earnings per share of $0.18 for the same period in 2015 and a decrease of $0.04 from diluted and adjusted diluted earnings per share of $0.16 for the same period of 2015 on a comparable 13-week basis. Excluding the $0.01 effect of the payments associated with the Executive Chairman of the Board’s retirement, diluted earnings per share would have been $0.13 for the fourth quarter of 2016, a decrease of 19% from adjusted diluted earnings per share of $0.16 in the same period in 2015 on a comparable 13-week basis.

Fiscal Year-to-Date Financial Results

For the 52-week fiscal year ended January 1, 2017, net sales were $4.05 billion, a 13% increase compared to 2015.  On a 52-week comparable basis, net sales increased 15%.  Net sales growth was driven by a 2.7% increase in comparable store sales growth and solid performance in new stores opened.  

Gross profit for the year increased 12% to $1.18 billion, resulting in a gross profit margin of 29.2%, a decrease of 10 basis points compared to 2015. This primarily reflects increased occupancy costs, while higher margins due to deflation early in the year were offset by lower margins from price investments in the back half of the year.

DSE for the year increased 17% to $829 million, or 20.5% of sales, compared to 19.7% in 2015.  Excluding the pre-tax loss on disposal of assets in 2015, direct store expenses as a percentage of sales increased 90 basis points. This primarily reflects higher payroll expense from planned increases in wage and training costs implemented at the beginning of the year.

SG&A for the year increased 19% to $127 million, or an increase of 10 basis points to 3.1% of sales, compared to 2015.  This primarily reflects the higher stock compensation costs due to executive changes in 2015, and the payments associated with the Executive Chairman of the Board’s retirement.


Net income for the year was $124 million, down $5 million, as compared to net income of $129 million in 2015.  Excluding the after-tax impact of the loss on extinguishment of debt, loss on disposal of assets, the store closure and exit costs and secondary offering expenses in 2015, net income decreased $10 million, compared to adjusted net income of $135 million in 2015.   Diluted earnings per share was $0.83, flat compared to diluted earnings per share, down $0.03 from adjusted diluted earnings per share of $0.86 and down $0.01 from adjusted diluted earnings per share on a comparable 52-week basis in 2015. Excluding the $0.01 effect of the payments associated with the retirement of the Executive Chairman of the Board, diluted earnings per share would have been $0.84 for 2016, flat from adjusted diluted earnings per share of $0.84 in 2015 on a comparable 52-week basis.

Growth and Development

During the fourth quarter of 2016, we opened 3 new stores: one each in California, Oklahoma and Texas. For fiscal 2016, we opened a total of 36 stores which resulted in unit growth of 17% and a total of 253 stores in 13 states as of January 1, 2017.

Leverage and Liquidity

We generated cash from operations of $254 million in fiscal 2016 and invested $167 million in capital expenditures net of landlord reimbursement, primarily for new stores. In addition, we repurchased 13.2 million shares of common stock for a total investment of $294 million in fiscal 2016 under our $400 million share repurchase authorizations. We ended the year with a $255 million balance on our revolving credit facility, $25 million of letters of credit outstanding under the facility, and $12 million in cash and cash equivalents.  Subsequent to the end of the year and through February 10, 2017, we repurchased an additional 4.1 million shares of common stock for a total investment of $80 million year-to-date, fully utilizing our share repurchase authorizations.

2017 Outlook

The following provides information on our guidance for 2017:

 

 

 

Full-year 2017 Guidance

 

Net sales growth

 

Approximately 12% - 13%

 

Unit growth

 

32 new stores

 

Comparable store sales growth

 

0.0% to 1.0%

 

Diluted earnings per share

 

$0.85 to $0.90 (1)

 

Capital expenditures

 

$155M to $165M

 

(net of landlord reimbursements)

 

 

 

 

 

(1)

Inclusive of an estimated $0.02 per diluted share benefit from the 2017 change in accounting standard related to reporting of the excess tax benefit for stock based compensation.

 

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 52 weeks ended January 1, 2017 and 14 and 53 weeks ended January 3, 2016, as applicable, in the tables included below.

 

Fourth Quarter 2016 Conference Call

We will hold a conference call at 8 a.m. Mountain Standard Time (10 a.m. Eastern Daylight Time) on Thursday, February 23, 2017, during which Sprouts executives will further discuss our fourth quarter and fiscal year 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: 60583547

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: 60583547.

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 2017. 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 255 stores in fourteen 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

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

 

Thirteen

Weeks Ended

January 1,

2017

 

 

Fourteen

Weeks Ended

January 3,

2016

 

 

Fifty-two

Weeks Ended

January 1,

2017

 

 

Fifty-three

Weeks Ended

January 3,

2016

 

Net sales

 

$

985,700

 

 

$

930,303

 

 

$

4,046,385

 

 

$

3,593,031

 

Cost of sales, buying and occupancy

 

 

707,522

 

 

 

661,564

 

 

 

2,864,379

 

 

 

2,541,403

 

Gross profit

 

 

278,178

 

 

 

268,739

 

 

 

1,182,006

 

 

 

1,051,628

 

Direct store expenses

 

 

211,126

 

 

 

187,483

 

 

 

828,943

 

 

 

706,044

 

Selling, general and administrative expenses

 

 

35,447

 

 

 

31,920

 

 

 

126,929

 

 

 

106,412

 

Store pre-opening costs

 

 

1,349

 

 

 

1,511

 

 

 

12,974

 

 

 

8,616

 

Store closure and exit costs

 

 

69

 

 

 

91

 

 

 

228

 

 

 

1,802

 

Income from operations

 

 

30,187

 

 

 

47,734

 

 

 

212,932

 

 

 

228,754

 

Interest expense

 

 

(3,809

)

 

 

(3,733

)

 

 

(14,794

)

 

 

(17,723

)

Other income

 

 

128

 

 

 

98

 

 

 

454

 

 

 

443

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(5,481

)

Income before income taxes

 

 

26,506

 

 

 

44,099

 

 

 

198,592

 

 

 

205,993

 

Income tax provision

 

 

(9,501

)

 

 

(15,883

)

 

 

(74,286

)

 

 

(77,002

)

Net income

 

$

17,005

 

 

$

28,216

 

 

$

124,306

 

 

$

128,991

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

 

$

0.18

 

 

$

0.84

 

 

$

0.84

 

Diluted

 

$

0.12

 

 

$

0.18

 

 

$

0.83

 

 

$

0.83

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

141,638

 

 

 

153,172

 

 

 

147,311

 

 

 

153,099

 

Diluted

 

 

143,950

 

 

 

155,635

 

 

 

149,653

 

 

 

155,877

 

 

 

 


SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

 

 

 

January 1,

2017

 

 

January 3,

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,465

 

 

$

136,069

 

Accounts receivable, net

 

 

25,228

 

 

 

20,424

 

Inventories

 

 

204,464

 

 

 

165,434

 

Prepaid expenses and other current assets

 

 

21,869

 

 

 

23,288

 

Total current assets

 

 

264,026

 

 

 

345,215

 

Property and equipment, net of accumulated depreciation

 

 

604,660

 

 

 

494,067

 

Intangible assets, net of accumulated amortization

 

 

197,608

 

 

 

198,601

 

Goodwill

 

 

368,078

 

 

 

368,078

 

Other assets

 

 

5,521

 

 

 

19,003

 

Deferred income tax asset

 

 

 

 

 

1,400

 

Total assets

 

$

1,439,893

 

 

$

1,426,364

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

157,550

 

 

$

134,480

 

Accrued salaries and benefits

 

 

32,859

 

 

 

30,717

 

Other accrued liabilities

 

 

56,376

 

 

 

50,253

 

Current portion of capital and financing lease obligations

 

 

12,370

 

 

 

14,972

 

Total current liabilities

 

 

259,155

 

 

 

230,422

 

Long-term capital and financing lease obligations

 

 

117,366

 

 

 

115,500

 

Long-term debt

 

 

255,000

 

 

 

160,000

 

Other long-term liabilities

 

 

116,200

 

 

 

97,450

 

Deferred income tax liability

 

 

19,263

 

 

 

 

Total liabilities

 

 

766,984

 

 

 

603,372

 

Commitments and contingencies (Note 19)

 

 

 

 

 

 

 

 

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,

   140,256,313 shares issued and outstanding, January 1, 2017;

   152,577,884 shares issued and outstanding, January 3, 2016

 

 

140

 

 

 

153

 

Additional paid-in capital

 

 

597,269

 

 

 

577,393

 

Retained earnings

 

 

75,500

 

 

 

245,446

 

Total stockholders’ equity

 

 

672,909

 

 

 

822,992

 

Total liabilities and stockholders’ equity

 

$

1,439,893

 

 

$

1,426,364

 

 


SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

Fifty-two Weeks Ended January 1,

2017

 

 

Fifty-three Weeks Ended January 3,

2016

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net income

 

$

124,306

 

 

$

128,991

 

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

80,414

 

 

 

69,169

 

 

Accretion of asset retirement obligation and closed store reserve

 

 

309

 

 

 

344

 

 

Amortization of financing fees and debt issuance costs

 

 

463

 

 

 

742

 

 

Loss on disposal of property and equipment

 

 

439

 

 

 

1,512

 

 

Equity-based compensation

 

 

13,399

 

 

 

8,018

 

 

Loss on extinguishment of debt

 

 

 

 

 

5,481

 

 

Deferred income taxes

 

 

20,663

 

 

 

15,581

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(4,803

)

 

 

(5,622

)

 

Inventories

 

 

(39,030

)

 

 

(22,641

)

 

Prepaid expenses and other current assets

 

 

1,419

 

 

 

(12,042

)

 

Other assets

 

 

13,018

 

 

 

(481

)

 

Accounts payable

 

 

16,015

 

 

 

19,387

 

 

Accrued salaries and benefits

 

 

2,142

 

 

 

1,030

 

 

Other accrued liabilities

 

 

6,103

 

 

 

7,395

 

 

Other long-term liabilities

 

 

19,494

 

 

 

23,034

 

 

Cash flows from operating activities

 

 

254,351

 

 

 

239,898

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(181,018

)

 

 

(125,313

)

 

Proceeds from sale of property and equipment

 

 

706

 

 

 

2,708

 

 

Purchase of leasehold interests

 

 

(491

)

 

 

(5,707

)

 

Cash flows used in investing activities

 

 

(180,803

)

 

 

(128,312

)

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

105,000

 

 

 

260,000

 

 

Payments on revolving credit facility

 

 

(10,000

)

 

 

(100,000

)

 

Payments on term loan

 

 

 

 

 

(261,250

)

 

Payments on capital lease obligations

 

 

(714

)

 

 

(662

)

 

Payments on financing lease obligations

 

 

(3,650

)

 

 

(3,480

)

 

Payments of deferred financing costs

 

 

 

 

 

(1,896

)

 

Cash from landlord related to financing lease obligations

 

 

 

 

 

419

 

 

Excess tax benefit for exercise of stock options

 

 

3,737

 

 

 

20,009

 

 

Proceeds from exercise of stock options

 

 

2,740

 

 

 

6,565

 

 

Repurchase of common stock

 

 

(294,265

)

 

 

(25,735

)

 

Cash flows used in financing activities

 

 

(197,152

)

 

 

(106,030

)

 

(Decrease) / Increase in cash and cash equivalents

 

 

(123,604

)

 

 

5,556

 

 

Cash and cash equivalents at beginning of the period

 

 

136,069

 

 

 

130,513

 

 

Cash and cash equivalents at the end of the period

 

$

12,465

 

 

$

136,069

 

 

 


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 fifty-two weeks ended January 1, 2017, 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 fifty-two weeks ended January 1, 2017 and fourteen and fifty-three weeks ended January 3, 2016:

 

 

 

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NON-GAAP MEASURE RECONCILIATION

(UNAUDITED)

(IN THOUSANDS)

 

 

 

Thirteen

Weeks Ended

January 1,

2017

 

 

Fourteen

Weeks Ended

January 3,

2016

 

 

Fifty-two

Weeks Ended

January 1,

2017

 

 

Fifty-three

Weeks Ended

January 3,

2016

 

Net income

 

$

17,005

 

 

$

28,216

 

 

$

124,306

 

 

$

128,991

 

Income tax provision

 

 

9,501

 

 

 

15,883

 

 

 

74,286

 

 

 

77,002

 

Interest expense, net

 

 

3,808

 

 

 

3,726

 

 

 

14,791

 

 

 

17,707

 

Earnings before interest and taxes (EBIT)

 

 

30,314

 

 

 

47,825

 

 

 

213,383

 

 

 

223,700

 

Depreciation, amortization and accretion

 

 

20,489

 

 

 

18,543

 

 

 

80,723

 

 

 

69,256

 

Earnings before interest, taxes, depreciation and amortization (EBITDA)

 

$

50,803

 

 

$

66,368

 

 

$

294,106

 

 

$

292,956

 

 

 


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 fourteen and fifty-three weeks ended January 3, 2016:

 

 

Thirteen

Weeks Ended

January 1,

2017

 

 

Fourteen

Weeks Ended

January 3,

2016

 

 

Fifty-two

Weeks Ended

January 1,

2017

 

 

Fifty-three

Weeks Ended

January 3,

2016

 

Net income

 

$

17,005

 

 

$

28,216

 

 

$

124,306

 

 

$

128,991

 

Income tax provision

 

 

9,501

 

 

 

15,883

 

 

 

74,286

 

 

 

77,002

 

Net income before income taxes

 

 

26,506

 

 

 

44,099

 

 

 

198,592

 

 

 

205,993

 

Store closure and exit costs (a)

 

 

 

 

 

91

 

 

 

 

 

 

1,802

 

Loss on disposal of assets (b)

 

 

 

 

 

247

 

 

 

 

 

 

1,521

 

Secondary offering expenses (c)

 

 

 

 

 

 

 

 

 

 

 

335

 

Loss on extinguishment of debt (d)

 

 

 

 

 

 

 

 

 

 

 

5,481

 

Adjusted income tax provision (e)

 

 

(9,501

)

 

 

(16,005

)

 

 

(74,286

)

 

 

(80,418

)

Adjusted net income

 

 

17,005

 

 

 

28,432

 

 

 

124,306

 

 

 

134,714

 

Interest expense, net

 

 

3,808

 

 

 

3,726

 

 

 

14,791

 

 

 

17,707

 

Adjusted income tax provision (e)

 

 

9,501

 

 

 

16,005

 

 

 

74,286

 

 

 

80,418

 

Adjusted earnings before interest and taxes (EBIT)

 

 

30,314

 

 

 

48,163

 

 

 

213,383

 

 

 

232,839

 

Depreciation, amortization and accretion

 

 

20,489

 

 

 

18,543

 

 

 

80,723

 

 

 

69,256

 

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

 

$

50,803

 

 

$

66,706

 

 

$

294,106

 

 

$

302,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share—basic

 

$

0.12

 

 

$

0.18

 

 

$

0.84

 

 

$

0.84

 

Per share impact of net income adjustments

 

$

 

 

$

0.01

 

 

$

 

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share—basic

 

$

0.12

 

 

$

0.19

 

 

$

0.84

 

 

$

0.88

 

Net income per share—diluted

 

$

0.12

 

 

$

0.18

 

 

$

0.83

 

 

$

0.83

 

Per share impact of net income adjustments

 

$

 

 

$

(0.00

)

 

$

 

 

$

0.03

 

Adjusted net income per share—diluted

 

$

0.12

 

 

$

0.18

 

 

$

0.83

 

 

$

0.86

 

 

 

(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 represents expenses the company incurred in its secondary public 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.

 

 

 

 


 

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES

NON-GAAP MEASURE RECONCILIATION

(UNAUDITED)

(IN THOUSANDS)

 

 

 

Thirteen

Weeks Ended

January 1,

2017

 

 

Fourteen

Weeks Ended

January 3,

2016

 

 

Fifty-two

Weeks Ended

January 1,

2017

 

 

Fifty-three

Weeks Ended

January 3,

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

985,700

 

 

$

930,303

 

 

$

4,046,385

 

 

$

3,593,031

 

     Less: 53rd week

 

 

 

 

 

(68,077

)

 

 

 

 

 

(68,077

)

Sales adjusted to 13-week quarter and 52-week year

 

$

985,700

 

 

$

862,226

 

 

$

4,046,385

 

 

$

3,524,954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (per table above)

 

$

17,005

 

 

$

28,432

 

 

$

124,306

 

 

$

134,714

 

     Less: 53rd week

 

 

 

 

 

(4,150

)

 

 

 

 

 

(4,150

)

Adjusted net income adjusted to 13-week quarter and 52-week year

 

$

17,005

 

 

$

24,282

 

 

$

124,306

 

 

$

130,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic, as reported

 

$

0.12

 

 

$

0.18

 

 

$

0.84

 

 

$

0.84

 

     Basic, adjusted

 

$

0.12

 

 

$

0.16

 

 

$

0.84

 

 

$

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Diluted, as reported

 

$

0.12

 

 

$

0.18

 

 

$

0.83

 

 

$

0.83

 

     Diluted, adjusted

 

$

0.12

 

 

$

0.16

 

 

$

0.83

 

 

$

0.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

 

141,638

 

 

 

153,172

 

 

 

147,311

 

 

 

153,099

 

     Diluted

 

 

143,950

 

 

 

155,635

 

 

 

149,653

 

 

 

155,877

 

 

 

 

###

Source: Sprouts Farmers Market, Inc.

Phoenix, AZ

2/23/17

 

(Back To Top)