Sprouts Farmers Market, Inc. Reports Third Quarter 2013 Results

Sprouts Farmers Market, Inc. Reports Third Quarter 2013 Results

PHOENIX, Nov. 7, 2013 (GLOBE NEWSWIRE) -- Sprouts Farmers Market, Inc. (the
"Company") (Nasdaq:SFM) today reported results for its 13-week third quarter
ended Sept. 29, 2013.

Third Quarter Highlights:

  *Increased the Company's EPS guidance for 2013
  *Net sales of $633.6 million; a 24% increase from the same period in 2012
  *Pro forma comparable store sales growth of 10.2% and two-year combined pro
    forma comparable store sales growth of 20.2%
  *Diluted earnings per share of $0.08; compared to $0.01 from the same
    period in 2012
  *Adjusted diluted earnings per share of $0.13; compared to $0.06 from the
    same period in 2012
  *Adjusted EBITDA of $52.6 million; a 63% increase from pro forma adjusted
    EBITDA in 2012

"We are pleased to report another strong quarter, evidence of our customers'
desire for fresh, natural and organic food at affordable prices," said Doug
Sanders, president and chief executive officer of Sprouts Farmers Market. "Our
positive first-half momentum continued into the third quarter, with comparable
store sales growth of 10.2%. This gives us confidence in the power of our
model and the ability to increase our guidance for the year. Our new store
pipeline remains strong with more than 55 leases approved for 2014 and beyond,
of which 30 are signed. Based on our robust pipeline, we remain optimistic
about our future growth opportunities and expansion strategy."

In order to aid understanding of 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 adjusted net income,
adjusted diluted earnings per share and adjusted EBITDA, which are non-GAAP
measures that are explained and reconciled to the comparable GAAP measures in
the tables included in this release. In addition, in comparing its results to
the comparable periods of 2012, the Company has presented 2012 financial
results on a pro forma basis as if the May 2012 business combination with
Sunflower Farmers Market, Inc. ("Sunflower Transaction") had occurred on the
first day of the Company's 2012 fiscal year. Unaudited pro forma condensed
consolidated statements of operations for the 13 and 39 weeks ended September
30, 2012, giving effect to the Sunflower Transaction, are included in the
tables to this release.

Third Quarter 2013 Financial Results

Net sales in the third quarter 2013 increased 24% to $633.6 million. Third
quarter net sales growth was driven by an increase in comparable store sales
growth of 10.2% and strong performance in new stores opened.

Gross profit for the quarter increased 30% to $190.1 million resulting in a
margin of 30.0% of sales, or an increase of 130 basis points, compared to
reported and pro forma gross profit in the same period in 2012. The
improvement in gross profit margin was primarily driven by cycling various
promotions and product markdowns related to merchandise alignment made in the
third quarter of 2012 in certain markets during the Sunflower integration, in
addition to leverage in occupancy costs. This leverage was partially offset by
lower margins in produce due to a tight supply of certain items, as compared
to 2012.

Direct store expenses, as a percentage of sales, for the quarter decreased 10
basis points to 20.4% compared to reported and pro forma direct store expenses
in the same period in 2012. This was primarily due to lower non-capitalizable
store development costs partially offset by higher healthcare costs.

Net income for the quarter was $11.5 million, up $10.2 million from the same
period in 2012. Net income in the quarter included a $9.5 million pre-tax loss
on extinguishment of debt; a $3.2 million pre-tax bonus related to the IPO;
and $0.4 million pre-tax loss on disposal of assets. Pro forma net income for
the third quarter of 2012 included certain costs related to the Sunflower
Transaction, including pre-tax acquisition and integration costs of $5.6
million; pre-tax store closure and exit costs of $2.3 million; $0.5 million
pre-tax loss on disposal of assets; and a $1.0 million pre-tax loss on
extinguishment of debt. Excluding these items, adjusted net income increased
160% to $19.5 million compared to pro forma adjusted net income of $7.5
million in the same period in 2012. Adjusted EBITDA totaled $52.6 million, up
$20.4 million, or 63%, from pro forma adjusted EBITDA for the same period in
2012. Adjusted diluted earnings per share was $0.13, a 117% increase from pro
forma adjusted diluted earnings per share from the same period in 2012. This
increase was attributable to strong business performance driven by increased
comparable store sales and resulting operating leverage, performance of new
stores opened, and reduced interest expense, partially offset by an increase
in share count due to shares issued in the IPO.

Fiscal Year-to-Date Financial Results

For the 39-week period ended Sept. 29, 2013, net sales increased 39% to $1.83
billion compared to net sales for the same period of 2012. Growth was driven
by the Sunflower Transaction, increased comparable store sales, as well as new
store openings. Net income was $42.0 million, up $25.8 million from the same
period in 2012, or an increase of 160%. Net sales increased 21% compared to
pro forma net sales for the same period of 2012.Adjusted EBITDA totaled
$157.4 million, up $38.8 million or 33% from pro forma adjusted EBITDA in the
same period of 2012.

Growth and Development

During the third quarter of 2013, the Company opened seven new stores – four
in Texas, two in Arizona and one in Colorado. This brings the Company's 2013
new store openings to 19, representing 13% growth, for a total of 167 stores
in eight states.

Leverage, Liquidity and IPO

The Company generated cash from operations of $142.7 million year-to-date
through Sept. 29, 2013 and invested $74.8 million in capital expenditures,
primarily for new stores. The Company ended the quarter with a principal
balance on its term loan of $360.0 million, had $91.7 million in cash and cash
equivalents and $52.0 million available under its revolving credit facility.

On Aug. 6, 2013, the Company closed its IPO of 21.3 million shares of common
stock. The Company received net proceeds from the IPO of $344.1 million,
after deducting underwriting discounts and offering expenses, and used these
proceeds to pay down $340.0 million of outstanding indebtedness under its term
loan facility.

"With a strong balance sheet, and the continuation of strong operating cash
flows, we are well positioned to achieve our current and future strategic
plans," said Amin Maredia, chief financial officer.

Outlook

The following provides updated information on the Company's current estimated
2013 results:

                                      Full-year 2013       Full-year 2013
                                      Current Outlook      Prior Outlook
Net Sales Growth*                      20% to 21%           19% to 21%
Comparable store sales growth*        9.0% to 9.5%         8.5% to 9.0%
Net Income                            $48M to $50M         $44M to $47M
Adjusted EBITDA                       $188M to $192M       $180M to $185M
Adjusted Net Income                   $63M to $65M         $57M to $60M
Adjusted diluted earnings per share   $0.45 to $0.46       $0.41 to $0.43
Capital expenditures                  $70M to $75M         $70M to $75M
(net of landlord reimbursements)                          
                                                          
* Compared to pro forma fiscal year 2012
The Company's adjusted diluted earnings per share, adjusted net income and
adjusted EBITDA guidance for the year do not include charges and costs which
are expected to be similar to those charges and costs excluded from adjusted
diluted earnings per share, adjusted net income and adjusted EBITDA in prior
quarters. Please see the explanation and reconciliation of these non-GAAP
measures to the comparable GAAP measures for the thirteen and thirty-nine
weeks ended September 29, 2013 in the tables included below.

Third Quarter Conference Call

The Company will hold a conference call at 3 p.m. Mountain Standard Time (5
p.m. Eastern Standard Time) on Thursday, Nov. 7, 2013, during which Sprouts'
executives will further discuss the Company's third quarter 2013 financial
results.

A webcast of the conference call will be available through Sprouts' investor
webpage located at http://investors.sprouts.com. For those participating via
teleconference, the phone number for the call is 1-877-398-9481 (U.S.) or
1-408-337-0130 (international), and the passcode is 74124622.Participants are
encouraged to dial in 10 minutes early.A replay of the event will remain
available for two weeks and can be accessed by dialing 1-855-859-2056
(toll-free) or 1-404-537-3406 (international) and entering the confirmation
code: 74124622. An archive of the webcast will be available for one year at
http://investors.sprouts.com, under "Events and Presentations."

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. Such
forward-looking statements 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 (including, but not limited to, statements to the effect that Sprouts
Farmers Market or its management "anticipates," "plans," "estimates,"
"expects," "believes," or the negative of these terms and other similar
expressions) that are not statements of historical fact should be considered
forward-looking statements, including, without limitation, the Company's
belief that its new store pipeline remains strong; the Company's optimism
about its future growth opportunities and expansion strategy; the Company's
belief that with its improved balance sheet in place and the continuation of
strong operating cash flows, it is well positioned to achieve its current and
future strategic plans; and the Company's updated expectations regarding
estimated fiscal 2013 net sales growth,comparable store sales growth, net
income, adjusted EBITDA, adjusted net income, adjusted diluted earnings per
share, and capital expenditures. 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.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 specialty retailer of natural and organic
foods at great prices. We offer a complete shopping experience that includes
fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat
and seafood, 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 Farmers Market employs
more than 14,000 team members and operates more than 160 stores in eight
states.

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                             
                      Thirteen Weeks Ended        Thirty-Nine Weeks Ended
                      September 29, September 30, September 29, September 30,
                      2013          2012          2013          2012
                                                             
Net sales              $633,614    $510,050    $1,829,675  $1,315,882
Cost of sales, buying  443,509      363,641      1,278,623    921,955
and occupancy
Gross profit           190,105      146,409      551,052      393,927
Direct store expenses  129,418      104,450      367,064      268,279
Selling, general and
administrative         22,807       25,175       60,259       64,846
expenses
Store pre-opening      1,237        1,216        5,254        2,070
costs
Store closure and exit (38)         2,273        1,670        3,552
costs
Income from operations 36,681       13,295       116,805      55,180
Interest expense       (8,790)      (9,951)      (30,346)     (25,414)
Other income           203          133          447          201
Loss on extinguishment (9,507)      (992)        (17,682)     (992)
of debt
Income before income   18,587       2,485        69,224       28,975
taxes
Income tax provision   (7,126)      (1,178)      (27,178)     (12,816)
Net income             $11,461     $1,307      $42,046     $16,159
Net income per share:                                         
Basic                  $0.08       $0.01       $0.32       $0.14
Diluted                $0.08       $0.01       $0.31       $0.14
Weighted average                                              
shares outstanding:
Basic                  139,687      125,794      130,538      116,791
Diluted                144,710      127,820      134,529      118,441

                                                                
SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                                                
                                                   September29, December 30,
                                                   2013          2012
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                           $91,735     $67,211
Accounts receivable, net                            8,962        8,415
Inventories                                         114,765      98,382
Prepaid expenses and other current assets           14,078       4,521
Deferred income tax asset                           9,728        24,592
Total current assets                                239,268      203,121
Property and equipment, net of accumulated          348,177      303,166
depreciation
Intangible assets, net of accumulated amortization  195,790      196,772
Goodwill                                            368,078      368,078
Other assets                                        13,118       9,521
Deferred income tax asset                           17,372       22,578
Total assets                                        $1,181,803  $1,103,236
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                             
Accounts payable                                    $117,430    $82,721
Accrued salaries and benefits                       20,928       21,397
Other accrued liabilities                           26,201       27,561
Current portion of capital and financing lease      2,676        3,379
obligations
Current portion of long-term debt                   5,684        1,788
Total current liabilities                           172,919      136,846
Long-term capital and financing lease obligations   117,632      104,260
Long-term debt                                      346,094      424,756
Other long-term liabilities                         59,524       50,619
Total liabilities                                   696,169      716,481
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, 146,433,944 and125,956,729 shares      146          126
issued and outstanding, September 29, 2013 and
December 30, 2013, respectively
Additional paid-in capital                          460,271      395,480
Retained earnings (accumulated deficit)             25,217       (8,851)
Total stockholders' equity                          485,634      386,755
Total liabilities and stockholders' equity          $1,181,803  $1,103,236

                                                               
SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
                                                               
                                                  Thirty-Nine Weeks Ended
                                                  September 29, September 30,
                                                  2013          2012
Cash flows from operating activities                            
Net income                                         $42,046     $16,159
Adjustments to reconcile net income to net cash                 
provided by operating activities:
Depreciation and amortization expense              34,860       25,788
Accretion of asset retirement obligation           84           212
Amortization of financing fees and debt issuance   2,041        1,876
costs
Loss on disposal of property and equipment         437          2,609
Gain on sale of intangible assets                  (19)         --
Equity-based compensation                          4,285        2,948
Non-cash loss on extinguishment of debt            17,474       992
Deferred income taxes                              23,074       10,790
Changes in operating assets and liabilities:                    
Accounts receivable                                (721)        (2,610)
Inventories                                        (16,383)     1,290
Prepaid expenses and other current assets          (9,752)      3,590
Other assets                                       (3,875)      (5,378)
Accounts payable                                   39,808       6,921
Accrued salaries and benefits                      (469)        5,016
Other accrued liabilities                          39           3,675
Other long-term liabilities                        9,777        8,617
Net cash provided by operating activities          142,706      82,495
                                                               
Cash flows from investing activities                            
Purchases of property and equipment                (74,777)     (28,637)
Proceeds from disposal of property and equipment   2            9,646
Proceeds from sale of intangible assets            172          --
Acquisition, net of cash acquired                  --           (130,174)
Net cash used in investing activities              (74,603)     (149,165)
                                                               
Cash flows from financing activities                            
Borrowings on line of credit                       --           3,000
Payments on line of credit                         --           (3,000)
Borrowings on term loan, net of financing costs    688,127      97,247
Payments on term loan                              (745,100)    (2,575)
Borrowings on Sr. Subordinated Notes               --           35,000
Payments on Sr. Subordinated Notes                 (35,000)     --
Payments on capital lease obligations              (335)        (321)
Payments on financing lease obligations            (2,104)      (1,572)
Payments of deferred financing costs               (1,370)      (401)
Payments of IPO costs                              (4,212)      --
Cash from landlords related to financing lease     4,057        527
obligations
Payment to stockholders and option holders         (295,921)    --
Repurchase of shares                               (113)        --
Proceeds from the issuance of shares               348,392      5,549
Net cash (used in) provided by financing           (43,579)     133,454
activities
Net increase in cash and cash equivalents          24,524       66,784
Cash and cash equivalents at beginning of the      67,211       14,542
period
Cash and cash equivalents at the end of the period $91,735     $81,326

Unaudited Supplemental Pro Forma Condensed Consolidated Financial Information

In May 2012, the Company acquired Sunflower Farmers Market, Inc.
("Sunflower"), which operated 37 Sunflower Farmers Market stores, in a
transaction referred to as the "Sunflower Transaction." The effects of the
Sunflower Transaction have a material effect on the comparability of the
Company's results of operations. The Company has therefore supplemented the
comparative discussion of its results of operations for the thirteen and
thirty-nine weeks ended September 29, 2013 with comparisons to the results for
the thirteen and thirty-nine weeks ended September 30, 2012 on a pro forma
basis giving effect to the Sunflower Transaction as if it had occurred on the
first day of fiscal 2012. Set forth below are unaudited pro forma condensed
consolidated statements of operations for the thirteen and thirty-nine weeks
ended September 30, 2012.

SPROUTS FARMERS MARKET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Thirteen Weeks Ended September 30, 2012
(in thousands, except per share amounts)
                                                              
                Thirteen weeks ended September 30, 2012
                 Historical            Pro Forma       Pro Forma   Pro Forma
                 Sprouts    Historical Adjustment for  Adjustment  for
                Farmers    Sunflower  Sunflower       for         Sunflower
                 Market,    (1)        Fiscal Period   Sunflower   Transaction
                 Inc. (1)              Alignment (2)   Transaction (2)
                                                       (2)
                                                              
Net sales        $510,050 $--      $--           $--       $510,050
Cost of sales,
buying and       363,641   --        --             112        363,753
occupancy
Gross profit     146,409   --        --             (112)      146,297
Direct store     104,450   --        --             (23)       104,427
expenses
Selling, general
and              25,175    --        --             (357)      24,818
administrative
expenses
Store
pre-opening      1,216     --        --             --         1,216
costs
Store closure    2,273     --        --             --         2,273
and exit costs
Income from      13,295    --        --             268        13,563
operations
                                                              
Interest expense (9,951)   --        --             122        (9,829)
Other income     133       --        --             --         133
Loss on
extinguishment   (992)     --        --             --         (992)
of debt
Income before    2,485     --        --             390        2,875
income taxes
Income tax       (1,178)   --        --             (152)      (1,330)
provision
Net income       $1,307   $--      $--           $238      $1,545
Net income per                                                 
share:
Basic            $0.01                                        $0.01
Diluted          $0.01                                        $0.01
Weighted average
shares                                                         
outstanding:
Basic            125,794                                       125,794
Diluted          127,820                                       127,820

                                                             
SPROUTS FARMERS MARKET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Thirty-nine Weeks Ended September 30, 2012
(in thousands, except per share amounts)
                                                             
              Thirty-Nine weeks ended September 30, 2012
               Historical              Pro Forma      Pro Forma   Pro Forma
               Sprouts      Historical Adjustments    Adjustment  for
              Farmers      Sunflower  for Sunflower  for         Sunflower
               Market, Inc. (1)        Fiscal Period  Sunflower   Transaction
               (1)                     Alignment (2)  Transaction (2)
                                                      (2)
                                                             
Net sales      $1,315,882 $197,612 $(1,472)     $--       $1,512,022
Cost of sales,
buying and     921,955     138,880   (1,011)       749        1,060,573
occupancy
Gross profit   393,927     58,732    (461)         (749)      451,449
Direct store   268,279     35,956    (287)         (222)      303,726
expenses
Selling,
general and    64,846      13,386    (90)          (8,033)    70,109
administrative
expenses
Store
pre-opening    2,070       2,450     (14)          --         4,506
costs
Store closure  3,552       59        --            --         3,611
and exit costs
Income from    55,180      6,881     (70)          7,506      69,497
operations
                                                             
Interest       (25,414)    (2,019)   14            (2,933)    (30,352)
expense
Other income   201         88        (1)           --         288
Loss on
extinguishment (992)       --        --            --         (992)
of debt
Income before  28,975      4,950     (57)          4,573      38,441
income taxes
Income tax     (12,816)    (2,796)   14            (1,784)    (17,382)
provision
Net income     $16,159    $2,154   $(43)        $2,789    $21,059
Net income per                                                
share:
Basic          $0.14                                         $0.17
Diluted        $0.14                                         $0.17
Weighted
average shares                                                
outstanding:
Basic          116,791                                        125,363
Diluted        118,441                                        127,013

SPROUTS FARMERS MARKET, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

1. Basis of Presentation and Description of Transactions

Effective May29, 2012, the Company acquired all of the outstanding common and
preferred stock of Sunflower in the Sunflower Transaction, a transaction
accounted for as a business combination, which was financed through the
issuance of debt and 14.9 million shares of common stock.

The historical Sprouts Farmers Market, Inc. results of operations for the
thirteen and thirty-nine weeks ended September 30, 2012 are derived from its
unaudited consolidated financial statements for the periods then ended. The
historical Sunflower results of operations for the period January1, 2012 to
May28, 2012, were derived from the Sunflower pre-combination unaudited
financial statements. Certain amounts from the Sunflower pre-combination
unaudited financial statements have been reclassified to conform to the
Company's presentation.

2. Pro Forma for Sunflower Transaction

The historical results of operations have been adjusted to give pro forma
effect to events that are (i)directly attributable to the Sunflower
Transaction, (ii)factually supportable and (iii)expected to have a
continuing impact on the combined results, as if the Sunflower Transaction
occurred on the first day of fiscal 2012 (referred to as "Pro Forma
Adjustments for Sunflower Transaction"). Below is a description of the types
of adjustments represented in the Sunflower Fiscal Period Alignment and
Sunflower Transaction Adjustments columns.

Sunflower Fiscal Period Alignment - Sunflower's fiscal 2012 commenced one day
earlier than the Company's fiscal 2012. Pro forma adjustments for Sunflower
Fiscal Period Alignment reflect the pro forma impact of deducting one day from
the historical Sunflower results of operations.

Cost of Sales, Buying and Occupancy – Adjustments attributable to the
application of acquisition accounting including straight-line rent adjustments
and adjustments to the amortization of favorable lease intangible assets and
unfavorable lease liabilities.

Direct Store Expenses – Adjustments to historical Sunflower depreciation
related to changes in value and estimated useful lives of property plant and
equipment.

Selling, General and Administrative Expenses – Adjustments related to
Sunflower Transaction fees recorded by both Sprouts and Sunflower, accelerated
share-based compensation recorded by Sunflower, adjustments to depreciation
related to changes in value and estimated useful lives of property, plant and
equipment and amortization of the Sunflower trade name.

Interest Expense – Adjustments related to the reversal of historical Sunflower
interest expense, incremental interest expense related to the proceeds from
additional term loan and senior subordinated notes that were used to
effectuate the transaction and interest related to Sunflower capital and
financing lease obligations.

Income Tax Provision – Adjustment to the income tax provision for the items
listed above.

Net income per share – Net income per share has been adjusted to reflect those
items listed above and the change in weighted average shares outstanding –
basic and diluted as described below.

Weighted average shares outstanding – basic and diluted – The weighted average
shares outstanding basic and diluted have been adjusted for the effect of the
additional shares issued in the Sunflower Transaction.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, the
Company has presented adjusted net income, adjusted diluted earnings per share
and adjusted EBITDA. These measures are not in accordance with, or 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 as well as a
component of incentive compensation. For the thirteen and thirty-nine weeks
ended September 30, 2012, these non-GAAP measures are presented pro forma for
the Sunflower Transaction. See "Unaudited Supplemental Pro Forma Condensed
Consolidated Financial Information." The Company defines adjusted net income
as net income excluding store closure and exit costs, one-time costs
associated with its combination with Henry's Holdings, LLC ("Henry's") and the
Sunflower Transaction (collectively, the "Transactions"), gain and losses from
disposal of assets and the loss of extinguishment of debt. The Company defines
adjusted diluted earnings per share as adjusted net income divided by the
weighted average diluted shares outstanding. The Company defines EBITDA as net
income before interest expense, provision for income tax, and depreciation and
amortization, and defines adjusted EBITDA as EBITDA excluding store closure
and exit costs, one-time costs associated with the Transactions, and losses
from disposal of assets.

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 adjusted and pro forma adjusted
net income , and adjusted and pro forma adjusted EBITDA to net income for the
thirteen and thirty-nine weeks ended September 29, 2013 and pro forma net
income for the thirteen and thirty-nine weeks ended September 30, 2012:

Sprouts Farmers Market, Inc. and Subsidiaries
Non-GAAP Measure Reconciliation
(In thousands)
(Unaudited)
                                                             
                    Thirteen weeks ended          Thirty-nine weeks ended
                    September 29,  September 30,  September 29, September 30,
                    2013           2012           2013          2012
                                    Pro Forma for                Pro Forma for
                    Actual         Sunflower      Actual        Sunflower
                                    Transaction                  Transaction
                                                             
Net income (a)       $11,461      $1,545       $42,046     $21,059
Income tax provision 7,126         1,330         27,178       17,382
Net income before    18,587        2,875         69,224       38,441
income taxes
Store closure and    (38)          2,272         1,670        3,611
exit costs (b)
Costs associated
with acquisitions    --            5,639         (15)         13,010
and integration (c)
Loss on disposal of  382           539           399          1,925
assets (d)
IPO bonus            3,183         --            3,183        --
Loss on
extinguishment of    9,507         992           17,682       992
debt
Adjusted income tax  (12,123)      (4,823)       (36,097)     (23,231)
provision ( e)
Adjusted net income  19,498        7,494         56,046       34,748
Interest expense,    8,785         9,829         30,335       30,352
net
Adjusted income tax  12,123        4,823         36,097       23,231
provision ( e)
Adjusted earnings
before interest and  40,406        22,146        122,478      88,331
taxes (EBIT)
Depreciation,
amortization and     12,235        10,030        34,946       30,279
accretion
Adjusted earnings
before interest,
taxes, depreciation  $52,641      $32,176      $157,424    $118,610
and amortization
(EBITDA)
                                                             
                                                             
Adjusted Net Income                                           
Per Share
                                                             
Net income per share $0.08        $0.01        $0.32       $0.17
- basic
Per share impact of
net income           $0.06        $0.05        $0.11       $0.11
adjustments
Adjusted net income  $0.14        $0.06        $0.43       $0.28
per share - basic
                                                             
Net income per share $0.08        $0.01        $0.31       $0.17
- diluted
Per share impact of
net income           $0.05        $0.05        $0.11       $0.10
adjustments
Adjusted net income  $0.13        $0.06        $0.42       $0.27
per share - diluted
                                                             
(a) See "Unaudited Supplemental Pro Forma Condensed Consolidated Financial
Information" for a reconciliation of pro forma net income to net income for
the thirteen and thirty-nine weeks ended September 30, 2012.
(b) Store closure and exit costs have been excluded from adjusted and pro
forma adjusted EBITDA, and from adjusted and pro forma adjusted net income. In
fiscal 2013 these costs included the costs related to the closure of a former
Sunflower warehouse facility and adjustments to sublease assumptions on other
properties.In fiscal 2012 these consist primarily of the costs to close a
Sunflower administrative facility following the Sunflower Transaction.
(c) Costs associated with acquisitions and integration represent the costs to
integrate the combined businesses resulting from the Sunflower and Henry's
Transactions. These expenses include professional fees and severance, which
the Company excludes from its pro forma adjusted EBITDA and pro forma adjusted
net income to provide period-to-period comparability of the Company's
operating results because management believes these costs do not directly
reflect the ongoing performance of its store operations.The Company does not
expect to incur material expenses associated with integration of the Sunflower
and Henry's Transactions in fiscal 2013.
(d) Gain/Loss on disposal of assets represents the gains and losses recorded
in connection with the disposal of property and equipment.The Company
excludes gains and losses on disposals of assets from its adjusted and pro
forma adjusted EBITDA and adjusted and pro forma adjusted net income to
provide period-to-period comparability of its operating results because
management believes these costs do not directly reflect the ongoing
performance of its store operations. The loss recorded in fiscal 2012
primarily relates to the loss on the sale leaseback of a store property.
(e) Pro forma adjusted and adjusted income tax provision for all periods
presented represents the income tax provision and pro forma income tax
provision plus the tax effect of the adjustments described in notes (b)
through (e) above based on statutory tax rates for the period. For the
thirty-nine weeks ended September 30, 2012, this amount was further adjusted
to reflect a $1.8 million reduction in pro forma income tax provision for the
effects of certain items related to the Sunflower Transaction. Of the
adjustment, $2.2 million relates to the tax effects of $3.3 million and $2.9
million of non-deductible transaction costs incurred by the Company and
Sunflower, respectively, based on statutory tax rates for the period. This
adjustment was partially offset by a $0.4 million adjustment related to tax
benefits from Sunflower stock option exercises. The Company has excluded these
items from its pro forma adjusted income tax provision because management
believes they do not directly reflect the ongoing performance of its store
operations and are not reflective of its ongoing income tax provision.

CONTACT: Investor Contact:
         Susannah Livingston
         (602) 682-1584
         susannahlivingston@sprouts.com
        
         Media Contact:
         Kim Rockley
         (602) 682-3173
         kimrockley@sprouts.com

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