Sprouts Farmers Market, Inc. Reports Fourth Quarter and Full Year 2013 Results

Sprouts Farmers Market, Inc. Reports Fourth Quarter and Full Year 2013 Results

PHOENIX, Feb. 27, 2014 (GLOBE NEWSWIRE) -- Sprouts Farmers Market, Inc. (the
"Company") (Nasdaq:SFM) today reported results for its 13-week fourth quarter
and 52-week year ended Dec. 29, 2013.

Fourth Quarter 2013 Highlights:

-- Net sales of $608.2 million; a 27% increase from the same period in 2012

  *Pro forma comparable store sales growth of 13.8% and two-year combined pro
    forma comparable store sales growth of 22.4%

-- Net income increased to $9.3 million with diluted earnings per share of
$0.06

-- Adjusted diluted earnings per share of $0.07; compared to $0.04 from the
same period in 2012

-- Adjusted EBITDA of $37.7 million; a 31% increase from pro forma adjusted
EBITDA in 2012

-- $40 million voluntary pay down of term loan

Fiscal Year End 2013 Highlights:

-- Net sales of $2.44 billion; a 36% increase compared to reported net sales
and a 22% increase compared to pro forma net sales in 2012

  *Pro forma comparable store sales growth of 10.7% and two-year combined pro
    forma comparable store sales growth of 20.4%

-- Net income increased to $51.3 million with diluted earnings per share of
$0.37

-- Adjusted net income increased to $67.4 million; compared to $40.0 million
in 2012

-- Adjusted diluted earnings per share of $0.48; compared to $0.31 in 2012

-- Adjusted EBITDA of $195.2 million; a 33% increase from pro forma adjusted
EBITDA in 2012

"Driven by our best-in-class people, products and prices, Sprouts reported its
27^th consecutive quarter of positive same store comps, and an impressive 27%
increase in net sales for the quarter," said Doug Sanders, president and chief
executive officer of Sprouts Farmers Market. "In 2013 we crossed the $2
billion sales milestone with the opening of 19 stores and strong same store
sales growth resulting in an increase of 22% in pro forma net sales and 69%
increase in adjusted pro forma net income. This record performance, in our
first year as a public company, demonstrates Sprouts' ability to create value,
build trust and deliver on our strategy to successfully grow our company."

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 52 weeks ended December
30, 2012, giving effect to the Sunflower Transaction, are included in the
tables to this release. Where applicable, the numbers below are first
presented on a GAAP basis and then on a pro forma, or an adjusted basis.

Fourth Quarter 2013 Financial Results

Net sales in the fourth quarter 2013 increased 27% to $608.2 million. Fourth
quarter net sales growth was driven by a 13.8% increase in comparable store
sales growth and strong performance in new stores opened.

Gross profit for the quarter increased 28% to $174.2 million resulting in a
gross profit margin of 28.6% of sales, or an increase of 10 basis points,
compared to the same period in 2012. The improvement in gross profit margin
was primarily driven by leverage in occupancy costs. This leverage was
partially offset by lower merchandise margins from increased holiday
promotions.

Direct store expenses, as a percentage of sales, for the quarter increased 30
basis points to 21.2%, compared to the same period in 2012. This was primarily
due to higher health care costs.

Net income for the quarter was $9.3 million, up $5.9 million from the same
period in 2012. Net income in the quarter included a $1.0 million pre-tax loss
on extinguishment of debt; $2.0 million of pre-tax secondary offering expenses
including employer taxes on options exercised; and $0.4 million pre-tax store
closure and exit costs. Pro forma net income for the fourth quarter of 2012
included pre-tax acquisition and integration costs related to the Sunflower
Transaction of $4.1 million and pre-tax net credit for store closure and exit
costs of $1.4 million. Excluding these items, adjusted net income increased
119% to $11.4 million, compared to $5.2 million in the same period in 2012.
Adjusted EBITDA totaled $37.7 million, up $9.0 million, or 31%, from the same
period in 2012. Adjusted diluted earnings per share was $0.07, a 75% increase
from adjusted diluted earnings per share of $0.04 from the same period in
2012.

Fiscal Year 2013 Financial Results

For the fiscal year ended Dec. 29, 2013, net sales increased 36% to $2.44
billion. Net sales growth was driven by the Sunflower Transaction, an increase
in comparable store sales growth and new store openings. Net sales increased
22% compared to pro forma sales for 2012, driven by pro forma comparable store
sales growth of 10.7% and strong performance in new stores opened.

Gross profit for the year increased 37% to $725.3 million, resulting in a
margin of 29.7% of sales, or an increase of 20 basis points, from 2012. Gross
profit increased 23% compared to pro forma gross profit in 2012, primarily
driven by the increase in sales. The resulting gross profit margin increased
by 20 basis points and reflected leverage in occupancy, and promotional and
buying costs. These increases were partially offset by lower margins in
produce that were driven by inflation in certain commodity items and lower
margins in the vitamin, supplement and body care departments as a result of
markdowns from merchandise alignment.

Direct store expenses as a percentage of sales for the year decreased by 10
basis points to 20.4%. Direct store expenses included a pre-tax loss on
disposal of assets of $0.4 million in 2013 and $1.4 million in 2012. Excluding
these items, direct store expenses increased 10 basis points as a percentage
of sales, which was relatively consistent with the prior period as we utilized
the leverage in payroll to invest in store level compensation programs and to
fund higher health care costs.

Net income was $51.3 million, up $31.8 million from 2012, or an increase of
163%. Net income for 2013 included a $18.7 million pre-tax loss on
extinguishment of debt; $2.0 million of pre-tax secondary offering expenses;
$3.2 million pre-tax bonus paid concurrently with the Company's IPO; $0.4
million pre-tax loss on disposal of assets and $2.1 million pre-tax store
closure and exit costs. Pro forma net income for 2012 included pre-tax
acquisition and integration costs related to the Sunflower Transaction of
$17.1 million; $2.0 million pre-tax loss of disposal of assets and a pre-tax
store closure and exit costs of $2.2 million. Excluding these items, adjusted
net income increased 69% to $67.4 million compared to $40.0 million in 2012.
Adjusted EBITDA totaled $195.2 million, up $47.9 million or 33% from 2012.
Adjusted diluted earnings per share was $0.48, a 55% increase from adjusted
diluted earnings per share of $0.31 in 2012. This increase was attributable to
strong business performance driven by increased comparable store sales and
resulting operating leverage, strong performance of new stores opened, and
reduced interest expense, partially offset by an increase in share count due
to shares issued in the IPO.

Growth and Development

In fiscal 2013, the Company opened 19 new stores – six in Texas, five in
California, three in both Arizona and Colorado, and two in Oklahoma. This
represented unit growth of 13%, for a total of 167 stores in eight states.

Leverage, Liquidity and IPO

The Company generated cash from operations of $160.6 million for the fiscal
year 2013 and invested $87.5 million in capital expenditures, primarily for
new stores. The Company ended the year with a principal balance on its term
loan of $318.3 million, had $77.7 million in cash and cash equivalents and
$52.6 million available under its revolving credit facility. The Company
voluntarily paid down an additional $40.0 million dollars of outstanding debt
under its term loan during the fourth quarter of 2013.

2014 Outlook

The following provides information on the Company's guidance for 2014:

                                                  Q1 2014
                                                  Guidance
Comparable store sales growth                      10.5% to 11.5%
                                                  
                                                  Full-year 2014
                                                  Guidance
Net sales growth                                   16% to 18%
Unit growth                                        22 to 24 new stores
Comparable store sales growth                     7% to 8%
Adjusted EBITDA growth                             17% to 20%
Adjusted net income growth                         30% plus
Adjusted diluted earnings per share ^(1)           $0.58 to $0.60
Capital expenditures (net of landlord              $110M to $120M
reimbursements)
                                                  
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
periods. Please see the explanation and reconciliation of these non-GAAP
measures to the comparable GAAP measures for the thirteen and fifty-two weeks
ended December 29, 2013 and December 20, 2012 in the tables included below.
                                                  
^(1)^ Based on a weighted average share count of approximately 154 million
shares for 2014, compared to a weighted average share count of 140 million
shares for 2013.

Fourth Quarter & Fiscal 2013 Conference Call

The Company will hold a conference call at 3 p.m. Mountain Standard Time (5
p.m. Eastern Standard Time) on Thursday, Feb. 27, 2014, during which Sprouts'
executives will further discuss the Company's fourth quarter and full year
fiscal 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 56276311.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: 56276311. 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 record performance demonstrates its ability to create value,
build trust and deliver on its strategy to successfully grow the Company and
the Company's outlook for 2014. 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 170 stores in nine states.

SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                              
                          Thirteen Weeks Ended      Fifty-Two Weeks Ended
                          December 29, December 30, December 29, December 30,
                           2013         2012         2013         2012
                                                              
Net sales                  $608,236   $478,941   $2,437,911 $1,794,823
Cost of sales, buying and  434,021     342,559     1,712,644   1,264,514
occupancy
Gross profit               174,215     136,382     725,267     530,309
Direct store expenses      129,119     100,044     496,183     368,323
Selling, general and       21,536      21,518      81,795      86,364
administrative expenses
Store pre-opening costs    480         712         5,734       2,782
Store closure and exit     381         (1,397)     2,051       2,155
costs
Income from operations     22,699      15,505      139,504     70,685
                                                              
Interest expense           (6,857)     (10,074)    (37,203)    (35,488)
Other income               40          361         487         562
Loss on extinguishment of  (1,039)     --          (18,721)    (992)
debt
Income before income taxes 14,843      5,792       84,067      34,767
Income tax provision       (5,563)     (2,451)     (32,741)    (15,267)
Net income                 $9,280     $3,341     $51,326    $19,500
Net income per share:                                          
Basic                      $0.06      $0.03      $0.38      $0.16
Diluted                    $0.06      $0.03      $0.37      $0.16
Weighted average shares                                        
outstanding:
Basic                      146,876     125,957     134,622     119,427
Diluted                    152,974     128,958     139,765     121,781


SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                                           
                                          December 29, 2013 December 30, 2012
ASSETS                                                      
Current assets:                                             
Cash and cash equivalents                  $77,652         $67,211
Accounts receivable, net                   9,524            8,415
Inventories                                118,256          98,382
Prepaid expenses and other current assets  8,049            4,521
Deferred income tax asset                  18,146           24,592
Total current assets                       231,627          203,121
Property and equipment, net of accumulated 348,830          303,166
depreciation
Intangible assets, net of accumulated      195,467          196,772
amortization
Goodwill                                   368,078          368,078
Other assets                               13,135           9,521
Deferred income tax asset                  15,267           22,578
Total assets                               $1,172,404      $1,103,236
                                                           
LIABILITIES AND STOCKHOLDERS' EQUITY                        
Accounts payable                           $111,159        $82,721
Accrued salaries and benefits              22,287           21,397
Other accrued liabilities                  32,958           27,561
Current portion of capital and financing   3,395            3,379
lease obligations
Current portion of long-term debt          5,822            1,788
Total current liabilities                  175,621          136,846
Long-term capital and financing lease      116,177          104,260
obligations
Long-term debt                             305,418          424,756
Other long-term liabilities                61,417           50,619
Total liabilities                          658,633          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, 147,616,560
shares issued and outstanding, December    147              126
29, 2013; 125,956,721 shares issued and
outstanding, December 30, 2012
Additional paid-in capital                 479,127          395,480
Retained earnings (accumulated deficit)    34,497           (8,851)
Total stockholders' equity                 513,771          386,755
Total liabilities and stockholders' equity $1,172,404      $1,103,236


SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                                                
                                                    Year Ended
                                                    December 29, December 30,
                                                     2013         2012
Cash flows from operating activities                             
Net income                                           $51,326    $19,500
Adjustments to reconcile net income to net cash                  
provided by operating activities:
Depreciation and amortization expense                47,217      35,773
Accretion of asset retirement obligation             322         237
Amortization of financing fees and debt issuance     2,482       2,590
costs
Loss on disposal of property and equipment           449         2,704
Gain on sale of intangible assets                    (19)        (134)
Equity-based compensation                            5,780       4,653
Non-cash loss on extinguishment of debt              18,513      992
Excess tax benefit from exercise of stock options    (17,826)    (143)
and antidilution payment to optionholders
Deferred income taxes                                25,176      13,996
Changes in operating assets and liabilities, net of              
effects from acquisitions:
Accounts receivable                                  (1,521)     (2,861)
Inventories                                          (19,875)    (1,442)
Prepaid expenses and other current assets            2,643       3,337
Other assets                                         (4,114)     (4,586)
Accounts payable                                     31,996      (4,673)
Accrued salaries and benefits                        890         2,956
Other accrued liabilities                            5,397       1,533
Other long-term liabilities                          11,752      9,999
Net cash provided by operating activities            160,588     84,431
                                                                
Cash flows from investing activities                             
Purchases of property and equipment                  (87,463)    (46,485)
Proceeds from disposal of property and equipment     1,000       9,657
Proceeds from sale of intangible assets              172         --
Payments for business combinations, net of cash      --          (129,875)
acquired
Net cash used in investing activities                (86,291)    (166,703)
                                                                
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                                (786,850)   (2,575)
Borrowings on Sr. Subordinated Notes                 --          35,000
Payments on Sr. Subordinated Notes                   (35,000)    --
Payments on capital lease obligations                (412)       (439)
Payments on financing lease obligations              (2,868)     (2,377)
Payments of deferred financing costs                 (1,370)     (401)
Payments of IPO costs                                (4,212)     --
Cash from landlords related to financing lease       4,581       2,942
obligations
Payment to stockholders and optionholders            (295,921)   --
Excess tax benefit for exercise of stock options and 17,826      143
antidilution payment to optionholders
Proceeds from the issuance of shares                 348,536     --
Proceeds from the exercise of stock options          3,820       5,549
Repurchase of shares                                 (113)       (148)
Net cash (used in) provided by financing activities  (63,856)    134,941
Net increase in cash and cash equivalents            10,441      52,669
Cash and cash equivalents at beginning of the period 67,211      14,542
Cash and cash equivalents at the end of the period   $77,652    $67,211

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
fifty-two weeks ended December 29, 2013 with comparisons to the results for
the thirteen and fifty-two weeks ended December 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 fifty-two weeks
ended December 30, 2012.

SPROUTS FARMERS MARKET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
                                                              
                   Thirteen weeks ended December 30, 2012
                                           Pro Forma
                                           Adjustment
                    Historical             for         Pro Forma
                   Sprouts                Sunflower   Adjustment  Pro Forma
                    Farmers                Fiscal      for         for
                    Market,     Historical Period      Sunflower   Sunflower
                    Inc.        Sunflower  Alignment   Transaction Transaction
                                                              
Net sales           $478,941  $--      $--       $--       $478,941
Cost of sales,
buying and          342,559    --        --         26         342,585
occupancy
Gross profit        136,382    --        --         (26)       136,356
Direct store        100,044    --        --         (39)       100,005
expenses
Selling, general
and administrative  21,518     --        --         (16)       21,502
expenses
Store pre-opening   712        --        --         --         712
costs
Store closure and   (1,397)    --        --         --         (1,397)
exit costs
Income from         15,505     --        --         29         15,534
operations
                                                              
Interest expense    (10,074)   --        --         176        (9,898)
Other income        361        --        --         --         361
Loss on
extinguishment of   --         --        --         --         --
debt
Income before       5,792      --        --         205        5,997
income taxes
Income tax          (2,451)    --        --         (79)       (2,530)
provision
Net income          $3,341    $--      $--       $126      $3,467
Net income per                                                 
share:
Basic               $0.03                                     $0.03
Diluted             $0.03                                     $0.03
Weighted average                                               
shares outstanding:
Basic               125,957                                    125,957
Diluted             128,958                                    128,958


SPROUTS FARMERS MARKET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Fifty-two Weeks Ended December 30, 2012
(in thousands, except per share amounts)
                                                             
                Fifty-two weeks ended December 30, 2012
                                         Pro Forma
                                         Adjustments
                                         for          Pro Forma
                Historical              Sunflower    Adjustment  Pro Forma
                 Sprouts                 Fiscal       for         for
                 Farmers      Historical Period       Sunflower   Sunflower
                 Market, Inc. Sunflower  Alignment    Transaction Transaction
                                                             
Net sales        $1,794,823 $197,612 $(1,472)   $--       $1,990,963
Cost of sales,
buying and       1,264,514   138,880   (1,011)     775        1,403,158
occupancy
Gross profit     530,309     58,732    (461)       (775)      587,805
Direct store     368,323     35,956    (287)       (261)      403,731
expenses
Selling, general
and              86,364      13,386    (90)        (8,049)    91,611
administrative
expenses
Store
pre-opening      2,782       2,450     (14)        --         5,218
costs
Store closure    2,155       59        --          --         2,214
and exit costs
Income from      70,685      6,881     (70)        7,535      85,031
operations
                                                             
Interest expense (35,488)    (2,019)   14          (2,757)    (40,250)
Other income     562         88        (1)         --         649
Loss on
extinguishment   (992)       --        --          --         (992)
of debt
Income before    34,767      4,950     (57)        4,778      44,438
income taxes
Income tax       (15,267)    (2,796)   14          (1,863)    (19,912)
provision
Net income       $19,500    $2,154   $(43)      $2,915    $24,526
Net income per                                                
share:
Basic            $0.16                                       $0.20
Diluted          $0.16                                       $0.19
Weighted average
shares                                                        
outstanding:
Basic            119,427                                      125,510
Diluted          121,781                                      127,864

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 fifty-two weeks ended December 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, 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. For the thirteen and fifty-two
weeks ended December 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 fifty-two weeks ended December 29, 2013 and pro forma net income
for the thirteen and fifty-two weeks ended December 30, 2012:

                  Thirteen Weeks Ended     Fifty-Two Weeks Ended
                   December   December 30,  December 29, December 30,
                  29,        2012          2013         2012
                   2013
                              Pro Forma for              Pro Forma for
                             Sunflower                  Sunflower
                   Actual     Transaction   Actual       Transaction
                                                     
Net income (a)     $9,280   $3,467      $51,326    $24,526
Income tax         5,563     2,530        32,741      19,912
provision
Net income before  14,843    5,997        84,067      44,438
income taxes
Store closure and  381       (1,397)      2,051       2,214
exit costs (b)
Costs associated
with acquisitions  --        4,110        (15)        17,120
and integration
(c)
Loss on disposal   13        28           412         1,953
of assets (d)
IPO bonus (e)      --        --           3,183       --
Secondary offering
expenses including
employment taxes   2,014     --           2,014       --
on options
exercises (f)
Loss on
extinguishment of  1,039     --           18,721      992
debt
Adjusted income    (6,855)   (3,490)      (43,010)    (26,721)
tax provision (g)
Adjusted net       11,435    5,248        67,423      39,996
income
Interest expense,  6,851     9,898        37,185      40,250
net
Adjusted income    6,855     3,490        43,010      26,721
tax provision (g)
Adjusted earnings
before interest    25,141    18,636       147,618     106,967
and taxes (EBIT)
Depreciation,
amortization and   12,593    10,094       47,539      40,373
accretion
Adjusted earnings
before interest,
taxes,             $37,734  $28,730     $195,157   $147,340
depreciation and
amortization
(EBITDA)
                                                     
Adjusted Net                                          
Income Per Share
                                                     
Net income per     $0.06    $0.03       $0.38      $0.20
share - basic
Per share impact
of net income      $0.02    $0.01       $0.12      $0.12
adjustments
Adjusted net
income per share - $0.08    $0.04       $0.50      $0.32
basic
                                                     
Net income per     $0.06    $0.03       $0.37      $0.19
share - diluted
Per share impact
of net income      $0.01    $0.01       $0.11      $0.12
adjustments
Adjusted net
income per share - $0.07    $0.04       $0.48      $0.31
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 fifty-two weeks ended December 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 and one store location
and in the thirteen weeks ended December 30, 2012 included a benefit
from a landlord's voluntary release of a lease obligation for a
previously closed location.
(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.
(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) IPO bonus represents the bonuses paid to certain employees in
connection with the Company's initial public offering. The Company
excludes the IPO bonus 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.
(f) Secondary offering expenses including employment taxes on options
exercises represents expenses the Company incurred in its second
public offering and employment taxes paid by the Company in connection
with options exercised in that offering. The Company has excluded
these items 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 performance of its store
operations.
(g) 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 fifty-two weeks ended December 30, 2012, this amount
was further adjusted to reflect a $1.9 million reduction in pro forma
income tax provision for the effects of certain items related to the
Sunflower Transaction. Of the adjustment, $2.3 million relates to the
tax effects of $3.3 million and $2.9million 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:
         Donna Egan
         (602) 682-3152
         donnaegan@sprouts.com

Sprouts Farmers Market Logo
 
Press spacebar to pause and continue. Press esc to stop.