Sprouts Farmers Market 2013 Annual Report Download - page 104
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Table of Contents
Cost of Sales, Buying and Occupancy
Cost of sales includes the cost of inventory sold during the period, including the direct costs of purchased merchandise (net of
discounts and allowances), distribution and supply chain costs, buying costs and supplies. Occupancy costs include store rental,
property taxes, utilities, common area maintenance, amortization of favorable or unfavorable leasehold interests and property
insurance. The Company recognizes vendor allowances and merchandise volume related rebate allowances as a reduction of
inventories during the period when earned and reflects the allowances as a component of cost of sales, buying and occupancy as
the inventory is sold.
Our largest supplier accounted for approximately 23% and 17% of total purchases, expressed as a percentage of our cost of
sales, buying and occupancy expense, during 2013 and 2012, respectively.
Direct Store Expenses
Direct store expenses consist of store-level expenses such as salaries and benefits, related equity-based compensation,
supplies, depreciation and amortization for buildings and store leasehold improvements, equipment and other store specific costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily consist of salaries and benefits costs, related equity-based
compensation, advertising, acquisition-related costs and corporate overhead.
The Company charges third-parties to place advertisements in the Company’s in-store guide and newspaper circulars. The
Company records rebates received from vendors in connection with cooperative advertising programs as a reduction to advertising
costs when the allowance represents a reimbursement of a specific incremental and identifiable cost. Advertising costs are
expensed as incurred. Advertising expense was as follows:
Store Pre-Opening Costs
Store pre-opening costs include rent expense during construction of new stores and costs related to new store openings,
including costs associated with hiring and training personnel and other miscellaneous costs. Store pre-opening costs are expensed
as incurred.
Loss on Extinguishment of Debt
In 2013, the Company recorded a loss on extinguishment of debt totaling $18.2 million primarily related to the write-off of
deferred financing costs and issue discount. These write-offs included $1.0 million related to a partial repayment of our Term Loan,
$9.0 million related to the August 2013 pay down of debt using proceeds from our IPO and $8.2 million related to the April 2013
Refinancing as defined in Note 13. Additionally, loss on extinguishment of debt for 2013 includes $0.5 million related to the renewal
of a financing lease.
99
Year Ended
December 29,
2013
December 30,
2012
January 1,
2012
Advertising expense
$
34,075
$
29,238
$
22,344
Vendor rebates
(12,530
)
(9,905
)
(5,745
)
Advertising expense, net of rebates
$
21,545
$
19,333
$
16,599