Sprouts Farmers Market 2013 Annual Report Download - page 124

Table of Contents
At December 29, 2013 and December 30, 2012 the Company had unrecognized tax benefits of $0.4 million and $0.2 million
(tax effected) that would impact the effective tax rate if recognized.
The Company’s policy is to recognize accrued interest and penalties as a component of income tax expense.
The Company anticipates an increase in the total amount of unrecognized tax benefits during the next twelve months related
to depreciation for transaction cost allocation in the amount of $0.2 million.
The Company files income tax returns with federal and state tax authorities within the United States. The statute of limitations
remains open for federal and state income tax examinations for the tax years 2011 and 2012. The statute of limitations remains
open for Sunflower’s pre-merger federal tax returns for 2010 through 2012 and state tax returns for 2008 through 2012.
19. Related-Party Transactions
Transactions with S&F
Prior to April 18, 2011, transactions between Henry’s and S&F and its wholly owned subsidiaries commonly occurred in the
normal course of business. These transactions included allocation of corporate costs, Henry’s participation in S&F’s centralized
cash management system, self-insurance and share-based compensation plans as described further below.
Corporate Allocations
S&F and its wholly owned subsidiaries provided corporate and other services to Henry’
s in the normal course of business. The
financial statements for 2011 through April 17, 2011 include charges from S&F to Henry’s for corporate expenses relating to these
transactions and services, using the following methodologies:
Direct Costs —costs incurred by S&F and its wholly owned subsidiaries on behalf of Henry’
s were charged directly to the
Company. Direct costs relate to store lease payments, common area maintenance charges, utilities, store design and
construction costs, distribution service charges and other specifically identifiable costs. These specific costs are included
within individual line items in the accompanying consolidated statements of operations.
Allocated Corporate Expenses —corporate overhead costs not specifically charged to Henry’s were generally allocated
based on Henry’s sales, number of stores, case volume shipped or number of employees in relation to totals for S&F.
Allocated corporate costs relate to real estate management, store design and construction, distribution services and general
corporate services. Costs amounting to $2.6 million allocated to Henry’s for the year ended January 1, 2012, are included in
the accompanying consolidated statements of operations. Those costs were previously presented as “allocated corporate
costs”, but have been reclassified to costs of sales, buying and occupancy, direct store expenses and selling, general and
administrative expenses as appropriate for the character of each cost item.
Management believes the allocation methodology described above is a fair and reasonable reflection of the utilization of the
services provided to, or the benefit received by, Henry’
s during the periods presented. The allocations may not, however, reflect the
expense Henry’s would have incurred as an independent company for the periods presented. Actual costs that may have been
incurred if Henry’s had been a stand-alone company would depend on a number of factors, including the chosen organization
structure, what functions were outsourced or performed by employees, and strategic decisions made in the areas such as
information technology and infrastructure.
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