Sprouts Farmers Market 2013 Annual Report Download - page 59

Download and view the complete annual report

Please find page 59 of the 2013 Sprouts Farmers Market annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

Table of Contents
These items were offset by the items discussed in the paragraph above. Selling, general and administrative expenses decreased
as a percentage of net sales during 2013 due to improved leverage of payroll and store advertising costs and the decrease in
acquisition and integration costs described above.
Store pre-opening costs
Store pre-opening costs increased to $5.7 million for 2013 from $2.8 million for 2012. Store pre-opening costs in 2013
primarily include pre-
opening costs related to the 19 stores opened during that period and $0.5 million of expenses related to stores
opening in early 2014. Store pre-opening costs for 2012 include pre-opening costs related to nine stores opened during that time
period and $0.8 million for stores opened in 2013. Of those nine stores, two were stores acquired in the Sunflower Transaction,
where a portion of the related pre
-opening costs are reflected in the Sunflower pre-acquisition financial statements (and
accordingly, in the pro forma pre-opening costs discussed below). The increase in store pre-opening costs in 2013 is due to the
increased number of stores opened, increases related to opening stores in new markets which require additional pre-opening
advertising, travel and team member training expenses, and certain pre-
opening costs for stores opened in 2012 that were incurred
in the Sunflower pre-acquisition financial statements. See pro forma pre-opening cost discussion below.
Store pre-opening costs increased to $5.7 million during 2013 compared to $5.2 million during pro forma 2012. Store pre-
opening costs for 2013 are described above. Pro forma store pre-opening costs for 2012 include store pre-opening costs incurred
by both us and Sunflower for the nine stores opened during that period. Seven stores were opened by us and two stores were
opened by Sunflower prior to the Sunflower Transaction. Pre-opening costs recorded by Sunflower reflect higher store pre-opening
rent incurred by Sunflower prior to the Sunflower Transaction due to early commencement dates for pre-combination leases. The
increase in store pre-opening costs in 2013 is due to an increased number of store openings and increases related to opening
stores in new markets as described above, offset by the impact of higher pre-opening costs incurred by Sunflower as described
above.
Store closure and exit costs
Store closure and exit costs decreased to $2.1 million for 2013 from $2.2 million for 2012. Store closure and exit costs for
2013 include charges related to the closure of a former Sunflower warehouse, and adjustments to sublease estimates for stores
and facilities already closed. Store closure and exit costs for 2012 include charges related to the closure of a former Sunflower
administrative facility and one store offset by a $2.0 million favorable adjustment to our store closure reserve resulting from
sublease rents in excess of original estimates and a $1.3 million favorable adjustment resulting from a lessor’
s voluntary termination
of a lease obligation previously reserved.
Comparing 2013 to pro forma 2012, store closure and exit costs decreased to $2.1 million for 2013 from $2.2 million for 2012,
primarily due to the factors noted above.
Loss on extinguishment of debt
In 2013, we recorded a loss on extinguishment of debt totaling $18.7 million primarily related to the write-off of deferred
financing costs and issue discount. These write-offs included $9.0 million related to the August 2013 pay down of debt using
proceeds from our IPO, $8.2 million related to the April 2013 Refinancing and $1.0 million related to the December 2013 $40.0
million additional principal payment. Additionally, loss on extinguishment of debt includes $0.5 million related to the renewal of a
financing lease.
We recorded a $1.0 million loss on extinguishment of debt related to the renewal of a financing lease during 2012.
54