Sprouts Farmers Market 2013 Annual Report Download - page 72

Table of Contents
SPROUTS FARMERS MARKET, INC.
NOTES TO UNAUDITED SUPPLEMENTAL PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
1. Basis of Presentation and Description of Transactions
On April 19, 2011, we completed the Henry’s Transaction, in which we issued debt and 110.0 million of our shares to finance
the merger of Sprouts Arizona and Henry’s in which Henry’s was the accounting acquirer. Effective May 29, 2012, we completed
the Sunflower Transaction, in which we acquired the outstanding common and preferred stock of Sunflower in a transaction
financed through the issuance of debt and 14.9 million of our shares. For further information about the Transactions, which were
accounted for as business combinations, see Note 4 to our audited consolidated financial statements included elsewhere in this
Annual Report on Form 10-K.
The historical Sprouts Farmers Market, Inc. results of operations for fiscal 2011 are derived from our audited consolidated
financial statements included in the November 2013 Prospectus. The historical Sprouts Arizona results of operations for the period
from December 27, 2010 to April 18, 2011, were derived from the Sprouts Arizona pre-combination audited financial statements
included in the November 2013 Prospectus. The historical Sunflower results of operations for fiscal 2011 were derived from the
Sunflower pre-combination audited financial statements included in the November 2013 Prospectus.
The unaudited supplemental pro forma information for fiscal 2011 was prepared in a manner comparable to the requirements
of Article 11 of Regulation S-X, but does not comply with Article 11 in that Rule 11-02(c) of Article 11 does not allow for the
presentation of pro forma condensed statements of operations prior to the most recent year.
Certain amounts from the Sunflower pre-combination audited financial statements have been reclassified to conform to our
presentation.
2. Supplemental Pro Forma Sprouts Farmers Market, Inc.
The historical financial information has been adjusted to give pro forma effect to events that are (i) directly attributable to the
Transactions, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results, as if the Transactions
occurred on the first day of fiscal 2011 (referred to as “Pro Forma Adjustments for the Transactions”).
Sprouts Arizona’s fiscal 2011 commenced five days earlier than our fiscal 2011. Pro forma adjustments for Fiscal Period
Alignment reflect the estimated pro forma impacts to align the starting date of the historical Sprouts Arizona results of operations to
our starting date for fiscal 2011. Additional pro forma adjustments for the Transactions consist of the following:
(a)
Reflects pro forma adjustments attributable to the application of acquisition accounting to the Transactions comprised of
(i) a $2.0 million increase in rent expense, resulting principally from straight-line adjustments to rent expense as a result of the new
basis in the acquired leases as of the acquisition date and (ii) a $0.7 million net decrease in amortization expense related to the fair
value of favorable lease intangible assets and unfavorable lease liabilities recognized in the Transactions. Management has
assumed a weighted average useful life of 12.2 years for favorable and unfavorable leases in arriving at the pro forma amortization
adjustment.
(b)
Reflects pro forma adjustments to historical Sprouts Arizona and Sunflower depreciation related to the fair value of acquired
buildings, leasehold improvements and furniture, fixtures and equipment, which are being amortized and depreciated over their
estimated useful lives on a straight-line basis.
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