Sprouts Farmers Market 2013 Annual Report Download - page 64

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Table of Contents
(c)
Reflects costs associated with the Sunflower Transaction, which have been excluded from pro forma results due to the
absence of a continuing effect on our business. The costs consist of (i) $3.2 million of transaction expenses we incurred in 2012 in
connection with the Sunflower Transaction, consisting primarily of professional fees, (ii) $3.5 million of transaction expenses,
consisting primarily of professional fees, recorded in Sunflower’s historical pre-combination financial statements, and (iii) $1.1
million of share-based compensation expense associated with a change in control as a result of our acquisition of Sunflower
recorded in Sunflower’s historical pre-combination financial statements. Additionally, the pro forma adjustment includes (i) a $0.3
million decrease to historical Sunflower depreciation related to the fair value of acquired furniture and fixtures used for general and
administrative purposes, which are being depreciated over their estimated useful lives on a straight-line basis and (ii) a $0.1 million
increase to historical amortization expense associated with the Sunflower trade name. Management has assumed weighted
average useful lives of 0.4 years for the acquired furniture and fixtures and 10 years for the Sunflower trade name in arriving at the
pro forma depreciation and amortization amounts.
(d)
In May 2012, we borrowed an additional $100.0 million, net of $0.5 million in financing fees and $2.7 million of issue
discount, under our Former Term Loan and received net proceeds of $35.0 million from the issuance of our 10% Senior
Subordinated Promissory Notes due 2019 (referred to as the “Notes”) to finance the Sunflower Transaction. The pro forma
adjustment represents (i) the incremental interest expense of $4.0 million from our variable rate Former Term Loan and Notes,
including amortization of issue discount and deferred financing fees, based on an interest rate of 6% in effect for the Former Term
Loan and 10% for the Notes, (ii) the reversal of historical Sunflower interest expense of $0.9 million, as the pre-combination
Sunflower debt was paid off in connection with the Sunflower Transaction, and (iii) a decrease in interest of $0.4 million resulting
from the new basis in Sunflower finance and capital lease obligations acquired in the Sunflower Transaction. A one-eighth
percentage change in the interest rate would increase or decrease interest expense by $0.1 million for the year ended
December 30, 2012.
(e)
The pro forma adjustment to income tax (provision) benefit is derived by applying a blended federal and state statutory tax
rate of 39.0% to the above pro forma adjustments.
(f)
Pro forma net income per weighted average basic and diluted shares outstanding reflects the issuance of 14,898,136
shares to finance the Sunflower Transaction, as if the Sunflower Transaction occurred on the first day of fiscal 2012.
Comparison of Fiscal 2012 to Fiscal 2011
Net sales
Net sales increased during fiscal 2012 primarily as a result of (i) stores added through the Sunflower Transaction in fiscal 2012
(net of closures), (ii) incremental sales from stores added through the Henry’s Transaction in fiscal 2011 as a result of operating for
a full year in fiscal 2012, (iii) new store openings and (iv) sales growth at stores operated prior to fiscal 2011.
59
Fiscal 2012
Fiscal 2011
Change
% Change
(dollars in thousands)
Net sales
$
1,794,823
$
1,105,879
$
688,944
62
%
Pro forma net sales
1,990,963
1,722,655
268,308
16
%
Pro forma comparable store sales growth
9.7
%
5.1
%