Sprouts Farmers Market 2013 Annual Report Download - page 79

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Table of Contents
The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally
binding. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.
We periodically make other commitments and become subject to other contractual obligations that we believe to be routine in
nature and incidental to the operation of the business. Management believes that such routine commitments and contractual
obligations do not have a material impact on our business, financial condition or results of operations.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financing activities, nor do we have any interest in entities referred to as variable
interest entities.
Impact of Inflation
Inflation and deflation in the prices of food and other products we sell may periodically affect our sales, gross profit and gross
margin. The short-
term impact of inflation and deflation is largely dependent on whether or not the effects are passed through to our
customers, which is subject to competitive market conditions. In the first half of fiscal 2012, we experienced produce price deflation,
which contributed to higher gross margins in our business during that period and the full fiscal year.
Food inflation and deflation is affected by a variety of factors and our determination of whether to pass on the effects of
inflation or deflation to our customers is made in conjunction with our overall pricing and marketing strategies. Although we may
experience periodic effects on sales, gross profit and gross margins as a result of changing prices, we do not expect the effect of
inflation or deflation to have a material impact on our ability to execute our long-term business strategy.
Seasonality
Our business is subject to modest seasonality. Our average weekly sales fluctuate throughout the year and are typically
highest in the first half of the fiscal year. Produce, which contributed approximately 26% of our net sales for 2013, is generally more
available in the first six months of our fiscal year due to the timing of peak growing seasons.
74
estimated LIBOR based on LIBOR in effect at December 29, 2013 to derive the contractual interest rate expected to apply to our Term Loan.
(3) Represents estimated payments for capital and financing and operating lease obligations as of December 29, 2013. Capital and financing lease
obligations and operating lease obligations are presented gross without offset for subtenant rentals. We have subtenant agreements under which we
will receive $0.5 million for the period of less than one year, $1.0 million for years one to three, $2.0 million for years four to five, and $4.0 million for
the period beyond five years.
(4)
Consists primarily of open purchase orders and commitments under noncancelable service contracts as of December 29, 2013.
(5)
As of December 29, 2013, the Company had recorded $23.1 million of liabilities related to its self
-insurance program. Self-insurance liabilities are not
included in the table above because the payments are not contractual in nature and the timing of the payments is uncertain.