Sprouts Farmers Market 2014 Annual Report Download - page 100
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Additions made during 2014 relate to the closure and relocation of one store and to the closure and
relocation of the Texas warehouse, and usage during 2014 relates to lease payments made during the
period for closed stores. Adjustments made during 2014 include a $0.4 million favorable reserve
adjustment due to a sublease for the Sunflower administrative office and a $1.2 million favorable reserve
adjustment for one store due to settlement with the landlord. Also during 2014, the Company determined
that it should have been recording accretion expense for store closure reserves and made a correcting
entry of $0.9 million to adjust the liability for closed stores to include such accretion for prior periods. The
effect of this error on the Company’s financial statements was not material to any prior period. 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.
18. Income Taxes
In July 2013, in connection with the IPO, the Company converted from a limited liability company to a
C-corporation. During the period from April 17, 2011 until the corporate conversion, the Company had
elected to be taxed as a corporation for income tax purposes.
Income Tax Provision
The income tax provision consists of the following:
Year Ended
December 28,
2014
December 29,
2013
December 30,
2012
U.S. Federal—current .................. $(41,217) $(15,684) $ (309)
U.S. Federal—deferred ................ (17,007) (12,203) (12,687)
U.S. Federal—total .................... (58,224) (27,887) (12,996)
State—current ........................ (7,815) (3,299) (1,105)
State—deferred ....................... (375) (1,555) (1,166)
State—total .......................... (8,190) (4,854) (2,271)
Total provision ........................ $(66,414) $(32,741) $(15,267)
Tax Rate Reconciliation
Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate
to pretax income as a result of the following:
Year Ended
December 28,
2014
December 29,
2013
December 30,
2012
Federal statutory rate .................. 35.00% 35.00% 35.00%
Increase in income taxes resulting from:
State income taxes, net of federal
benefit ......................... 3.78 5.18 5.17
Nondeductible transaction costs ..... — — 3.38
Other, net ........................ (0.63) (1.23) 0.36
Effective tax rate ...................... 38.15% 38.95% 43.91%
The effective income tax rate decreased to 38.15% in 2014 from 38.95% in 2013 as a result of
increased enhanced charitable food contribution deductions for 2014. The effective income tax rate
decreased to 38.95% in 2013 from 43.91% in 2012 as a result of increased tax credits and charitable
contributions for 2013 and the non-deductible transaction costs incurred in 2012 related to the Sunflower
Transaction.
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