Sprouts Farmers Market 2014 Annual Report Download - page 55

Download and view the complete annual report

Please find page 55 of the 2014 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 125

  • 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

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 additional principal payment of $40.0 million.
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.
Interest expense
Interest expense increased to $37.2 million for 2013 from $35.5 million for 2012, primarily as a result
of increased interest expense related to capital and financing leases. These were partially offset by a
reduction in the interest rates related to the April 2013 Refinancing, the August 2013 pay down on the
Term Loan, and the May 2013 payoff of the Senior Subordinated Notes. See Note 13 “Long-Term Debt” to
our audited consolidated financial statements.
Comparing 2013 to pro forma for 2012, interest expense decreased to $37.2 million for 2013 from
$40.3 million 2012, primarily due to the factors noted above.
Income tax provision
Income tax provision increased to $32.7 million for 2013 from $15.3 million for 2012, primarily related
to an increase in income before income taxes. Our effective income tax rate decreased to 38.9% in 2013
from 43.9% in 2012 related to increased tax credits and charitable contributions for 2013 and the non-
deductible transaction costs incurred in 2012 related to the Sunflower Transaction.
Comparing 2013 to pro forma 2012, income tax provision was $32.7 million for 2013 compared to
income tax provision of $19.9 million for 2012, primarily related to an increase in income before income
taxes. Our effective income tax rate decreased to 38.9% in 2013 from 44.8% in 2012 related to increased
tax credits and charitable contributions for 2013 and the non-deductible transaction costs incurred in 2012
related to the Sunflower Transaction.
52