Sprouts Farmers Market 2014 Annual Report Download - page 79

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SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Sprouts Farmers Market, Inc., a Delaware corporation is the parent company of Sprouts Farmers
Markets Holdings, LLC (“Intermediate Holdings”) which, through its subsidiaries, operates as a specialty
retailer of natural and organic food, offering a complete shopping experience that includes fresh produce,
bulk foods, vitamins and supplements, grocery, meat and seafood, bakery, dairy, frozen foods, body care
and natural household items catering to consumers’ growing interest in eating and living healthier. As of
December 28, 2014, the Company operated 191 stores in Arizona, California, Colorado, Georgia, Kansas,
New Mexico, Nevada, Oklahoma, Texas and Utah. For convenience, the “Company” is used to refer
collectively to Sprouts Farmers Market, Inc. and, unless the context requires otherwise, its subsidiaries.
The Company’s store operations are conducted by its subsidiaries.
Sunflower Transaction
In May 2012, the Company acquired Sunflower Farmers Markets, Inc., a Delaware corporation (the
“Sunflower Transaction”) that operated 37 Sunflower Farmers Market stores (referred to as “Sunflower”),
which increased the Company’s total store count to 143 and extended the Company’s footprint into New
Mexico, Nevada, Oklahoma and Utah. The Company’s consolidated financial statements include the
financial position, results of operations and cash flows of Sunflower commencing on May 29, 2012.
See Note 4, “Business Combinations,” for additional information about the Sunflower Transaction.
Corporate Conversion
On July 29, 2013, Sprouts Farmers Markets, LLC, a Delaware limited liability company, converted into
Sprouts Farmers Market, Inc., a Delaware corporation (the “Corporate Conversion”). As a result of the
corporate conversion, the members holding interests in Class A and Class B units of Sprouts Farmers
Markets, LLC became holders of common stock of Sprouts Farmers Market, Inc., and options to purchase
Class B units of Sprouts Farmers Markets, LLC were converted to options to purchase shares of common
stock of Sprouts Farmers Market, Inc. The conversion of units and options to purchase units was on an 11
for 1 basis. The Company refers to this transaction as the “Corporate Conversion.” All equity related
disclosures, including share, per share, and option disclosures, have been revised to reflect the effects of
the Corporate Conversion, including the 11 for 1 exchange.
The purpose of the Corporate Conversion was to reorganize the corporate structure so that the top-tier
entity in the corporate structure, the entity that offered common stock to the public in the Company’s initial
public offering, is a corporation rather than a limited liability company and so that the existing investors
would own the Company’s common stock rather than equity interests in a limited liability company.
Initial Public Offering
On August 6, 2013, the Company completed its initial public offering (“IPO”) of 21,275,000 shares of
common stock at a price of $18.00 per share. The Company sold 20,477,215 shares of common stock, and
certain stockholders sold the remaining 797,785 shares. The Company received net proceeds from the
IPO of $344.1 million, after deducting underwriting discounts and offering expenses.
2. Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries in accordance with accounting principles generally accepted in the United States of America
(“GAAP”). All material intercompany accounts and transactions have been eliminated in consolidation.
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