Sprouts Farmers Market 2015 Annual Report Download - page 27

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19
could cause our earnings to decrease. If we are unable to hire and retain team members capable of
meeting our business needs and expectations, our business and brand image may be impaired. Any
failure to meet our staffing needs or any material increase in turnover rates of our team members or team
member wages may adversely affect our business, results of operations or financial condition.
Union attempts to organize our team members could negatively affect our business.
None of our team members are currently subject to a collective bargaining agreement. As we
continue to grow and enter different regions, unions may attempt to organize all or part of our team
member base at certain stores or within certain regions. Responding to such organization attempts may
distract management and team members and may have a negative financial impact on individual stores,
or on our business as a whole.
Our lease obligations could adversely affect our financial performance and may require us to
continue paying rent for store locations that we no longer operate.
We are subject to risks associated with our current and future store, distribution center and
administrative office real estate leases. Our high level of fixed lease obligations will require us to use a
portion of cash generated by our operations to satisfy these obligations, and could adversely impact our
ability to obtain future financing, if required, to support our growth or other operational investments. We
will require substantial cash flows from operations to make our payments under our operating leases, all
of which provide for periodic increases in rent. If we are not able to make the required payments under
the leases, the lenders or owners of the relevant stores, distribution centers or administrative offices may,
among other things, repossess those assets, which could adversely affect our ability to conduct our
operations. In addition, our failure to make payments under our operating leases could trigger defaults
under other leases or under agreements governing our indebtedness, which could cause the
counterparties under those agreements to accelerate the obligations due thereunder.
Further, we generally cannot cancel our leases, so if we decide to close or relocate a location, we
may nonetheless be committed to perform our obligations under the applicable lease, including paying
the base rent for the remaining lease term. In addition, as our leases expire, we may fail to negotiate
renewals, either on commercially acceptable terms or any terms at all, which could materially adversely
affect our business, results of operations or financial condition.
Claims under our insurance plans may differ from our estimates, which could materially impact
our results of operations.
We use a combination of insurance and self-insurance plans to provide for the potential liabilities for
workers’ compensation, general liability (including, in connection with legal proceedings described under
“—Legal proceedings could materially impact our business, financial condition and results of operations”
below), property insurance, director and officers’ liability insurance, vehicle liability and team member
health-care benefits. Liabilities associated with the risks that are retained by us are estimated, in part, by
considering historical claims experience, demographic factors, severity factors and other actuarial
assumptions. Our results could be materially impacted by claims and other expenses related to such
plans if future occurrences and claims differ from these assumptions and historical trends.
We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which
could adversely impact our business.
As of January 3, 2016, we had outstanding indebtedness of $160.0 million under our credit
agreement (referred to as the “Credit Facility”). We may incur additional indebtedness in the future,
including borrowings under our Credit Facility. Our indebtedness, or any additional indebtedness we may
incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity
position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to