UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 8-K

 

CURRENT REPORT
P
ursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of report  (Date of earliest event reported)  November 16, 2016

 

SMART & FINAL STORES, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

001-36626

 

80-0862253

(State or Other Jurisdiction
of Incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

600 Citadel Drive, Commerce, CA

 

90040

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (323) 869-7500

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02                                           Results of Operations and Financial Condition.

 

On November 16, 2016, Smart & Final Stores, Inc. issued a press release announcing its (a) financial results for the quarter ended October 9, 2016 and (b) revised 2016 fiscal year guidance.  The text of the press release is included as Exhibit 99.1 to this Form 8-K.

 

The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

 

Item 9.01.                                        Financial Statements and Exhibits.

 

(d)                                                                                 Exhibits:

 

Exhibit Number

 

Description

 

 

 

99.1

 

Press Release, dated November 16, 2016

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

SMART & FINAL STORES, INC.

 

 

 

Date: November 16, 2016

 

 

 

 

 

 

By:

/s/ Richard N. Phegley

 

Name:

Richard N. Phegley

 

Title:

Senior Vice President and Chief Financial Officer

 

3



 

Exhibit Index

 

Exhibit Number

 

Description

99.1

 

Press Release, dated November 16, 2016

 

4


Exhibit 99.1

 

 

Smart & Final Stores, Inc. Reports Third Quarter 2016 Financial Results

 

COMMERCE, Calif. (November 16, 2016) —Smart & Final Stores, Inc. (the “Company”) (NYSE:SFS), the value-oriented food and everyday staples retailer, today reported financial results for the third fiscal quarter ended October 9, 2016.

 

Third Quarter Highlights:

 

·                  Net sales increase of 11.9% to $1,394.4 million

·                  Comparable store sales decrease of 1.3%, including impacts of deflation and cannibalization

·                  Net income of $7.0 million, or $0.09 per diluted share

·                  Adjusted net income of $15.0 million, or $0.19 per diluted share

·                  Adjusted EBITDA of $57.2 million

 

“Smart & Final Stores continues to execute our planned growth by expanding both Smart & Final Extra! and Cash & Carry banners,” said David Hirz, President and Chief Executive Officer. “Year-to-date, we’ve opened 33 new Smart & Final Extra! and Cash & Carry banner stores and relocated six Smart & Final legacy to new Extra! store locations. With four additional new stores and six legacy-to-Extra! store conversions planned in the fourth quarter, we are on track to deliver by year-end 15% annual new unit growth in the Smart & Final banner, and above historical average growth in the Cash & Carry banner.  We continue to build upon our differentiated brand message and support growth in our two strong, well-positioned store banners.”

 

Mr. Hirz added, “In the third fiscal quarter, the effects of deflation and anticipated cannibalization continued to pressure comparable store sales growth and earnings, despite overall growth in customer visits.  We are pleased that our merchandising and marketing initiatives are driving broader exposure to Smart & Final’s unique brands, products and service.  We will continue to focus on developing product categories with strong potential sales growth and a robust marketing program and digital campaign to support store performance during the upcoming holiday season.”

 

In order to aid understanding of the Company’s business performance, it has presented results in conformity with accounting principles generally accepted in the United States (“GAAP”) and has also presented adjusted net income, adjusted net income per share, adjusted net income per diluted share, EBITDA and adjusted EBITDA, which are non-GAAP measures that are explained and reconciled to the comparable GAAP measures in the tables included in this release. Where applicable, the numbers below are first presented on a GAAP basis and then on an adjusted basis.

 

Third Quarter Fiscal 2016 Financial Results

 

Net sales were $1,394.4 million, representing an 11.9% increase as compared to $1,246.1 million in the same period of 2015.  Net sales growth was driven by the net sales contribution of new stores, partially offset by a 1.3% decrease in comparable store sales. Comparable store sales were comprised of a 0.3% increase in comparable transaction count, including the effect of anticipated cannibalization from new stores, and a 1.6% decrease in comparable average transaction size, including the impact of deflation in key product categories in both store banners.

 

1



 

Net sales for Smart & Final banner stores were $1,083.4 million, a 15.2% increase as compared to $940.2 million in the same period of 2015.  Comparable store sales for the Smart & Final banner decreased 1.6% in the third quarter.

 

Net sales for Cash & Carry banner stores were $311.0 million, a 1.7% increase as compared to $305.9 million in the same period of 2015.  Comparable store sales for the Cash & Carry banner decreased 0.4% in the third quarter.

 

Gross margin from operations was $203.0 million, an 8.4% increase as compared to $187.2 million in the third quarter of 2015. Gross margin rate was 14.6% as compared to 15.0% in the same period of 2015.

 

Operating and administrative expenses were $183.4 million, a 16.8% increase as compared to $157.0 million in the same period of 2015. This increase was primarily related to expenses associated with 39 new stores developed over the prior 12 months and related support costs.

 

Net income was $7.0 million, including the effects of higher store development costs, store closures, and the amendment of our First Lien Term Loan Credit Facility, as compared to net income of $12.4 million in the same period of 2015. Net income per diluted share was $0.09 as compared to $0.16 in the same period of 2015.

 

Adjusted net income was $15.0 million, a decrease of 11.2% as compared to $16.9 million for the same period of 2015. Adjusted net income per diluted share was $0.19 as compared to $0.22 in the same period of 2015.

 

Adjusted EBITDA was $57.2 million, as compared to $59.8 million in the third quarter of 2015.

 

Fiscal Year-to-Date Financial Results

 

In the forty weeks ended October 9, 2016, net sales were $3,341.2 million, an increase of 12.4% as compared to $2,973.4 million in the same period of 2015.  Net sales growth was driven by the net sales contribution of new stores, partially offset by a 0.1% decline in comparable store sales.  The decline in comparable store sales was comprised of a 0.9% increase in comparable transaction count and a 1.0% decrease in comparable average transaction size.

 

Net sales for Smart & Final banner stores were $2,604.5 million, a 15.4% increase as compared to $2,256.4 million in the same period of 2015. Year-to-date comparable store sales decline for the Smart & Final banner was 0.1%.

 

Net sales for Cash & Carry banner stores were $736.7 million, a 2.7% increase as compared to $717.0 million in the same period of 2015.  Year-to-date comparable store sales for the Cash & Carry banner were flat.

 

Net income was $13.2 million, including the effects of higher store development costs, store closures, and the amendment of our First Lien Term Loan Credit Facility, as compared to $28.3 million in the same period of 2015. Net income per diluted share was $0.17 as compared to $0.37 for the same period of 2015.

 

2



 

Adjusted net income was $37.1 million, a 10.6% decrease as compared to $41.6 million in the same period of 2015. Adjusted net income per diluted share was $0.47 as compared to $0.54 in the same period of 2015.

 

Adjusted EBITDA was $142.9 million, as compared to $145.5 million in the same period of 2015.

 

Growth and Development

 

During the third quarter of fiscal year 2016, the Company opened two new Smart & Final Extra! stores, completed two relocations of legacy Smart & Final stores to the Smart & Final Extra! format and closed five legacy Smart & Final stores. The Company opened one new Cash & Carry store during the third quarter of fiscal year 2016.  As of October 9, 2016, the Company operated a total of 304 stores, including 165 Smart & Final Extra! stores, 83 legacy Smart & Final stores and 56 Cash & Carry stores.

 

Operating Stores at Quarter End (October 9, 2016)

 

 

 

Smart & Final Banner Stores

 

 

 

 

 

 

 

Extra!

 

Legacy

 

 

 

Cash & Carry

 

Total

 

 

 

format

 

format

 

Total

 

Banner Stores

 

Company

 

End of Fiscal 2015

 

127

 

94

 

221

 

55

 

276

 

New stores

 

32

 

 

32

 

1

 

33

 

Relocations, net

 

6

 

(6

)

 

 

 

Conversions

 

 

 

 

 

 

Store closures

 

 

(5

)

(5

)

 

(5

)

End of 3rd Quarter 2016

 

165

 

83

 

248

 

56

 

304

 

 

Leverage and Liquidity

 

As of October 9, 2016, the Company’s debt, net of debt issuance costs, was $651.6 million and cash and cash equivalents were $54.0 million.

 

During the third quarter of fiscal 2016, the Company amended and extended its First Lien Term Loan Credit Facility by increasing the borrowing base by $30.1 million to $625.0 million, extending the maturity of the facility from November 15, 2019 to November 15, 2022, and increasing the applicable margin by 0.25%.

 

In the forty week period ended October 9, 2016, the Company generated cash from operations of $86.0 million and invested $117.7 million in capital expenditures, primarily related to the development of Extra! format stores and to improvements of existing assets.

 

Outlook

 

The Company is revising certain elements of its previously issued guidance for the 2016 fiscal year ending January 1, 2017, to reflect revised expectations of the impact of deflation on net sales growth, as well as the anticipated lost sales as a result of the five Smart & Final legacy store closures during the third quarter of fiscal year 2016, and resulting impact on measures of income (revised elements noted in bold type):

 

3



 

Net sales growth

 

11.5% - 12.0%

Comparable store sales growth 

 

(0.5)% - 0.0%

Unit growth (new stores)

 

33 Smart & Final Extra!
4 Cash & Carry

Relocations of existing stores to Extra! format

 

6 Smart & Final stores

Conversions of legacy stores to Extra! format

 

6 Smart & Final stores

Adjusted EBITDA

 

$178 - $183 million

Adjusted net income

 

$45 - $47 million

Adjusted diluted EPS

 

$0.57 - $0.59

Capital expenditures 

 

$150 - $160 million

Basic weighted average shares

 

72.8 million

Fully diluted weighted average shares

 

78.3 million

 

The above guidance includes certain non-GAAP financial measures (namely adjusted net income, adjusted net income per diluted share and adjusted EBITDA), which exclude certain costs and non-cash costs and provide investors with additional financial measures of the expected operating performance of the Company’s business. The primary factors in reconciling these non-GAAP financial measures to comparable GAAP measures include the following: costs associated with the acquired Haggen store locations of approximately $18 million, non-cash rent related to other stores of approximately $6 million and share-based compensation expense of approximately $10 million. The other amounts needed to reconcile these non-GAAP financial measures to comparable GAAP measures cannot be quantified and are not available without an unreasonable effort.

 

In the fourth quarter of fiscal year 2016, the Company expects to open one new Smart & Final Extra! store, complete six Smart & Final legacy to Extra! store conversions and open three new Cash & Carry stores.

 

Third Quarter 2016 Conference Call

 

The Company will host a conference call today at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its third quarter 2016 financial results. To participate in the call, please dial (877) 407-0784 (U.S.) or (201) 689-8560 (International) ten minutes prior to the start time. The conference call can also be accessed on the “Investors” section of the Company’s web site at http://www.smartandfinal-investor.com/.

 

For those unable to participate during the live broadcast, a telephonic replay of the call will also be available beginning today at approximately 8:00 p.m. Eastern Time, by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International) and entering the replay pin number: 13647684.  The telephonic replay will be available until 11:59 p.m. Eastern Time, on Wednesday, November 30, 2016.

 

4



 

About Smart & Final

 

Smart & Final Stores, Inc. (NYSE: SFS), is a value-oriented food and everyday staples retailer, headquartered in Commerce (near Los Angeles), California. The Company offers quality products in a variety of sizes, saving household, nonprofit and business customers time and money. As of October 9, 2016, the Company operated 304 grocery and foodservice stores under the “Smart & Final,” “Smart & Final Extra!” and “Cash & Carry Smart Foodservice” banners in California, Oregon, Washington, Arizona, Nevada, and Idaho, with an additional 15 stores in Northwestern Mexico operated through a joint venture. In business for 145 years, the Company remains committed to giving back to local communities through employee volunteer opportunities and Company donations to local nonprofits.

 

Forward-Looking Statements

 

Certain statements contained in this release that are not historical information contain forward-looking statements. The forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected or implied. Further, certain forward-looking statements are based on assumptions of future events which may not prove to be accurate. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or, in each case, their negative, or other variations or comparable terminology. The Company derives many of its forward-looking statements from its operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes that its assumptions are reasonable, it is difficult to predict the impact of known factors and, of course, it is impossible to anticipate all factors that could affect actual results. These factors are discussed in the special note concerning “Forward-Looking Statements,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” sections and elsewhere in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

 

You should keep in mind that any forward-looking statement made by the Company herein, or elsewhere, speaks only as of the date on which made. New risks and uncertainties come up from time to time, and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.

 

INVESTOR CONTACTS:

Laura Bainbridge / Andrew Greenebaum

Addo Investor Relations

O: 310.829.5400

investors@smartandfinal.com

 

MEDIA CONTACT:

press@smartandfinal.com

 

5



 

Smart & Final Stores, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(In Thousands, Except Share and Per Share Amounts)

 

 

 

Sixteen Weeks Ended

 

Forty Weeks Ended

 

 

 

October 9, 2016

 

October 4, 2015

 

October 9, 2016

 

October 4, 2015

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,394,429

 

$

1,246,063

 

$

3,341,163

 

$

2,973,354

 

Cost of sales, buying and occupancy

 

1,191,400

 

1,058,824

 

2,852,569

 

2,522,367

 

Gross margin

 

203,029

 

187,239

 

488,594

 

450,987

 

 

 

 

 

 

 

 

 

 

 

Operating and administrative expenses

 

183,402

 

157,040

 

447,303

 

378,122

 

Income from operations

 

19,627

 

30,199

 

41,291

 

72,865

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

9,977

 

9,333

 

24,729

 

25,007

 

Loss on early extinguishment of debt

 

4,978

 

 

4,978

 

2,192

 

Equity in earnings of joint venture

 

502

 

138

 

1,230

 

1,045

 

Income before income taxes

 

5,174

 

21,004

 

12,814

 

46,711

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (provision)

 

1,859

 

(8,624

)

387

 

(18,410

)

Net income

 

$

7,033

 

$

12,380

 

$

13,201

 

$

28,301

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

$

0.17

 

$

0.18

 

$

0.39

 

Diluted

 

$

0.09

 

$

0.16

 

$

0.17

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

72,601,724

 

73,116,746

 

72,956,554

 

73,099,258

 

Diluted

 

77,705,917

 

77,404,466

 

78,468,330

 

77,025,990

 

 

6



 

Smart & Final Stores, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

 

 

 

October 9, 2016

 

January 3, 2016

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

54,043

 

$

59,327

 

Accounts receivable, less allowances of $435 and $454 at October 9, 2016 and January 3, 2016, respectively

 

30,304

 

27,304

 

Inventories

 

255,475

 

234,289

 

Prepaid expenses and other current assets

 

34,388

 

29,072

 

Deferred income taxes

 

22,502

 

22,471

 

Assets held for sale

 

3,254

 

 

Total current assets

 

399,966

 

372,463

 

 

 

 

 

 

 

Property, plant, and equipment:

 

 

 

 

 

Land

 

9,259

 

10,940

 

Buildings and improvements

 

17,691

 

20,441

 

Leasehold improvements

 

283,214

 

237,820

 

Fixtures and equipment

 

338,481

 

266,080

 

Construction in progress

 

14,240

 

19,501

 

 

 

662,885

 

554,782

 

Less accumulated depreciation and amortization

 

230,023

 

174,906

 

 

 

432,862

 

379,876

 

 

 

 

 

 

 

Capitalized software, net of accumulated amortization of $14,912 and $12,356 at October 9, 2016 and January 3, 2016, respectively

 

11,292

 

11,365

 

Other intangible assets, net

 

371,130

 

376,122

 

Goodwill

 

611,242

 

611,242

 

Equity investment in joint venture

 

14,090

 

12,763

 

Other assets

 

57,626

 

53,250

 

Total assets

 

$

1,898,208

 

$

1,817,081

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

205,264

 

$

194,149

 

Accrued salaries and wages

 

35,540

 

33,859

 

Accrued expenses

 

87,352

 

77,374

 

Current portion of debt, less debt issuance costs

 

35,280

 

3,904

 

Total current liabilities

 

363,436

 

309,286

 

 

 

 

 

 

 

Long-term debt, less debt issuance costs

 

616,317

 

586,956

 

Deferred income taxes

 

127,931

 

128,752

 

Postretirement and postemployment benefits

 

110,797

 

117,417

 

Other long-term liabilities

 

118,383

 

108,099

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.001 par value;
Authorized shares — 10,000,000
Issued and outstanding shares — none

 

 

 

Common stock, $0.001 par value;
Authorized shares — 340,000,000
Issued and outstanding shares - 72,944,908 and 73,789,608 at October 9, 2016 and January 3, 2016, respectively

 

73

 

74

 

Additional paid-in capital

 

499,615

 

502,304

 

Retained earnings

 

68,186

 

70,181

 

Accumulated other comprehensive loss

 

(6,530

)

(5,988

)

Total stockholders’ equity

 

561,344

 

566,571

 

Total liabilities and stockholders’ equity

 

$

1,898,208

 

$

1,817,081

 

 

7



 

Smart & Final Stores, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)

 

 

 

Forty Weeks Ended

 

 

 

October 9, 2016

 

October 4, 2015

 

Operating activities

 

 

 

 

 

Net income

 

$

13,201

 

$

28,301

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

38,421

 

28,982

 

Amortization

 

26,094

 

22,688

 

Amortization of debt discount and debt issuance costs

 

2,040

 

2,114

 

Share-based compensation

 

7,248

 

8,081

 

Excess tax benefits related to share-based payments

 

 

(275

)

Deferred income taxes

 

(608

)

1,442

 

Equity in earnings of joint venture

 

(1,230

)

(1,045

)

Loss (gain) on disposal of property, plant, and equipment

 

34

 

(38

)

Asset impairment

 

790

 

562

 

Loss on early extinguishment of debt

 

4,978

 

2,192

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

(3,000

)

1,085

 

Inventories

 

(21,185

)

(8,814

)

Prepaid expenses and other assets

 

(6,469

)

15,620

 

Accounts payable

 

11,115

 

6,623

 

Accrued salaries and wages

 

1,681

 

201

 

Other accrued liabilities

 

12,905

 

6,835

 

Net cash provided by operating activities

 

86,015

 

114,554

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property, plant, and equipment

 

(113,195

)

(101,025

)

Proceeds from sale of property, plant, and equipment

 

443

 

8,103

 

Assets acquired in Haggen Transaction

 

(2,235

)

 

Investment in capitalized software

 

(2,752

)

(3,254

)

Other

 

(2,106

)

(1,252

)

Net cash used in investing activities

 

(119,845

)

(97,428

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from exercise of stock options

 

3,477

 

196

 

Payment of minimum withholding taxes on net share settlement of share-based compensation awards

 

(652

)

(694

)

Fees paid in conjunction with debt financing

 

(8,374

)

(1,236

)

Borrowings on bank line of credit

 

70,000

 

 

Payments on bank line of credit

 

(38,000

)

 

Issuance of bank debt, net of issuance costs

 

30,093

 

 

Payments of public offering costs

 

 

(214

)

Excess tax benefits related to share-based payments

 

 

275

 

Stock repurchases

 

(27,998

)

 

Net cash provided by (used in) financing activities

 

28,546

 

(1,673

)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

(5,284

)

15,453

 

Cash and cash equivalents at beginning of period

 

59,327

 

106,847

 

Cash and cash equivalents at end of period

 

$

54,043

 

$

122,300

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

21,766

 

$

22,407

 

Income taxes

 

$

8,091

 

$

10,229

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

Software development costs incurred but not paid

 

$

41

 

$

 

Construction in progress costs incurred but not paid

 

$

13,695

 

$

16,147

 

 

8



 

Smart & Final Stores, Inc. and Subsidiaries

Segment Reporting

(In Thousands)

 

 

 

Smart & Final

 

Cash & Carry

 

Corporate /
Other

 

Consolidated

 

Sixteen Weeks Ended October 9, 2016

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,083,437

 

$

310,992

 

$

 

$

1,394,429

 

Cost of sales, distribution and store occupancy

 

922,201

 

266,238

 

2,961

 

1,191,400

 

Operating and administrative expenses

 

141,010

 

21,082

 

21,310

 

183,402

 

Income (loss) from operations

 

$

20,226

 

$

23,672

 

$

(24,271

)

$

19,627

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

38,345

 

$

3,957

 

$

1,914

 

$

44,216

 

Assets acquired in Haggen Transaction

 

$

8

 

$

 

$

 

$

8

 

 

 

 

 

 

 

 

 

 

 

Sixteen Weeks Ended October 4, 2015

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

940,168

 

$

305,895

 

$

 

$

1,246,063

 

Cost of sales, distribution and store occupancy

 

794,004

 

262,131

 

2,689

 

1,058,824

 

Operating and administrative expenses

 

116,276

 

19,964

 

20,800

 

157,040

 

Income (loss) from operations

 

$

29,888

 

$

23,800

 

$

(23,489

)

$

30,199

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

39,365

 

$

1,741

 

$

1,149

 

$

42,255

 

 

 

 

 

 

 

 

 

 

 

Forty Weeks Ended October 9, 2016

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,604,505

 

$

736,658

 

$

 

$

3,341,163

 

Cost of sales, distribution and store occupancy

 

2,214,012

 

630,934

 

7,623

 

2,852,569

 

Operating and administrative expenses

 

344,251

 

51,132

 

51,920

 

447,303

 

Income (loss) from operations

 

$

46,242

 

$

54,592

 

$

(59,543

)

$

41,291

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

105,468

 

$

5,843

 

$

4,636

 

$

115,947

 

Assets acquired in Haggen Transaction

 

$

2,235

 

$

 

$

 

$

2,235

 

 

 

 

 

 

 

 

 

 

 

Forty Weeks Ended October 4, 2015

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,256,357

 

$

716,997

 

$

 

$

2,973,354

 

Cost of sales, distribution and store occupancy

 

1,898,841

 

616,646

 

6,880

 

2,522,367

 

Operating and administrative expenses

 

276,922

 

48,483

 

52,717

 

378,122

 

Income (loss) from operations

 

$

80,594

 

$

51,868

 

$

(59,597

)

$

72,865

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

93,415

 

$

6,060

 

$

4,804

 

$

104,279

 

 

9



 

Non-GAAP Financial Measures

 

To supplement the Company’s financial information presented in accordance with GAAP, the Company uses certain non-GAAP financial measures (namely adjusted net income, adjusted net income per share, adjusted net income per diluted share, EBITDA and adjusted EBITDA) to evaluate our operating and financial performance and to compare such performance to that of prior periods. We also use these non-GAAP financial measures in making operational and financial decisions and in establishing operational goals. We believe that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, helps investors to (i) evaluate our operating and financial performance and future prospects, (ii) compare financial results across accounting periods, (iii) better understand the long-term performance of our core business and (iv) evaluate trends in our business, all consistent with how management evaluates such performance and movements. The Company defines adjusted net income as net income adjusted for the items set forth in the table below.  The Company defines adjusted net income per share as adjusted net income divided by the weighted average basic shares outstanding.  The Company defines adjusted net income per diluted share as adjusted net income divided by the weighted average diluted shares outstanding.  The Company defines EBITDA as net income before depreciation and amortization, interest expense and provision for income tax, and adjusted EBITDA as EBITDA adjusted for the items set forth in the table below.

 

Use of these non-GAAP measures may differ from similar measures reported by other companies. Each of these non-GAAP measures has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

 

The following tables present reconciliations of adjusted net income, EBITDA and adjusted EBITDA to net income, and adjusted net income per share and adjusted net income per diluted share to net income per share, for the sixteen-week and forty-week periods ended October 9, 2016 and October 4, 2015.

 

Smart & Final Stores, Inc. and Subsidiaries

Reconciliation of EBITDA to Adjusted EBITDA

(Unaudited)

(In Thousands)

 

 

 

Sixteen Weeks Ended

 

Forty Weeks Ended

 

 

 

October 9, 2016

 

October 4, 2015

 

October 9, 2016

 

October 4, 2015

 

Net income

 

$

7,033

 

$

12,380

 

$

13,201

 

$

28,301

 

Depreciation and amortization

 

27,728

 

21,887

 

64,515

 

51,670

 

Interest expense, net

 

9,977

 

9,333

 

24,729

 

25,007

 

Income tax (benefit) provision

 

(1,859

)

8,624

 

(387

)

18,410

 

EBITDA

 

42,879

 

52,224

 

102,058

 

123,388

 

 

 

 

 

 

 

 

 

 

 

Adjustments to EBITDA

 

 

 

 

 

 

 

 

 

Transaction costs (a)

 

 

 

 

936

 

Net loss from closed stores and exit costs (b)

 

2,283

 

638

 

6,021

 

2,012

 

Loss from asset dispositions (c)

 

819

 

55

 

1,004

 

558

 

Share-based compensation expense (d)

 

3,830

 

3,178

 

7,248

 

8,081

 

Non-cash rent (e)

 

1,222

 

1,801

 

2,055

 

3,078

 

Pre-opening costs (f)

 

1,287

 

1,764

 

1,724

 

5,174

 

Costs associated with acquired Haggen store locations (g)

 

1,297

 

 

19,248

 

 

Loss on extinguishment of debt (h)

 

4,978

 

 

4,978

 

2,192

 

Other items (i)

 

(1,401

)

142

 

(1,395

)

97

 

Adjusted EBITDA

 

$

57,194

 

$

59,802

 

$

142,941

 

$

145,516

 

 

10



 

Smart & Final Stores, Inc. and Subsidiaries

Reconciliation of Net Income to Non-GAAP Adjusted Net Income

(Unaudited)

(In Thousands, Except Share and Per Share Amounts)

 

 

 

Sixteen Weeks Ended

 

Forty Weeks Ended

 

 

 

October 9, 2016

 

October 4, 2015

 

October 9, 2016

 

October 4, 2015

 

Net income

 

$

7,033

 

$

12,380

 

$

13,201

 

$

28,301

 

Income tax (benefit) provision

 

(1,859

)

8,624

 

(387

)

18,410

 

Income before income taxes

 

5,174

 

21,004

 

12,814

 

46,711

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Net Income

 

 

 

 

 

 

 

 

 

Transaction costs (a)

 

 

 

 

936

 

Net loss from closed stores and exit costs (b)

 

2,283

 

638

 

6,021

 

2,012

 

Loss from asset dispositions (c)

 

819

 

55

 

1,004

 

558

 

Share-based compensation expense (d)

 

3,830

 

3,178

 

7,248

 

8,081

 

Non-cash rent (e)

 

1,222

 

1,801

 

2,055

 

3,078

 

Pre-opening costs (f)

 

1,287

 

1,764

 

1,724

 

5,174

 

Costs associated with acquired Haggen store locations (g)

 

1,297

 

 

19,248

 

 

Loss on extinguishment of debt (h)

 

4,978

 

 

4,978

 

2,192

 

Other items (i)

 

(1,401

)

142

 

(1,395

)

97

 

Adjusted income tax provision

 

(4,448

)

(11,651

)

(16,555

)

(27,289

)

Adjusted net income

 

$

15,041

 

$

16,931

 

$

37,142

 

$

41,550

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - basic

 

$

0.10

 

$

0.17

 

$

0.18

 

$

0.39

 

Per share impact of net income adjustments

 

 

0.11

 

 

0.06

 

 

0.33

 

 

0.18

 

Adjusted net income per share - basic

 

$

0.21

 

$

0.23

 

$

0.51

 

$

0.57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted

 

$

0.09

 

$

0.16

 

$

0.17

 

$

0.37

 

Per share impact of net income adjustments

 

 

0.10

 

 

0.06

 

 

0.30

 

 

0.17

 

Adjusted net income per share - diluted

 

$

0.19

 

$

0.22

 

$

0.47

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

72,601,724

 

73,116,746

 

72,956,554

 

73,099,258

 

Weighted average shares - fully diluted

 

77,705,917

 

77,404,466

 

78,468,330

 

77,025,990

 

 


(a)  Represents costs primarily associated with the Company’s secondary public offering that were charged to expense in the forty weeks ended October 4, 2015.

(b)  Represents costs associated with store closure and exit costs.

(c)  Represents non-cash loss associated with asset dispositions and impairment charges.

(d)  Represents expenses associated with the Company’s equity-based incentive award program.

(e)  Represents non-cash component of recognized rent expense.

(f)   Represents new store and relocation opening costs consisting primarily of rent, utilities, distribution, store labor and advertising.

(g)  Represents new store opening and relocation costs and non-cash rent related to acquired former Haggen store locations.

(h)  Represents loss on the early extinguishment of debt in the sixteen and forty weeks ended October 9, 2016 and the forty weeks ended October 4, 2015 in connection with amendments to the Company’s First Lien Term Loan Credit Facility.

(i)  Represents (i) death benefit income from Company-owned life insurance policies in the sixteen and forty weeks ended October 9, 2016 and the forty weeks ended October 4, 2015 and (ii) severance costs in the sixteen and forty weeks ended October 9, 2016 and the sixteen and forty weeks ended October 4, 2015.

 

11


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