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)  March 3, 2017

 

 

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 March 8, 2017, Smart & Final Stores, Inc. (the “Company”) issued a press release announcing its financial results for the quarter and full year ended January 1, 2017.  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 5.02                                  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On March 3, 2017, the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved the payment of discretionary bonuses to the named executive officers of the Company listed below in the amounts set forth below:

 

Named Executive Officer

 

Discretionary Bonus

David G. Hirz, President and Chief Executive Officer

 

     $261,250.00

Richard N. Phegley, SVP and Chief Financial Officer

 

     $ 86,646.01

Scott R. Drew, EVP, Smart & Final Operations

 

     $ 70,731.35

Eleanor E. Hong, SVP and Chief Marketing and Strategy Officer

 

     $ 63,654.01

 

The Committee determined to pay discretionary bonuses to the named executive officers in recognition of the Company’s performance in the face of a challenging business environment.

 

Item 9.01.                              Financial Statements and Exhibits.

 

(d)                                                                              Exhibits:

 

Exhibit Number

Description

 

 

99.1

Press Release, dated March 8, 2017

 



 

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: March 8, 2017

 

 

 

 

 

 

 

 

 

By:

/s/ Richard N. Phegley

 

Name:

Richard N. Phegley

 

Title:

Senior Vice President and Chief Financial Officer

 



 

Exhibit Index

 

Exhibit Number

Description

99.1

Press Release, dated March 8, 2017

 


Exhibit 99.1

 

 

Smart & Final Stores, Inc. Reports Fourth Quarter and Full Year 2016 Financial
Results

 

COMMERCE, Calif. (March 8, 2017) – Smart & Final Stores, Inc. (the “Company”) (NYSE:SFS), the value-oriented food and everyday staples retailer, today reported financial results for the fiscal fourth quarter and full year ended January 1, 2017.

 

Full Year Highlights:

 

·                 Net sales increase of 9.3% to $4,341.8 million

·                 Comparable store sales decrease of 0.5%, including impacts of deflation and cannibalization

·                 Net income of $12.9 million, or $0.17 per diluted share

·                 Adjusted net income of $42.2 million, or $0.54 per diluted share

·                 Adjusted EBITDA of $180.3 million

 

“We are pleased with our performance in 2016, which marks a period of unprecedented store growth,” said David Hirz, President and Chief Executive Officer. “Our 2016 store development included the successful integration of a major acquisition resulting in the largest number of new Smart & Final Extra! stores in a single year in the Company’s history, and we simultaneously expanded our Cash & Carry banner.  We continue to build upon our differentiated brand message as the one-stop shop for business and household needs, and to communicate Smart & Final’s unique banner propositions to both new and existing customers.”

 

Mr. Hirz added, “2016 was not without its challenges as the continued effects of deflation and anticipated impacts from cannibalization pressured comparable store sales growth and earnings.  Looking ahead to 2017, we expect these pressures to ease as we move through the year and that, when combined with our merchandising and marketing initiatives, will position us to return to positive comparable store sales growth in 2017.”

 

The Company’s fiscal year and fiscal fourth quarter ended January 1, 2017 comprised 52-week and 12-week periods respectively, and the Company’s fiscal year and fiscal fourth quarter ended January 3, 2016 comprised 53-week and 13-week periods, respectively.  For comparability of net sales between periods, the Company includes in the presentation below consistent 52-week and 12-week comparisons, calculated by excluding the first week of the 53-week and 13-week periods, respectively.

 

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.

 

1



 

Fourth Quarter Fiscal 2016 Financial Results

 

Net sales were $1,000.6 million in the 12-week quarter ended January 1, 2017, representing a 0.3% increase as compared to $997.6 million in the 13-week quarter ended January 3, 2016.  On a consistent 12-week comparison basis, sales increased by 9.2% from the prior year quarter.  Net sales growth was driven by the net sales contribution of new stores, partially offset by a 2.0% decrease in comparable store sales. Comparable store sales were comprised of a 0.2% increase in comparable transaction count, including the effect of anticipated cannibalization from new stores, and a 2.2% decrease in comparable average transaction size, including the impact of deflation in key product categories in both store banners.

 

Net sales for Smart & Final banner stores were $796.2 million for the 12-week quarter ended January 1, 2017, a 2.0% increase as compared to $780.6 million in the 13-week quarter ended January 3, 2016.  On a consistent 12-week comparison basis, sales increased by 11.1% from the prior year quarter.  Comparable store sales for the Smart & Final banner decreased 2.1% in the fourth quarter.

 

Net sales for Cash & Carry banner stores were $204.4 million for the 12-week period ended January 1, 2017, a 5.8% decrease as compared to $217.0 million in the 13-week quarter ended January 3, 2016.  On a consistent 12-week comparison basis, sales increased by 2.6% from the prior year quarter.  Comparable store sales for the Cash & Carry banner decreased 1.5% in the fourth quarter.

 

Gross margin from operations was $140.9 million, a 4.7% decrease as compared to $147.9 million in the fourth quarter of 2015. Gross margin rate was 14.1% as compared to 14.8% in the same period of 2015.

 

Operating and administrative expenses were $135.2 million, a 7.4% increase as compared to $125.9 million in the same period of 2015. This increase was primarily related to expenses associated with 37 new stores opened over the prior 12 months and related support costs.

 

Net loss was $0.3 million, including the effect of higher store development and closure expenses, and an income tax benefit of $1.7 million, as compared to net income of $10.0 million in the same period of 2015. Net loss per diluted share was $0.00 as compared to net income per diluted share of $0.13 in the same period of 2015.

 

Adjusted net income was $5.0 million as compared to $14.7 million for the same period of 2015. Adjusted net income per diluted share was $0.07 as compared to $0.19 in the same period of 2015.

 

Adjusted EBITDA was $37.3 million as compared to $47.4 million in the fourth quarter of 2015.

 

Fiscal 2016 Financial Results

 

In the 52-week year ended January 1, 2017, net sales were $4,341.8 million, an increase of 9.3% as compared to $3,971.0 million in the 53-week year ended January 3, 2016.  On a consistent 52-week comparison basis, sales increased by 11.2% from the prior year.  Net sales growth was driven by the net sales contribution of new stores, partially offset by a 0.5% decline in comparable store sales.  The decline in comparable store sales was comprised of a 0.8% increase in comparable transaction count and a 1.3% decrease in comparable average transaction size.

 

2



 

Net sales for Smart & Final banner stores were $3,400.8 million, a 12.0% increase as compared to $3,037.0 million in the 53 weeks of fiscal 2015.  On a consistent 52-week comparison basis, sales increased by 13.9% from the prior year.  Full year comparable store sales decline for the Smart & Final banner was 0.6%.

 

Net sales for Cash & Carry banner stores were $941.0 million, a 0.8% increase as compared to $934.0 million in the 53 weeks of fiscal 2015.  On a consistent 52-week comparison basis, sales increased by 2.4% from the prior year.  Full year comparable store sales decline for the Cash & Carry banner was 0.3%.

 

Net income was $12.9 million, including the effect of higher store development costs, as compared to $38.3 million in 2015. Net income per diluted share was $0.17 as compared to $0.50 for 2015.

 

Adjusted net income was $42.2 million, a 25.0% decrease as compared to $56.3 million in 2015. Adjusted net income per diluted share was $0.54 as compared to $0.73 for 2015.

 

Adjusted EBITDA was $180.3 million, as compared to $192.9 million in 2015.

 

Growth and Development

 

During fiscal 2016, the Company opened 33 new Smart & Final Extra! stores, completed six conversions of legacy Smart & Final stores to the Smart & Final Extra! format, relocated six legacy Smart & Final stores and closed eight legacy Smart & Final stores. The Company opened four new Cash & Carry stores during fiscal 2016.  As of January 1, 2017, the Company operated a total of 305 stores, including 172 Smart & Final Extra! stores, 74 legacy Smart & Final stores and 59 Cash & Carry stores.

 

Operating Stores at Fiscal Year End (January 1, 2017)

 

 

 

Smart & Final Banner Stores

 

 

 

 

 

 

 

Extra!
format

 

Legacy
format

 

Total

 

 

Cash & Carry
Banner Stores

 

Total
Company

End of Fiscal 2015

 

127

 

94

 

221

 

55

 

276

 

 

 

 

 

 

 

 

 

 

 

New stores

 

33

 

-

 

33

 

4

 

37

 

 

 

 

 

 

 

 

 

 

 

Relocations, net

 

6

 

(6)

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

Conversions

 

6

 

(6)

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

Store closures

 

-

 

(8)

 

(8)

 

-

 

(8)

 

 

 

 

 

 

 

 

 

 

 

End of Fiscal 2016

 

172

 

74

 

246

 

59

 

305

 

Leverage and Liquidity

 

As of January 1, 2017, the Company’s debt, net of debt issuance costs, was $678.9 million and cash and cash equivalents were $54.2 million.

 

In the 52 weeks ended January 1, 2017, the Company generated cash from operations of $97.1 million and invested $151.2 million in capital expenditures, primarily related to the development of Extra! format stores and to improvements of existing assets.

 

3



 

Outlook

 

The Company is providing the following guidance for the full year ending December 31, 2017:

 

Net sales growth

5.5% - 6.5%

Comparable store sales growth

1.0% - 2.0%

Unit growth (new stores)

15 Smart & Final Extra!

4 Cash & Carry

Relocations of existing stores to Extra! format

Smart & Final stores

Expansions or conversions of legacy stores to Extra! format

4 to 5 Smart & Final stores

Adjusted EBITDA

$185 - $195 million

Adjusted net income

$39 - $43 million

Adjusted diluted EPS

$0.50 - $0.55

Capital expenditures 

$120 - $130 million

Fully diluted weighted average shares

77 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: pre-opening costs associated with new stores of approximately $6 million, non-cash rent, related to stores, of approximately $4 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 first quarter of fiscal year 2017, the Company expects to open two new Smart & Final Extra! stores, and one new Cash & Carry store.

 

Fourth Quarter and Fiscal 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 fiscal fourth quarter and 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: 13653391.  The telephonic replay will be available until 11:59 p.m. Eastern Time, on Wednesday, March 22, 2017.

 

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 January 1, 2017, the Company operated 305 grocery and foodservice stores under the “Smart & Final,” “Smart &

 

4



 

Final Extra!” and “Cash & Carry Smart Foodservice” banners in California, Oregon, Washington, Arizona, Nevada, Idaho and Utah, with an additional 15 stores in Northwestern Mexico operated through a joint venture. In business for over 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

Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Amounts)

 

 

 

 

Twelve Weeks
Ended

 

Thirteen Weeks
Ended

 

Fifty-two Weeks
Ended

 

Fifty-three
Weeks Ended

 

 

January 1, 2017

 

January 3, 2016

 

January 1, 2017

 

January 3, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,000,632

 

$

997,626

 

$

4,341,795

 

$

3,970,980

Cost of sales, buying and occupancy

 

859,722

 

849,753

 

3,712,291

 

3,372,120

Gross margin

 

140,910

 

147,873

 

629,504

 

598,860

 

 

 

 

 

 

 

 

 

Operating and administrative expenses

 

135,183

 

125,873

 

582,486

 

503,995

Income from operations

 

5,727

 

22,000

 

47,018

 

94,865

 

 

 

 

 

 

 

 

 

Interest expense, net

 

7,925

 

7,680

 

32,654

 

32,687

Loss on early extinguishment of debt

 

-    

 

-    

 

4,978

 

2,192

Equity in earnings of joint venture

 

295

 

333

 

1,525

 

1,378

Income (loss) before income taxes benefit (provision)

 

(1,903)

 

14,653

 

10,911

 

61,364

 

 

 

 

 

 

 

 

 

Income tax benefit (provision)

 

1,650

 

(4,692)

 

2,037

 

(23,102)

Net income (loss)

 

$

(253)

 

$

9,961

 

$

12,948

 

$

38,262

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.00

 

$

0.14

 

$

0.18

 

$

0.52

Diluted

 

$

0.00

 

$

0.13

 

$

0.17

 

$

0.50

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

71,962,127

 

73,191,829

 

72,727,071

 

73,121,964

Diluted

 

71,962,127

 

77,497,406

 

78,026,159

 

77,141,621

 

6



 

Smart & Final Stores, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

 

 

 

 

January 1, 2017

 

January 3, 2016

 

 

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

54,235

 

$

59,327

Accounts receivable, less allowances of $434 and $454 at January 1, 2017 and January 3, 2016, respectively

 

31,809

 

27,304

Inventories

 

278,718

 

234,289

Prepaid expenses and other current assets

 

48,769

 

29,072

Deferred income taxes

 

22,105

 

22,471

Total current assets

 

435,636

 

372,463

 

 

 

 

 

Property, plant, and equipment:

 

 

 

 

Land

 

9,106

 

10,940

Buildings and improvements

 

17,351

 

20,441

Leasehold improvements

 

301,522

 

237,820

Fixtures and equipment

 

353,764

 

266,080

Construction in progress

 

12,110

 

19,501

 

 

693,853

 

554,782

Less accumulated depreciation and amortization

 

249,251

 

174,906

 

 

444,602

 

379,876

 

 

 

 

 

Capitalized software, net of accumulated amortization of $13,293 and $12,356 at January 1, 2017 and January 3, 2016, respectively

 

10,392

 

11,365

Other intangible assets, net

 

369,519

 

376,122

Goodwill

 

611,242

 

611,242

Equity investment in joint venture

 

14,366

 

12,763

Other assets

 

66,662

 

53,250

Total assets

 

$

1,952,419

 

$

1,817,081

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

225,227

 

$

194,149

Accrued salaries and wages

 

31,933

 

33,859

Accrued expenses

 

82,925

 

77,374

Current portion of debt, less debt issuance costs

 

62,352

 

3,904

Total current liabilities

 

402,437

 

309,286

 

 

 

 

 

Long-term debt, less debt issuance costs

 

616,588

 

586,956

Deferred income taxes

 

129,902

 

128,752

Postretirement and postemployment benefits

 

121,409

 

117,417

Other long-term liabilities

 

129,834

 

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 - 72,930,653 and 73,789,608 at

 

 

 

 

January 1, 2017 and January 3, 2016, respectively

 

73

 

74

Additional paid-in capital

 

500,666

 

502,304

Retained earnings

 

65,093

 

70,181

Accumulated other comprehensive loss

 

(13,583)

 

(5,988)

Total stockholders’ equity

 

552,249

 

566,571

Total liabilities and stockholders’ equity

 

$

1,952,419

 

$

1,817,081

 

7



 

Smart & Final Stores, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

 

 

 

Fifty-two Weeks Ended

 

Fifty-three Weeks Ended

 

 

January 1, 2017

 

January 3, 2016

Operating activities

 

 

 

 

Net income

 

$

12,948

 

$

38,262

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

 

 

 

 

Depreciation

 

51,385

 

38,585

Amortization

 

35,630

 

30,181

Amortization of debt discount and debt issuance costs

 

2,511

 

2,780

Share-based compensation

 

9,803

 

10,003

Excess tax benefits related to share-based payments

 

 

(358)

Deferred income taxes

 

(1,469)

 

3,325

Dividend from joint venture

 

769

 

Equity in earnings of joint venture

 

(1,525)

 

(1,378)

Gain (loss) on disposal of property, plant, and equipment

 

282

 

(40)

Asset impairment

 

1,323

 

1,413

Loss on early extinguishment of debt

 

4,978

 

2,192

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

(2,726)

 

(3,637)

Inventories

 

(44,429)

 

(10,885)

Prepaid expenses and other assets

 

(23,962)

 

(1,202)

Accounts payable

 

31,078

 

9,252

Accrued salaries and wages

 

(1,926)

 

5,277

Other accrued liabilities

 

22,423

 

21,621

Net cash provided by operating activities

 

97,093

 

145,391

 

 

 

 

 

Investing activities

 

 

 

 

Purchases of property, plant, and equipment

 

(148,043)

 

(132,738)

Proceeds from disposal of property, plant, and equipment

 

2,265

 

8,104

Assets acquired in Haggen Transaction

 

(2,257)

 

(66,440)

Investment in capitalized software

 

(3,193)

 

(4,265)

Other

 

(2,024)

 

(1,277)

Net cash used in investing activities

 

(153,252)

 

(196,616)

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from exercise of stock options

 

4,667

 

719

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

 

(669)

 

(694)

Fees paid in conjunction with debt financing

 

(8,500)

 

(1,335)

Borrowings on bank line of credit

 

97,000

 

15,000

Payments on bank line of credit

 

(38,000)

 

(10,000)

Issuance of bank debt, net of issuance costs

 

30,093

 

Payments of public offering issuance costs

 

 

(214)

Excess tax benefits related to share-based payments

 

 

358

Stock repurchases

 

(33,524)

 

(129)

Net cash provided by financing activities

 

51,067

 

3,705

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(5,092)

 

(47,520)

Cash and cash equivalents at beginning of period

 

59,327

 

106,847

Cash and cash equivalents at end of period

 

$

54,235

 

$

59,327

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

Interest

 

$

29,750

 

$

29,462

Income taxes

 

$

10,448

 

$

23,729

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

Software development costs incurred but not paid

 

$

24

 

$

310

Construction in progress costs incurred but not paid

 

$

12,070

 

$

8,534

 

8



 

Smart & Final Stores, Inc. and Subsidiaries

Segment Reporting

(In Thousands)

 

 

 

Smart & Final

 

Cash & Carry

 

Corporate /
Other

 

Consolidated

Twelve Weeks Ended January 1, 2017

 

 

 

 

 

 

 

 

Net sales

 

$

796,250

 

$

204,382

 

$

-

 

$

1,000,632

Cost of sales, distribution and store occupancy

 

680,210

 

177,324

 

2,188

 

859,722

Operating and administrative expenses

 

100,067

 

15,556

 

19,560

 

135,183

Income (loss) from operations

 

$

15,973

 

$

11,502

 

$

(21,748)

 

$

5,727

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

30,209

 

$

4,231

 

$

849

 

$

35,289

Assets acquired in Haggen Transaction

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended January 3, 2016

 

 

 

 

 

 

 

 

Net sales

 

$

780,592

 

$

217,034

 

$

-

 

$

997,626

Cost of sales, distribution and store occupancy

 

662,194

 

185,469

 

2,090

 

849,753

Operating and administrative expenses

 

95,089

 

15,885

 

14,899

 

125,873

Income (loss) from operations

 

$

23,309

 

$

15,680

 

$

(16,989)

 

$

22,000

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

29,393

 

$

1,556

 

$

1,775

 

$

32,724

Assets acquired in Haggen Transaction

 

$

66,440

 

$

-

 

$

-

 

$

66,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fifty-two Weeks Ended January 1, 2017

 

 

 

 

 

 

 

 

Net sales

 

$

3,400,755

 

$

941,040

 

$

-

 

$

4,341,795

Cost of sales, distribution and store occupancy

 

2,894,222

 

808,258

 

9,811

 

3,712,291

Operating and administrative expenses

 

444,318

 

66,688

 

71,480

 

582,486

Income (loss) from operations

 

$

62,215

 

$

66,094

 

$

(81,291)

 

$

47,018

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

135,677

 

$

10,074

 

$

5,485

 

$

151,236

Assets acquired in Haggen Transaction

 

$

2,257

 

$

-

 

$

-

 

$

2,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fifty-three Weeks Ended January 3, 2016

 

 

 

 

 

 

 

 

Net sales

 

$

3,036,949

 

$

934,031

 

$

-

 

$

3,970,980

Cost of sales, distribution and store occupancy

 

2,561,035

 

802,115

 

8,970

 

3,372,120

Operating and administrative expenses

 

372,011

 

64,368

 

67,616

 

503,995

Income (loss) from operations

 

$

103,903

 

$

67,548

 

$

(76,586)

 

$

94,865

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

122,808

 

$

7,616

 

$

6,579

 

$

137,003

Assets acquired in Haggen Transaction

 

$

66,440

 

$

-

 

$

-

 

$

66,440

 

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 12-week and 52-week periods ended January 1, 2017, and the 13-week and 53-week periods ended January 3, 2016.

 

 

 

Smart & Final Stores, Inc. and Subsidiaries

Reconciliation of EBITDA to Adjusted EBITDA

(Unaudited)

(In Thousands)

 

 

 

Twelve Weeks
Ended January 1,
2017

 

Thirteen Weeks
Ended January 3,
2016

 

Fifty-two Weeks
Ended January 1,
2017

 

Fifty-three Weeks
Ended January 3,
2016

Net income (loss)

 

$

(253)

 

$

9,961

 

$

12,948

 

$

38,262

Depreciation and amortization

 

22,500

 

17,096

 

87,015

 

68,766

Interest expense, net

 

7,925

 

7,680

 

32,654

 

32,687

Income tax (benefit) provision

 

(1,650)

 

4,692

 

(2,037)

 

23,102

EBITDA

 

28,522

 

39,429

 

130,580

 

162,817

 

 

 

 

 

 

 

 

 

Adjustments to EBITDA

 

 

 

 

 

 

 

 

Transaction costs (a)

 

-    

 

-    

 

-    

 

936

Net loss from closed stores and exit costs (b)

 

2,650

 

332

 

8,671

 

2,344

Loss from asset dispositions (c)

 

594

 

838

 

1,598

 

1,396

Share-based compensation expense (d)

 

2,555

 

1,922

 

9,803

 

10,003

Non-cash rent (e)

 

442

 

1,430

 

2,498

 

4,508

Pre-opening costs (f)

 

906

 

3,369

 

2,630

 

8,543

Costs associated with acquired Haggen store locations (g)

 

1,266

 

-    

 

20,513

 

-    

Loss on extinguishment of debt (h)

 

-    

 

-    

 

4,978

 

2,192

Other items (i)

 

377

 

38

 

(1,018)

 

135

Adjusted EBITDA

 

$

37,312

 

$

47,358

 

$

180,253

 

$

192,874

 

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)

 

 

 

Twelve Weeks
Ended January 1,
2017

 

Thirteen Weeks
Ended January 3,
2016

 

Fifty-two Weeks
Ended January 1,
2017

 

Fifty-three Weeks
Ended January 3,
2016

Net income (loss)

 

$

(253)

 

$

9,961

 

$

12,948

 

$

38,262

Income tax (benefit) provision

 

(1,650)

 

4,692

 

(2,037)

 

23,102

Income (loss) before income taxes (benefit)

 

(1,903)

 

14,653

 

10,911

 

61,364

 

 

 

 

 

 

 

 

 

Adjustments to net income (loss)

 

 

 

 

 

 

 

 

Transaction costs (a)

 

-    

 

-    

 

-    

 

936

Net loss from closed stores and exit costs (b)

 

2,650

 

332

 

8,671

 

2,344

Loss from asset dispositions (c)

 

594

 

838

 

1,598

 

1,396

Share-based compensation expense (d)

 

2,555

 

1,922

 

9,803

 

10,003

Non-cash rent (e)

 

442

 

1,430

 

2,498

 

4,508

Pre-opening costs (f)

 

906

 

3,369

 

2,630

 

8,543

Costs associated with acquired Haggen store locations (g)

 

1,266

 

-    

 

20,513

 

-    

Loss on extinguishment of debt (h)

 

-    

 

-    

 

4,978

 

2,192

Other items (i)

 

377

 

38

 

(1,018)

 

135

Adjusted income tax provision

 

(1,890)

 

(7,859)

 

(18,363)

 

(35,139)

Adjusted net income

 

$

4,997

 

$

14,723

 

$

42,221

 

$

56,282

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - basic

 

$

0.00

 

$

0.14

 

$

0.18

 

$

0.52

Per share impact of net income adjustments

 

$

0.07

 

$

0.06

 

$

0.40

 

$

0.25

Adjusted net income per share - basic

 

$

0.07

 

$

0.20

 

$

0.58

 

$

0.77

Net income (loss) per share - diluted

 

$

0.00

 

$

0.13

 

$

0.17

 

$

0.50

Per share impact of net income adjustments

 

$

0.07

 

$

0.06

 

$

0.37

 

$

0.23

Adjusted net income per share - diluted

 

$

0.07

 

$

0.19

 

$

0.54

 

$

0.73

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

71,962,127

 

73,191,829

 

72,727,071

 

73,121,964

Weighted average shares - fully diluted

 

76,552,257

 

77,497,406

 

78,026,159

 

77,141,621

 

(a)      Represents costs primarily associated with the Company’s secondary public offering that were charged to expense in the fiscal year ended January 3, 2016.

(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 fiscal years ended January 1, 2017 and January 3, 2016 in connection with amendments to the Company’s First Lien Term Loan Credit Facility.

(i)        Represents (i) death benefit income from a Company-owned life insurance policy in the fiscal years ended January 1, 2017 and January 3, 2016 and (ii) severance costs in the twelve and fifty-two weeks ended January 1, 2017 and the thirteen and fifty-three weeks ended January 3, 2016.

 

11


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