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 11, 2015

 

 

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

 

 

 

 

 

 

(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 11, 2015, Smart & Final Stores, Inc. (the “Company”) issued a press release (the “Press Release”) announcing its financial results for the quarter ended October 4, 2015.  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 8.01                                 Other Events.

 

On November 11, 2015, the Company announced in the Press Release the approval of a share repurchase program pursuant to which the Company may purchase shares of its outstanding common stock representing up to an aggregate of $25.0 million.

 

Item 9.01.                             Financial Statements and Exhibits.

 

(d)                                                                             Exhibits:

 

Exhibit Number                                         Description

 

99.1                                                                                                                    Press Release, dated November 11, 2015

 



 

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 12, 2015

 

 

 

 

 

 

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 November 11, 2015

 


Exhibit 99.1

 

 

Smart & Final Stores, Inc. Reports Third Quarter 2015 Financial Results

 

 

COMMERCE, Calif. (November 11, 2015) –Smart & Final Stores, Inc. (the “Company”) (NYSE:SFS) today reported financial results for the sixteen week fiscal third quarter ended October 4, 2015.

 

Third Quarter Highlights:

·                  Net sales increased 10.1% to $1,246.1 million

·                  Comparable store sales growth of 4.8%

·                  Net income of $12.4 million, or $0.16 per diluted share

·                  Adjusted net income increased 13.6% to $16.9 million, or $0.22 per diluted share

·                  Adjusted EBITDA increased 4.8% to $59.8 million

·                  270 stores at quarter-end, including 120 Smart & Final Extra! stores

·                  Increased Adjusted EBITDA guidance for 2015

 

“Smart & Final Stores delivered solid operational and financial results in the third quarter, led by our consistent comparable store sales growth and new store development in-line with our plans,” said Dave Hirz, President and Chief Executive Officer. “Since our September 2014 initial public offering, we have grown the number of Smart & Final Extra! stores by 33 to 120, opened two new stores in the Cash & Carry banner, and continued to deepen our merchandise offering to meet the evolving needs of both our household and business customers.”

 

Mr. Hirz continued, “Our third quarter performance was strong across our banners, with both Smart & Final and Cash & Carry stores posting solid transaction growth and stable gross margin rates.  While average transaction size continues to be impacted by moderating deflation in some product categories, overall sales growth is in our expected range for 2015. As a result, we are increasing our full year 2015 guidance for Adjusted EBITDA to a range of $190 to $192 million.”

 

“Our consistent new store execution provides us with a solid foundation to pursue an exciting opportunity for accelerated development of Smart & Final Extra! stores, through the acquisition of 32 store leases and related assets in central and southern California previously operated under the Haggen store banner,” Mr. Hirz added.  “While this opportunity remains subject to court approval and customary closing conditions, we are optimistic that we will be successful in acquiring these store leases, which we expect to open in 2016. Our 2016 store development plans also include an anticipated additional six to eight new Smart & Final Extra! stores and three to five new Cash & Carry stores.  With exciting store growth prospects, an exceptional team, and a differentiated consumer proposition, we look forward to continuing to execute our growth plan.”

 

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

 

1



 

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 2015 Financial Results

Net sales were $1,246.1 million, a 10.1% increase as compared to $1,131.8 million in the same period of 2014. Net sales growth was driven by a 4.8% increase in comparable store sales and from the net sales contribution of new stores. The growth in comparable store sales was comprised of a 5.0% increase in comparable transaction count and a 0.2% decrease in comparable average transaction size.

 

Net sales for Smart & Final banner stores were $940.2 million, a 12.0% increase as compared to $839.3 million in the same period of 2014.  Comparable store sales growth for the Smart & Final banner was 5.5% in the third quarter.

 

Net sales for Cash & Carry banner stores were $305.9 million, a 4.6% increase as compared to $292.5 million in the same period of 2014.  Comparable store sales growth for the Cash & Carry banner was 2.9% in the third quarter.

 

Gross margin from operations was $187.2 million, a 10.5% increase as compared to $169.5 million in the same period of 2014. Gross margin rate in the third quarter was 15.0%, unchanged from the same period in the prior year.

 

Operating and administrative expenses were $157.0 million, an 11.6% increase as compared to $140.7 million in the same period of 2014. This increase was primarily related to higher sales volumes, increased store count and support costs, additional marketing expenses and public company costs.

 

Net income was $12.4 million, as compared to $10.2 million in the same period of 2014. Net income per diluted share was $0.16 as compared to $0.17 in the same period of 2014, and reflects an increase of approximately 16.2 million fully diluted shares, including shares issued in the Company’s September 2014 initial public offering (the “IPO”).

 

Adjusted net income was $16.9 million, an increase of 13.6% as compared to $14.9 million for the same period of 2014. Adjusted net income per diluted share was $0.22 as compared to $0.24 in the same period of 2014, and reflects an increase of approximately 16.2 million fully diluted shares, including shares issued in the IPO.

 

Adjusted EBITDA was $59.8 million, an increase of 4.8% as compared to $57.1 million in the same period of 2014.

 

Fiscal Year-to-date Financial Results

Net sales were $2,973.4 million in the 40 weeks (three fiscal quarters) ended October 4, 2015, an increase of 10.3% as compared to $2,694.9 million in the same period of 2014. The net sales growth was primarily due to a 4.8% increase in comparable store sales and from the net sales contribution of new stores.  The growth in comparable store sales was comprised of a 4.5% increase in comparable transaction count and a 0.2% increase in comparable average transaction size.

 

2



 

Net sales for Smart & Final banner stores were $2,256.4 million, an 11.5% increase as compared to $2,024.3 million in the same period of 2014. Year-to-date comparable store sales growth for the Smart & Final banner was 4.6%.

 

Net sales for Cash & Carry banner stores were $717.0 million, a 6.9% increase as compared to $670.6 million in the same period of 2014.  Year-to-date comparable store sales growth for the Cash & Carry banner was 5.3%.

 

Net income was $28.3 million, an increase of 18.7% as compared to $23.8 million in the same period of 2014. Net income per diluted share was $0.37 as compared to $0.40 for the same period of 2014, and reflects an increase of approximately 16.8 million fully diluted shares, including shares issued in the Company’s September 2014 initial public offering.

 

Adjusted net income was $41.6 million, an increase of 21.1% as compared to $34.3 million in the same period of 2014. Adjusted net income per diluted share was $0.54 as compared to $0.57 in the same period of 2014 and reflects an increase of approximately 16.8 million fully diluted shares, including shares issued in the Company’s September 2014 initial public offering.

 

Adjusted EBITDA was $145.5 million, an increase of 7.9% as compared to $134.8 million in the same period of 2014.

 

Growth and Development

During the third quarter of fiscal 2015, the Company opened six new Smart & Final Extra! stores and completed three conversions of legacy Smart & Final stores to the Smart & Final Extra! format, including one store relocation. The Company also opened one new Cash & Carry store.

 

As of October 4, 2015, the Company operated a total of 120 Smart & Final Extra! and 96 legacy Smart & Final stores, and 54 Cash & Carry stores.

 

Operating Stores at Quarter End (October 4, 2015)

 

 

 

Smart & Final Banner Stores

 

 

 

 

 

 

Extra!

 

Legacy

 

 

 

Cash & Carry

 

Total

 

 

format

 

format

 

Total

 

Banner Stores

 

Company

End of Fiscal 2014

 

98

 

103

 

201

 

53

 

254

New stores

 

15

 

-

 

15

 

1

 

16

Relocations, net

 

2

 

(2)

 

-

 

-

 

-

Conversions

 

5

 

(5)

 

-

 

-

 

-

End of 3rd Quarter 2015

 

120

 

96

 

216

 

54

 

270

 

3



 

Consistent with prior guidance, during the fourth quarter of fiscal 2015, the Company expects to open five additional new Smart & Final Extra! stores, complete two additional conversions of legacy Smart & Final stores to the Extra! format, including one store relocation, and open one new Cash & Carry store.  The fourth quarter of fiscal 2015 will be a thirteen-week period, and the 2015 fiscal year will be a 53-week period.

 

Leverage and Liquidity

At October 4, 2015, the Company’s debt, net of debt discount, was $589.8 million. Cash and cash equivalents was $122.3 million.

 

In the 40 weeks ended October 4, 2015, the Company generated cash from operations of $114.6 million. The Company invested a net amount of $96.2 million in capital expenditures, primarily related to the development of new stores, store relocations and conversions, and to improvements of existing assets.

 

Share Repurchase Program

The Company’s Board of Directors has authorized a share repurchase program of up to $25 million of the Company’s common stock, to be financed from cash on hand and executed over a period of time.  The Company expects any repurchases under the program to commence no earlier than November 16, 2015 and to occur over the following twelve months.

 

The specific timing and amount of any repurchases will be dependent on market conditions, applicable laws and other factors.  In connection with the share repurchase program, the Company may acquire shares in open market transactions (including pursuant to plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended) or privately negotiated transactions.

 

Outlook

The Company currently expects to achieve the following results for its 2015 Fiscal Year (ending January 3, 2016):

 

 

 

Fiscal Year Ending January 3, 2016

 

Net sales growth

11% - 12%

Comparable store sales growth

3.5% - 4.5%

Unit growth (net new stores)

20 Smart & Final Extra!
2 Cash & Carry

Relocations of existing stores

3 Smart & Final
1 Cash & Carry

Conversions of legacy stores to the Extra! format

6 stores

Adjusted EBITDA

$190 - $192 million

Adjusted net income

$51 - $53 million

Adjusted diluted EPS

$0.67- $0.70

Capital expenditures

$135 - $145 million

Basic weighted average shares

73.1 million

Fully diluted weighted average shares

76.6 million

 

4



 

Third Quarter 2015 Conference Call

The Company will host a conference call today at 1:30 p.m. PT / 4:30 p.m. ET to discuss its fiscal third quarter 2015 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 7:30 p.m. Eastern Time, by dialing (877) 870-5176 (U.S.) or (858) 384-5517 (International) and entering the replay pin number: 13621882.  The telephonic replay will be available until 11:59 p.m. Eastern Time, on Wednesday, November 25, 2015.

 

About Smart & Final

Smart & Final Stores, Inc. (NYSE: SFS), is a value-oriented food and everyday staples retailer that serves household and business customers. The Company is headquartered in Commerce (Los Angeles), CA, where it was founded over 140 years ago.  As of October 4, 2015, the Company operated 270 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 16 Smart & Final stores in northern Mexico operated through a joint venture.

 

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 “Risk Factors,” “Special Note Concerning Forward-Looking Statements,” “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 Communications

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 4, 2015

 

October 5, 2014

 

October 4, 2015

 

October 5, 2014

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,246,063

 

$

1,131,821

 

$

2,973,354

 

$

2,694,908

Cost of sales, buying and occupancy

 

1,058,824

 

962,317

 

2,522,367

 

2,292,630

Gross margin

 

187,239

 

169,504

 

450,987

 

402,278

 

 

 

 

 

 

 

 

 

Operating and administrative expenses

 

157,040

 

140,678

 

378,122

 

334,527

Income from operations

 

30,199

 

28,826

 

72,865

 

67,751

 

 

 

 

 

 

 

 

 

Interest expense, net

 

9,333

 

11,725

 

25,007

 

29,483

Loss on early extinguishment of debt

 

-

 

2,224

 

2,192

 

2,224

Equity in earnings of joint venture

 

138

 

318

 

1,045

 

1,032

Income before income taxes

 

21,004

 

15,195

 

46,711

 

37,076

 

 

 

 

 

 

 

 

 

Income tax provision

 

(8,624)

 

(4,972)

 

(18,410)

 

(13,231)

Net income

 

$

12,380

 

$

10,223

 

$

28,301

 

$

23,845

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.17

 

$

0.17

 

$

0.39

 

$

0.41

Diluted

 

$

0.16

 

$

0.17

 

$

0.37

 

$

0.40

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

73,116,746

 

59,101,972

 

73,099,258

 

57,969,954

Diluted

 

77,404,466

 

61,232,212

 

77,025,990

 

60,196,116

 

6



 

Smart & Final Stores, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

 

 

 

October 4, 2015

 

December 28, 2014

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

122,300

 

$

106,847

Accounts receivable, less allowances of $809 and $787 at October 4, 2015 and December 28, 2014, respectively

 

22,581

 

23,666

Inventories

 

232,218

 

223,404

Prepaid expenses and other current assets

 

15,428

 

26,532

Deferred income taxes

 

22,500

 

22,419

Total current assets

 

415,027

 

402,868

 

 

 

 

 

Property, plant, and equipment:

 

 

 

 

Land

 

10,940

 

11,165

Buildings and improvements

 

20,441

 

23,938

Leasehold improvements

 

222,664

 

176,114

Fixtures and equipment

 

251,758

 

203,473

Construction in progress

 

16,138

 

7,344

 

 

521,941

 

422,034

Less accumulated depreciation and amortization

 

160,559

 

115,350

 

 

361,382

 

306,684

 

 

 

 

 

Capitalized software, net of accumulated amortization of $11,632 and $9,486 at October 4, 2015 and December 28, 2014, respectively

 

10,775

 

10,403

Other intangible assets, net

 

323,550

 

325,289

Goodwill

 

611,242

 

611,242

Deferred financing costs, net

 

4,496

 

5,894

Equity investment in joint venture

 

12,355

 

11,924

Other assets

 

49,951

 

54,988

Total assets

 

$

1,788,778

 

$

1,729,292

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

191,520

 

$

184,897

Accrued salaries and wages

 

28,783

 

28,582

Accrued expenses

 

82,733

 

72,667

Total current liabilities

 

303,036

 

286,146

 

 

 

 

 

Long-term debt, less debt discount

 

589,789

 

588,117

Deferred income taxes

 

125,392

 

125,673

Postretirement and postemployment benefits

 

120,400

 

127,004

Other long-term liabilities

 

97,865

 

85,144

 

 

 

 

 

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 - 73,736,982 and 73,755,388 at October 4, 2015 and December 28, 2014, respectively

 

74

 

74

Additional paid-in capital

 

499,823

 

489,550

Retained earnings

 

60,302

 

32,001

Accumulated other comprehensive loss

 

(7,903)

 

(4,417)

Total stockholders’ equity

 

552,296

 

517,208

Total liabilities and stockholders’ equity

 

$

1,788,778

 

$

1,729,292

 

7



 

Smart & Final Stores, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)

 

 

 

Forty Weeks Ended

 

 

 

October 4, 2015

 

October 5, 2014

 

Operating activities

 

 

 

 

 

 

 

Net income

 

$

28,301

 

 

$

23,845

 

 

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

 

 

 

 

 

 

 

Depreciation

 

28,982

 

 

27,107

 

 

Amortization

 

22,688

 

 

21,886

 

 

Amortization of deferred financing costs and debt discount

 

2,114

 

 

2,509

 

 

Share-based compensation

 

8,081

 

 

8,455

 

 

Excess tax benefits related to share-based payments

 

(275

)

 

(730

)

 

Deferred income taxes

 

1,442

 

 

(3,382

)

 

Equity in earnings of joint venture

 

(1,045

)

 

(1,032

)

 

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

 

(38

)

 

28

 

 

Asset impairment

 

562

 

 

501

 

 

Loss on early extinguishment of debt

 

2,192

 

 

2,224

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, net

 

1,085

 

 

(2,871

)

 

Inventories

 

(8,814

)

 

(1,540

)

 

Prepaid expenses and other assets

 

15,620

 

 

3,589

 

 

Accounts payable

 

6,623

 

 

12,306

 

 

Accrued salaries and wages

 

201

 

 

2,778

 

 

Other accrued liabilities

 

6,835

 

 

4,752

 

 

Net cash provided by operating activities

 

114,554

 

 

100,425

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Purchases of property, plant, and equipment

 

(101,025

)

 

(87,619

)

 

Proceeds from sale of property, plant, and equipment

 

8,103

 

 

33

 

 

Investment in capitalized software

 

(3,254

)

 

(2,065

)

 

Purchase of intangible asset

 

 

 

(100

)

 

Other

 

(1,252

)

 

(38

)

 

Net cash used in investing activities

 

(97,428

)

 

(89,789

)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Issuance of common stock in IPO

 

 

 

173,080

 

 

Issuance of common stock, other

 

 

 

79

 

 

Proceeds from exercise of stock options

 

196

 

 

450

 

 

Payment of minimum withholding taxes on net share settlement of stock option exercise and vested restricted stock

 

(694

)

 

(2,667

)

 

Fees paid in conjunction with debt financing

 

(1,236

)

 

(200

)

 

Payments on bank debt

 

 

 

(120,880

)

 

Payments of public offering issuance costs

 

(214

)

 

(4,611

)

 

Excess tax benefits related to share-based payments

 

275

 

 

730

 

 

Contingent consideration related to acquisition of Smart & Final Holdings Corp.

 

 

 

(248

)

 

Net cash (used in) provided by financing activities

 

(1,673

)

 

45,733

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

15,453

 

 

56,369

 

 

Cash and cash equivalents at beginning of period

 

106,847

 

 

53,699

 

 

Cash and cash equivalents at end of period

 

$

122,300

 

 

$

110,068

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

 

$

22,407

 

 

$

33,174

 

 

Income taxes

 

$

10,229

 

 

$

11,375

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

Software development costs incurred but not paid

 

$

 

 

$

57

 

 

Construction in progress costs incurred but not paid

 

$

16,147

 

 

$

12,593

 

 

 

8



 

Smart & Final Stores, Inc. and Subsidiaries

Segment Reporting

(Dollars in Thousands)

 

 

 

Smart & Final

 

 

Cash & Carry

 

 

Corporate /
Other

 

 

Consolidated

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sixteen Weeks Ended October 5, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

839,276

 

 

$

292,545

 

 

$

-

 

 

$

1,131,821

 

 

Cost of sales, distribution and store occupancy

 

708,599

 

 

251,148

 

 

2,570

 

 

962,317

 

 

Operating and administrative expenses

 

102,688

 

 

18,495

 

 

19,495

 

 

140,678

 

 

Income (loss) from operations

 

$

27,989

 

 

$

22,902

 

 

$

(22,065

)

 

$

28,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

38,535

 

 

$

803

 

 

$

1,900

 

 

$

41,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forty Weeks Ended October 5, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,024,324

 

 

$

670,584

 

 

$

-

 

 

$

2,694,908

 

 

Cost of sales, distribution and store occupancy

 

1,707,868

 

 

578,479

 

 

6,283

 

 

2,292,630

 

 

Operating and administrative expenses

 

243,651

 

 

44,324

 

 

46,552

 

 

334,527

 

 

Income (loss) from operations

 

$

72,805

 

 

$

47,781

 

 

$

(52,835

)

 

$

67,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

83,595

 

 

$

1,184

 

 

$

4,905

 

 

$

89,684

 

 

 

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 clarify and enhance understanding of its past performance. The Company defines adjusted net income as net income adjusted for the items set forth in the tables 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 tables 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 4, 2015 and October 5, 2014.

 

 

Smart & Final  Stores, Inc. and Subsidiaries

Reconciliation of EBITDA  to Non-GAAP Adjusted EBITDA

(Unaudited)

(In Thousands)

 

 

 

Sixteen Weeks Ended

 

Forty Weeks Ended

 

 

 

October 4, 2015

 

October 5, 2014

 

October 4, 2015

 

October 5, 2014

 

Net income

 

  $

12,380

 

  $

10,223

 

  $

28,301

 

  $

23,845

 

Depreciation and amortization

 

21,887

 

20,540

 

51,670

 

48,993

 

Interest expense, net

 

9,333

 

11,725

 

25,007

 

29,483

 

Income tax provision

 

8,624

 

4,972

 

18,410

 

13,231

 

EBITDA

 

52,224

 

47,460

 

123,388

 

115,552

 

 

 

 

 

 

 

 

 

 

 

Adjustments to EBITDA

 

 

 

 

 

 

 

 

 

Transaction costs (a)

 

-

 

1,169

 

936

 

1,639

 

Net loss from closed stores and exit costs (b)

 

638

 

491

 

2,012

 

1,461

 

Loss from asset dispositions (c)

 

55

 

271

 

558

 

506

 

Share-based compensation expense (d)

 

3,178

 

6,714

 

8,081

 

8,455

 

Non-cash rent (e)

 

1,801

 

1,573

 

3,078

 

4,151

 

Pre-opening costs (f)

 

1,764

 

1,123

 

5,174

 

3,099

 

Loss on extinguishment of debt (g)

 

-

 

2,224

 

2,192

 

2,224

 

Other items (h)

 

142

 

(3,952)

 

97

 

(2,280)

 

Adjusted EBITDA

 

  $

59,802

 

  $

57,073

 

  $

145,516

 

  $

134,807

 

 

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 4, 2015

 

October 5, 2014

 

October 4, 2015

 

October 5, 2014

 

Net income

 

  $

12,380

 

  $

10,223

 

  $

28,301

 

  $

23,845

 

Income tax provision

 

8,624

 

4,972

 

18,410

 

13,231

 

Net income before income taxes

 

21,004

 

15,195

 

46,711

 

37,076

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Net Income

 

 

 

 

 

 

 

 

 

Transaction costs (a)

 

-

 

1,169

 

936

 

1,639

 

Net loss from closed stores and exit costs (b)

 

638

 

491

 

2,012

 

1,461

 

Loss from asset dispositions (c)

 

55

 

271

 

558

 

506

 

Share-based compensation expense (d)

 

3,178

 

6,714

 

8,081

 

8,455

 

Non-cash rent (e)

 

1,801

 

1,573

 

3,078

 

4,151

 

Pre-opening costs (f)

 

1,764

 

1,123

 

5,174

 

3,099

 

Loss on extinguishment of debt (g)

 

-

 

2,224

 

2,192

 

2,224

 

Other items (h)

 

142

 

(3,952)

 

97

 

(2,280)

 

Adjusted income tax provision

 

(11,651)

 

(9,908)

 

(27,289)

 

(22,015)

 

Adjusted net income

 

  $

16,931

 

  $

14,900

 

  $

41,550

 

  $

34,316

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - basic

 

  $

0.17

 

  $

0.17

 

  $

0.39

 

  $

0.41

 

Per share impact of net income adjustments

 

0.06

 

0.08

 

  $

0.18

 

  $

0.18

 

Adjusted net income per share - basic

 

  $

0.23

 

  $

0.25

 

  $

0.57

 

  $

0.59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted

 

  $

0.16

 

  $

0.17

 

  $

0.37

 

  $

0.40

 

Per share impact of net income adjustments

 

0.06

 

0.07

 

  $

0.17

 

  $

0.17

 

Adjusted net income per share - diluted

 

  $

0.22

 

  $

0.24

 

  $

0.54

 

  $

0.57

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

73,116,746

 

59,101,972

 

73,099,258

 

57,969,954

 

Weighted average shares - fully diluted

 

77,404,466

 

61,232,212

 

77,025,990

 

60,196,116

 

 

 

(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 and the Company’s initial public offering that were charged to expense in the sixteen and forty weeks ended October 5, 2014.

(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 loss on the early extinguishment of debt in the forty weeks ended October 4, 2015 in connection with an amendment to the Company’s Term Loan Facility and the write-off of unamortized debt discount and deferred financing costs in the sixteen and forty weeks ended October 5, 2014 in connection with the early payment on the Company’s Term Loan Facility.

(h)  Represents (i) severance costs in the sixteen-week and forty-week periods ended October 4, 2015 and October 5, 2014, (ii) death benefit income from a Company-owned life insurance policy for the sixteen-week and forty-week periods ended October 5, 2014, (iii) reversal of a reserve related to executive compensation for the sixteen-week and forty-week periods ended October 5, 2014, and (iv) consulting expenses related to strategic growth initiatives for the sixteen-week and forty-week periods ended October 5, 2014.

 

11


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