UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported) November 15, 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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company   o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 



 

Item 2.02                                 Results of Operations and Financial Condition.

 

On November 15, 2017, Smart & Final Stores, Inc. issued a press release announcing its (a) financial results for the quarter ended October 8, 2017 and (b) revised 2017 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 15, 2017

 



 

Exhibit Index

 

Exhibit Number

 

Description

99.1

 

Press Release, dated November 15, 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: November 15, 2017

 

 

 

 

 

 

 

 

 

By:

/s/ Richard N. Phegley

 

 

Name:

Richard N. Phegley

 

Title:

Senior Vice President and Chief Financial Officer

 


Exhibit 99.1

 

 

Smart & Final Stores, Inc. Reports Third Quarter 2017 Financial Results

 

COMMERCE, Calif. (November 15, 2017) – Smart & Final Stores, Inc. (the “Company”) (NYSE:SFS), the value-oriented food and everyday staples retailer, today reported financial results for the fiscal third quarter ended October 8, 2017.

 

Third Quarter Highlights:

·                  Net sales increase of 4.5% to $1,457.4 million

·                  Comparable store sales increase of 1.5%

·                  Net income of $5.1 million, or $0.07 per diluted share

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

·                  Adjusted EBITDA of $62.9 million, an increase of 10%

 

“Our third quarter financial performance demonstrates improving fundamentals despite a challenging industry environment,” said David Hirz, President and Chief Executive Officer. “We are encouraged by our 4.5% increase in net sales and 1.5% growth in comparable store sales, the second consecutive quarter of positive comparable store sales in 2017.  Our stable gross margin rate and low-cost operating model helped to deliver a 10% increase in adjusted EBITDA over the prior year quarter.”

 

Mr. Hirz continued, “Smart & Final has a long history of business evolution and we’re well positioned to support our customers’ needs today and in the future.  We’ve invested to provide customers with digital ordering and delivery platforms to allow for greater flexibility in shopping from our unique, value-oriented assortment.  Looking forward to 2018, we are planning a disciplined approach to capital investment, with more modest unit growth to realize the benefits of the significant investments made in new stores in the last couple of years.  As a result, we expect that our debt-to-EBITDA leverage ratio will continue to improve.”

 

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 EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per share, and adjusted net income per diluted share, 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 results below are first presented on a GAAP basis and then on a non-GAAP adjusted basis.

 

Fiscal Third Quarter 2017 Financial Results

Net sales were $1,457.4 million in the 16-week quarter ended October 8, 2017, representing a 4.5% increase as compared to $1,394.4 million for the same period of 2016. Net sales growth was driven by a 1.5% increase in comparable store sales and from the net sales contribution of new stores. Comparable store sales growth was comprised of a 1.5% increase in comparable average transaction size and a 0.1% increase in comparable transaction count, including the effect of cannibalization from new stores.

 

1



 

Net sales for Smart & Final banner stores were $1,115.2 million, a 2.9% increase as compared to $1,083.4 million for the same period of 2016. Comparable store sales growth for the Smart & Final banner was 1.0% in the third quarter.

 

Net sales for Cash & Carry banner stores were $342.1 million, a 10.0% increase as compared to $311.0 million for the same period of 2016. Comparable store sales growth for the Cash & Carry banner was 3.4% in the third quarter.

 

Gross margin was $213.8 million, a 5.3% increase as compared to $203.0 million in the third quarter of 2016. Gross margin rate was 14.7% as compared to 14.6% for the same period of 2016.

 

Operating and administrative expenses were $195.3 million, a 6.5% increase as compared to $183.4 million for the same period of 2016. This increase was primarily related to expenses associated with the 15 new stores that opened following the third quarter of 2016 through the end of the third quarter of 2017 and related support costs.

 

Net income was $5.1 million, including the effect of store development expenses, as compared to $7.0 million for the same period of 2016. Net income per diluted share was $0.07 as compared to $0.09 for the same period of 2016.

 

Adjusted net income was $12.9 million, as compared to $15.0 million for the same period of 2016. Adjusted net income per diluted share was $0.17 as compared to $0.19 for the same period of 2016.

 

Adjusted EBITDA was $62.9 million as compared to $57.2 million for the same period of 2016.

 

Fiscal Year-to-Date Financial Results

In the forty weeks ended October 8, 2017, net sales were $3,502.7 million, an increase of 4.8% as compared to $3,341.2 million for the same period of 2016.  Net sales growth was driven by the net sales contribution of new stores, and a 0.4% increase in comparable store sales.  Comparable store sales growth was comprised of a 0.5% increase in comparable transaction count, partially offset by a 0.1% decrease in comparable average transaction size.

 

Net sales for Smart & Final banner stores were $2,716.3 million, an increase of 4.3% as compared to $2,604.5 million for the same period of 2016. Year-to-date comparable store sales for the Smart & Final banner increased 0.1%.

 

Net sales for Cash & Carry banner stores were $786.3 million, a 6.7% increase as compared to $736.7 million for the same period of 2016.  Year-to-date comparable store sales for the Cash & Carry banner increased 1.3%.

 

Net income was $7.6 million, as compared to $13.2 million for the same period of 2016. Net income per diluted share was $0.10 as compared to $0.17 for the same period of 2016.

 

Adjusted net income was $22.4 million, as compared to $37.1 million for the same period of 2016. Adjusted net income per diluted share was $0.30 as compared to $0.47 for the same period of 2016.

 

Adjusted EBITDA was $135.4 million, as compared to $142.9 million for the same period of 2016.

 

2



 

Growth and Development

During the fiscal third quarter of 2017, the Company opened one new Smart & Final Extra! store, and completed two conversions of legacy Smart & Final stores to the Extra! store format, including one store relocation. The Company also opened two new Cash & Carry banner stores during the quarter. As of October 8, 2017, the Company operated a total of 316 stores, including 183 Smart & Final Extra! stores, 70 legacy format Smart & Final stores and 63 Cash & Carry stores.

 

Operating Stores at Fiscal Quarter End (October 8, 2017)

 

 

 

Smart & Final Banner Stores

 

 

 

 

 

 

 

Extra!
format

 

Legacy
format

 

Total

 

Cash & Carry
Banner Stores

 

Total
Company

 

End of Fiscal 2016

 

172

 

74

 

246

 

59

 

305

 

New stores

 

7

 

-

 

7

 

4

 

11

 

Relocations, net

 

2

 

(2)

 

-

 

-

 

-

 

Conversions

 

2

 

(2)

 

-

 

-

 

-

 

Store closures

 

-

 

-

 

-

 

-

 

-

 

End of 3rd Quarter 2017

 

183

 

70

 

253

 

63

 

316

 

 

Leverage and Liquidity

As of October 8, 2017, the Company’s debt, net of debt issuance costs, was $683.1 million and cash and cash equivalents were $60.9 million.

 

For the forty weeks ended October 8, 2017, the Company generated cash from operations of $128.0 million and invested $117.6 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 framework for the full year ending December 31, 2017, as noted in the table below.  As a result, the Company is also providing fiscal fourth quarter 2017 guidance.

 

 

Previous Full Year
2017 Guidance

Revised Full Year
2017 Guidance

4th Quarter 2017
Guidance

Comparable store sales growth

1.0% - 1.5%

0.8% - 1.0%

2.50% - 2.75%

Net sales growth

5.5% - 6.0%

5.0% - 5.2%

6.25% - 6.50%

Unit growth (new stores)

15 Smart & Final Extra!
4 Cash & Carry

14 Smart & Final Extra!
4 Cash & Carry

7 new Smart & Final Extra! in quarter

Relocations of existing stores to Extra! format

3 Smart & Final stores

3 Smart & Final stores

1 store relocation in quarter

Expansions or conversions of legacy stores to Extra! format

4 to 5 Smart & Final stores

5 Smart & Final stores

3 store expansions in quarter

 

3



 

Adjusted EBITDA

$185 - $190 million

Approximately $185 million

Approximately $49 million

Adjusted net income

$39 - $41 million

$32.5 to $33.5 million

$10 to $11 million

Adjusted diluted EPS

$0.50 - $0.52

Approximately $0.43

Approximately $0.14

Capital expenditures (stores)

$120 - $130 million

$120 - $130 million

$13 - $23 million

Fully diluted weighted average shares

77 million shares

75 million shares

74 million shares

 

The above guidance includes certain non-GAAP financial measures (namely adjusted EBITDA, adjusted net income and adjusted net income per diluted share), 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 $5 million, non-cash rent related to stores of approximately $6 million, share-based compensation expense of approximately $11 million, and $3 million of severance expense. 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.

 

Fiscal Third Quarter 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 third quarter 2017 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 “For Investors” section of the Company’s web site at www.smartandfinal.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: 13671853. The telephonic replay will be available until 11:59 p.m. Eastern Time, November 29, 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 October 8, 2017, the Company operated 316 grocery and foodservice stores under the “Smart & Final,” “Smart & Final Extra!” and “Cash & Carry Smart Foodservice” banners in California, Oregon, Washington, Arizona, Nevada, Idaho, Montana 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.

 

4



 

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 8, 2017

 

 

October 9, 2016

 

 

October 8, 2017

 

 

October 9, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,457,353

 

 

$

1,394,429

 

 

$

3,502,657

 

 

$

3,341,163

 

Cost of sales, buying and occupancy

 

1,243,490

 

 

1,191,400

 

 

2,993,413

 

 

2,852,569

 

Gross margin

 

213,863

 

 

203,029

 

 

509,244

 

 

488,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating and administrative expenses

 

195,285

 

 

183,402

 

 

474,021

 

 

447,303

 

Income from operations

 

18,578

 

 

19,627

 

 

35,223

 

 

41,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

11,229

 

 

9,977

 

 

27,738

 

 

24,729

 

Loss on early extinguishment of debt

 

-

 

 

4,978

 

 

-

 

 

4,978

 

Equity in earnings of joint venture

 

362

 

 

502

 

 

576

 

 

1,230

 

Income before income taxes

 

7,711

 

 

5,174

 

 

8,061

 

 

12,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (provision) benefit

 

(2,605

)

 

1,859

 

 

(419

)

 

387

 

Net income

 

$

5,106

 

 

$

7,033

 

 

$

7,642

 

 

$

13,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.07

 

 

$

0.10

 

 

$

0.11

 

 

$

0.18

 

Diluted earnings per share

 

$

0.07

 

 

$

0.09

 

 

$

0.10

 

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

72,446,404

 

 

72,601,724

 

 

72,437,033

 

 

72,956,554

 

Diluted

 

74,253,374

 

 

77,705,917

 

 

75,588,182

 

 

78,468,330

 

 

6



 

Smart & Final Stores, Inc. and Subsidiaries

 

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

 

 

 

 

October 8, 2017

 

January 1, 2017

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

60,890

 

$

54,235

 

Accounts receivable, less allowances of $425 and $434 at October 8, 2017 and January 1, 2017, respectively

 

33,889

 

31,809

 

Inventories

 

271,327

 

278,718

 

Prepaid expenses and other current assets

 

31,885

 

48,769

 

Deferred income taxes

 

-

 

22,105

 

Total current assets

 

397,991

 

435,636

 

 

 

 

 

 

 

Property, plant, and equipment:

 

 

 

 

 

Land

 

10,678

 

9,106

 

Buildings and improvements

 

26,384

 

17,351

 

Leasehold improvements

 

330,341

 

301,522

 

Fixtures and equipment

 

403,967

 

353,764

 

Construction in progress

 

45,817

 

12,110

 

 

 

817,187

 

693,853

 

Less accumulated depreciation and amortization

 

318,072

 

249,251

 

 

 

499,115

 

444,602

 

 

 

 

 

 

 

Capitalized software, net of accumulated amortization of $16,556 and $13,293 at October 8, 2017 and January 1, 2017, respectively

 

17,875

 

10,392

 

Other intangible assets, net

 

364,148

 

369,519

 

Goodwill

 

611,242

 

611,242

 

Equity investment in joint venture

 

15,055

 

14,366

 

Other assets

 

69,988

 

66,662

 

Total assets

 

$

1,975,414

 

$

1,952,419

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

229,470

 

$

225,227

 

Accrued salaries and wages

 

35,173

 

31,933

 

Accrued expenses

 

103,486

 

82,925

 

Current portion of debt, less debt issuance costs

 

65,445

 

62,352

 

Total current liabilities

 

433,574

 

402,437

 

 

 

 

 

 

 

Long-term debt, less debt issuance costs

 

617,602

 

616,588

 

Deferred income taxes

 

107,696

 

129,902

 

Postretirement and postemployment benefits

 

112,779

 

121,409

 

Other long-term liabilities

 

145,372

 

129,834

 

 

 

 

 

 

 

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 - 73,216,516 and 72,930,653 at October 8, 2017 and January 1, 2017, respectively

 

73

 

73

 

Additional paid-in capital

 

502,617

 

500,666

 

Retained earnings

 

68,396

 

65,093

 

Accumulated other comprehensive loss

 

(12,695

)

(13,583

)

Total stockholders’ equity

 

558,391

 

552,249

 

Total liabilities and stockholders’ equity

 

$

1,975,414

 

$

1,952,419

 

 

7



 

Smart & Final Stores, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)

 

 

 

 

Forty Weeks Ended

 

 

 

October 8, 2017

 

October 9, 2016

 

Operating activities

 

 

 

 

 

Net income

 

$

7,642

 

$

13,201

 

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

 

 

 

 

 

Depreciation

 

44,526

 

38,421

 

Amortization

 

30,522

 

26,094

 

Amortization of debt discount and debt issuance costs

 

1,485

 

2,040

 

Share-based compensation

 

8,504

 

7,248

 

Deferred income taxes

 

(506

)

(608

)

Equity in earnings of joint venture

 

(576

)

(1,230

)

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

 

(50

)

34

 

Asset impairment

 

1,430

 

790

 

Loss on early extinguishment of debt

 

 

4,978

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

(3,858

)

(3,000

)

Inventories

 

7,391

 

(21,185

)

Prepaid expenses and other assets

 

16,404

 

(6,469

)

Accounts payable

 

(758

)

11,115

 

Accrued salaries and wages

 

3,240

 

1,681

 

Other accrued liabilities

 

12,644

 

12,905

 

Net cash provided by operating activities

 

128,040

 

86,015

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property, plant, and equipment

 

(107,078

)

(113,195

)

Proceeds from disposal of property, plant, and equipment

 

1,850

 

443

 

Assets acquired in Haggen Transaction

 

 

(2,235

)

Investment in capitalized software

 

(10,505

)

(2,752

)

Other

 

(579

)

(2,106

)

Net cash used in investing activities

 

(116,312

)

(119,845

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Borrowings on bank line of credit

 

 

 

 

 

Issuance of bank debt, net of issuance costs

 

 

 

 

 

Issuance of common stock in IPO

 

 

 

 

 

Issuance of common stock, other

 

 

 

 

 

Proceeds from exercise of stock options

 

3,780

 

3,477

 

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

 

(1,826

)

(652

)

Fees paid in conjunction with debt financing

 

(154

)

(8,374

)

Borrowings on bank line of credit

 

63,000

 

70,000

 

Payments on bank line of credit

 

(57,000

)

(38,000

)

Issuance of bank debt, net of issuance costs

 

 

30,093

 

Stock repurchases

 

(12,873

)

(27,998

)

Net cash (used in) provided by financing activities

 

(5,073

)

28,546

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

6,655

 

(5,284

)

Cash and cash equivalents at beginning of period

 

54,235

 

59,327

 

Cash and cash equivalents at end of period

 

$

60,890

 

$

54,043

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

26,191

 

$

21,766

 

Income taxes

 

$

1

 

$

8,091

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

Software development costs incurred but not paid

 

$

331

 

$

41

 

Construction in progress costs incurred but not paid

 

$

26,093

 

$

13,695

 

 

8



 

Smart & Final Stores, Inc. and Subsidiaries

Segment Information

(In Thousands)

 

 

 

 

Smart & Final

 

 

Cash & Carry

 

 

Corporate /
Other

 

 

Consolidated

 

Sixteen Weeks Ended October 8, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,115,234

 

 

$

342,119

 

 

$

-

 

 

$

1,457,353

 

Cost of sales, distribution and store occupancy

 

948,476

 

 

292,502

 

 

2,512

 

 

1,243,490

 

Operating and administrative expenses

 

145,410

 

 

23,972

 

 

25,903

 

 

195,285

 

Income (loss) from operations

 

$

21,348

 

 

$

25,645

 

 

$

(28,415

)

 

$

18,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

38,699

 

 

$

5,201

 

 

$

4,201

 

 

$

48,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forty Weeks Ended October 8, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,716,337

 

 

$

786,320

 

 

$

-

 

 

$

3,502,657

 

Cost of sales, distribution and store occupancy

 

2,311,878

 

 

675,007

 

 

6,528

 

 

2,993,413

 

Operating and administrative expenses

 

357,112

 

 

57,579

 

 

59,330

 

 

474,021

 

Income (loss) from operations

 

$

47,347

 

 

$

53,734

 

 

$

(65,858

)

 

$

35,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

93,503

 

 

$

11,575

 

 

$

12,505

 

 

$

117,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

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 EBITDA and adjusted EBITDA, adjusted net income, adjusted net income per share, and adjusted net income per diluted share) 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 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.  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.

 

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 net income to EBITDA, adjusted EBITDA and adjusted net income, and net income per share to adjusted net income per share and adjusted net income per diluted share, for the sixteen-week and forty-week periods ended October 8, 2017 and October 9, 2016.

 

 

Smart & Final Stores, Inc. and Subsidiaries

Reconciliation of EBITDA to Adjusted EBITDA

(Unaudited)

(In Thousands)

 

 

 

 

Sixteen Weeks
Ended October 8,
2017

 

 

Sixteen Weeks
Ended October 9,
2016

 

 

Forty Weeks
Ended October 8,
2017

 

 

Forty Weeks
Ended October 9,
2016

 

Net income

 

$

5,106

 

 

$

7,033

 

 

$

7,642

 

 

$

13,201

 

Depreciation and amortization

 

31,052

 

 

27,728

 

 

75,049

 

 

64,515

 

Interest expense, net

 

11,229

 

 

9,977

 

 

27,738

 

 

24,729

 

Income tax provision (benefit)

 

2,605

 

 

(1,859

)

 

419

 

 

(387

)

EBITDA

 

49,992

 

 

42,879

 

 

110,848

 

 

102,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from closed stores and exit costs (a)

 

1,275

 

 

2,283

 

 

2,556

 

 

6,021

 

Loss from asset dispositions (b)

 

830

 

 

819

 

 

1,458

 

 

1,004

 

Share-based compensation expense (c)

 

4,199

 

 

3,830

 

 

8,503

 

 

7,248

 

Non-cash rent (d)

 

1,917

 

 

2,889

 

 

5,043

 

 

6,258

 

Pre-opening costs (e)

 

1,346

 

 

917

 

 

3,519

 

 

16,769

 

Loss on extinguishment of debt (f)

 

-

 

 

4,978

 

 

-

 

 

4,978

 

Other items (g)

 

3,354

 

 

(1,401

)

 

3,435

 

 

(1,395

)

Adjusted EBITDA

 

$

62,913

 

 

$

57,194

 

 

$

135,362

 

 

$

142,941

 

 

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 October 8,
2017

 

 

Sixteen Weeks
Ended October 9,
2016

 

 

Forty Weeks
Ended October 8,
2017

 

 

Forty Weeks
Ended October 9,
2016

 

Net income

 

$

5,106

 

 

$

7,033

 

 

$

7,642

 

 

$

13,201

 

Income tax provision (benefit)

 

2,605

 

 

(1,859

)

 

419

 

 

(387

)

Income before income taxes

 

7,711

 

 

5,174

 

 

8,061

 

 

12,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to net income

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from closed stores and exit costs (a)

 

1,275

 

 

2,283

 

 

2,556

 

 

6,021

 

Loss from asset dispositions (b)

 

830

 

 

819

 

 

1,458

 

 

1,004

 

Share-based compensation expense (c)

 

4,199

 

 

3,830

 

 

8,503

 

 

7,248

 

Non-cash rent (d)

 

1,917

 

 

2,889

 

 

5,043

 

 

6,258

 

Pre-opening costs (e)

 

1,346

 

 

917

 

 

3,519

 

 

16,769

 

Loss on extinguishment of debt (f)

 

-

 

 

4,978

 

 

-

 

 

4,978

 

Other items (g)

 

3,354

 

 

(1,401

)

 

3,435

 

 

(1,395

)

Adjusted income tax provision

 

(7,702

)

 

(4,443

)

 

(10,090

)

 

(16,542

)

Adjusted net income

 

$

12,930

 

 

$

15,046

 

 

$

22,485

 

 

$

37,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - basic

 

$

0.07

 

 

$

0.10

 

 

$

0.11

 

 

$

0.18

 

Per share impact of net income adjustments

 

0.11

 

 

0.11

 

 

0.20

 

 

0.33

 

Adjusted net income per share - basic

 

$

0.18

 

 

$

0.21

 

 

$

0.31

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted

 

$

0.07

 

 

$

0.09

 

 

$

0.10

 

 

$

0.17

 

Per share impact of net income adjustments

 

0.10

 

 

0.10

 

 

0.20

 

 

0.30

 

Adjusted net income per share - diluted

 

$

0.17

 

 

$

0.19

 

 

$

0.30

 

 

$

0.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

72,446,404

 

 

72,601,724

 

 

72,437,033

 

 

72,956,554

 

Weighted average shares - diluted

 

74,253,374

 

 

77,705,917

 

 

75,588,182

 

 

78,468,330

 

 

 

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

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

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

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

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

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

(g)  Represents (i) severance costs in the sixteen and forty weeks ended October 8, 2017 and the sixteen and forty weeks ended October 9, 2016, and (ii) death benefit income from a Company-owned life insurance policy in the sixteen and forty weeks ended October 9, 2016.

 

11


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2 EX-99.1 a17-27158_1ex99d1.htm EX-99.1 646988
3 GRAPHIC g271581mm01i001.jpg GRAPHIC 2387
  Complete submission text file 0001104659-17-068855.txt   680375