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) March 14, 2018

 

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 March 14, 2018, Smart & Final Stores, Inc. issued a press release announcing its financial results for the quarter and full year ended December 31, 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 9.01.       Financial Statements and Exhibits.

 

(d)                   Exhibits:

 

Exhibit Number

 

Description

 

 

 

99.1

 

Press Release, dated March 14, 2018

 



 

Exhibit Index

 

Exhibit Number

 

Description

99.1

 

Press Release, dated March 14, 2018

 



 

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 14, 2018

 

 

 

 

 

 

 

 

 

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 Fourth Quarter and Full Year 2017 Financial Results

 

COMMERCE, Calif. (March 14, 2018) – 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 December 31, 2017.

 

Fourth Quarter Highlights:

 

·                  Net sales increase of 6.7% to $1,068 million driven by comparable store sales increase of 3.2%.

 

·                  Online options for both business and household customers, including delivery or in-store pickup options, available in over 85% of Smart & Final banner stores.

 

·                  Net loss of $146.6 million in fourth quarter reflects non-cash goodwill impairment charge of $180 million.

 

·                  Adjusted net income of $11.3 million or $0.15 per diluted share and adjusted EBITDA of $49.1 million.

 

·                  Named one of Fortune’s “Most Admired Companies” for second consecutive year.

 

“We have a differentiated position in the evolving retail marketplace and our unique store operating model enables us to maintain our position as a low-cost leader serving multiple sales channels,” said David Hirz, president and chief executive officer. “We are pleased with our strengthening comparable store sales trends, which represent the third consecutive quarter of comp growth. This reflects the success of our merchandising initiatives aimed at both household and business customers with an emphasis on our natural and organic, private label and club-size items. These initiatives, combined with our efforts in strategic sourcing and pricing, contributed to a gross margin rate expansion in the fourth quarter, despite ongoing promotional activity within the grocery landscape.”

 

Mr. Hirz continued, “Over the course of 2017, we accelerated the expansion of our online sales channel and delivery offerings, with over 85% of our Smart & Final banner stores offering delivery or in-store pickup at year-end.  While we remain focused on our strong brick-and-mortar stores with two successful store banners, we are increasingly focused on digital channels for brand marketing and customer transaction options.  In 2018, we plan to make additional investments in our infrastructure to position all of our sales channels for continued success.”

 

1



 

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 Fourth Quarter 2017 Financial Results

 

Net sales were $1,067.9 million in the 12-week quarter ended December 31, 2017, representing a 6.7% increase as compared to $1,000.6 million for the same period of 2016. Net sales growth was driven by a 3.2% increase in comparable store sales and the net sales contribution of new stores. Comparable store sales growth was comprised of a 3.7% increase in comparable average transaction size, partially offset by a 0.4% decrease in comparable transaction count, including the effect of cannibalization from new stores.

 

Net sales for Smart & Final banner stores were $841.4 million, a 5.7% increase as compared to $796.3 million for the same period of 2016. Comparable store sales growth for the Smart & Final banner was 2.5% in the fourth quarter.

 

Net sales for Cash & Carry Smart Foodservice banner stores were $226.6 million, a 10.8% increase as compared to $204.4 million for 2016. Comparable store sales growth for the Cash & Carry banner was 6.2% in the fourth quarter.

 

Gross margin was $164.4 million, a 16.7% increase as compared to $140.9 million in the fourth quarter of 2016. Gross margin rate was 15.4% as compared to 14.1% for the same period of 2016.

 

Operating and administrative expenses were $147.1 million, an 8.8% increase as compared to $135.2 million for the same period of 2016. The increase was related to expenses associated with the effect of higher minimum wages, the 14 new stores that opened following the fourth quarter of 2016 through the end of the fourth quarter of 2017 and related support costs.

 

Net loss was $146.6 million, or $2.03 per diluted share, as compared to a net loss of $0.3 million for the same period of 2016. These results included a non-cash net benefit of $27.0 million, as a result of the Tax Cuts and Jobs Act and other one-time items, primarily due to a lower valuation of net deferred tax liabilities. During the quarter, the Company also recorded a goodwill impairment charge of $180.0 million, related to the Company’s Smart & Final banner.

 

Adjusted net income was $11.3 million, or $0.15 per diluted share, as compared to $5.0 million, or $0.07 per share, for the same period of 2016.   Adjusted net income excludes the $27.0 million, or $0.37 per diluted share, benefit associated with the Tax Cuts and Jobs Act and other one-time items, and the $180.0 million, or $2.44 per diluted share, goodwill impairment charge.

 

Adjusted EBITDA was $49.1 million as compared to $37.3 million for the same period of 2016.

 

Fiscal 2017 Financial Results

 

In the fifty-two weeks ended December 31, 2017, net sales were $4,570.6 million, an increase of 5.3% as compared to $4,341.8 million for the same period of 2016.  Net sales growth was driven by the net sales contribution of new stores, and a 1.0% increase in comparable store sales.  Comparable store sales growth was comprised of a 0.3% increase in comparable transaction count, and a 0.8% increase in comparable average transaction size.

 

2



 

Net sales for Smart & Final banner stores were $3,557.7 million, an increase of 4.6% as compared to $3,400.8 million for 2016. Full year 2017 comparable store sales for the Smart & Final banner increased 0.7%.

 

Net sales for Cash & Carry Smart Foodservice banner stores were $1,012.9 million, a 7.6% increase as compared to $941.0 million for 2016.  Full year 2017 comparable store sales for the Cash & Carry banner increased 2.4%.

 

Net loss was $138.9 million, or $1.92 per diluted share, as compared to net income of $12.9 million, or $0.17 per diluted share, for fiscal 2016. These results included a non-cash net benefit of $27.0 million, as a result of the Tax Cuts and Jobs Act and other one-time items, primarily due to a lower valuation of net deferred tax liabilities. During the fourth quarter, the Company also recorded a goodwill impairment charge of $180.0 million, related to the Company’s Smart & Final banner.

 

Adjusted net income was $33.6 million, or $0.45 per diluted share, as compared to $42.2 million, or $0.54 per share, for 2016.   Adjusted net income excludes the $27.0 million, or $0.36 per diluted share, benefit associated with income tax reform and other one-time items, as well as the $180.0 million, or $2.39 per diluted share, goodwill impairment charge, recorded in the fourth quarter 2017.

 

Adjusted EBITDA was $184.4 million as compared to $180.3 million for 2016.

 

Goodwill Impairment

 

In the fourth quarter of 2017, the Company concluded an annual review of its goodwill as required under accounting standard ASC 350.  The review included current equity market valuation metrics and the Company’s near term plans for growth.  The result of the review was an impairment of Smart & Final banner goodwill in the amount of $180.0 million.  The Company does not believe that this impairment charge reflects a fundamental change in the long-term attractiveness of future store investments.

 

Growth and Development

 

During the fiscal fourth quarter of 2017, the Company opened seven new Smart & Final Extra! stores, and completed three expansions of legacy Smart & Final stores to the Extra! store format, and one store relocation. As of December 31, 2017, the Company operated a total of 323 stores, including 194 Smart & Final Extra! stores, 66 legacy format Smart & Final stores and 63 Cash & Carry Smart Foodservice stores.

 

 

 

Operating Stores at Fiscal Year End (December 31, 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

 

14

 

-

 

14

 

4

 

18

Relocations, net

 

3

 

(3)

 

-

 

-

 

-

Expansions

 

5

 

(5)

 

-

 

-

 

-

Store closures

 

-

 

-

 

-

 

-

 

-

End of Fiscal 2017

 

194

 

66

 

260

 

63

 

323

 

3



 

Leverage and Liquidity

 

As of December 31, 2017, the Company’s debt, net of debt issuance costs, was $699.4 million and cash and cash equivalents were $71.7 million.

 

For the fifty-two weeks ended December 31, 2017, the Company generated cash from operations of $169.5 million and invested $162.6 million in capital expenditures, primarily related to the development of Extra! format stores and to improvements of existing assets.

 

Outlook

 

The Company is providing the following guidance for the full year ending December 30, 2018:

 

 

Net sales growth

4.0% - 5.0%

Comparable store sales growth

1.0% - 2.0%

Unit growth (new stores)

3-5 Smart & Final Extra!
3-5 Cash & Carry Smart Foodservice

Relocations of existing stores to Extra! format

2-3 Smart & Final stores

Expansions or conversions of legacy stores to Extra! format

1-2 Smart & Final stores

Adjusted EBITDA

$180 - $190 million

Adjusted net income

$31 - $35 million

Adjusted diluted EPS

$0.42 - $0.47

Capital expenditures (net)

$80 - $90 million

Fully diluted weighted average shares

74 to 75 million

 

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 $3.8 million, non-cash rent related to stores of approximately $2.9 million, share-based compensation expense of approximately $15.5 million, and $3.9 million of store closure expenses. 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.

 

The Company additionally is providing first quarter 2018 guidance for comparable store sales growth of 1.0% to 1.5% and adjusted EBITDA in the range of $23 to $25 million.

 

Fiscal Fourth Quarter and Full Year 2017 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 fiscal 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: 13677083. The telephonic replay will be available until 11:59 p.m. Eastern Time, March 28, 2018.

 

4



 

About Smart & Final

 

Smart & Final Stores, Inc. (NYSE: SFS), is a value-oriented food and everyday staples retailer, headquartered in Commerce (near Los Angeles), California. The Company offers quality products in a variety of sizes, saving household, nonprofit and business customers time and money. As of December 31, 2017, the Company operated 323 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 146 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

 

 

 

Fifty-two Weeks Ended

 

 

 

December 31, 2017

 

January 1, 2017

 

 

December 31, 2017

 

January 1, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

$

1,067,908

 

 

$

1,000,632

 

 

 

$

4,570,565

 

 

$

4,341,795

 

Cost of sales, buying and occupancy

 

 

903,484

 

 

859,722

 

 

 

3,896,897

 

 

3,712,291

 

Gross margin

 

 

164,424

 

 

140,910

 

 

 

673,668

 

 

629,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating and administrative expenses

 

 

147,057

 

 

135,183

 

 

 

621,078

 

 

582,486

 

Goodwill impairment

 

 

180,000

 

 

-     

 

 

 

180,000

 

 

-     

 

(Loss) income from operations

 

 

(162,633

)

 

5,727

 

 

 

(127,410

)

 

47,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

8,732

 

 

7,925

 

 

 

36,470

 

 

32,654

 

Loss on early extinguishment of debt

 

 

-     

 

 

-     

 

 

 

-     

 

 

4,978

 

Equity in earnings of joint venture

 

 

347

 

 

295

 

 

 

923

 

 

1,525

 

(Loss) income before income tax benefit

 

 

(171,018

)

 

(1,903

)

 

 

(162,957

)

 

10,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

24,462

 

 

1,650

 

 

 

24,043

 

 

2,037

 

Net (loss) income

 

 

$

(146,556

)

 

$

(253

)

 

 

$

(138,914

)

 

$

12,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

(2.03

)

 

$

0.00

 

 

 

$

(1.92

)

 

$

0.18

 

Diluted

 

 

$

(2.03

)

 

$

0.00

 

 

 

$

(1.92

)

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

72,068,998

 

 

71,962,127

 

 

 

72,352,102

 

 

72,727,071

 

Diluted

 

 

72,068,998

 

 

71,962,127

 

 

 

72,352,102

 

 

78,026,159

 

 

6



 

Smart & Final Stores, Inc. and Subsidiaries

 

Consolidated Balance Sheets

 

(In Thousands, Except Share and Per Share Amounts)

 

 

 

December 31, 2017

 

January 1, 2017

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

71,671

 

$

54,235

 

Accounts receivable, less allowances of $177 and $434 at December 31, 2017 and January 1, 2017, respectively

 

33,019

 

31,809

 

Inventories

 

289,712

 

278,718

 

Prepaid expenses and other current assets

 

54,241

 

48,769

 

Deferred income taxes

 

-    

 

22,105

 

Total current assets

 

448,643

 

435,636

 

 

 

 

 

 

 

Property, plant, and equipment:

 

 

 

 

 

Land

 

10,076

 

9,106

 

Buildings and improvements

 

53,965

 

17,351

 

Leasehold improvements

 

346,181

 

301,522

 

Fixtures and equipment

 

421,912

 

353,764

 

Construction in progress

 

8,242

 

12,110

 

 

 

840,376

 

693,853

 

Less accumulated depreciation and amortization

 

338,149

 

249,251

 

 

 

502,227

 

444,602

 

 

 

 

 

 

 

Capitalized software, net of accumulated amortization of $17,325 and $13,293 at December 31, 2017 and January 1, 2017, respectively

 

21,984

 

10,392

 

Other intangible assets, net

 

362,536

 

369,519

 

Goodwill

 

385,918

 

565,918

 

Equity investment in joint venture

 

15,380

 

14,366

 

Other assets

 

73,249

 

66,662

 

Total assets

 

$

1,809,937

 

$

1,907,095

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

245,009

 

$

225,227

 

Accrued salaries and wages

 

36,216

 

31,933

 

Accrued expenses

 

100,639

 

82,925

 

Current portion of debt, less debt issuance costs

 

81,512

 

62,352

 

Total current liabilities

 

463,376

 

402,437

 

 

 

 

 

 

 

Long-term debt, less debt issuance costs

 

617,867

 

616,588

 

Deferred income taxes

 

38,095

 

84,578

 

Postretirement and postemployment benefits

 

127,649

 

121,409

 

Other long-term liabilities

 

159,904

 

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 - 74,120,113 and 72,930,653 at December 31, 2017 and January 1, 2017, respectively

 

74

 

73

 

Additional paid-in capital

 

506,098

 

500,666

 

Retained (deficit) earnings

 

(78,160

)

65,093

 

Accumulated other comprehensive loss

 

(24,966

)

(13,583

)

Total stockholders’ equity

 

403,046

 

552,249

 

Total liabilities and stockholders’ equity

 

$

1,809,937

 

$

1,907,095

 

 

7



 

Smart & Final Stores, Inc. and Subsidiaries

 

Consolidated Statements of Cash Flows

 

(In Thousands)

 

 

 

Fiscal Year

 

Fiscal Year

 

Fiscal Year

 

 

 

2017

 

2016

 

2015

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

Net (loss) income

 

$

(138,914

)

$

12,948

 

$

38,262

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation

 

58,589

 

51,385

 

38,585

 

Amortization

 

39,783

 

35,630

 

30,181

 

Amortization of debt discount and debt issuance costs

 

1,908

 

2,511

 

2,780

 

Share-based compensation

 

11,560

 

9,803

 

10,003

 

Excess tax benefits related to share-based payments

 

 

 

(358

)

Deferred income taxes

 

(20,283

)

(1,469

)

3,325

 

Equity in earnings of joint venture

 

(923

)

(1,525

)

(1,378

)

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

 

(51

)

282

 

(40

)

Asset impairment

 

1,796

 

1,323

 

1,413

 

Goodwill impairment

 

180,000

 

 

 

Loss on early extinguishment of debt

 

 

4,978

 

2,192

 

Dividend from joint venture

 

455

 

769

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, net

 

(2,988

)

(2,726

)

(3,637

)

Inventories

 

(10,994

)

(44,429

)

(10,885

)

Prepaid expenses and other assets

 

405

 

(23,962

)

(1,202

)

Accounts payable

 

19,782

 

31,078

 

9,252

 

Accrued salaries and wages

 

4,283

 

(1,926

)

5,277

 

Other accrued liabilities

 

25,087

 

22,423

 

21,621

 

Net cash provided by operating activities

 

169,495

 

97,093

 

145,391

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Purchases of property, plant, and equipment

 

(149,347

)

(148,043

)

(132,738

)

Proceeds from disposal of property, plant, and equipment

 

1,858

 

2,265

 

8,104

 

Assets acquired in Haggen Transaction

 

 

(2,257

)

(66,440

)

Investment in capitalized software

 

(14,316

)

(3,193

)

(4,265

)

Other

 

(782

)

(2,024

)

(1,277

)

Net cash used in investing activities

 

(162,587

)

(153,252

)

(196,616

)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

4,228

 

4,667

 

719

 

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

 

(1,850

)

(669

)

(694

)

Fees paid in conjunction with debt financing

 

(245

)

(8,500

)

(1,335

)

Borrowings on bank line of credit

 

88,000

 

97,000

 

15,000

 

Payments on bank line of credit

 

(71,000

)

(38,000

)

(10,000

)

Cash from landlord related to financing lease obligations

 

4,268

 

 

 

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

 

(12,873

)

(33,524

)

(129

)

Net cash provided by financing activities

 

10,528

 

51,067

 

3,705

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

17,436

 

(5,092

)

(47,520

)

Cash and cash equivalents at beginning of period

 

54,235

 

59,327

 

106,847

 

Cash and cash equivalents at end of period

 

$

71,671

 

$

54,235

 

$

59,327

 

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

 

$

33,957

 

$

29,750

 

$

29,462

 

Income taxes

 

2

 

10,448

 

 

23,729

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

Software development costs incurred but not paid

 

$

1,397

 

$

24

 

$

310

 

Construction in progress costs incurred but not paid

 

 

18,834

 

 

12,070

 

 

8,534

 

Property acquired through financing lease obligations

 

 

7,135

 

 

 

 

 

 

8



 

Smart & Final Stores, Inc. and Subsidiaries

 

Segment Information

 

(In Thousands)

 

 

 

Smart & Final

 

Cash & Carry

 

Corporate / Other

 

Consolidated

 

Twelve Weeks Ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

841,354

 

$

226,554

 

$

-

 

$

1,067,908

 

Cost of sales, distribution and store occupancy

 

708,326

 

193,537

 

1,621

 

903,484

 

Operating and administrative expenses

 

111,834

 

17,212

 

18,011

 

147,057

 

Goodwill impairment

 

180,000

 

-

 

-

 

180,000

 

(Loss) income from operations

 

$

(158,806)

 

$

15,805

 

$

(19,632)

 

$

(162,633)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

40,814

 

$

1,269

 

$

3,996

 

$

46,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fifty-two Weeks Ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

3,557,691

 

$

1,012,874

 

$

-

 

$

4,570,565

 

Cost of sales, distribution and store occupancy

 

3,020,204

 

868,544

 

8,149

 

3,896,897

 

Operating and administrative expenses

 

468,946

 

74,791

 

77,341

 

621,078

 

Goodwill impairment

 

180,000

 

-

 

-

 

180,000

 

(Loss) income from operations

 

$

(111,459)

 

$

69,539

 

$

(85,490)

 

$

(127,410)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

134,317

 

$

12,844

 

$

16,502

 

$

163,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

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 (loss) before depreciation and amortization, interest expense and provision (benefit) 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 (loss) adjusted for the items set forth in the table below. The Company defines adjusted net income (loss) 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 (loss) per share to adjusted net income per share and adjusted net income per diluted share, for the twelve-week and fifty-two week periods ended December 31, 2017.

 

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 December
31, 2017

 

Twelve Weeks
Ended January 1,
2017

 

Fifty-two Weeks
Ended December
31, 2017

 

Fifty-two Weeks
Ended January 1,
2017

 

Net (loss) income

 

$

(146,556)

 

$

(253)

 

$

(138,914)

 

$

12,948

 

Income tax (benefit)

 

(24,462)

 

(1,650)

 

(24,043)

 

(2,037)

 

(Loss) income before income taxes

 

(171,018)

 

(1,903)

 

(162,957)

 

10,911

 

 

 

 

 

 

 

 

 

 

 

Adjustments to net (loss) income

 

 

 

 

 

 

 

 

 

Net loss from closed stores and exit costs (a)

 

1,262

 

2,650

 

3,818

 

8,671

 

Goodwill impairment (b)

 

180,000

 

-      

 

180,000

 

-      

 

Loss from asset dispositions and impairment charges (c)

 

369

 

594

 

1,827

 

1,598

 

Share-based compensation expense (d)

 

3,057

 

2,555

 

11,560

 

9,803

 

Non-cash rent (e)

 

1,492

 

1,688

 

6,535

 

7,946

 

Pre-opening costs (f)

 

1,914

 

926

 

5,433

 

17,695

 

Loss on extinguishment of debt (g)

 

-     

 

-     

 

-     

 

4,978

 

Other items (h)

 

(45)

 

377

 

3,390

 

(1,018)

 

Adjusted income tax (benefit)

 

(5,731)

 

(1,890)

 

(15,951)

 

(18,363)

 

Adjusted net income

 

$

11,300

 

$

4,997

 

$

33,655

 

$

42,221

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net (Loss) Income Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share - basic

 

$

(2.03)

 

$

0.00

 

$

(1.92)

 

$

0.18

 

Per share impact of net income adjustments

 

2.19

 

0.07

 

2.39

 

0.40

 

Adjusted net income per share - basic

 

$

0.16

 

$

0.07

 

$

0.47

 

$

0.58

 

Net (loss) income per share - diluted

 

$

(1.99)

 

$

0.00

 

$

(1.85)

 

$

0.17

 

Per share impact of net income adjustments

 

2.14

 

0.07

 

2.30

 

0.37

 

Adjusted net income per share - diluted

 

$

0.15

 

$

0.07

 

$

0.45

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

72,068,998

 

71,962,127

 

72,352,102

 

72,727,071

 

Weighted average shares - diluted

 

73,828,639

 

76,552,257

 

75,182,134

 

78,026,159

 

 

11



 

Smart & Final  Stores, Inc. and Subsidiaries

 

Reconciliation of EBITDA to Adjusted EBITDA

 

(Unaudited)

 

(In Thousands)

 

 

 

Twelve Weeks
Ended December
31, 2017

 

Twelve Weeks
Ended January 1,
2017

 

Fifty-two Weeks
Ended December
31, 2017

 

Fifty-two Weeks
Ended January 1,
2017

 

Net (loss) income

 

  $

(146,556)

 

  $

(253)

 

  $

(138,914)

 

  $

12,948

 

Depreciation and amortization

 

23,324

 

22,500

 

98,373

 

87,015

 

Interest expense, net

 

8,732

 

7,925

 

36,470

 

32,654

 

Income tax (benefit)

 

(24,462)

 

(1,650)

 

(24,043)

 

(2,037)

 

EBITDA

 

(138,962)

 

28,522

 

(28,114)

 

130,580

 

 

 

 

 

 

 

 

 

 

 

Adjustments to EBITDA

 

 

 

 

 

 

 

 

 

Net loss from closed stores and exit costs (a)

 

1,262

 

2,650

 

3,818

 

8,671

 

Goodwill impairment (b)

 

180,000

 

-     

 

180,000

 

-     

 

Loss from asset dispositions and impairment charges (c)

 

369

 

594

 

1,827

 

1,598

 

Share-based compensation expense (d)

 

3,057

 

2,555

 

11,560

 

9,803

 

Non-cash rent (e)

 

1,492

 

1,688

 

6,535

 

7,946

 

Pre-opening costs (f)

 

1,914

 

926

 

5,433

 

17,695

 

Loss on extinguishment of debt (g)

 

-     

 

-     

 

-     

 

4,978

 

Other items (h)

 

(45)

 

377

 

3,390

 

(1,018)

 

Adjusted EBITDA

 

  $

49,087

 

  $

37,312

 

  $

184,449

 

  $

180,253

 

 

 

 

(a)

Represents costs associated with store closure and exit costs.

(b)

Represents non-cash charge associated with goodwill impairment.

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

(h)

Represents (i) severance costs in the twelve and fifty-two weeks ended December 31, 2017 and the twelve and fifty-two weeks ended January 1, 2017 and (ii) death benefit income from a Company-owned life insurance policy in the fifty-two weeks ended January 1, 2017.

 

12


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1 8-K a18-8148_18k.htm 8-K 28208
2 EX-99.1 a18-8148_1ex99d1.htm EX-99.1 612716
3 GRAPHIC g81481mm01i001.jpg GRAPHIC 1927
  Complete submission text file 0001104659-18-017488.txt   645004