As filed with the Securities and Exchange Commission on March 17, 20144, 2015
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Sprouts Farmers Market, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 5411 | 32-0331600 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
11811 N. Tatum Boulevard
Suite 2400
Phoenix, Arizona 85028
(480) 814-8016
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Brandon F. Lombardi, Esq.
Chief Legal Officer and Corporate Secretary
Sprouts Farmers Market, Inc.
11811 N. Tatum Boulevard
Suite 2400
Phoenix, Arizona 85028
(480) 814-8016
(Name, address, including zip code, and telephone number, including area code, of agent for service)
CopiesCopy to:
Howard A. Kenny, Esq. Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 (212) 309-6000 |
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Approximate date of commencement of proposed sale to the public:As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | ¨ | ||||
Non-accelerated filer | Smaller reporting company | ¨ |
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered | Number of Shares to be | Proposed Maximum Offering Price per Share(2) | Proposed Maximum Aggregate Offering Price(2) | Amount of Registration Fee | Number of Shares to be | Proposed Maximum Offering Price per Share(1) | Proposed Maximum Aggregate Offering Price(1) | Amount of Registration Fee | ||||||||
Common Stock, $0.001 par value per share | 17,250,000 | $37.56 | $647,910,000 | $83,450.81 | 15,847,800 | $35.85 | $568,143,630 | $66,018.29 | ||||||||
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, and is based upon the average of the high and low sales prices of the Company’s common stock as reported on the NASDAQ Global Select Market on |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated March 17, 20144, 2015
PRELIMINARY PROSPECTUS
15,000,00015,847,800 Shares
Common Stock
The selling stockholdersThis prospectus relates solely to sales of Sprouts Farmers Market, Inc. identifiedcommon stock by the selling stockholders named in this prospectus are offeringprospectus. The selling stockholders may offer and sell shares of our common stock. stock from time to time in amounts, at prices and on terms that will be determined at the time of any such offering. Each of the selling stockholders may be deemed an affiliate of ours. See “Prospectus Summary — Selling Stockholders.”
These sales may occur at fixed prices, at market prices prevailing at the time of sale, at prices related to prevailing market price, or at negotiated prices. The distribution of the common stock by the selling stockholders may be effected from time to time through brokerage transactions, block trades, purchases by a broker/dealer as principal and resale by the broker–dealer for its account, privately negotiated transactions and any other method permitted by applicable law. The brokers or dealers through or to whom the shares of common stock may be sold may be deemed underwriters of the shares within the meaning of the Securities Act of 1933, as amended, in which event all brokerage commissions or discounts and other compensation received by those brokers or dealers may be deemed to be underwriting compensation. To the extent required, the names of any underwriters and applicable commissions or discounts and any other required information with respect to any particular sale will be set forth in an accompanying prospectus supplement. See “Plan of Distribution” for a further description of how the selling stockholders may dispose of the common stock covered by this prospectus.
We are not selling any shares incommon stock under this offeringprospectus and will not receive any proceeds from the sale of common stock to be offered by the proceeds.selling stockholders. We will bear all ofpay the offering expenses, other than the underwriting discounts and commissions.commissions, associated with the sale of shares by the selling stockholders.
Our common stock is listed on the NASDAQ Global Select Market under the symbol “SFM.” On March 14, 2014,3, 2015, the last reported sale price of our common stock was $37.95$35.16 per share.
Investing in our common stock involves risks. See “Risk Factors”“Risk Factors” beginning on page 138 for a discussion of factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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The underwriters have the option to purchase up to an additional 2,250,000 shares from the selling stockholders at the public offering price less the underwriting discount. They may exercise that option for 30 days.
The underwriters expect to deliver the shares of common stock against payment in New York, New York on or about , 2014.
Prospectus dated , 2014
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Neither we, the selling stockholders nor the underwritersany underwriter have authorized anyone to provide any information or to make any representations other than those contained or incorporated by reference in this prospectus or in any prospectus supplement or free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained or incorporated by reference in this prospectus or any prospectus supplement is current only as of its date.
Persons who come into possession of this prospectus and any such free writing prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free writing prospectus applicable to that jurisdiction.
BASIS OF PRESENTATION
We report our results of operations on a 52- or 53-week fiscal year ending on the Sunday closest to December 31, with each fiscal quarter generally divided into three periods consisting of two four-week periods and one five-week period. Our last three completed fiscal years ended on January 1, 2012, December 30, 2012 and December 29, 2013. For ease of reference, we identify our fiscal years in this prospectus by reference to the calendar year ending closest to the last day of such fiscal year. For example, we refer to our fiscal years ended January 1, 2012, December 30, 2012 and December 29, 2013 as “fiscal 2011,” “fiscal 2012” and “fiscal 2013,” respectively.
TRADEMARKS AND TRADE NAMES
This prospectus includes our trademarks and service marks, SPROUTS FARMERS MARKET®, SPROUTS® and HEALTHY LIVING FOR LESS!®, which are protected under applicable intellectual property laws and are the property of Sprouts. This prospectus also contains trademarks, service
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marks, trade names and copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the® orTM symbols. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
MARKET, INDUSTRY AND OTHER DATAABOUT THIS PROSPECTUS
Unless otherwise indicated,This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, the selling stockholders may sell certain shares of our common stock in one or more offerings. When the selling stockholders sell shares of common stock under this shelf registration process, we may provide a prospectus supplement that will contain more specific information about the terms of such offering. The prospectus supplement may add, update or change the information contained or incorporated by referencein this prospectus. The prospectus supplement will supersede this prospectus to the extent it contains information that is different from, or that conflicts with, the information contained or incorporated in this prospectus. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to an offering. You should read and consider all information contained in this prospectus concerning our industry and the marketsany accompanying prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you) in which we operate is based on information from independent industry and research organizations, such as Buxton Company, and other third-party sources (including theNutrition Business Journal, theProgressive Grocer’s 80th Annual Reportmaking your investment decision.
This prospectus does not contain all of the Grocery Industry (referred to as “Progressive Grocer”), and other industry publications, surveys and forecasts), and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of our industry and markets, which we believe to be reasonable. In addition, projections, assumptions and estimates of the future performance of our industry and our future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause results to differ materially from those expressedincluded in the estimates maderegistration statement. The registration statement filed with the SEC includes or incorporates by reference exhibits that provide more details about the independent partiesmatters discussed in this prospectus. You should carefully read this prospectus, the related exhibits filed with the SEC and by us.
RECENT TRANSACTIONS
In 2002, Sprouts Farmers Markets, LLC, an Arizona limited liability company (referred to as “Sprouts Arizona”) opened the first Sprouts Farmers Market store in Chandler, Arizona. In 2011, we were formed when Sprouts Arizona combined with Henry’s Holdings, LLC (referred to as “Henry’s”), which operated 35 Henry’s Farmers Markets stores and eight Sun Harvest Market stores (referred to as the “Henry’s Transaction”). The Henry’s Transaction was led by investment funds affiliated with, and co-investment vehicles managed by, Apollo Management VI, L.P. (referred to as the “Apollo Funds”). The Apollo Funds are affiliates of Apollo Global Management, LLC (together with its subsidiaries, referred to as “Apollo”). In May 2012, we acquired Sunflower Farmers Market, Inc., which operated 37 Sunflower Farmers Market stores (referred to as “Sunflower”). We refer to this as the “Sunflower Transaction.” The Henry’s Transaction and the Sunflower Transaction are collectively referred to as the “Transactions.”
Effective as of April 23, 2013, we entered into a credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent, and certain lenders (referred to as the “Credit Facility”), providing for a $700.0 million senior secured term loan (referred to as the “Term Loan”), and a $60.0 million senior secured revolving credit facility (referred to as the “Revolving Credit Facility”). A portion of the proceeds of the Term Loan was used to repay in full the outstanding balance of $403.1 million under our prior credit facility. We used the remaining proceeds of the Term Loan,any prospectus supplement, together with cash on hand, to make a distribution to our equity holders, to make payments to vested option holders and to pay transaction fees and expenses. We refer to the transactions through which we entered into the Credit Facility and applied the proceeds asadditional information described above as the “April 2013 Refinancing.” We used a portion of the net proceeds of our IPO (as defined below) to repay $340.0 million of outstanding indebtednessbelow under the Term Loan. In addition, we voluntarily paid down $40.0 millionheadings “Where You Can Find Additional Information” and “Incorporation of outstanding indebtedness underDocuments by Reference.”
No offer of these securities will be made in any jurisdiction where the Term Loan during the fourth quarter of 2013.
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CORPORATE CONVERSION
On July 29, 2013, Sprouts Farmers Markets, LLC, a Delaware limited liability company, converted into Sprouts Farmers Market, Inc., a Delaware corporation and the issuer of the shares of common stock offered by this prospectus, pursuant to a statutory conversion (referred to as the “corporate conversion”). As used in this prospectus, unless the context otherwise requires, references to the “Company,” “Sprouts,” “we,” “us” and “our” refer to Sprouts Farmers Markets, LLC and after the corporate conversion to Sprouts Farmers Market, Inc. and, where appropriate, its subsidiaries. In the corporate conversion, each unit of Sprouts Farmers Markets, LLC was converted into 11 shares of common stock of Sprouts Farmers Market, Inc., and each option to purchase units of Sprouts Farmers Markets, LLC was converted into an option to purchase 11 shares of common stock of Sprouts Farmers Market, Inc. For the convenience of the reader, except as the context otherwise requires, all information contained or incorporated by reference in this prospectus is presented giving effect to the corporate conversion.
COMPARABLE STORE SALES
As used in this prospectus, the term “comparable store sales growth” refers to the percentage change in our comparable store sales as compared to the prior comparable period. Our practice is to include sales from a store in comparable store sales beginning on the first day of the 61st week following the store’s opening and to exclude sales from a closed store from comparable store sales beginning on the day of closure. We include sales from an acquired store in comparable store sales on the later of (i) the day of acquisition or (ii) the first day of the 61st week following the store’s opening. This practice may differ from the methods that other retailers use to calculate comparable store sales.
In this prospectus we discuss our “pro forma comparable store sales growth” for fiscal 2009 through fiscal 2013. We compute pro forma comparable store sales growth giving effect to (i) the 2011 combination of Sprouts Arizona with Henry’s in the Henry’s Transaction, and (ii) our 2012 acquisition of Sunflower in the Sunflower Transaction, in each case as if such Transactions occurred on the first day of fiscal 2007. Stores acquired in these transactions have been rebranded as Sprouts Farmers Market stores. See “Prospectus Summary—Summary Consolidated Historical and Pro Forma Financial and Other Data” for reconciliation of historical sales to pro forma net sales and a presentation of pro forma comparable store sales growth for fiscal 2009 through fiscal 2013.
In addition, in this prospectus we refer to pro forma comparable store sales growth on a “two-year stacked basis,” which is computed by adding the pro forma comparable store sales growth of the period referenced and the pro forma comparable store sales growth of the same fiscal period ended twelve months prior.
We believe pro forma comparable store sales growth provides investors with helpful information with respect to our operating performance.
PRO FORMA INFORMATION
This prospectus contains unaudited pro forma financial information prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed consolidated statement of operations for fiscal 2013 gives pro forma effect to:
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in each case as if such transactions had been consummated on December 31, 2012, the first day of fiscal 2013. See “Unaudited Pro Forma Condensed Consolidated Financial Information.”
NON-GAAP FINANCIAL MEASURES
To supplement our financial information presented in accordance with U.S. generally accepted accounting principles (referred to as “GAAP”), we use the following additional measures to clarify and enhance an understanding of past performance:
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See “Prospectus Summary—Summary Consolidated Historical and Pro Forma Financial and Other Data” for further discussion and a reconciliation of adjusted EBITDA and adjusted EBIT.
Adjusted EBITDA and adjusted EBIT are performance measures that provide supplemental information we believe is useful to analysts and investors to evaluate our ongoing results of operations, when considered alongside other GAAP measures such as net income, net income per share, operating income and gross profit. These non-GAAP measures exclude the financial impact of items management does not consider in assessing our ongoing operating performance, and thereby facilitate review of our operating performance on a period-to-period basis. Other companies may have different capital structures or different lease terms, and comparability to our results of operations may be impacted by the effects of acquisition accounting on our depreciation and amortization. As a result of the effects of these factors and factors specific to other companies, we believe adjusted EBITDA and adjusted EBIT provide helpful information to analysts and investors to facilitate a comparison of our operating performance to that of other companies. We also use adjusted EBITDA, as further adjusted for additional items defined in our Credit Facility (as defined below), for board of director and bank compliance reporting.
These non-GAAP measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Because of their limitations, these non-GAAP measures should not be considered as measures of discretionary cash available to use to reinvest in growth of our business, or as measures of cash that will be available to meet our obligations. These non-GAAP measures have their limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.
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This summary highlights information contained elsewhere in this prospectus or incorporated by reference into this prospectus from our Annual Report on Form 10-K for the year ended December 29, 2013 (referred to as our “Form 10-K”) and our other filings with the Securities and Exchange Commission (referred to as the “SEC”) listed in the section of this prospectus entitled “Incorporation of Documents by Reference” and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this prospectus and the information incorporated by reference herein in their entirety, including the section entitled “Risk Factors” in this prospectus and in our Form 10-K and our consolidated financial statements and related notes included in our Form 10-K.
As used in this prospectus, unless the context otherwise requires, references to the “Company,” “Sprouts,” “we,” “us” and “our” refer to Sprouts Farmers Markets, LLC and after the corporate conversion to Sprouts Farmers Market, Inc. and, where appropriate, its subsidiaries.
Who We Are
Sprouts Farmers Market is a high-growth, differentiated, specialty retailer of natural and organic food focusing on health and wellness at great value. We offer a complete shopping experience that includes fresh produce, bulk foods, vitamins and supplements, grocery, meat and seafood, bakery, dairy, frozen foods, body care and natural household items catering to consumers’ growing interest in eating and living healthier. Since our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability. With fiscal 2013 net sales of $2.4 billion and 170 stores in nine states as of February 28, 2014, we are one of the largest specialty retailers of natural and organic food in the United States. According to research conducted for us by Buxton Company, a customer analytics research firm, we have significant growth opportunities in existing and new markets across the United States with the potential for approximately 1,200 locations operating under our current format.
The cornerstones of our business are fresh, natural and organic products at compelling prices, an attractive and differentiated shopping experience, and knowledgeable team members who we believe provide best-in-class customer service and product education. These attributes have positioned us to deliver strong financial results, as evidenced by the following:
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Healthy Living for Less. We offer high-quality, natural and organic products at attractive prices in every department. Consistent with our farmers market heritage, our offering begins with fresh produce, which we source, warehouse and distribute in-house and sell at prices we believe to be
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significantly below those of other food retailers. In addition, our scale, operating structure and deep industry relationships position us to consistently deliver “Healthy Living for Less” throughout the store. Based on our experience, we believe we attract a broad customer base, including conventional supermarket customers, and appeal to a much wider demographic than other specialty retailers of natural and organic food. We believe that over time, our compelling prices and product offering converts many “trial” customers into loyal “lifestyle” customers who shop Sprouts with greater frequency and across an increasing number of departments.
Attractive, Differentiated Shopping Experience. In a convenient, small-box format (average store size of 27,500 sq. ft.), our stores have a farmers market feel, with a bright, open-air atmosphere to create a comfortable and engaging in-store experience. We strive to be our customers’ everyday market. We feature fresh produce and bulk foods at the center of the store surrounded by a complete grocery offering, including vitamins and supplements, grocery, meat and seafood, bakery, dairy, frozen foods, beer and wine, body care and natural household items. Consistent with our natural and organic offering, we choose not to carry most of the traditional, national branded consumer packaged goods generally found at conventional grocery retailers (e.g., Doritos, Tide and Lucky Charms). Instead, we offer high-quality alternatives that emphasize our focus on fresh, natural and organic products at great values.
Customer Service & Education. We are dedicated to our mission of “Healthy Living for Less,” and we attract team members who share our passion for educating and serving our customers with the goal of making healthy eating easier and more accessible. We believe our well-trained and engaged team members help our customers increasingly understand that they can purchase a wide selection of high-quality, healthy and great tasting food for themselves and their families at attractive prices by shopping at Sprouts.
Our Industry
We operate in the $600 billion U.S. supermarket industry and, based on our industry experience, we believe we are capturing significant market share from conventional supermarkets and other food retailers. We believe interest in healthy eating, an increasing focus on preventative health measures, and the rising costs of healthcare have driven significant growth in natural and organic food consumption. According to theNutrition Business Journal, spending on natural and organic food experienced a compound annual growth rate (referred to as “CAGR”) of 12% from 1997 to 2012, reaching $54 billion in the United States, and is expected to continue to grow to $113 billion in 2020, representing a CAGR of 11.3% from 2013 to 2020.
What Makes Us Different
We believe the following competitive strengths position Sprouts to capitalize on two powerful, long-term consumer trends—a growing interest in health and wellness and a focus on value:
Comprehensive natural and organic product offering at great value. We feature an expansive offering of high-quality, natural and organic products at compelling value. In particular, we position Sprouts to be a value leader in fresh produce in order to drive trial visits to our stores by new customers. We believe that, over time, our differentiated product offering and strong value proposition converts many trial customers into loyal, lifestyle customers.
Resilient business model with strong financial performance. We achieved positive, pro forma comparable store sales growth of 2.6%, 2.3%, 5.1%, 9.7% and 10.7% in fiscal 2009, 2010, 2011, 2012
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and 2013, respectively. We believe the consistency of our performance over time, even through the recent economic downturn from 2008 to 2010, and across geographies and vintages is the result of a number of factors, including our distinctive value positioning and merchandising strategies, product innovation and a well-trained staff focused on customer education and service. In addition, we believe our high volume and low-cost store model enhance our ability to consistently offer competitive prices on a complete assortment of natural and organic products.
Proven and replicable economic store model. We believe that our store model, combined with our rigorous store selection process and a growing interest in health and wellness, contribute to our attractive new store returns on investment. Our typical store requires an average new store cash investment of approximately $2.8 million, including store buildout (net of contributions from landlords), inventory (net of payables) and cash pre-opening expenses. Based on historical performance, we target pre-tax cash-on-cash returns of 35-40% within three to four years after opening. We believe the consistent performance of our store portfolio across geographies and vintages supports the portability of the Sprouts brand and store model into a wide range of markets.
Significant new store growth opportunity supported by broad demographic appeal. We believe, based on our experience, that our broad product offering and value proposition appeals to a wider demographic than other leading competitors, including higher-priced health food and gourmet food retailers. Sprouts has been successful across a variety of urban, suburban and rural locations in diverse geographies, from California to Oklahoma, underscoring the heightened interest in eating healthy across markets. Based on research conducted for us, we believe that the U.S. market can support approximately 1,200 Sprouts Farmers Market stores operating under our current format, including 300 in states in which we currently operate. We intend to achieve 12% or more annual new store growth over at least the next five years, balanced among existing, adjacent and new markets.
The below diagram shows our current store footprint, by state, as of February 28, 2014.
Passionate and experienced management team with proven track record. Since inception, we have been dedicated to delivering “Healthy Living for Less.” Our passion and commitment is shared by team members throughout the entire organization, from our stores to our corporate office. Our executive management team has extensive grocery and food retail industry experience, and deep roots in organic, natural and specialty food retail. With recent investments in people, systems and other infrastructure, we believe we are well positioned to achieve our future growth plans.
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Growing Our Business
We are pursuing a number of strategies to continue our growth and strong financial performance, including:
Expand our store base. We intend to continue expanding our store base by pursuing new store openings in existing markets, expanding into adjacent markets, and penetrating new markets. From our founding in 2002 through February 28, 2014, we opened 94 new stores while successfully rebranding 43 Henry’s and 39 Sunflower stores to the Sprouts banner. On a combined basis, Sprouts, Henry’s and Sunflower opened an average of 17 stores per year from fiscal 2008 through fiscal 2013. We opened 19 new stores in fiscal 2013. We expect to continue to expand our store base with 22-24 store openings planned in fiscal 2014, of which three have opened as of February 28, 2014, and we intend to achieve 12% or more annual new store growth over at least the next five years.
Increase comparable store sales. For 27 consecutive quarters, including throughout the recent economic downturn from 2008 to 2010, stores under our management have achieved positive comparable store sales growth. We believe we can continue to grow the number of customer transactions by enhancing our core value proposition and distinctive customer-oriented shopping experience. We aim to grow our average ticket by continuing to expand and refine our fresh, natural and organic product offering, our targeted and personalized marketing efforts and our in-store education. We believe these factors, combined with the continued strong growth in natural and organic food consumption, will allow Sprouts to gain new customers, increase customer loyalty and, over time, convert single-department trial customers into core, lifestyle customers who shop Sprouts with greater frequency and across an increasing number of departments.
Continue to enhance our operating margins. We believe we can continue to enhance our operating margins though efficiencies of scale, improved systems, continued cost discipline and enhancements to our merchandise offerings. We have made significant investments in management, information technology systems, training, marketing, compliance and other infrastructure to enable us to pursue our growth plans, which we believe will also enhance our margins over time. Furthermore, we expect to achieve economies of scale in sourcing and distribution as we add new stores.
Grow the Sprouts Farmers Market brand. We are committed to supporting our stores, product offerings and brand through a variety of marketing programs, private label offerings and corporate partnerships. In addition, we will continue our community outreach and charity programs to more broadly connect with our local communities with the aim of promoting our brand and educating consumers on healthy choices. We will also continue to expand our innovative marketing and promotional strategy through print, digital and social media platforms, all of which promote our mission of “Healthy Living for Less.”
Public Offerings of Common Stock
On August 6, 2013, we completed our initial public offering (referred to as our “IPO”) of 21,275,000 shares of common stock, including 2,775,000 shares of common stock issued as a result of the exercise in full of the underwriters’ option to purchase additional shares, at a price of $18.00 per share. We sold 20,477,215 shares of common stock, including the additional shares, and certain stockholders sold the remaining 797,785 shares. We received net proceeds from our IPO of approximately $344.1 million, after deducting underwriting discounts and offering expenses. We used the net proceeds to repay $340.0 million of outstanding indebtedness under the Term Loan and the remainder for general corporate purposes.
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On December 2, 2013, certain of our stockholders completed a second public offering of 19,550,000 shares of common stock, including 2,550,000 shares of common stock sold as a result of the exercise in full of the underwriters’ option to purchase additional shares, at a price of $37.00 per share (referred to as the “December Secondary Offering”). We did not sell any shares in the December Secondary Offering.
Recent Developments
Based on results through , 2014, we expect that for the thirteen weeks ending March 30, 2014, net sales will be approximately , compared to $573.7 million for the thirteen weeks ended March 31, 2013, driven primarily by comparable store sales growth of approximately %, or % on a two-year stacked basis, and strong performance in new stores opened. We expect gross margin for the thirteen weeks ending March 30, 2014 will be in the range of to , compared to 30.3% for the same period in fiscal 2013.
These preliminary estimated results are unaudited, and do not present all information necessary for an understanding of our financial condition as of March 30, 2014 and our results of operations for the thirteen weeks ending March 30, 2014. These preliminary estimated results are subject to the completion of our financial closing procedures. Accordingly, our actual results may be different. These preliminary estimated results have been prepared by and are the responsibility of our management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to this guidance and does not express an opinion or any other form of assurance with respect thereto.
Risks To Consider
Investing in our common stock involves a high degree of risk. You should carefully consider the risks highlighted in the section entitled “Risk Factors” following this prospectus summary and in our Form 10-K incorporated herein by reference before making an investment decision. These risks include, among others, the following:
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Corporate Information
Our principal executive offices are located at 11811 N. Tatum Boulevard, Suite 2400, Phoenix, Arizona 85028, and our telephone number is (480) 814-8016. Our website address iswww.sprouts.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.
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The Offering
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Unless otherwise indicated, all information in this prospectus reflects and assumes:
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The number of shares of common stock to be outstanding before and after this offering is based on 147,751,776 shares of our common stock outstanding as of March 17, 2014, which excludes:
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Summary Consolidated Historical and Pro Forma Financial and Other Data
The following tables summarize our consolidated historical and pro forma financial and other data and should be read together with “Unaudited Pro Forma Condensed Consolidated Financial Information,” included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in our Form 10-K incorporated by reference into this prospectus. We have derived the consolidated statements of operations data for fiscal 2011, fiscal 2012 and fiscal 2013 from our audited consolidated financial statements included in our Form 10-K incorporated by reference into this prospectus. Our historical results set forth below are not necessarily indicative of results to be expected for any future period.
In 2002, Sprouts Arizona opened the first Sprouts Farmers Market store in Chandler, Arizona. In 2011, Sprouts Arizona combined with Henry’s, which operated 35 Henry’s Farmers Market stores and eight Sun Harvest Market stores, as a part of the Henry’s Transaction led by the Apollo Funds. Apollo held a controlling interest in Henry’s former parent prior to the Henry’s Transaction and continued to hold a controlling interest in the Company afterwards. Due to Apollo’s continued controlling interest, the Henry’s Transaction resulted in Henry’s financial statements becoming the financial statements of the Company, followed immediately by the acquisition by the Company of the Sprouts Farmers Market business. As a result, the Company was determined to be the accounting acquirer, effective April 18, 2011. Accordingly, our consolidated financial statements for the period from January 3, 2011 through April 17, 2011 reflect only the historic results of Henry’s prior to the Henry’s Transaction. Commencing on April 18, 2011, our consolidated financial statements also include the financial position, results of operations and cash flows of Sprouts Arizona.
In May 2012, we acquired Sunflower in the Sunflower Transaction. Commencing on May 29, 2012, our consolidated financial statements also include the financial position, results of operations and cash flows of Sunflower.
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The April 2013 Refinancing and our IPO had a material impact on our results of operations. Accordingly, we have included pro forma information for fiscal 2013 which gives effect to these transactions, as more fully described in the notes below. See “Unaudited Pro Forma Condensed Consolidated Financial Information” for unaudited pro forma information for fiscal 2013.
Fiscal 2013 | ||||||||||||||||
Fiscal 2011(1) | Fiscal 2012(2) | Actual | Pro Forma Sprouts Farmers Market, Inc.(3) | |||||||||||||
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Statements of Operations Data: | ||||||||||||||||
Net sales | $ | 1,105,879 | $ | 1,794,823 | $ | 2,437,911 | $ | 2,437,911 | ||||||||
Cost of sales, buying and occupancy | 794,905 | 1,264,514 | 1,712,644 | 1,712,644 | ||||||||||||
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Gross profit | 310,974 | 530,309 | 725,267 | 725,267 | ||||||||||||
Direct store expenses | 238,245 | 368,323 | 496,183 | 496,183 | ||||||||||||
Selling, general and administrative expenses | 58,528 | 86,364 | 81,795 | 81,795 | ||||||||||||
Amortization of Henry’s trade names and capitalized software | 32,202 | — | — | — | ||||||||||||
Store pre-opening costs | 1,338 | 2,782 | 5,734 | 5,734 | ||||||||||||
Store closure and exit costs | 6,382 | 2,155 | 2,051 | 2,051 | ||||||||||||
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Income (loss) from operations | (25,721 | ) | 70,685 | 139,504 | 139,504 | |||||||||||
Interest expense | (19,813 | ) | (35,488 | ) | (37,203 | ) | (28,239 | ) | ||||||||
Other income | 358 | 562 | 487 | 487 | ||||||||||||
Loss on extinguishment of debt | — | (992 | ) | (18,721 | ) | (1,513 | ) | |||||||||
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Income (loss) before income taxes | (45,176 | ) | 34,767 | 84,067 | 110,239 | |||||||||||
Income tax (provision) benefit | 17,731 | (15,267 | ) | (32,741 | ) | (42,948 | ) | |||||||||
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Net income (loss) | $ | (27,445 | ) | $ | 19,500 | $ | 51,326 | $ | 67,291 | |||||||
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Per Share Data: | ||||||||||||||||
Net income (loss) per share—basic(4) | $ | (0.28 | ) | $ | 0.16 | $ | 0.38 | $ | 0.46 | |||||||
Net income (loss) per share—diluted(4) | $ | (0.28 | ) | $ | 0.16 | $ | 0.37 | $ | 0.44 | |||||||
Weighted average shares outstanding—basic(4) | 96,954 | 119,427 | 134,622 | 145,624 | ||||||||||||
Weighted average shares outstanding—diluted(4) | 96,954 | 121,781 | 139,765 | 151,436 | ||||||||||||
Supplemental Financial Measures: | ||||||||||||||||
Adjusted EBITDA(5) | $ | 195,157 | ||||||||||||||
Adjusted EBIT(5) | $ | 147,618 |
Fiscal 2011 | Fiscal 2012 | Fiscal 2013 | ||||||||||
Pro forma comparable store sales growth(6) | 5.1 | % | 9.7 | % | 10.7 | % | ||||||
Pro forma stores at end of period | 138 | 148 | 167 | |||||||||
Other Operating Data: | ||||||||||||
Stores at beginning of period | 43 | 103 | 148 | |||||||||
Opened | 7 | 9 | 19 | |||||||||
Acquired(7) | 56 | 37 | — | |||||||||
Closed | (3 | ) | (1 | ) | — | |||||||
Stores at end of period | 103 | 148 | 167 | |||||||||
Gross square feet at end of period | 2,721,430 | 4,064,888 | 4,582,743 | |||||||||
Average store size at end of period (gross square feet) | 26,422 | 27,465 | 27,442 |
Balance Sheet Data: | ||||
As of December 29, 2013 | ||||
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Cash and cash equivalents | $ | 77,652 | ||
Total assets | 1,172,404 | |||
Total capital and finance lease obligations, including current portion | 119,572 | |||
Total long-term debt, including current portion | 311,240 | |||
Total stockholders’ equity | 513,771 |
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Adjusted EBITDA and adjusted EBIT are performance measures that provide supplemental information we believe is useful to analysts and investors to evaluate our ongoing results of operations, when considered alongside other GAAP measures such as net income, operating income and gross profit. These non-GAAP measures exclude the financial impact of items management does not consider in assessing our ongoing operating performance, and thereby facilitate review of our operating performance on a period-to-period basis. Other companies may have different capital structures or different lease terms, and comparability to our results of operations may be impacted by the effects of acquisition accounting on our depreciation and amortization. As a result of the effects of these factors and factors specific to other companies, we believe adjusted EBITDA and adjusted EBIT provide helpful information to analysts and investors to facilitate a comparison of our operating performance to that of other companies. We also use adjusted EBITDA, as further adjusted for additional items defined in our Credit Facility, for board of director and bank compliance reporting.
These non-GAAP measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Because of their limitations, none of these non-GAAP measures should be considered as a measure of discretionary cash available to use to reinvest in growth of our business, or as a measure of cash that will be available to meet our obligations. 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 our results as reported under GAAP.
The following table shows a reconciliation of adjusted EBITDA and adjusted EBIT to net income for fiscal 2013:
Fiscal 2013 | ||||
Sprouts Farmers Market, Inc. | ||||
(in thousands) | ||||
Net income | $ | 51,326 | ||
Add: Income tax provision | 32,741 | |||
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Net income before income taxes | 84,067 | |||
Adjustments: | ||||
Costs associated with integration(a) | (15 | ) | ||
IPO bonus(b) | 3,183 | |||
Loss on extinguishment of debt(c) | 18,721 | |||
Store closure and exit costs(d) | 2,051 | |||
Loss on disposal of assets(e) | 412 | |||
Secondary offering expenses including employment taxes on option exercises(f) | 2,014 | |||
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Total adjustments | 26,366 | |||
Interest expense, net | 37,185 | |||
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Adjusted EBIT | 147,618 | |||
Depreciation, amortization and accretion | 47,539 | |||
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Adjusted EBITDA | $ | 195,157 | ||
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Supplemental Pro Forma Data—Net Sales
Fiscal 2009 | Fiscal 2010 | Fiscal 2011 | Fiscal 2012 | Fiscal 2013 | ||||||||||||||||
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Net sales—actual | $ | 487,693 | $ | 516,816 | $ | 1,105,879 | $ | 1,794,823 | $ | 2,437,911 | ||||||||||
Pro forma adjustments(a) | 751,677 | 973,543 | 616,776 | 196,140 | — | |||||||||||||||
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Pro forma net sales | $ | 1,239,370 | $ | 1,490,359 | $ | 1,722,655 | $ | 1,990,963 | $ | 2,437,911 | ||||||||||
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Pro forma comparable store sales growth(b) | 2.6 | % | 2.3 | % | 5.1 | % | 9.7 | % | 10.7 | % |
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Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below and under “Risk Factors” in our Form 10-K, together with all of the other information included or incorporated by reference in this prospectus, including our consolidated financial statements and related notes in our Form 10-K and other filings with the SEC, before deciding whether to purchase shares of our common stock. Any of these risks could materially and adversely affect our business, operating results, financial condition, or prospects and cause the value of our common stock to decline, which could cause you to lose all or part of your investment.
Risks Related to this Offering and Ownership of our Common Stock
Our stock price may be volatile, and you may not be able to resell your shares at or above the offering price or at all.
Prior to our IPO in August 2013, there had been no public market for our common stock. An active public market for our common stock may not be sustained. If an active public market is not sustained, it may be difficult for you to sell your shares of our common stock at a price that is attractive to you, or at all. The price of our common stock in any such market may be higher or lower than the price that you pay in this offering. If you purchase shares of our common stock in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay the price that the selling stockholders negotiated with the representatives of the underwriters, which may not be indicative of prices that will prevail in the trading market.
There is no guarantee that our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. The trading price of our common stock may be volatile and subject to wide price fluctuations in response to various factors, many of which are beyond our control, including the following:
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Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the price or liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, we could incur substantial costs defending the lawsuit or paying for settlements or damages. Such a lawsuit could also divert the time and attention of our management from our business.
The large number of shares eligible for public sale could depress the market price of our common stock.
The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market, and the perception that these sales could occur may depress the market price. We had 147,751,776 shares of common stock outstanding as of March 17, 2014. Of these shares, the 21,275,000 shares of common stock sold in our IPO and the 19,550,000 shares of common stock sold in the December Secondary Offering are, and the shares of common stock sold in this offering will be, freely tradable, except for any shares purchased by our “affiliates” as defined in Rule 144 under the Securities Act of 1933, as amended (referred to as the “Securities Act”).
The remaining shares of our common stock outstanding after this offering are restricted securities, as such term is defined in Rule 144 under the Securities Act. In addition, the stockholders agreement by and among us and holders of all of the outstanding shares of our common stock prior to our IPO (referred to as the “Stockholders Agreement”) limits the ability of such current equity holders (other than the Apollo Funds) to sell their shares, subject to various exceptions, until October 31, 2014 (subject to a potential extension of up to 90 days). However, the Apollo Funds will have the ability to require us to register shares of our common stock held by them for resale, and our stockholders party to the Stockholders Agreement will also have the ability to participate in such registered offerings or to otherwise sell the same percentage of their shares of our common stock as the percentage of shares sold by the Apollo Funds in any such registered offering. We are registering the shares offered by the selling stockholders hereby pursuant to the exercise by the Apollo Funds of a demand registration right under the Stockholders Agreement. See “Shares Eligible for Future Sale—Registration Rights under the Stockholders Agreement.” Subject to the foregoing, after the expiration of the restricted period, these shares may be sold in the public market, subject to prior registration or qualification for an exemption from registration, including, in the case of shares held by affiliates, compliance with the volume restrictions of Rule 144.
Following a specified period after any registered offering pursuant to the exercise by the Apollo Funds of a demand registration right under the Stockholders Agreement (which could be up to 90 days), stockholders party to the Stockholders Agreement who do not sell the same percentage of their shares of our common stock as the percentage of shares sold by the Apollo Funds in such offering are permitted to sell such number of shares they would have been permitted to sell in such offering if they had so elected. Accordingly, an aggregate of 1,855,716 shares of our common stock (including shares issuable upon exercise of stock options) that were eligible for sale in the December Secondary Offering were released from the transfer restrictions under the Stockholders Agreement. In addition, beginning 60 days after the completion of this offering, an additional shares of our common stock that were permitted to be sold in this offering but were not so offered will also be released from such transfer restrictions. On June 30, 2014, a number of shares held by each stockholder party to the Stockholders Agreement equal to (x) 33% of the shares held thereby as of the date such stockholder became a party to the Stockholders
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Agreement minus (y) any shares previously released from the transfer restrictions thereunder, will be released from the transfer restrictions under the Stockholders Agreement.
We, our officers and directors and the selling stockholders will enter into lock-up agreements in connection with this offering that will restrict transfers for a period of 60 days, subject to certain exceptions. This 60-day restricted period may be extended under a limited number of circumstances. See “Underwriting”.
We have registered all shares of common stock that we may issue under our incentive plans. They can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up arrangements described above.
Sales of common stock as restrictions end may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
In the future, we may also issue our securities in connection with a capital raise or acquisitions. The amount of shares of our common stock issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of common stock, which would result in dilution.
Our principal stockholders have substantial control over us and are able to influence corporate matters.
As of the date of this prospectus, our directors, executive officers, and holders of more than 5% of our common stock, together with their affiliates, beneficially own, in the aggregate, approximately 49.0% of our outstanding common stock. In particular, as of the date of this prospectus, the Apollo Funds beneficially own, in the aggregate, approximately 37.3% of our outstanding common stock, and will own, in the aggregate, approximately % of our outstanding common stock upon the completion of this offering. These amounts compare to approximately 27.6% of our outstanding common stock represented by the shares sold in our IPO and in the December Secondary Offering, and % of our outstanding common stock sold in this offering. As a result, these stockholders, acting together, or the Apollo Funds acting alone, will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
Certain underwriters are affiliates of our controlling stockholder and have interests in this offering beyond customary underwriting discounts and commissions.
Apollo Global Securities, LLC, an underwriter of this offering, is an affiliate of Apollo, our controlling stockholder. Since Apollo beneficially owns more than 10% of our outstanding common stock, a “conflict of interest” is deemed to exist under FINRA Rule 5121(f)(5)(B). In addition, a “conflict of interest” is also deemed to exist under Rule 5121(f)(5)(C) because affiliates of Apollo Global Securities, LLC will receive more than 5% of the net proceeds of this offering. Accordingly, we intend that this offering will be made in compliance with the applicable provisions of Rule 5121. In particular, pursuant to Rule 5121, the appointment of a qualified independent underwriter is not necessary because our common stock has a “bona fide public market” as defined in Rule 5121(f)(3). However, in accordance with Rule 5121, Apollo Global Securities, LLC will not sell our common stock to a discretionary account without receiving written approval from the account holder. See “Underwriting—Conflicts of Interest.”
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Anti-takeover provisions could impair a takeover attempt and adversely affect existing stockholders.
Certain provisions of our certificate of incorporation and bylaws and applicable provisions of Delaware law may have the effect of rendering more difficult, delaying, or preventing an acquisition of our company, even when this would be in the best interest of our stockholders. Our corporate governance documents include the following provisions:
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In addition, Delaware law imposes conditions on the voting of “control shares” and on certain business combination transactions with “interested stockholders.”
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
If securities or industry analysts cease publishing research or reports about us, our business, or our market, or if they adversely change their recommendations regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If we do not maintain adequate research coverage, or if any of the analysts who may cover us downgrade our stock or publish inaccurate or unfavorable research about our business or provide relatively more favorable recommendations about our competitors, our stock price could decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
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Since we do not expect to pay any cash dividends for the foreseeable future, investors in this offering may be forced to sell their stock in order to obtain a return on their investment.
We do not anticipate declaring or paying in the foreseeable future any cash dividends on our capital stock. Instead, we plan to retain any earnings to finance our operations and growth plans discussed elsewhere or incorporated by reference in this prospectus. In addition, our Credit Facility contains covenants that would restrict our ability to pay cash dividends. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into it, including the sections entitled “Prospectus Summary” and “Risk Factors,” contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this prospectus and the documents incorporated by reference into it, including statements regarding our future operating results and financial position, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar expressions.
The forward-looking statements contained or incorporated by reference in this prospectus reflect our views as of the dates of such statements about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, without limitation, those factors described in “Risk Factors” in this prospectus and our Form 10-K incorporated by reference herein and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K incorporated by reference herein. Some of the key factors that could cause actual results to differ from our expectations include the following:
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Ÿ | our ability to maintain or increase comparable store sales; |
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Ÿ | disruption of significant supplier relationships; |
Ÿ | significant interruptions in the operations of our distribution centers or supply chain network; |
Ÿ | the |
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Ÿ | our ability to identify market trends and react to changing consumer preferences; |
Ÿ | our ability to maintain or improve operating margins; |
Ÿ | the impact of quality or food safety concerns; |
Ÿ | our |
Ÿ | the retention of key management; |
Ÿ | our ability to attract, train and retain store team members; |
Ÿ | union organization activities; |
Ÿ | our high level of fixed lease obligations; |
Ÿ | our ability to accurately estimate claims under our insurance plans; |
Ÿ | our ability to service our debt obligations; |
Ÿ | restrictions in our debt agreements; |
Ÿ | the |
Ÿ | the competitive nature of the industry in which we conduct our business; |
Ÿ | disruption in the supply of produce or fresh, natural and organic products; |
Ÿ | general economic conditions affecting consumer spending; |
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Ÿ | increased commodity prices and lack of availability; |
Ÿ | increased energy costs; |
Ÿ | the effect of increased labor costs; |
Ÿ | increases in the cost of our marketing, advertising, and promotional activities; |
Ÿ | the occurrence of a widespread health epidemic; |
Ÿ | our ability to raise additional capital to finance the growth of our business; |
Ÿ | the effects of government regulation; |
Ÿ | liabilities arising out of our nutrition-oriented educational activities; |
Ÿ | our inability to protect our intellectual property; |
Ÿ | changes in accounting standards; |
Ÿ | the outcome of litigation against us; |
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Ÿ | the potential for our goodwill to become impaired. |
Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included or incorporated by reference in this prospectus are based on information available to us on the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as otherwise required by law.
19This summary highlights information contained elsewhere in this prospectus or incorporated by reference into this prospectus from our Annual Report on Form 10-K for the year ended December 28, 2014, as amended on Form 10-K/A (referred to as our “Form 10-K”) and our other filings with the Securities and Exchange Commission (referred to as the “SEC”) listed in the section of this prospectus entitled “Incorporation of Documents by Reference” and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this prospectus and the information incorporated by reference herein in their entirety, including the section entitled “Risk Factors” in this prospectus and in our Form 10-K and our consolidated financial statements and related notes included in our Form 10-K.
Sprouts Farmers Market operates as a healthy grocery store that offers fresh, natural and organic food that includes fresh produce, bulk foods, vitamins and supplements, grocery, meat and seafood, bakery, dairy, frozen foods, body care and natural household items catering to consumers’ growing interest in eating and living healthier. Since our founding in 2002, we have grown rapidly, significantly increasing our sales, store count and profitability. We are one of the largest specialty retailers of fresh, natural and organic food in the United States.
The cornerstones of our business are fresh, natural and organic products at compelling prices (which we refer to as “Healthy Living for Less”), an attractive and differentiated shopping experience, and knowledgeable team members who we believe provide best-in-class customer service and product education.
Healthy Living for Less.We offer high-quality, fresh, natural and organic products at attractive prices in every department. Consistent with our farmers market heritage, our offering begins with fresh produce, which we source, warehouse and distribute in-house and sell at prices we believe to be significantly below those of other food retailers. In addition, our scale, operating structure and deep industry relationships position us to consistently deliver “Healthy Living for Less” throughout the store. Based on our experience, we believe we attract a broad customer base, including conventional supermarket customers, and appeal to a much wider demographic than other specialty retailers of natural and organic food. We believe that over time, our compelling prices and product offering convert many “trial” customers into loyal “lifestyle” customers who shop Sprouts with greater frequency and across an increasing number of departments.
Attractive, Differentiated Shopping Experience. In a convenient, small-box format (average store size of 28,000 to 30,000 sq. ft.), our stores have a farmers market feel, with a bright, open-air atmosphere to create a comfortable and engaging in-store experience. We strive to be our customers’ everyday healthy grocery store. We feature fresh produce and bulk foods at the center of the store surrounded by a complete grocery offering, including vitamins and supplements, grocery, meat and seafood, bakery, dairy, frozen foods, beer and wine, body care and natural household items. Consistent with our fresh, natural and organic offering, we choose not to carry most of the traditional, national branded consumer packaged goods generally found at conventional grocery retailers (e.g., Doritos, Tide and Lucky Charms). Instead, we offer high-quality, healthier alternatives that emphasize our focus on fresh, natural and organic products at great values.
Customer Service and Education. We are dedicated to our mission of “Healthy Living for Less,” and we attract team members who share our passion for educating and serving our customers with the goal of making healthy eating easier and more accessible. We believe our well-trained and engaged team members help our customers increasingly understand that they can purchase a wide selection of high-quality, healthy, and great tasting food for themselves and their families at attractive prices by shopping at Sprouts.
Corporate Information
Sprouts Farmers Market, Inc. is a Delaware corporation. Our principal executive offices are located at 11811 N. Tatum Boulevard, Suite 2400, Phoenix, Arizona 85028, and our telephone number is (480) 814-8016. Our website address iswww.sprouts.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.
Selling Stockholders
In 2002, Sprouts Farmers Markets, LLC, an Arizona limited liability company opened the first Sprouts Farmers Market store in Chandler, Arizona. In 2011, we were formed when Sprouts Arizona combined with Henry’s Holdings, LLC (referred to as “Henry’s”), which operated 35 Henry’s Farmers Markets stores and eight Sun Harvest Market stores (referred to as the “Henry’s Transaction”). The Henry’s Transaction was led by investment funds affiliated with, and co-investment vehicles managed by, Apollo Management VI, L.P. (referred to as the “Apollo Funds”), including each of the selling stockholders. The Apollo Funds are affiliates of Apollo Global Management, LLC (together with its subsidiaries, referred to as “Apollo”). In May 2012, we acquired Sunflower Farmers Market, Inc., which operated 37 Sunflower Farmers Market stores (referred to as “Sunflower”). We refer to this as the “Sunflower Transaction.” The Henry’s Transaction and the Sunflower Transaction are collectively referred to as the “Transactions.” Following the Transactions, immediately prior to our initial public offering, the Apollo Funds held approximately 51.8% of our common equity.
On July 31, 2013, we priced our initial public offering and on August 1, 2013, our common stock began trading on the Nasdaq Global Select Market. Following our IPO, the Apollo Funds ownership interest in us was approximately 44.5%. The Apollo Funds, together with other pre-IPO stockholders, sold shares of our common stock to the public in registered secondary offerings completed in November 2013, March 2014 and August 2014. The Apollo Funds also sold shares of our common stock to the public in a registered secondary offering completed in November 2014. As of the date of this prospectus, the Apollo Funds hold 15,847,800 shares, representing approximately 10.4% of our common stock, all of which are offered hereby.
Our Chairman of the Board, Andrew Jhawar, is a senior partner of Apollo Management, L.P., an affiliate of Apollo. Based upon the foregoing, each of the selling stockholders may be deemed an affiliate of the Company.
The Offering
Securities offered | This prospectus relates to the resale from time to time of up to 15,847,800 shares of our common stock, par value $0.001 per share, held by the selling stockholders named herein. |
Common stock outstanding | 152,068,893 shares as of March 2, 2015 including the shares offered hereby. |
Use of Proceeds | The selling stockholders will receive all net proceeds from the sale of the shares of common stock offered by this prospectus and any accompanying prospectus supplement. We will not receive any of the proceeds from the sale of our common stock by the selling stockholders. |
Listing of Common Stock | Our Common Stock is listed on the NASDAQ Global Select Market under the symbol “SFM”. |
Transfer Agent | American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, NY 11219 |
Fees and Expenses | We will pay the fees and expenses related to the offering. |
Risk Factors | Before you invest in our common stock, you should be aware that there are risks associated with your investment, including the risks described in the section entitled “Risk Factors” beginning on page 8 of this prospectus. You should carefully read and consider these risk factors together with all of the other information included in or incorporated by reference into this prospectus before you decide to purchase shares of our common stock. |
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described under “Risk Factors” in our Form 10-K and in any prospectus supplement, together with all of the other information included or incorporated by reference in this prospectus and in any prospectus supplement, including our consolidated financial statements and related notes, before deciding whether to purchase shares of our common stock. Any of these risks could materially and adversely affect our business, operating results, financial condition, or prospects and cause the value of our common stock to decline, which could cause you to lose all or part of your investment.
The selling stockholders will receive all of the net proceeds from the sale of the shares offered hereby. We will not receive any proceeds from this offering. Certain of the selling stockholders will exercise options to purchase all or a portion of the shares they are offering hereby. Any proceeds we receive from the exercise of such options will be used by us for general corporate purposes.
In connection with this offering, we will incur certain issuance costs, consisting of various registration, printing and professional services fees. We will expense these costs as incurred.
MARKET PRICE RANGE OF COMMON STOCKSELLING STOCKHOLDERS
Our common stock began trading onThe selling stockholders may from time to time offer and sell any or all of the NASDAQ Global Select Market under the symbol “SFM” on August 1, 2013. Prior to that date, there was no public market for our common stock. The price range per share of common stock presented below represents the highest and lowest sales prices for our common stock on the NASDAQ Global Select Market for each quarterly period since our IPO.
High | Low | |||||||
2013 | ||||||||
Third quarter | $ | 46.31 | $ | 33.00 | ||||
Fourth quarter | $ | 49.45 | $ | 35.58 | ||||
2014 | ||||||||
First quarter (through March 14, 2014) | $ | 40.09 | $ | 34.04 |
The closing priceshares of our common stock as of March 14, 2014 was $37.95 per share,set forth below pursuant to this prospectus. When we refer to “selling stockholders” in this prospectus, we mean the persons listed in the table below, and the numberpledgees, donees, transferees, assignees, successors and others who later come to hold any of stockholders of recordthe selling stockholders’ interests in shares of our common stock as of March 14, 2014 was 530. This number excludes stockholders whose stock is held in nominee or street name by brokers.
We do not anticipate declaring or paying in the foreseeable future, any cash dividends on our capital stock. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our operating results, financial condition, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant. Our Credit Facility contains covenants that would restrict our ability to pay cash dividends.
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CAPITALIZATIONthan through a public sale.
The following table sets forth, our cash and cash equivalents and capitalization as of December 29, 2013.
In connection with this offering we will incur certain issuance costs, consisting of various registration, printing and professional services fees. We will expense these costs as incurred.
You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in our Form 10-K incorporated by reference into this prospectus.
As of December 29, 2013 | ||||
(in thousands, except share data) | ||||
Cash and cash equivalents | $ | 77,652 | ||
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Capital and finance lease obligations, including current portion | $ | 119,572 | ||
Long-term debt, including current portion | 311,240 | |||
Stockholders’ equity: | ||||
Undesignated preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding | — | |||
Common stock, $0.001 par value; 200,000,000 shares authorized; 147,616,560 shares issued and outstanding | 147 | |||
Additional paid-in capital | 479,127 | |||
Retained earnings | 34,497 | |||
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Total stockholders’ equity | 513,771 | |||
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Total capitalization | $ | 944,583 | ||
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In connection with the closingdate of this offering,prospectus, the names of the selling stockholders will exercise stock optionsfor whom we are registering shares for resale to acquire newly-issuedthe public, and the number of shares of common stock that the selling stockholders may offer pursuant to be sold in this offering. Ifprospectus.
This prospectus relates to the underwriters’ option to acquirepossible resale by certain of our stockholders of up to 2,250,000 additional15,847,800 shares is exercised in full, an additionalof our common stock. We have agreed to register the resale of such shares of common stock will be issued upon the exercisepursuant to that certain Stockholders Agreement, dated as of stock optionsJuly 29, 2013, by and sold in the offering.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information presents the unaudited pro forma condensed consolidated statement of operations for fiscal 2013 after giving effect to the transactionsamong us and adjustments as described in the accompanying notes.
The unaudited pro forma condensed consolidated financial information includes our historical results of operations after giving pro forma effect to our April 2013 Refinancing and the issuance of 18,888,889 shares of common stock in our IPO (excluding the remaining 1,588,326 shares of common stock issued in that offering, which were deemed to have been used to pay underwriting discounts, offering expenses in such offering and general corporate expenses) and the application of $340.0 millionall of the proceeds to us from the sale of such shares by us to repay certain indebtedness as described herein (referred to collectively as the “Pro Forma Offering” and presented as “Pro Forma Sprouts Farmers Market, Inc.” in the unaudited pro forma condensed consolidated financial information). The unaudited pro forma condensed consolidated statement of operations for fiscal 2013 reflects the Pro Forma Offering as if it occurred on December 31, 2012, the first day of fiscal 2013.
The historical financial information has been adjusted to give pro forma effect to events that are directly attributable to the Pro Forma Offering, have an ongoing effect on our statement of operations and are factually supportable. Our unaudited pro forma condensed consolidated financial information and explanatory notes present how our financial statements may have appeared had our capital structure reflected the above transactions as of the dates noted above.
The unaudited pro forma condensed consolidated financial information was prepared in accordance with Article 11 of Regulation S-X, using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated financial information. The following unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not purport to reflect the results the consolidated company may achieve in future periods or the historical results that would have been obtained had the above transactions been completed as of December 31, 2012. The unaudited pro forma condensed consolidated statement of operations does not include certain nonrecurring charges and the related tax effects which result directly from the Pro Forma Offering as described in the notes to the unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated financial information is derived from and should be read in conjunction with our historical financial statements and related notes incorporated by reference from our Form 10-K into this prospectus.
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SPROUTS FARMERS MARKET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended December 29, 2013
(in thousands, except per share amounts)
Historical Sprouts Farmers Market, Inc.(1) | Pro Forma Adjustment for Pro Forma Offering(2) | Notes | Pro Forma Sprouts Farmers Market, Inc.(2) | |||||||||||||
Net sales | $ | 2,437,911 | $ | — | $ | 2,437,911 | ||||||||||
Cost of sales, buying and occupancy | 1,712,644 | — | 1,712,644 | |||||||||||||
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Gross profit | 725,267 | — | 725,267 | |||||||||||||
Direct store expenses | 496,183 | — | 496,183 | |||||||||||||
Selling, general and administrative expenses | 81,795 | — | 81,795 | |||||||||||||
Store pre-opening costs | 5,734 | — | 5,734 | |||||||||||||
Store closure and exit costs | 2,051 | — | 2,051 | |||||||||||||
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Income from operations | 139,504 | — | 139,504 | |||||||||||||
Interest expense | (37,203 | ) | 8,964 | (2)(a) | (28,239 | ) | ||||||||||
Other income | 487 | — | 487 | |||||||||||||
Loss on extinguishment of debt | (18,721 | ) | 17,208 | (2)(b) | (1,513 | ) | ||||||||||
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Income before income taxes | 84,067 | 26,172 | 110,239 | |||||||||||||
Income tax (provision) benefit | (32,741 | ) | (10,207 | ) | (2)(c) | (42,948 | ) | |||||||||
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Net income | $ | 51,326 | $ | 15,965 | $ | 67,291 | ||||||||||
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Per Share Information: | ||||||||||||||||
Net income—basic | $ | 0.38 | (2)(d) | $ | 0.46 | |||||||||||
Net income—diluted | $ | 0.37 | (2)(d) | $ | 0.44 | |||||||||||
Weighted Average Shares: | ||||||||||||||||
Basic | 134,622 | (2)(d) | 145,624 | |||||||||||||
Diluted | 139,765 | (2)(d) | 151,436 |
The accompanying notes are an integral part of, and should be read in conjunction with, this unaudited pro forma condensed consolidated financial information.
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SPROUTS FARMERS MARKET, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. Basis of Presentation and Description of Transactions
In April 2013, we completed the April 2013 Refinancing, which consisted of a refinancing of our debt, a distribution to our equity holders of $282 million and payments to vested option holders of $13.9 million. In conjunction with our IPO, we used proceeds received in the offering to repay $340.0 million of our existing indebtedness, which is further reflected in these unaudited pro forma condensed consolidated financial statements. For further information about the April 2013 Refinancing and the $340.0 million repayment, see Note 13 to our audited consolidated financial statements included in our Form 10-K incorporated by reference into this prospectus.
The historical Sprouts Farmers Market, Inc. results of operations for fiscal 2013 are derived from our audited consolidated financial statements included in our Form 10-K incorporated by reference into this prospectus.
2. Pro Forma Sprouts Farmers Market, Inc.
The Pro Forma Sprouts Farmers Market, Inc. condensed consolidated statement of operations data for fiscal 2013 reflects the pro forma effect of the April 2013 Refinancing and the issuance of 18,888,889 shares of common stock in our IPO (excluding the remaining 1,588,326 shares of common stock issued in that offering, which were deemed to have been used to pay underwriting discounts, offering expenses in such offering and general corporate expenses) and the application of $340.0 million of the proceeds to us from the sale of such shares by us to repay certain indebtedness as described herein as if these events had occurred on the first day of fiscal 2013, as follows:
(a) The pro forma adjustment to interest expense represents the decrease in pro forma interest expense on the Credit Facility related to the repayment on our Credit Facility. The pro forma adjustment of $9.0 million is based on an effective interest rate of 4.0%, which reflects the 0.5% reduction in the applicable interest rate upon completion of our IPO.
(b) The pro forma adjustment to loss on extinguishment of debt includes $8.2 million related to our April 2013 Refinancing and $9.0 million related to the $340.0 million repayment discussed above.
(c) The pro forma adjustment to income tax (provision) benefit is derived by applying a blended federal and state statutory tax rate of 39.0% to the pro forma adjustment to interest expense and loss on extinguishment of debt described above.
(d) Pro forma net income per weighted average basic and diluted shares outstanding gives effect to the issuance of 18,888,889 shares of common stock in our IPO (excluding the remaining 1,588,326 shares of common stock issued in that offering, which were deemed to have been used to pay underwriting discounts, offering expenses in such offering and general corporate expenses).
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock as of March 17, 2014 by the following:prior to our initial public offering.
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Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power of that security, including options that are currently exercisable or exercisable within 60 days of March 17, 2014. Shares issuable pursuant to options are deemed outstanding for computing the percentagedate of the person holding such options, but are not outstanding for computing the percentage of any other person.this prospectus. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose.
TheBased on the information contained in the table below assumes no exerciseprovided to us by the underwritersselling stockholders as of their optionthe date of this prospectus, assuming that the selling stockholders sell all of the shares of our common stock being registered hereunder and do not acquire any additional shares, the selling stockholders will not own any shares of our common stock after the completion of any offering of the shares being registered hereunder.
We cannot advise you as to purchase an additional 2,250,000whether the selling stockholders will in fact sell any or all of such shares of common stock. In addition, the selling stockholders may sell, transfer or otherwise dispose of, at any time and from time to time, the shares of our common stock in transactions exempt from the selling stockholders.registration requirements of the Securities Act after the date of this prospectus.
Our calculation of the percentage of beneficial ownership is based on 147,751,776152,068,893 shares of common stock outstanding as of March 17, 2014.2, 2015.
The description of our relationships with the selling stockholders and their affiliates set forth in “Item 13. Certain Relationships and Related Transactions, and Director Independence” in our Annual Report on Form 10-K is incorporated by reference herein.
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Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Sprouts Farmers Market, Inc., 11811 N. Tatum Boulevard, Suite 2400, Phoenix, Arizona 85028 and the address of each selling stockholder and each person who may be deemed a beneficial owner of the shares held thereby is c/o Weiss Brown PLLC, 6263 N. Scottsdale Road, Suite 340, Scottsdale, Arizona 85250, Attn: Scott K. Weiss.
Name of Beneficial Owner | Number of Shares Beneficially Owned Before the Offering(1) | Percentage Beneficially Owned Before the Offering | Number of Shares to be Sold in the Offering(1) | Percentage Beneficially Owned to be Sold in the Offering | Number of Shares Beneficially Owned After the Offering(1) | Percentage Beneficially Owned After the Offering | ||||||||||
Named Executive Officers and Directors: | ||||||||||||||||
J. Douglas Sanders(2) | 2,131,684 | 1.4 | % | |||||||||||||
Amin N. Maredia(3) | 515,461 | * | ||||||||||||||
James L. Nielsen(4) | 460,003 | * | ||||||||||||||
Brandon F. Lombardi(5) | 196,886 | * | ||||||||||||||
Stephen D. Black(6) | 69,991 | * | ||||||||||||||
Andrew S. Jhawar | — | * | ||||||||||||||
Shon A. Boney(7) | 1,765,078 | * | ||||||||||||||
Joseph Fortunato(8) | 42,500 | * | ||||||||||||||
Terri Funk Graham(9) | 3,000 | * | ||||||||||||||
George G. Golleher(10) | 499,893 | * | ||||||||||||||
Lawrence P. Molloy(11) | 25,000 | * | ||||||||||||||
Steven H. Townsend(12) | 40,000 | * | ||||||||||||||
All directors and executive officers as a group (13 persons) | 5,806,026 | 3.8 | % | |||||||||||||
5% Stockholders: | ||||||||||||||||
Apollo Funds(13) | 55,042,157 | 37.3 | % | |||||||||||||
Premier Grocery, Inc.(14) | 11,740,303 | 7.9 | % | |||||||||||||
Other Selling Stockholders: | ||||||||||||||||
Name of Selling Stockholder | Number of Shares Beneficially Owned Before the Offering | Percentage Beneficially Owned Before the Offering(1) | Number of Shares to be Sold in the Offering | Percentage Beneficially Owned to be Sold in the Offering(1) | Number of Shares Beneficially Owned After the Offering | Percentage Beneficially Owned After the Offering | ||||||||||||||||||
AP Sprouts Holdings, LLC(2) | 8,302,329 | 5.5 | % | 8,302,329 | 5.5 | % | — | — | ||||||||||||||||
AP Sprouts Holdings (Overseas), L.P.(2) | 7,545,471 | 5.0 | % | 7,545,471 | 5.0 | % | — | — | ||||||||||||||||
TOTAL | 15,847,800 | 10.4 | % | 15,847,800 | 10.4 | % | — | — |
(2) |
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Based upon information contained in Amendment No. 1 to Schedule 13G filed by the beneficial |
Apollo Management VI, L.P. (“Management VI”) is the manager of Holdings LLC, Holdings Overseas GP, Sprouts Incentive, Sprouts Coinvest, Sprouts Management and AIF VI. AIF VI Management, LLC (“AIF VI LLC”) is the general partner of Management VI. Apollo Management, L.P. (“Apollo Management”) is the sole member and manager of AIF VI LLC, and Apollo Management GP, LLC (“Apollo Management GP”) is the general partner of Apollo Management. Apollo Management Holdings, L.P. (“Management Holdings”) is the sole member and manager of each of International GP and Apollo Management GP, and Apollo Management Holdings GP, LLC (“Management Holdings GP”) is the general partner of Management Holdings. Leon Black, Joshua Harris and Marc Rowan are the managers of Principal I GP, and the managers, as well as executive officers, of Management Holdings GP, and as such may be deemed to have voting and dispositive control over the shares of our common stock held by the Apollo Funds.
AP Sprouts Holdings (Overseas) GP, LLC (“Holdings Overseas GP”) is the general partner of AP Sprouts Holdings (Overseas), L.P. (“Sprouts Overseas). Apollo Management VI, L.P. (“Management VI”) is the manager of Sprouts LLC and Holdings Overseas GP, and the investment manager for AIF VI. AIF VI Management, LLC (“AIF VI LLC”) is the general partner of Management VI. Apollo Management, L.P. (“Apollo Management”) is the sole member and manager of AIF VI LLC, and Apollo Management GP, LLC (“Apollo Management GP”) is the general partner of Apollo Management. Apollo Management Holdings, L.P. (“Management Holdings”) is the sole member and manager of Apollo Management GP, and Apollo Management Holdings GP, LLC (“Management Holdings GP”) is the general partner of Management Holdings. Leon Black, Joshua Harris and Marc Rowan are the managers of Principal I GP, and the managers, as well as executive officers, of Management Holdings GP, and as such may be deemed to have voting and dispositive control over the shares of our common stock held by Sprouts LLC and Sprouts Overseas. |
Each of the Apollo Funds disclaims