Sprouts Farmers Market (SFM) 8-K Regulation FD Disclosure

ICR Xchange

January 2014

Exhibit 99.1

Forward-Looking Statements and Non-

Forward-Looking Statements and Non-

GAAP Financial Measures

GAAP Financial Measures

1

Certain

statements

in

this

presentation

are

forward-looking

as

defined

in

the

Private

Securities

Litigation

Reform

Act

of

1995.

Any

statements

contained

herein

(including,

but

not

limited

to,

statements

to

the

effect

that

Sprouts

Farmers

Market,

Inc.

(the

“Company”)or

its

management

“anticipates,”

“plans,”

“estimates,”

“expects,”

“believes,”

or

the

negative

of

these

terms

and

other

similar

expressions)

that

are

not

statements

of

historical

fact

should

be

considered

forward-looking

statements.

These

statements

involve

certain

risks

and

uncertainties

that

may

cause

actual

results

to

differ

materially

from

expectations

as

of

the

date

of

this

presentation.

These

risks

and

uncertainties

include,

without

limitation,

risks

associated

with

the

Company’s

ability

to

successfully

compete

in

its

intensely

competitive

industry;

the

Company’s

ability

to

successfully

open

new

stores;

the

Company’s

ability

to

manage

its

rapid

growth;

the

Company’s

ability

to

maintain

or

improve

its

operating

margins;

the

Company’s

ability

to

identify

and

react

to

trends

in

consumer

preferences;

product

supply

disruptions;

general

economic

conditions;

and

other

factors

as

set

forth

from

time

to

time

in

the

Company’s

Securities

and

Exchange

Commission

filings.

The

Company

intends

these

forward-looking

statements

to

speak

only

as

of

the

date

of

this

presentation

and

does

not

undertake

to

update

or

revise

them

as

more

information

becomes

available,

except

as

required

by

law.

In

addition

to

reporting

financial

results

in

accordance

with

GAAP,

the

Company

has

presented

adjusted

net

income,

adjusted

diluted

earnings

per

share

and

adjusted

EBITDA.

These

measures

are

not

in

accordance

with,

or

an

alternative

to

GAAP.

The

Company's

management

believes

that

these

presentations

provide

useful

information

to

management,

analysts

and

investors

regarding

certain

additional

financial

and

business

trends

relating

to

its

results

of

operations

and

financial

condition.

In

addition,

management

uses

these

measures

for

reviewing

the

financial

results

of

the

Company

as

well

as

a

component

of

incentive

compensation.

In

addition,

in

comparing

its

results

to

the

comparable

periods

of

2012,

the

Company

has

presented

2012

financial

results

on

a

pro

forma

basis

as

if

the

May

2012

business

combination

with

Sunflower

Farmers

market,

Inc.

(“Sunflower

Transaction”)

had

occurred

on

the

first

day

of

the

Company’s

2012

fiscal

year.

See

the

Appendix

for

unaudited

supplemental

pro

forma

condensed

consolidated

financial

information.

The

Company

defines

adjusted

net

income

as

net

income

excluding

store

closure

and

exit

costs,

one-time

costs

associated

with

its

April

2011

combination

(the

Henry’s

Transaction)

with

Henry’s

Holdings,

LLC

(“Henry’s”)

and

the

Sunflower

Transaction

(collectively,

the

“Transactions”),

gain

and

losses

from

disposal

of

assets,

the

loss

on

extinguishment

of

debt

and

the

related

tax

impact

of

those

adjustments.

The

Company

defines

adjusted

diluted

earnings

per

share

as

adjusted

net

income

divided

by

the

weighted

average

diluted

shares

outstanding.

The

Company

defines

EBITDA

as

net

income

before

interest

expense,

provision

for

income

tax,

and

depreciation

and

amortization,

and

defines

adjusted

EBITDA

as

EBITDA

excluding

store

closure

and

exit

costs,

one-time

costs

associated

with

the

Transactions,

gains

and

losses

from

disposal

of

assets

and

the

loss

on

extinguishment

of

debt.

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

the

Company’s

business,

or

as

a

measure

of

cash

that

will

be

available

to

meet

the

Company’s

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

the

Company’s

results

as

reported

under

GAAP.

See

the

Appendix

for

reconciliation

for

these

non-GAAP

measure

to

the

comparable

GAAP

measures.

2

Sprouts at a Glance

High-growth, value-oriented

natural and organic food

retailer

Broad consumer appeal

One of the largest natural and

organic retailers

Significant momentum

Significant white space

opportunity

3

Benefitting from Long-Term Macro

Trends

Strong Market Opportunity

1

Supported by Strong Macro Tailwinds

Sprouts is Outpacing Relevant Segments

2

Sprouts growing at 7x U.S. 

Supermarkets

2008-2012

CAGR:

2.4%

6.1%

8.6%

10.3%

17.1%

U.S.

Supermarkets

Vitamins &

Supplements

Natural &

Organic

Value

Health & Wellness

Greater focus on preventative health

Childhood obesity

Specialty diets (e.g., gluten-free)

Value

Increasingly cost-conscious consumers

Persistent shift in shopping behaviors

Sprouts makes healthy choices affordable

¹

Source: Nutrition Business Journal.

²

Chart

data

represents

the

multiple

of

average

annual

U.S.

Grocery

sales

growth

(“CAGR”)

from

2008

through

2012

for

each

respective

category

or

entity.

Value

segment

defined

as

dollar

stores

(Dollar

General,

Dollar

Tree,

Family

Dollar).

Source:

Progressive

Grocer

(U.S.

Supermarket

Industry),

Nutrition

Business

Journal

(Vitamins

&

Supplements;

Natural

&

Organic),

and

company

filings (Value).

4

$600B U.S. Supermarket Industry

Natural & Organic Sales Projected to Grow

by 9% Annually Through 2020

Sprouts has a Differentiated

Go-to-Market Strategy

Complete Natural &

Organic Offering

5

HEALTH

SELECTION

VALUE

SERVICE

An Engaged, Loyal Customer Base Leading to Strong Financial

Performance and Significant New Unit Growth Opportunity

Sprouts “Flips”

the Conventional

Grocery Store Model

Produce surrounded by

a complete grocery

offering

Differentiated

assortment of high-

quality, healthy

alternatives

Farmers market

inspired, open store

layout with low profile

displays

Convenient,

small-box:

25 –

28k sq. ft.

Comfortable, easy to

shop environment

Full grocery store

6

Sprouts Targets the Conventional

Supermarket Customer

Middle income and up

Educated

Wide spectrum of demographic

and ethnic makeups

Wanting to eat healthier

Looking for value

Broad Customer Demographics

“Natural / lifestyle”

markets and

more “traditional”

states

Densely populated, urban areas

as well as smaller metropolitan

markets

Successful Across Markets

Sprouts Proves

That Eating

Healthy Can

Be Affordable.

7

Reaching a Broad Base of Consumers in

Both Traditional and Digital Mediums

More than 10 million weekly circulars

Reinforces value offering

25+ annual department promotions¹, which drive

transition to increased basket size and higher

margin

Digital platform for relevance today and tomorrow

¹

Represents planned promotions at each store during FY 2013.

8

Sprouts Grows its Share of Consumers’

“Food Retail Wallet”

Consumers Start with

High Quality Produce

9

Increasing Average Basket Size and Gross Margin Over Time

TRIAL

TRANSITION

LIFESTYLE

Then Shop an Increasing

Number of Departments

Over Time Make

Sprouts Their Primary

Grocery Store

Estimated 15+ Years of New Store

Growth

Potential U.S. Store Count¹

1   Based on an assumed new store growth rate of 12% per year and research conducted by Buxton Company in 2012.

Proven Concept: 167 stores in eight states

Strong performance across all markets, demographics and real estate venues

Opened 19 stores in 2013 with a target of 12% unit growth going forward

Demographics allow for deep penetration in markets

New

Mexico

Texas

Colorado

Utah

Arizona

Nevada

California

4

29

26

6

73

2

3

24

Existing Market

Oklahoma

Target Near Term New Market

Kansas

Georgia

Florida

Louisiana

Missouri

Arkansas

Tennessee

North

Carolina

South

Carolina

Alabama

Mississippi

Oregon

Washington

10

Business & Financial

Performance

11

A Powerful Long-Term Growth Engine

High, balanced sales growth

Margin expansion in existing stores

Operating leverage from scale and infrastructure

Deleverage capital structure

12

Long-Term Net Earnings Growth

Target of 20%+

Compelling Unit Economics

¹

Includes store build-out  (net of contributions from landlords), inventory (net of payables) and cash pre-opening expenses.

Target New Store Economics

Store Size

25 –

28k sq. ft.

Net Cash Investment¹

$2.8 million

First Year Sales

~$10 –

$12 million

Initial Sales Growth

20-30% over 3 –

4 years

13

Pre-Tax Cash-on-Cash Returns

35%-40% within 3-4 years

History of Organic Growth

Pro

Forma

Comparable

Store

Sales

Growth

2

Pro

Forma

Net

Sales

1

¹

Pro

forma

net

sales

reflect

the

net

sales

of

our

predecessor

entity

and

Sunflower

as

if

the

Henry’s

Transaction

and

Sunflower

Transaction

had

been

consummated

on

the

first

day

of

fiscal

2008.

2

“Comparable

store

sales

growth”

refers

to

the

percentage

change

in

our

comparable

store

sales

as

compared

to

the

prior

comparable

period.

Pro

forma

comparable

store

sales

growth

reflects

comparable

store

sales

growth

calculated

as

if

the

Henry’s

Transaction

and

the

Sunflower

Transaction

had

been

consummated

on

the

first

day

of

fiscal

2007.

Comparable

store

sales

growth

on

a

“two-year

stacked

basis”

is

computed

by

adding

the

pro

forma

comparable

store

sales

growth

of

the

period

referenced

and

that

of

the

same

fiscal

period

ended

twelve

months

prior.

Balanced Sales Growth Across Comparable Store Sales Growth and New Store Openings

14

($ in mm)

2013 Growth Guidance

Unit Growth

19 New Stores

Comparable Store Sales Growth

9.0% -

9.5%

Total Sales Growth

20% -

21%

Adjusted EBITDA Growth

28% -

31%

15

Long-Term Financial Targets

Unit Growth

~12%

Comparable Store Sales Growth

6%+

Total Sales Growth

~15%

EBIT Growth

17 –

20%

Net Income Growth

20%+

16

Why Sprouts is a Compelling Investment

Authentic Natural and Organic Food Offering at

Great Value

Fast Growing Segment of the U.S. Supermarket

Industry with Strong Macro Tailwinds

Significant New Store Growth Opportunity

Supported by Broad Demographic Appeal

Proven and Replicable Store Model with

Compelling Unit Economics

Resilient Business Model

Delivering Strong

Financial Performance and Strong Comparable

Store Sales Growth

Passionate Team with a Customer-Focused

Culture

17

Significantly lower prices

9% CAGR to $98B in 2020

1,200 potential stores

(7.2x current base)

Target 35 –

40% cash-on-

cash returns

20% 2-year comps

Appendix: Supplemental

Materials

18

Non-GAAP Reconciliation

19

(a)

See

“Unaudited

Supplemental

Pro

Forma

Condensed

Consolidated

Financial

Information”

for

a

reconciliation

of

pro

forma

net

income

to

net

income

for

the

thirteen and

thirty-nine weeks ended September 30, 2012.

(b)

Store

closure

and

exit

costs

have

been

excluded

from

adjusted

and

pro

forma

adjusted

EBITDA, and from adjusted and pro forma adjusted net income. In fiscal 2013 these costs

included the costs related to the closure of a former Sunflower warehouse facility and

adjustments to sublease assumptions on other properties.  In fiscal 2012 these consist primarily

of the costs to close a Sunflower administrative facility following the Sunflower Transaction.

(c)

Costs

associated

with

acquisitions

and

integration

represent

the

costs

to

integrate

the

combined businesses resulting from the Sunflower and Henry’s Transactions. These expenses

include professional fees and severance, which the Company excludes from its pro forma

adjusted EBITDA and pro forma adjusted net income to provide period-to-period comparability

of the Company’s operating results because management believes these costs do not directly

reflect the ongoing performance of its store operations.  The Company does not expect to incur

material expenses associated with integration of the Sunflower and Henry’s Transactions in

fiscal 2013.

(d)

Gain/Loss

on

disposal

of

assets

represents

the

gains

and

losses

recorded

in

connection

with the disposal of property and equipment.  The Company excludes gains and losses on

disposals of assets from its adjusted and pro forma adjusted EBITDA and adjusted and pro

forma adjusted net income to provide period-to-period comparability of its operating results

because management believes these costs do not directly reflect the ongoing performance of its

store operations. The loss recorded in fiscal 2012 primarily relates to the loss on the sale

leaseback of a store property.

(e)

Pro

forma

adjusted

and

adjusted

income

tax

provision

for

all

periods

presented

represents

the

income

tax

provision

and

pro

forma

income

tax

provision

plus

the

tax effect of

the adjustments described in notes (b)

through (e)

above based on statutory tax rates for the

period. For the thirty-nine weeks ended September 30, 2012, this amount was further adjusted

to reflect a $1.8 million reduction in pro forma income tax provision for the effects of certain

items related to the Sunflower Transaction. Of the adjustment, $2.2 million relates to the tax

effects of $3.3 million and $2.9

million of non-deductible transaction costs incurred by the

Company and Sunflower, respectively, based on statutory tax rates for the period. This

adjustment was partially offset by a $0.4 million adjustment related to tax benefits from

Sunflower stock option exercises. The Company has excluded these

items from its pro forma

adjusted income tax provision because management believes they do not directly reflect the

ongoing performance of its store operations and are not reflective of its ongoing income tax

provision.

Pro Forma Reconciliation

20

SPROUTS FARMERS MARKET, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the Thirteen Weeks Ended September 30, 2012

(in thousands, except per share amounts)

Pro Forma Reconciliation

21

SPROUTS FARMERS MARKET, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the Thirty-nine Weeks Ended September 30, 2012

                                      (in thousands, except per share amounts)

Pro Forma Reconciliation

22

SPROUTS FARMERS MARKET, INC. 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION 

1. Basis of Presentation and Description of Transactions 

Effective May 29, 2012, the Company acquired all of the outstanding common and preferred stock of Sunflower in the Sunflower

Transaction, a transaction accounted for as a business combination, which was financed through the issuance of debt and 14.9 million shares of

common stock. 

The historical Sprouts Farmers Market, Inc. results of operations for the thirteen and thirty-nine weeks ended September 30, 2012 are

derived from its unaudited consolidated financial statements for the periods then ended. The historical Sunflower results of operations for the

period January 1, 2012 to May 28, 2012, were derived from the Sunflower pre-combination unaudited financial statements. Certain amounts from

the Sunflower pre-combination unaudited financial statements have been reclassified to conform to the Company’s presentation. 

2. Pro Forma for Sunflower Transaction 

The historical results of operations have been adjusted to give pro forma effect to events that are (i) directly attributable to the

Sunflower Transaction, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results, as if the Sunflower

Transaction occurred on the first day of fiscal 2012 (referred to as “Pro Forma Adjustments for Sunflower Transaction”). Below is a description

of the types of adjustments represented in the Sunflower Fiscal Period Alignment and Sunflower Transaction Adjustments columns. 

Sunflower Fiscal Period Alignment - Sunflower’s fiscal 2012 commenced one day earlier than the Company’s fiscal 2012. Pro forma

adjustments for Sunflower Fiscal Period Alignment reflect the pro forma impact of deducting one day from the historical Sunflower results of

operations. 

Cost of Sales, Buying and Occupancy – Adjustments attributable to the application of acquisition accounting including straight-line rent

adjustments and adjustments to the amortization of favorable lease intangible assets and unfavorable lease liabilities.

Direct Store Expenses – Adjustments to historical Sunflower depreciation related to changes in value and estimated useful lives of

property plant and equipment.

Selling, General and Administrative Expenses – Adjustments related to Sunflower Transaction fees recorded by both Sprouts and

Sunflower, accelerated share-based compensation recorded by Sunflower, adjustments to depreciation related to changes in value and estimated

useful lives of property, plant and equipment and amortization of the Sunflower trade name.

Interest Expense – Adjustments related to the reversal of historical Sunflower interest expense, incremental interest expense related to

the proceeds from additional term loan and senior subordinated notes that were used to effectuate the transaction and interest related to Sunflower

capital and financing lease obligations.

Income Tax Provision – Adjustment to the income tax provision for the items listed above.

Net income per share – Net income per share has been adjusted to reflect those items listed above and the change in weighted average

shares outstanding – basic and diluted as described below.

Weighted average shares outstanding – basic and diluted – The weighted average shares outstanding basic and diluted have been

adjusted for the effect of the additional shares issued in the Sunflower Transaction.