Smart & Final Stores, Inc. Reports Third Quarter 2014 Results

COMMERCE, Calif., Nov. 12, 2014 /PRNewswire/ -- Smart & Final Stores, Inc. (the "Company") (NYSE: SFS) today reported results for its 16-week third quarter ended October 5, 2014.

Third Quarter Highlights:

• Net sales increased 10.8% to $1.13 billion
• Comparable store sales growth of 6.6%
• Net income increased 1.9% to $10.2 million
• Adjusted net income increased 24.9% to $14.9 million, or $0.24 per diluted share
• Operated 252 stores at quarter-end, including 90 Smart & Final Extra! stores

"It's an exciting time at Smart & Final Stores," said Dave Hirz, President and Chief Executive Officer. "Our store banners are uniquely positioned at the intersection of value, convenience and quality.  We are leading the way with the growth of our Smart & Final Extra! stores which offer a one-stop shopping experience that resonates with today's household and business customers.  We continue to grow sales in both of our store banners – Smart & Final and Cash & Carry – and this has translated into strong financial results."

Mr. Hirz continued, "Importantly, we continue to see growth in customer transactions as our distinct merchandise and strong value pricing remains a compelling proposition for both household and business customers. Our strong financial performance of 10.8% sales growth and 6.6% comparable store sales growth provides a strong foundation for continued growth, and we plan to continue a robust program of new store openings during the balance of this year and during 2015."

In order to aid understanding of the Company's business performance, it has presented results in conformity with accounting principles generally accepted in the United States ("GAAP") and has also presented adjusted net income, adjusted net income per share, adjusted net income per diluted share, EBITDA and adjusted EBITDA, which are non-GAAP measures that are explained and reconciled to the comparable GAAP measures in the tables included in this release. Where applicable, the numbers below are first presented on a GAAP basis and then on an adjusted basis.

Fiscal Third Quarter 2014 Financial Results

Net sales were $1,131.8 million, a 10.8% increase as compared to $1,021.4 million in the same period of 2013. Net sales growth was driven by a 6.6% increase in comparable store sales and from the sales contribution of new stores.  In the 16 weeks ended October 5, 2014 the company opened six new stores, and has opened 13 new stores in the 52 weeks ended October 5, 2014.  All of the new stores have been in the Smart & Final Extra! store format.  The growth in comparable store sales was comprised of a 3.9% increase in comparable transaction count and a 2.5% increase in comparable average transaction size.

Net sales for Smart & Final banner stores were $839.3 million, a 10.5% increase as compared to $759.7 million in the same period of 2013.  Comparable store sales growth for the Smart & Final banner was 4.7% in the third quarter.

Net sales for Cash & Carry banner stores were $292.5 million, an 11.8% increase as compared to $261.7 million in the same period of 2013.  Comparable store sales growth for the Cash & Carry banner was 11.8% in the third quarter.

Gross margin from operations was $169.5 million, a 10.9% increase as compared to $152.8 million in the same period of 2013. Gross margin rate in the third quarter was 15.0%, consistent with the same period in 2013.

Operating and administrative expenses increased to $140.7 million as compared to $121.4 million in the same period of 2013. This increase was primarily related to higher sales volumes, increased store support costs, and costs charged to expense associated with the Company's initial public offering in September 2014.

Net income was $10.2 million, a 1.9% increase as compared to $10.0 million in the same period of 2013. Net income per diluted share was $0.17 as compared to $0.17 in the same period of 2013.

Adjusted net income was $14.9 million as compared to $11.9 million for the same period of 2013. Adjusted net income per diluted share was $0.24 as compared to $0.20 in the same period of 2013.

Adjusted EBITDA was $57.1 million, or a 4.3% increase as compared to $54.7 million in the same period of 2013.

Fiscal Year-to-date Financial Results

Net sales were $2,694.9 million in the 40 weeks (three fiscal quarters) ended October 5, 2014, a 9.2% increase as compared to $2,467.5 million in the same period of 2013. Net sales growth was driven by a 5.8% increase in comparable store sales growth and the net sales contribution from new stores.  The growth in comparable store sales was comprised of a 3.8% increase in comparable transaction count and a 1.9% increase in comparable average transaction size. 

Net sales for Smart & Final banner stores were $2,024.3 million, or a 9.0% increase as compared to $1,857.2 million in the same period of 2013. Year-to-date comparable store sales growth for the Smart & Final banner was 4.4%.

Net sales for Cash & Carry banner stores were $670.6 million, or a 9.9% increase as compared to $610.3 million in the same period of 2013.  Year-to-date comparable store sales growth for the Cash & Carry banner was 9.9%.

Net income was $23.8 million, a 57.3% increase as compared to $15.2 million in the same period of 2013. Net income per diluted share was $0.40 as compared to $0.26 for the same period of 2013.

Adjusted net income was $34.3 million as compared to $23.7 million in the same period of 2013. Adjusted net income per diluted share was $0.57, compared to $0.40 in the same period of 2013.

Adjusted EBITDA was $134.8 million, or a 7.2% increase as compared to $125.8 million in the same period of 2013.

Growth and Development

During the third quarter of fiscal 2014, the Company opened six new Smart & Final Extra! stores and completed four conversions of legacy Smart & Final to the Smart & Final Extra! store format. As of October 5, 2014, the Company operated a total of 90 Smart & Final Extra! and 110 legacy Smart & Final stores, and 52 Cash & Carry stores.

In the fourth quarter of fiscal 2014, the Company expects to open one additional new Smart & Final Extra! store, complete seven additional conversions of legacy stores to the Extra! format, including one store relocation, and open one new Cash & Carry store. 

Leverage and Liquidity

The Company generated cash from operations of $100.4 million in the 40 weeks ended October 5, 2014 and invested $89.7 million in capital expenditures for property, plant, and equipment and capitalized software.  

During the third quarter of 2014, in conjunction with its initial public offering, the Company repaid approximately $115.5 million in borrowings under its Term Loan Facility.  At the end of the quarter the Company's debt, net of debt discount, was $587.8 million and cash was $110.1 million.

Initial Public Offering

On September 29, 2014, the Company completed its initial public offering of 13,450,000 shares of common stock, at a price to the public of $12.00 per share, before underwriting discounts and commissions. The Company additionally sold 2,017,500 shares as a result of the underwriters' exercise of their over-allotment option to purchase additional shares. The initial public offering, including exercise of the over-allotment option, generated aggregate net proceeds to the Company of approximately $167.7 million, net of underwriting discounts and commissions and direct offering expenses.

Q4 2014 Outlook

The following provides information on the Company's guidance for the fourth quarter of 2014:

Third Quarter 2014 Conference Call

The Company will host a conference call today at 1:30 p.m. PT / 4:30 p.m. ET to discuss its third quarter financial results. To participate in the call, please dial (877) 407-0784 (U.S.) or (201) 689-8560 (International) ten minutes prior to the start time. The conference call can also be accessed on the "Investors" section of the Company's Web site at http://www.smartandfinal-investor.com/.

For those unable to participate during the live broadcast, a telephonic replay of the call will also be available beginning today at approximately 7:30 p.m. Eastern Time, by dialing 1-877-870-5176 (U.S.) or 1-858-384-5517 (international) and entering the replay pin number: 13593690.  The telephonic replay will be available until 11:59 p.m. Eastern Time, on Wednesday, November 26, 2014.

About Smart & Final

Smart & Final Stores, Inc. (NYSE: SFS), is a value-oriented food and everyday staples retailer that serves household and business customers. The Company is headquartered in Commerce (located in Los Angeles), CA, where it was founded over 140 years ago.  As of October 5, 2014, the Company operated 252 grocery and foodservice stores under the "Smart & Final", "Smart & Final Extra!" and "Cash & Carry Smart Foodservice" banners in California, Oregon, Washington, Arizona, Nevada, and Idaho, with an additional 13 stores in northern Mexico operated through a joint venture.

Forward-Looking Statements

Certain statements contained in this release that are not historical information contain forward-looking statements. The forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected or implied. Further, certain forward-looking statements are based on assumptions of future events which may not prove to be accurate. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "may," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or, in each case, their negative, or other variations or comparable terminology. The Company derives many of its forward-looking statements from its operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes that its assumptions are reasonable, it is difficult to predict the impact of known factors and, of course, it is impossible to anticipate all factors that could affect actual results. These factors are discussed in the "Risk Factors," "Special Note Concerning Forward-Looking Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business" sections and elsewhere in the prospectus that is contained in the Company's registration statement on Form S-1 (File No. 333-196931) filed with the Securities and Exchange Commission.

You should keep in mind that any forward-looking statement made by the Company herein, or elsewhere, speaks only as of the date on which made. New risks and uncertainties come up from time to time, and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.

Non-GAAP Financial Measures

To supplement the Company's financial information presented in accordance with GAAP, the Company uses certain non-GAAP financial measures, namely adjusted net income, adjusted net income per share, adjusted net income per diluted share, EBITDA and Adjusted EBITDA to clarify and enhance understanding of its past performance. The Company defines adjusted net income as net income adjusted for the items set forth in the table below.  The Company defines adjusted net income per share as adjusted net income divided by the weighted average basic shares outstanding.  The Company defines adjusted net income per diluted share as adjusted net income divided by the weighted average diluted shares outstanding.  The Company defines EBITDA as net income before depreciation and amortization, interest expense and provision for income tax, and adjusted EBITDA as EBITDA adjusted for the items set forth in the table below.

Use of these non-GAAP measures may differ from similar measures reported by other companies. Each of these non-GAAP measures has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

The following table shows reconciliations of adjusted net income, EBITDA and adjusted EBITDA to net income, and adjusted net income per share and adjusted net income per diluted share to net income per share, for the sixteen-week and forty-week periods ended October 5, 2014 and October 6, 2013.

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SOURCE Smart & Final Stores, Inc.

Related Links

http://www.smartandfinal.com