Sales Increased 3.3%; Reported GAAP Diluted
Earnings Per Share of $0.21; Adjusted Diluted Earnings Per Share of
$0.23
Updates Fiscal Year 2015 Guidance
The Fresh Market, Inc. (NASDAQ:TFM), a specialty grocery retailer,
today announced unaudited sales and earnings results for its
thirteen-week third quarter ended October 25, 2015.
Third Quarter Financial Overview
- Diluted earnings per share under U.S. generally accepted
accounting principles ("GAAP") were $0.21, compared to $0.31 in the
third quarter of fiscal 2014. Third quarter fiscal 2015 results
include net store closure and leadership change charges of $0.02
per diluted share and third quarter fiscal 2014 results include a
$0.04 per diluted share net benefit from adjustments to previously
recorded store closure and exit costs.
- Adjusted diluted earnings per share were $0.23, excluding $0.02
per diluted share of net store closure and leadership change
charges. Adjusted diluted earnings per share were $0.27 for
the third quarter of fiscal 2014, excluding net benefits from
adjustments to closed store reserves of $0.04 per diluted
share. Adjusted diluted earnings per share is a non-GAAP
financial measure. The schedules included in this press release
reconcile this and other non-GAAP financial measures referenced to
their comparable GAAP financial measures.
- GAAP net income was $10.0 million, compared to $14.9 million in
the third quarter of fiscal 2014. Third quarter fiscal 2015 GAAP
net income includes pre-tax net store closure and leadership change
charges of $1.7 million and third quarter fiscal 2014 results
include a net pre-tax benefit of $2.9 million resulting from
adjustments to previously recorded store closure and exit costs.
- Adjusted EBITDA was $37.5 million, compared to $39.1 million in
the third quarter of fiscal 2014. Adjusted EBITDA for the third
quarter of fiscal 2015 was 8.7% of sales, compared to 9.3% of sales
in the third quarter of fiscal 2014. Adjusted EBITDA is a non-GAAP
financial measure.
- Sales increased 3.3% to $433.1 million and comparable store
sales decreased 3.7% to $386.5 million from the third quarter of
fiscal 2014.
- Gross profit increased 4.3%, or $5.9 million, to $144.0
million, compared to the third quarter of fiscal 2014. Gross
margin was 33.2%, compared to 32.9% in the third quarter of fiscal
2014.
- The Company generated $28.1 million in cash flow from
operations during the third quarter of fiscal 2015, compared to
$30.0 million in the third quarter of the prior fiscal year, and
ended the quarter with a cash balance of $37.3 million.
Rick Anicetti, President and Chief Executive Officer, commented,
"The Fresh Market is a unique brand with enormous untapped
potential and I am excited about the opportunity to guide the
company's future direction. As our management team and Board
conduct a comprehensive strategic and financial review of the
business, we are simultaneously moving forward aggressively with a
number of initiatives to strengthen our foundation, increase
productivity, drive store traffic, and regain operating
momentum. With the holiday season fast approaching, we are
making changes as quickly as prudently possible to our
productivity, price optimization and brand differentiation to help
stabilize traffic trends and drive sales during this key shopping
period."
Third Quarter Operating Performance
Total sales for the third quarter of fiscal 2015 increased 3.3%
to $433.1 million compared to the third quarter of fiscal 2014.
Comparable store sales decreased 3.7% to $386.5 million from the
third quarter of fiscal 2014 as a result of a 3.7% decrease in the
number of transactions.
The Company's gross profit increased 4.3%, or $5.9 million, to
$144.0 million in the third quarter of fiscal 2015, compared to the
prior fiscal year period. The fiscal 2015 third quarter gross
margin increased 30 basis points to 33.2%, compared to the third
quarter of the prior fiscal year. The improvement in gross margin
was driven primarily by reduced supply chain costs, a favorable
LIFO expense adjustment and reduced store supplies expenses,
partially offset by an increase in occupancy costs.
Selling, general and administrative expenses for the third
quarter of fiscal 2015 increased $8.8 million to $109.6 million,
compared to the third quarter of fiscal 2014. Included in these
expenses is $1.6 million related to the previously announced
leadership changes at the Company. Selling, general and
administrative expenses as a percentage of sales for the quarter
increased to 25.3% from 24.0% in the third quarter of fiscal 2014,
primarily due to increased store labor expenses on lower comparable
store sales and investments in marketing and store productivity
programs, partially offset by a decrease in incentive compensation
expenses.
Operating income was $16.7 million, or 3.9% of sales, for the
third quarter of fiscal 2015, compared to $24.3 million, or 5.8% of
sales in the third quarter of fiscal 2014. The Company's third
quarter of fiscal 2015 operating income includes $1.7 million in
net store closure and leadership change charges and the Company's
third quarter 2014 operating income included a net benefit of $2.9
million as a result of adjustments to previously recorded store
closure and exit costs. Excluding these items, adjusted operating
income was $18.5 million, or 4.3% of sales, for the third quarter
of fiscal 2015 and $21.4 million, or 5.1% of sales, for the third
quarter of fiscal 2014. Adjusted operating income is a non-GAAP
financial measure.
Fiscal Year to Date Operating Performance
GAAP diluted earnings per share for the first thirty-nine weeks
of fiscal 2015 were $0.88, flat with the corresponding thirty-nine
week period in fiscal 2014. Excluding store closure and leadership
change charges of $0.21 per diluted share, adjusted diluted
earnings per share were $1.09 for the first thirty-nine weeks of
fiscal 2015. Excluding store closure and exit costs of $0.18 per
diluted share for the first thirty-nine weeks of fiscal 2014, the
Company generated adjusted diluted earnings per share of $1.06.
Adjusted diluted earnings per share is a non-GAAP financial
measure.
For the thirty-nine week period ended October 25, 2015, sales
were $1.34 billion, a 5.1% increase compared to the corresponding
thirty-nine week period in fiscal 2014, while comparable store
sales decreased 1.6% from the prior year period. GAAP net income
was $42.6 million for the thirty-nine week period ended October 25,
2015, compared to $42.8 million in the prior year period. GAAP net
income for the first thirty-nine weeks of fiscal 2015 includes net
pre-tax store closure and leadership change charges of $16.6
million, and GAAP net income for the first thirty-nine weeks of
fiscal 2014 includes pre-tax store closure and exit costs of $13.9
million.
Balance Sheet and Cash Flow
During the third quarter of fiscal 2015, the Company generated
$28.1 million in cash flow from operations and invested $26.3
million in capital expenditures, of which $21.9 million related to
new and remodeled stores. For the year-to-date fiscal 2015 period,
the Company generated $105.5 million in cash flow from operations
and invested $80.6 million in capital expenditures, with $70.2
million spent on real estate activities.
During the third quarter of fiscal 2015, the Company repurchased
1.6 million shares of its common stock at an average price of
$23.28 per share for a total expenditure of $37.6 million. As of
October 25, 2015, the Company had $162.4 million available for
future stock repurchases under its previously announced $200
million stock repurchase program.
The Company had $37.3 million of cash and no outstanding debt in
connection with the Company's revolving credit facility at the end
of the third quarter of fiscal 2015, compared to $48.5 million in
cash and no outstanding debt under the credit facility at the end
of fiscal 2014.
On a trailing four quarter basis for the period ended October
25, 2015, the Company's return on assets was 11.3%, return on
invested capital, excluding excess cash, was 17.6%, and return on
equity was 18.5%. Excluding the impact from store closure and
exit costs, as well as asset impairment and leadership change
charges recognized in the last quarter of fiscal 2014 and the first
three quarters of fiscal 2015, the Company's adjusted return on
assets was 14.0%, adjusted return on invested capital, excluding
excess cash, was 21.2%, and adjusted return on equity was 22.3%,
all on a trailing four quarter basis for the period ended October
25, 2015. These financial return measures are non-GAAP
financial measures. The schedules included in this press
release include a discussion of these non-GAAP financial measures,
as well as the details of the Company's calculations of these
financial return measures.
Growth and Development
During the third quarter of fiscal 2015, the Company opened six
new stores, including two stores in Florida and one each in South
Carolina, Georgia, Alabama and Connecticut. As of October 25, 2015,
the Company operated 180 stores in 27 states.
The following table provides additional information about the
Company's real estate and store opening activities through the
third quarter of fiscal 2015. Leases signed as of October 25,
2015 are for stores expected to open during or after fiscal
2015.
|
|
|
|
Stores Opened |
Leases Signed for
Future |
|
in FY 2015 |
Store Locations
1 |
Number of new leased store
locations |
14 |
24 |
Average capital cost per store 2 |
$3.5 million |
|
|
Information for All |
|
|
Open Stores |
|
Average store size (gross square
feet) |
21,256 |
|
Total rentable square footage (at end
of period) |
3.8 million |
|
|
|
|
Note 1: Includes leases for stores expected to open after
October 25, 2015 and such leases typically include customary
leasing conditions. In general, the Company does not announce
the location of a new store until all conditions to the lease are
satisfied or the Company's involvement in the property or project
will be made public in connection with governmental permitting or
approvals or in dealing with other third-parties. The Company
generally identifies a store as "coming soon" when the Company
takes possession of the property and commences construction related
activities. The Company's website sets forth the most current
list of announced lease locations and stores that are "coming
soon."
Note 2: Net of capital contributions, if any, received from
landlords and including building costs, but excluding cost of land
for owned stores. Lease inducement costs and similar
prepayments in connection with acquiring or entering into new
leases are not included in the capital cost per store and are
included as a long-term asset and expensed over the primary term of
the lease.
Fiscal 2015 Outlook
The Company expects fiscal 2015 adjusted earnings of $1.55 to
$1.60 per diluted share. This outlook excludes approximately $0.08
per diluted share of expenses associated with the leadership
transition and anticipated expenses related to the strategic and
financial review. The outlook also excludes anticipated
net charges of approximately $0.20 per diluted share, expected to
be realized during fiscal 2015 related to the recognition of lease
liabilities, asset disposals, severance and other store closure and
exit costs. GAAP diluted earnings per share are expected to be
$1.27 to $1.32, which includes an approximately $0.07 per diluted
share benefit related to the 53rd week of fiscal 2015. Both the
adjusted and GAAP earnings per share expectations exclude the
impact of any share repurchases by the Company conducted in the
fourth quarter of fiscal 2015.
Management's outlook for the 53-week fiscal 2015 is based upon
the following expectations:
- Total sales growth for the 53-week fiscal 2015 of approximately
5.5% to 6.5% compared to the 52-week fiscal 2014 total sales
(fiscal 2014 included the benefit of sales from the Company's three
California stores prior to their closing)
- Comparable store sales for the first 52 weeks of fiscal 2015 of
-2.0% to -2.6%
- An effective tax rate of 37.0% to 37.3%
- Approximately $95 million to $105 million in capital
expenditures, primarily related to real estate investments
- Unit growth of 18 new stores
- Remodeling or refreshing 9 stores
- Approximately $0.07 per diluted share of earnings related to
the 53rd week of operations in the fourth quarter of fiscal
2015
Strategic and Financial Review
On October 20, 2015, The Fresh Market announced that the Company
and the Board of Directors will conduct a strategic and financial
review of the Company's business. This review may result in
the Company pursuing value-enhancing initiatives as a standalone
company, capital structure optimization, or a sale of the Company
or other business combination. In the event that the Board of
Directors concludes that pursuing any potential strategic
alternative is in the best interests of the Company and its
stockholders, any such process will be conducted in a manner
designed to maximize value for all stockholders. The Company does
not intend to comment further regarding the strategic and financial
review until the Board of Directors approves a specific action or
concludes its review.
Earnings Conference Call
The Company will host a conference call today at 5:00 p.m.
Eastern Time. During the conference call, the Company may
answer questions concerning its business. The Company's
responses to these questions, as well as other matters discussed
during the conference call, may contain or constitute information
that has not been previously disclosed.
The call will be broadcast via a live audio webcast at
www.thefreshmarket.com, within the Investor Relations section of
the Company's website. Investors and analysts interested in
participating on the call are invited to dial (877) 407-8293 or
(201) 689-8349 to access the call. A telephone replay will be
available for two weeks following the call. To access the
replay, please dial (877) 660-6853 or (201) 612-7415 with
conference ID #13624645.
About The Fresh Market, Inc.
Founded in 1982, The Fresh Market, Inc. is a specialty grocery
retailer focused on providing high-quality products in a unique and
inviting atmosphere with a high level of customer service. As of
November 19, 2015, the Company operates 183 stores in 27 states
across the United States. For more information, please visit
www.thefreshmarket.com.
Forward Looking Statements: This document
contains forward-looking statements that reflect our plans,
estimates, and beliefs regarding future business and financial
performance and financial condition. These statements involve a
number of risks and uncertainties. Any statements contained herein
(including statements to the effect that The Fresh Market or its
management "anticipates," "plans," "estimates," "expects,"
"believes," and other similar expressions) that are not statements
of historical fact should be considered forward-looking statements.
The following are some of the factors that could cause actual
future results to differ materially from those expressed in any
forward-looking statements: accounting entries and adjustments at
the close of a fiscal quarter; unexpected expenses and risks
associated with our business; our ability to remain competitive in
the areas of merchandise quality, price, breadth of selection,
customer service and convenience; the effective management of our
merchandise buying and inventory levels; the quality and safety of
food products and other items that we may sell; our ability to
anticipate and/or react to changes in customer demand; changes in
economic and financial conditions, including U.S. fiscal and
monetary policy, and the resulting impact on consumer confidence;
other changes in consumer confidence and spending; unexpected
consumer responses to promotional programs; unusual, unpredictable
and/or severe weather conditions, including their effect on our
supply chain and our store operations; the effectiveness of our
logistics and supply chain model, including the ability of our
third-party logistics providers to meet our product demands and
restocking needs on a cost competitive basis; the execution and
management of our store growth, including the availability and cost
of acceptable real estate locations for new store openings, the
capital that we utilize in connection with new store development
and the anticipated time between lease execution and store opening;
the mix of our new store openings as between build to suit sites
and second-generation, as-is sites and as between existing markets
and newer markets; the actions of third parties involved in our
store growth activities, including property owners, landlords,
property managers, contractors, subcontractors, government
agencies, and current tenants who occupy one or more of our
proposed new store locations, all of whom may be impacted by their
financial condition, their lenders, their activities outside of
those focused on our new store growth and other tenants, customers
and business partners of theirs; impairment of recorded goodwill
and other long-lived assets; global economies and credit and
financial markets; our ability to maintain the security of
electronic and other confidential and/or personal information;
serious disruptions and catastrophic events; competition; personnel
recruitment and retention; acquisitions and divestitures, including
the ability to integrate successfully any such acquisitions;
information systems and technology; commodity, energy, fuel, and
other cost increases; compliance with laws, regulations and orders;
changes in laws and regulations; outcomes of litigation and
proceedings and the availability of insurance, indemnification, and
other third-party coverage of any losses suffered in connection
therewith; tax matters; numerous other matters of national,
regional and global scale, including those of a political,
economic, business, and competitive nature; the outcome of the
strategic and financial review being conducted by the Company and
the Board of Directors; and other factors as set forth from time to
time in our filings with the Securities and Exchange Commission.
Any forward-looking statement, including any contained herein,
speaks only as of the time of this release and we do not undertake
to update or revise them as more information becomes available or
to disclose any facts, events or circumstances after the date of
this release that may affect the accuracy of any forward-looking
statement, except as may be required by any applicable securities
laws.
This press release, and access to our earnings call, is also
available in the Investor Relations portion of The Fresh Market,
Inc. website (http://ir.thefreshmarket.com/).
|
The Fresh Market,
Inc. |
Consolidated Statements
of Comprehensive Income |
(In thousands, except share and
per share amounts) |
(unaudited) |
|
|
|
|
|
|
For the Thirteen
Weeks Ended |
For the
Thirty-Nine Weeks Ended |
|
October 25, |
October 26, |
October 25, |
October 26, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Sales |
$433,124 |
$419,450 |
$1,337,260 |
$1,272,679 |
Cost of goods sold |
289,106 |
281,375 |
883,687 |
842,723 |
Gross profit |
144,018 |
138,075 |
453,573 |
429,956 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Selling, general and administrative
expenses |
109,568 |
100,781 |
318,305 |
299,048 |
Impairments and store closure costs |
304 |
(2,728) |
14,565 |
13,881 |
Depreciation |
17,462 |
15,694 |
50,384 |
45,996 |
Income from operations |
16,684 |
24,328 |
70,319 |
71,031 |
Interest expense |
1,020 |
1,086 |
2,988 |
3,307 |
Income before provision for income taxes |
15,664 |
23,242 |
67,331 |
67,724 |
Tax provision |
5,673 |
8,358 |
24,702 |
24,879 |
|
|
|
|
|
Net income and comprehensive income |
$9,991 |
$14,884 |
$42,629 |
$42,845 |
|
|
|
|
|
Net income per share: |
|
|
|
|
Basic |
$0.21 |
$0.31 |
$0.88 |
$0.89 |
|
|
|
|
|
Diluted |
$0.21 |
$0.31 |
$0.88 |
$0.88 |
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
47,994,052 |
48,291,724 |
48,320,885 |
48,280,457 |
|
|
|
|
|
Diluted |
48,108,663 |
48,480,657 |
48,462,303 |
48,446,013 |
|
The Fresh Market,
Inc. |
Consolidated Balance
Sheets |
(In thousands, except share
amounts) |
(unaudited) |
|
|
|
|
October 25, |
January 25, |
|
2015 |
2015 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$37,328 |
$48,486 |
Accounts receivable |
7,936 |
12,442 |
Inventories |
68,398 |
61,237 |
Prepaid expenses and other current
assets |
3,870 |
4,633 |
Income tax benefit |
4,825 |
622 |
Deferred income taxes |
9,095 |
6,957 |
Total current assets |
131,452 |
134,377 |
Property and equipment, net |
411,720 |
392,194 |
Deferred income taxes |
6,595 |
1,452 |
Other assets |
7,157 |
9,429 |
Total assets |
$556,924 |
$537,452 |
|
|
|
Liabilities and stockholders'
equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$48,871 |
$45,592 |
Accrued liabilities |
78,287 |
74,641 |
Total current liabilities |
127,158 |
120,233 |
Capital and financing lease obligations |
32,493 |
33,337 |
Closed store reserves |
9,787 |
10,187 |
Deferred income taxes |
— |
929 |
Deferred rent |
14,662 |
13,797 |
Deferred lease incentives |
17,085 |
14,117 |
Other liabilities |
16,518 |
16,065 |
Total noncurrent liabilities |
90,545 |
88,432 |
|
|
|
Stockholders' equity: |
|
|
Preferred stock – $0.01 par value;
40,000,000 shares authorized, none issued |
— |
— |
Common stock – $0.01 par value;
200,000,000 shares authorized, 46,922,644 and 48,392,201 shares
issued and outstanding as of October 25, 2015 and January 25, 2015,
respectively |
468 |
483 |
Additional paid-in capital |
127,950 |
122,526 |
Retained earnings |
210,803 |
205,778 |
Total stockholders' equity |
339,221 |
328,787 |
Total liabilities and stockholders'
equity |
$556,924 |
$537,452 |
|
The Fresh Market,
Inc. |
Consolidated Statements
of Cash Flow |
(In thousands) |
(unaudited) |
|
|
|
|
For the
Thirty-Nine Weeks Ended |
|
October 25, |
October 26, |
|
2015 |
2014 |
Operating activities |
|
|
Net income |
$42,629 |
$42,845 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and amortization |
50,524 |
46,147 |
Loss on disposals of property and
equipment |
5,588 |
1,916 |
Gain on assignment of capital lease |
— |
(1,508) |
Share-based compensation |
3,652 |
5,513 |
Excess tax (benefit) shortfall from
share-based compensation |
(80) |
158 |
Deferred income taxes |
(8,210) |
(15,300) |
Change in assets and liabilities: |
|
|
Accounts receivable |
4,506 |
2,984 |
Inventories |
(7,161) |
(8,876) |
Prepaid expenses and other assets |
2,899 |
(41) |
Income tax benefit |
(4,203) |
(4,907) |
Accounts payable |
3,279 |
4,305 |
Closed store reserves |
3,417 |
14,018 |
Accrued and other liabilities |
8,677 |
10,952 |
Net cash provided by operating
activities |
105,517 |
98,206 |
|
|
|
Investing activities |
|
|
Purchases of property and equipment |
(80,634) |
(64,478) |
Proceeds from sale of property and
equipment |
745 |
102 |
Net cash used in investing activities |
(79,889) |
(64,376) |
|
|
|
Financing activities |
|
|
Borrowings on revolving credit facility |
— |
137,233 |
Payments made on revolving credit
facility |
— |
(161,933) |
Payments made on debt issuance costs |
— |
(499) |
Payments made on capital and financing lease
obligations |
(938) |
(562) |
Proceeds from issuance of common stock
pursuant to employee stock purchase plan |
120 |
132 |
Excess tax benefit (shortfall) from
share-based compensation |
80 |
(158) |
Payments made on withholding tax for
restricted stock vesting |
(1,009) |
(162) |
Proceeds from exercise of share-based
compensation awards |
2,581 |
234 |
Payments to repurchase common stock |
(37,620) |
— |
Net cash used in financing activities |
(36,786) |
(25,715) |
|
|
|
Net (decrease) increase in cash and cash
equivalents |
(11,158) |
8,115 |
Cash and cash equivalents at beginning of
period |
48,486 |
11,745 |
|
|
|
Cash and cash equivalents at end of
period |
$37,328 |
$19,860 |
|
|
|
Supplemental disclosures of cash flow
information: |
|
|
Cash paid during the period for interest |
$2,821 |
$3,172 |
|
|
|
Cash paid during the period for taxes |
$37,268 |
$45,522 |
|
|
|
Non-cash investing and financing
activities: |
|
|
Property and equipment acquired through
capital and financing lease obligations |
$51 |
$5,884 |
|
The Fresh Market,
Inc. |
Occupancy
Costs |
(In thousands) |
(unaudited) |
|
|
|
|
|
|
For the Thirteen
Weeks Ended |
For the
Thirty-Nine Weeks Ended |
|
October 25,
2015 |
October 26,
2014 |
October 25,
2015 |
October 26,
2014 |
|
|
|
|
|
Pre-Opening Rent |
$424 |
$691 |
$1,705 |
$1,817 |
Other Occupancy Costs |
23,845 |
21,833 |
69,332 |
64,394 |
Total Occupancy Costs |
$24,269 |
$22,524 |
$71,037 |
$66,211 |
|
|
|
|
|
Occupancy costs are
reflected in the "Cost of goods sold" line item on the Consolidated
Statements of Comprehensive Income. |
|
|
|
|
|
|
The Fresh Market,
Inc. |
New Store Pre-Opening
Expenses |
(In thousands) |
(unaudited) |
|
|
|
|
|
|
For the Thirteen
Weeks Ended |
For the
Thirty-Nine Weeks Ended |
|
October 25,
2015 |
October 26,
2014 |
October 25,
2015 |
October 26,
2014 |
|
|
|
|
|
New Store Pre-Opening Expenses |
$1,731 |
$1,502 |
$3,721 |
$4,234 |
|
|
|
|
|
New store pre-opening
expenses are reflected in the "Selling, general and administrative
expenses" line item on the Consolidated Statements of Comprehensive
Income. |
|
The Fresh Market,
Inc. |
Reconciliation of
Adjusted Financial Statement Items (1) |
(In thousands, except per share
amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
For the Thirteen Weeks Ended October 25,
2015 |
For the Thirteen Weeks Ended October 26,
2014 |
|
|
|
Adjusted |
|
|
Adjusted |
|
GAAP |
Adjustments (2) |
GAAP |
GAAP |
Adjustments (3) |
GAAP |
Income from operations |
$16,684 |
$1,826 |
$18,510 |
$24,328 |
$(2,904) |
$21,424 |
|
|
|
|
|
|
|
Income before provision for income taxes |
$15,664 |
$1,826 |
$17,490 |
$23,242 |
$(2,904) |
$20,338 |
|
|
|
|
|
|
|
Tax provision |
$5,673 |
$808 |
$6,481 |
$8,358 |
$(1,043) |
$7,315 |
|
|
|
|
|
|
|
Net income (loss) |
$9,991 |
$1,018 |
$11,009 |
$14,884 |
$(1,861) |
$13,023 |
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
Basic (4) |
$0.21 |
$0.02 |
$0.23 |
$0.31 |
$(0.04) |
$0.27 |
|
|
|
|
|
|
|
Diluted (4) |
$0.21 |
$0.02 |
$0.23 |
$0.31 |
$(0.04) |
$0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Thirty-Nine Weeks Ended October 25,
2015 |
For the Thirty-Nine Weeks Ended October 26,
2014 |
|
|
|
Adjusted |
|
|
Adjusted |
|
GAAP |
Adjustments (5) |
GAAP |
GAAP |
Adjustments (6) |
GAAP |
Income from operations |
$70,319 |
$16,705 |
$87,024 |
$71,031 |
$13,885 |
$84,916 |
|
|
|
|
|
|
|
Income before provision for income taxes |
$67,331 |
$16,705 |
$84,036 |
$67,724 |
$13,885 |
$81,609 |
|
|
|
|
|
|
|
Tax provision |
$24,702 |
$6,453 |
$31,155 |
$24,879 |
$5,307 |
$30,186 |
|
|
|
|
|
|
|
Net income |
$42,629 |
$10,252 |
$52,881 |
$42,845 |
$8,578 |
$51,423 |
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
Basic (4) |
$0.88 |
$0.21 |
$1.09 |
$0.89 |
$0.18 |
$1.07 |
|
|
|
|
|
|
|
Diluted (4) |
$0.88 |
$0.21 |
$1.09 |
$0.88 |
$0.18 |
$1.06 |
(1) In addition to reporting financial results in
accordance with U.S. generally accepted accounting principles, or
GAAP, the Company is also presenting results on an "adjusted" basis
in order to exclude certain charges incurred during the thirteen
and thirty-nine weeks ended October 25, 2015 and
October 26, 2014. These measures are not in accordance
with, or an alternative to, GAAP and are reconciled to the
Company's most recent GAAP financial statements. 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 the Company's
results of operations and financial condition. In addition,
the Company's management uses these measures to review the
Company's financial results and evaluate its business
operations.
(2) The Company recognized pre-tax charges of $1.8 million
($1.0 million, net of tax) with $1.7 million recorded to the
"Selling, general, and administrative expenses" line item on the
Consolidated Statements of Comprehensive Income for the thirteen
weeks ended October 25, 2015, primarily related to previously
announced leadership changes with additional store closure costs
recorded to the "Impairments and store closure costs" line
item.
(3) The Company recognized a pre-tax net benefit of $2.9
million ($1.9 million, net of tax) recorded to the "Impairments and
store closure costs" line item on the Consolidated Statements of
Comprehensive Income related to the gain on the assignment of a
capital lease and changes in estimates related to lease commitments
for previously closed stores.
(4) The net income per share totals in the above tables may
not equal the sum of the components due to rounding.
(5) The Company recognized pre-tax charges of $16.7 million
($10.3 million, net of tax) with $14.0 million recorded to the
"Impairments and store closure costs" line item on the Consolidated
Statements of Comprehensive Income. These charges include the
recognition of certain lease liabilities, severance, write down and
loss on disposal of assets and other exit costs. Additional
charges of $2.0 million related to the previously announced
leadership changes and were recorded to "Selling, general, and
administrative expenses" and the remaining charges, primarily
related to the liquidation of inventory for the store closures, are
reflected on other line items of the Consolidated Statements of
Comprehensive income.
(6) The Company recognized pre-tax charges of $13.9 million
($8.6 million, net of tax) with $13.5 million recorded to the
"Impairments and store closure costs" line item on the Consolidated
Statements of Comprehensive Income. These charges include the
recognition of certain lease liabilities, severance, write down and
loss on disposal of assets and other exit costs. The remaining
charges primarily relate to the liquidation of inventory for the
store closures and are reflected on other line items of the
Consolidated Statements of Comprehensive Income.
|
The Fresh Market,
Inc. |
Reconciliation Between
Net Income and Adjusted EBITDA (1) |
(In thousands) |
(unaudited) |
|
|
|
|
|
|
For the Thirteen
Weeks Ended |
For the
Thirty-Nine Weeks Ended |
|
October 25, |
October 26, |
October 25, |
October 26, |
|
2015 |
2014 |
2015 |
2014 |
Net income |
$9,991 |
$14,884 |
$42,629 |
$42,845 |
Adjusted items: |
|
|
|
|
Tax provision |
5,673 |
8,358 |
24,702 |
24,879 |
Interest expense |
1,020 |
1,086 |
2,988 |
3,307 |
Depreciation |
17,462 |
15,694 |
50,384 |
45,996 |
Leadership change related charges |
1,599 |
— |
2,014 |
— |
Share-based compensation, net of
leadership change related charges |
1,292 |
1,810 |
3,900 |
5,513 |
Strategic and financial review
charges |
144 |
— |
144 |
— |
Loss on disposals of property and
equipment, net of closed stores (2) |
7 |
27 |
18 |
64 |
Impairments and store closure costs |
304 |
(2,728) |
14,565 |
13,881 |
Other (3) |
2 |
— |
474 |
418 |
Total adjusted items |
27,503 |
24,247 |
99,189 |
94,058 |
|
|
|
|
|
Adjusted EBITDA |
$37,494 |
$39,131 |
$141,818 |
$136,903 |
(1) While the Company reports financial results in
accordance with U.S. generally accepted accounting principles
(GAAP), it also provides certain non-GAAP operating performance
measures. This non-GAAP information is provided as a
supplement to, and not as a substitute for, measures of financial
performance prepared in accordance with GAAP. The Company's
management uses this information internally to make operating
decisions and believes it is helpful to investors because it allows
period-to-period comparisons of the Company's ongoing operating
results. The information can also be used to perform trend analyses
and to better identify operating trends that may otherwise be
masked or distorted. Finally, the Company believes such
information provides a higher degree of transparency.
(2) The "Loss on disposals of property and equipment" line
item on the Consolidated Statements of Cash Flows includes the loss
from closed stores. See table below for the calculation of
loss on disposals of property and equipment, net of closed
stores.
Reconciliation of Loss on
Disposals of Property and Equipment: |
|
|
|
|
|
|
For the Thirteen
Weeks Ended |
For the
Thirty-Nine Weeks Ended |
|
October 25, |
October 26, |
October 25, |
October 26, |
|
2015 |
2014 |
2015 |
2014 |
(Gain) loss on disposals of property and
equipment |
$(18) |
$125 |
$5,588 |
$1,916 |
Less: (Gain) loss on disposals included in
the "Impairments and store closure costs" line item on the
Consolidated Statements of Comprehensive Income |
(25) |
98 |
5,570 |
1,852 |
Loss on disposals of property and equipment,
net of closed stores |
$7 |
$27 |
$18 |
$64 |
(3) Other adjusted items primarily relate to the
liquidation of inventory for closed stores and are reflected in
other line items on the Consolidated Statements of Comprehensive
Income for the thirteen and thirty-nine weeks ended
October 25, 2015 and October 26, 2014.
The Fresh Market,
Inc. |
Calculation of Return
Metrics (1) |
(unaudited) |
|
|
|
|
|
|
October 25, 2015 |
October 26, 2014 |
October 25, 2015 |
October 26, 2014 |
|
Calculated Using |
Calculated Using |
Calculated Using |
Calculated Using |
|
GAAP |
GAAP |
Adjusted |
Adjusted |
Return Metrics - Trailing Four
Quarters |
Net Income (2) |
Net Income (2) |
Net Income (3) |
Net Income (3) |
Return on assets (4) |
11.3% |
9.2% |
14.0% |
13.8% |
Return on invested capital (5) |
17.6% |
13.5% |
21.2% |
18.9% |
Return on equity (6) |
18.5% |
14.7% |
22.3% |
21.3% |
(1) The return metrics do not represent financial measures
prepared in accordance with U.S. generally accepted accounting
principles (GAAP). For a discussion of financial measures not
prepared in accordance with GAAP, please see below. 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 the Company's
results of operations and financial condition. In addition, the
Company's management uses these measures to review the Company's
financial results and evaluate its business operations. The
financial return metrics are calculated on a trailing four quarters
basis. The manner of calculating these return metrics is set
forth in the footnotes below and may not be comparable to the
manner in which other companies calculate these return metrics.
(2) The return metrics in these column are calculated using
net income determined in accordance with GAAP. Please see the
footnotes below for the formulas used to determine these return
metrics.
(3) The return metrics in these columns are calculated
using adjusted net income, which is a non-GAAP financial measure.
Please see the schedule below for the reconciliation of net income
determined in accordance with GAAP to adjusted net income.
Trailing four quarters ended (in
millions): |
|
|
|
As of October 25,
2015 |
As of October 26,
2014 |
Net income |
$62.8 |
$44.8 |
Impairments and store closure costs |
23.2 |
41.4 |
Leadership change related charges |
4.1 |
— |
Strategic and financial review charges |
0.1 |
— |
Adjustment for taxes |
(10.7) |
(16.0) |
Adjusted net income |
$79.5 |
$70.2 |
(4) Net Income/Average Assets (for the columns which
present metrics calculated using net income) and Adjusted Net
Income/Average Assets (for the columns which present metrics
calculated using adjusted net income).
(5) (1-Tax Rate)*(EBIT)/(Average Assets - Average Cash -
Average Non-Interest Bearing Current Liabilities). EBIT, which is
not presented as a stand-alone financial measure, is a non-GAAP
financial measure and equals (i) net income plus interest expense
plus provision for income taxes (for the calculation set forth in
the columns which present metrics calculated using net income) and
(ii) adjusted net income plus interest expense plus adjusted
provision for income taxes (for the calculation set forth in the
columns which present metrics calculated using adjusted net
income).
(6) Net Income/Ending Equity (for the columns which present
metrics calculated using net income) and Adjusted Net Income/Ending
Equity (for the columns which present metrics calculated using
adjusted net income).
Non-GAAP Financial Measures
While the Company reports financial results in accordance with
U.S. generally accepted accounting principles (GAAP), it also
provides certain non-GAAP operating performance measures. This
non-GAAP information is provided as a supplement to, and not as a
substitute for, measures of financial performance prepared in
accordance with GAAP. The Company's management uses this
information internally to make operating decisions and believes it
is helpful to investors because it allows period-to-period
comparisons of the Company's ongoing operating results. The
information can also be used to perform trend analyses and to
better identify operating trends that may otherwise be masked or
distorted. Finally, the Company believes such information
provides a higher degree of transparency.
CONTACT: Investor Relations
(336) 615-8065
investorrelations@thefreshmarket.com
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