Smart & Final Stores, Inc. Reports Fourth Quarter and Full Year 2017 Financial Results
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PR Newswire 14-Mar-2018 4:15 PM
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COMMERCE, Calif., March 14, 2018 /PRNewswire/ -- Smart & Final Stores, Inc. (the "Company") (NYSE:SFS), the value-oriented food and everyday staples retailer, today reported financial results for the fiscal fourth quarter and full year ended December 31, 2017.
Fourth Quarter Highlights:
Net sales increase of 6.7% to $1,068 million driven by comparable store sales increase of 3.2%.
Online options for both business and household customers, including delivery or in-store pickup options, available in over 85% of Smart & Final banner stores.
Net loss of $146.6 million in fourth quarter reflects non-cash goodwill impairment charge of $180 million.
Adjusted net income of $11.3 million or $0.15 per diluted share and adjusted EBITDA of $49.1 million.
Named one of Fortune's "Most Admired Companies" for second consecutive year.
"We have a differentiated position in the evolving retail marketplace and our unique store operating model enables us to maintain our position as a low-cost leader serving multiple sales channels," saidDavid Hirz, president and chief executive officer. "We are pleased with our strengthening comparable store sales trends, which represent the third consecutive quarter of comp growth. This reflects the success of our merchandising initiatives aimed at both household and business customers with an emphasis on our natural and organic, private label and club-size items. These initiatives, combined with our efforts in strategic sourcing and pricing, contributed to a gross margin rate expansion in the fourth quarter, despite ongoing promotional activity within the grocery landscape."
Mr. Hirz continued, "Over the course of 2017, we accelerated the expansion of our online sales channel and delivery offerings, with over 85% of our Smart & Final banner stores offering delivery or in-store pickup at year-end. While we remain focused on our strong brick-and-mortar stores with two successful store banners, we are increasingly focused on digital channels for brand marketing and customer transaction options. In 2018, we plan to make additional investments in our infrastructure to position all of our sales channels for continued success."
In order to aid understanding of the Company's business performance, it has presented results in conformity with accounting principles generally accepted in the United States ("GAAP") and has also presented EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per share, and adjusted net income per diluted share, which are non-GAAP measures that are explained and reconciled to the comparable GAAP measures in the tables included in this release. Where applicable, the results below are first presented on a GAAP basis and then on a non-GAAP adjusted basis.
Fiscal Fourth Quarter 2017 Financial ResultsNet sales were $1,067.9 million in the 12-week quarter ended December 31, 2017, representing a 6.7% increase as compared to $1,000.6 million for the same period of 2016. Net sales growth was driven by a 3.2% increase in comparable store sales and the net sales contribution of new stores. Comparable store sales growth was comprised of a 3.7% increase in comparable average transaction size, partially offset by a 0.4% decrease in comparable transaction count, including the effect of cannibalization from new stores.
Net sales for Smart & Final banner stores were $841.4 million, a 5.7% increase as compared to $796.3 million for the same period of 2016. Comparable store sales growth for the Smart & Final banner was 2.5% in the fourth quarter.
Net sales for Cash & Carry Smart Foodservice banner stores were $226.6 million, a 10.8% increase as compared to $204.4 million for 2016. Comparable store sales growth for the Cash & Carry banner was 6.2% in the fourth quarter.
Gross margin was $164.4 million, a 16.7% increase as compared to $140.9 million in the fourth quarter of 2016. Gross margin rate was 15.4% as compared to 14.1% for the same period of 2016.
Operating and administrative expenses were $147.1 million, an 8.8% increase as compared to $135.2 million for the same period of 2016. The increase was related to expenses associated with the effect of higher minimum wages, the 14 new stores that opened following the fourth quarter of 2016 through the end of the fourth quarter of 2017 and related support costs.
Net loss was $146.6 million, or $2.03 per diluted share, as compared to a net loss of $0.3 million for the same period of 2016. These results included a non-cash net benefit of $27.0 million, as a result of the Tax Cuts and Jobs Act and other one-time items, primarily due to a lower valuation of net deferred tax liabilities. During the quarter, the Company also recorded a goodwill impairment charge of $180.0 million, related to the Company's Smart & Final banner.
Adjusted net income was $11.3 million, or $0.15 per diluted share, as compared to $5.0 million, or $0.07 per share, for the same period of 2016. Adjusted net income excludes the $27.0 million, or $0.37 per diluted share, benefit associated with the Tax Cuts and Jobs Act and other one-time items, and the $180.0 million, or $2.44 per diluted share, goodwill impairment charge.
Adjusted EBITDA was $49.1 million as compared to $37.3 million for the same period of 2016.
Fiscal 2017 Financial Results In the fifty-two weeks endedDecember 31, 2017, net sales were$4,570.6 million, an increase of 5.3% as compared to$4,341.8 millionfor the same period of 2016. Net sales growth was driven by the net sales contribution of new stores, and a 1.0% increase in comparable store sales. Comparable store sales growth was comprised of a 0.3% increase in comparable transaction count, and a 0.8% increase in comparable average transaction size.
Net sales forSmart & Finalbanner stores were$3,557.7 million, an increase of 4.6% as compared to$3,400.8 million for 2016. Full year 2017 comparable store sales for theSmart & Finalbanner increased 0.7%.
Net sales forCash & CarrySmart Foodservice banner stores were$1,012.9 million, a 7.6% increase as compared to$941.0 million for 2016. Full year 2017 comparable store sales for theCash & Carrybanner increased 2.4%.
Net loss was $138.9 million, or $1.92 per diluted share, as compared to net income of $12.9 million, or $0.17 per diluted share, for fiscal 2016. These results included a non-cash net benefit of $27.0 million, as a result of the Tax Cuts and Jobs Act and other one-time items, primarily due to a lower valuation of net deferred tax liabilities. During the fourth quarter, the Company also recorded a goodwill impairment charge of $180.0 million, related to the Company's Smart & Final banner.
Adjusted net income was $33.6 million, or $0.45 per diluted share, as compared to $42.2 million, or $0.54 per share, for 2016. Adjusted net income excludes the $27.0 million, or $0.36 per diluted share, benefit associated with income tax reform and other one-time items, as well as the $180.0 million, or $2.39 per diluted share, goodwill impairment charge, recorded in the fourth quarter 2017.
Adjusted EBITDA was $184.4 million as compared to $180.3 million for 2016.
Goodwill Impairment In the fourth quarter of 2017, the Company concluded an annual review of its goodwill as required under accounting standard ASC 350. The review included current equity market valuation metrics and the Company's near term plans for growth. The result of the review was an impairment of Smart & Final banner goodwill in the amount of $180.0 million. The Company does not believe that this impairment charge reflects a fundamental change in the long-term attractiveness of future store investments.
Growth and Development During the fiscal fourth quarter of 2017, the Company opened seven new Smart & Final Extra!stores, and completed three expansions of legacy Smart & Final stores to the Extra! store format, and one store relocation. As of December 31, 2017, the Company operated a total of 323 stores, including 194 Smart & Final Extra!stores, 66 legacy format Smart & Finalstores and 63 Cash & Carry Smart Foodservice stores.
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Operating Stores at Fiscal Year End (December 31, 2017)

Smart & Final Banner Stores Cash & CarryBanner Stores TotalCompany
Extra!format Legacyformat Total
End of Fiscal 2016 172 74 246 59 305
New stores 14 - 14 4 18
Relocations, net 3 (3) - - -
Expansions 5 (5) - - -
Store closures - - - - -
End of Fiscal 2017 194 66 260 63 323
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Leverage and LiquidityAs of December 31, 2017, the Company's debt, net of debt issuance costs, was $699.4 million and cash and cash equivalents were $71.7 million.
For the fifty-two weeks ended December 31, 2017, the Company generated cash from operations of $169.5 million and invested $162.6 million in capital expenditures, primarily related to the development of Extra! format stores and to improvements of existing assets.
OutlookThe Company is providing the following guidance for the full year ending December 30, 2018:
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Net sales growth 4.0% - 5.0%
Comparable store sales growth 1.0% - 2.0%
Unit growth (new stores) 3-5 Smart & Final Extra! 3-5 Cash & Carry Smart Foodservice
Relocations of existing stores to Extra!format 2-3Smart & Finalstores
Expansions or conversions of legacy stores to Extra! format 1-2Smart & Finalstores
Adjusted EBITDA $180 - $190 million
Adjusted net income $31 - $35 million
Adjusted diluted EPS $0.42 - $0.47
Capital expenditures(net) $80 - $90 million
Fully diluted weighted average shares 74 to 75 million
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The above guidance includes certain non-GAAP financial measures (namely adjusted EBITDA, adjusted net income and adjusted net income per diluted share), which exclude certain costs and non-cash costs and provide investors with additional financial measures of the expected operating performance of the Company's business. The primary factors in reconciling these non-GAAP financial measures to comparable GAAP measures include the following: pre-opening costs associated with new stores of approximately $3.8 million, non-cash rent related to stores of approximately $2.9 million, share-based compensation expense of approximately $15.5 million, and $3.9 million of store closure expenses. The other amounts needed to reconcile these non-GAAP financial measures to comparable GAAP measures cannot be quantified and are not available without an unreasonable effort.
The Company additionally is providing first quarter 2018 guidance for comparable store sales growth of 1.0% to 1.5% and adjusted EBITDA in the range of $23 to $25 million.
Fiscal Fourth Quarter and Full Year 2017 Conference CallThe Company will host a conference call today at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its fiscal fourth quarter and fiscal 2017 financial results. To participate in the call, please dial (877) 407-0784 (U.S.) or (201) 689-8560 (International) ten minutes prior to the start time. The conference call can also be accessed on the "For Investors" section of the Company's web site at www.smartandfinal.com.
For those unable to participate during the live broadcast, a telephonic replay of the call will also be available beginning today at approximately 8:00 p.m. Eastern Time, by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International) and entering the replay pin number: 13677083. The telephonic replay will be available until 11:59 p.m. Eastern Time, March 28, 2018.
About Smart & Final Smart & Final Stores, Inc. (NYSE: SFS), is a value-oriented food and everyday staples retailer, headquartered in Commerce (near Los Angeles), California. The Company offers quality products in a variety of sizes, saving household, nonprofit and business customers time and money. As of December 31, 2017, the Company operated 323 grocery and foodservice stores under the "Smart & Final,""Smart & Final Extra!" and "Cash & Carry Smart Foodservice" banners in California, Oregon, Washington, Arizona, Nevada, Idaho, Montana and Utah, with an additional 15 stores in Northwestern Mexico operated through a joint venture. In business for over 146 years, the Company remains committed to giving back to local communities through employee volunteer opportunities and Company donations to local nonprofits.
Forward-Looking Statements Certain statements contained in this release that are not historical information contain forward-looking statements. The forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected or implied. Further, certain forward-looking statements are based on assumptions of future events which may not prove to be accurate. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "may," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or, in each case, their negative, or other variations or comparable terminology. The Company derives many of its forward-looking statements from its operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes that its assumptions are reasonable, it is difficult to predict the impact of known factors and, of course, it is impossible to anticipate all factors that could affect actual results. These factors are discussed in the special note concerning "Forward-Looking Statements," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business" sections and elsewhere in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.
You should keep in mind that any forward-looking statement made by the Company herein, or elsewhere, speaks only as of the date on which made. New risks and uncertainties come up from time to time, and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.

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Smart & Final Stores, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)

Twelve Weeks Ended Fifty-two Weeks Ended
December 31, 2017 January 1, 2017 December 31, 2017 January 1, 2017


Net sales $ 1,067,908 $ 1,000,632 $ 4,570,565 $ 4,341,795
Cost of sales, buying and occupancy 903,484 859,722 3,896,897 3,712,291
Gross margin 164,424 140,910 673,668 629,504

Operating and administrative expenses 147,057 135,183 621,078 582,486
Goodwill impairment 180,000 - 180,000 -
(Loss) income from operations (162,633) 5,727 (127,410) 47,018

Interest expense, net 8,732 7,925 36,470 32,654
Loss on early extinguishment of debt - - - 4,978
Equity in earnings of joint venture 347 295 923 1,525
(Loss) income before income tax benefit (171,018) (1,903) (162,957) 10,911

Income tax benefit 24,462 1,650 24,043 2,037
Net (loss) income $ (146,556) $ (253) $ (138,914) $ 12,948


Net (loss) income per share:
Basic $ (2.03) $ 0.00 $ (1.92) $ 0.18
Diluted $ (2.03) $ 0.00 $ (1.92) $ 0.17

Weighted average shares outstanding:
Basic 72,068,998 71,962,127 72,352,102 72,727,071
Diluted 72,068,998 71,962,127 72,352,102 78,026,159
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Smart & Final Stores, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)

December 31, 2017 January 1, 2017

Assets
Current assets:
Cash and cash equivalents $ 71,671 $ 54,235
Accounts receivable, less allowances of $177 and $434 at December 31, 2017 and January 1, 2017, respectively 33,019 31,809
Inventories 289,712 278,718
Prepaid expenses and other current assets 54,241 48,769
Deferred income taxes - 22,105
Total current assets 448,643 435,636

Property, plant, and equipment:
Land 10,076 9,106
Buildings and improvements 53,965 17,351
Leasehold improvements 346,181 301,522
Fixtures and equipment 421,912 353,764
Construction in progress 8,242 12,110
840,376 693,853
Less accumulated depreciation and amortization 338,149 249,251
502,227 444,602

Capitalized software, net of accumulated amortization of $17,325 and $13,293 at December 31, 2017 and January 1, 2017, respectively 21,984 10,392
Other intangible assets, net 362,536 369,519
Goodwill 385,918 565,918
Equity investment in joint venture 15,380 14,366
Other assets 73,249 66,662
Total assets $ 1,809,937 $ 1,907,095


Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 245,009 $ 225,227
Accrued salaries and wages 36,216 31,933
Accrued expenses 100,639 82,925
Current portion of debt, less debt issuance costs 81,512 62,352
Total current liabilities 463,376 402,437

Long-term debt, less debt issuance costs 617,867 616,588
Deferred income taxes 38,095 84,578
Postretirement and postemployment benefits 127,649 121,409
Other long-term liabilities 159,904 129,834

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.001 par value;
Authorized shares 10,000,000
Issued and outstanding shares none
Common stock, $0.001 par value;
Authorized shares 340,000,000
Issued and outstanding shares - 74,120,113 and 72,930,653 at December 31, 2017 and January 1, 2017, respectively 74 73
Additional paid-in capital 506,098 500,666
Retained (deficit) earnings (78,160) 65,093
Accumulated other comprehensive loss (24,966) (13,583)
Total stockholders' equity 403,046 552,249
Total liabilities and stockholders' equity $ 1,809,937 $ 1,907,095
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Smart & Final Stores, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)


Fiscal Year Fiscal Year Fiscal Year
2017 2016 2015

Operating activities
Net (loss) income $ (138,914) $ 12,948 $ 38,262
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation 58,589 51,385 38,585
Amortization 39,783 35,630 30,181
Amortization of debt discount and debt issuance costs 1,908 2,511 2,780
Share-based compensation 11,560 9,803 10,003
Excess tax benefits related to share-based payments (358)
Deferred income taxes (20,283) (1,469) 3,325
Equity in earnings of joint venture (923) (1,525) (1,378)
Loss (gain) on disposal of property, plant, and equipment (51) 282 (40)
Asset impairment 1,796 1,323 1,413
Goodwill impairment 180,000
Loss on early extinguishment of debt 4,978 2,192
Dividend from joint venture 455 769
Changes in operating assets and liabilities:
Accounts receivable, net (2,988) (2,726) (3,637)
Inventories (10,994) (44,429) (10,885)
Prepaid expenses and other assets 405 (23,962) (1,202)
Accounts payable 19,782 31,078 9,252
Accrued salaries and wages 4,283 (1,926) 5,277
Other accrued liabilities 25,087 22,423 21,621
Net cash provided by operating activities 169,495 97,093 145,391

Investing activities
Purchases of property, plant, and equipment (149,347) (148,043) (132,738)
Proceeds from disposal of property, plant, and equipment 1,858 2,265 8,104
Assets acquired in Haggen Transaction (2,257) (66,440)
Investment in capitalized software (14,316) (3,193) (4,265)
Other (782) (2,024) (1,277)
Net cash used in investing activities (162,587) (153,252) (196,616)

Financing activities
Proceeds from exercise of stock options 4,228 4,667 719
Payment of minimum withholding taxes on net share settlement of share-based compensation awards (1,850) (669) (694)
Fees paid in conjunction with debt financing (245) (8,500) (1,335)
Borrowings on bank line of credit 88,000 97,000 15,000
Payments on bank line of credit (71,000) (38,000) (10,000)
Cash from landlord related to financing lease obligations 4,268
Issuance of bank debt, net of issuance costs 30,093
Payments of public offering issuance costs (214)
Excess tax benefits related to share-based payments 358
Stock repurchases (12,873) (33,524) (129)
Net cash provided by financing activities 10,528 51,067 3,705

Net increase (decrease) in cash and cash equivalents 17,436 (5,092) (47,520)
Cash and cash equivalents at beginning of period 54,235 59,327 106,847
Cash and cash equivalents at end of period $ 71,671 $ 54,235 $ 59,327

Cash paid during the period for:
Interest $ 33,957 $ 29,750 $ 29,462
Income taxes 2 10,448 23,729

Non-cash investing and financing activities
Software development costs incurred but not paid $ 1,397 $ 24 $ 310
Construction in progress costs incurred but not paid 18,834 12,070 8,534
Property acquired through financing lease obligations 7,135
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Smart & Final Stores, Inc. and Subsidiaries
Segment Information
(In Thousands)

Smart & Final Cash & Carry Corporate / Other Consolidated
Twelve Weeks Ended December 31, 2017
Net sales $ 841,354 $ 226,554 $ - $ 1,067,908
Cost of sales, distribution and store occupancy 708,326 193,537 1,621 903,484
Operating and administrative expenses 111,834 17,212 18,011 147,057
Goodwill impairment 180,000 - - 180,000
Income (loss) from operations $ (158,806) $ 15,805 $ (19,632) $ (162,633)


Capital expenditures $ 40,814 $ 1,269 $ 3,996 $ 46,079




Twelve Weeks Ended January 1, 2017
Net sales $ 796,250 $ 204,382 $ - $ 1,000,632
Cost of sales, distribution and store occupancy 680,210 177,324 2,188 859,722
Operating and administrative expenses 100,067 15,556 19,560 135,183
Income (loss) from operations $ 15,973 $ 11,502 $ (21,748) $ 5,727


Capital expenditures $ 30,209 $ 4,231 $ 849 $ 35,289



Fifty-two Weeks Ended December 31, 2017
Net sales $ 3,557,691 $ 1,012,874 $ - $ 4,570,565
Cost of sales, distribution and store occupancy 3,020,204 868,544 8,149 3,896,897
Operating and administrative expenses 468,946 74,791 77,341 621,078
Goodwill impairment 180,000 - - 180,000
Income (loss) from operations $ (111,459) $ 69,539 $ (85,490) $ (127,410)


Capital expenditures $ 134,317 $ 12,844 $ 16,502 $ 163,663




Fifty-two Weeks Ended January 1, 2017
Net sales $ 3,400,755 $ 941,040 $ - $ 4,341,795
Cost of sales, distribution and store occupancy 2,894,222 808,258 9,811 3,712,291
Operating and administrative expenses 444,318 66,688 71,480 582,486
Income (loss) from operations $ 62,215 $ 66,094 $ (81,291) $ 47,018


Capital expenditures $ 135,677 $ 10,074 $ 5,485 $ 151,236

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Non-GAAP Financial Measures
To supplement the Company's financial information presented in accordance with GAAP, the Company uses certain non-GAAP financial measures (namely EBITDA and adjusted EBITDA, adjusted net income, adjusted net income per share, and adjusted net income per diluted share) to evaluate our operating and financial performance and to compare such performance to that of prior periods. We also use these non-GAAP financial measures in making operational and financial decisions and in establishing operational goals. We believe that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, helps investors to (i) evaluate our operating and financial performance and future prospects, (ii) compare financial results across accounting periods, (iii) better understand the long-term performance of our core business and (iv) evaluate trends in our business, all consistent with how management evaluates such performance and movements. The Company defines EBITDA as net income (loss) before depreciation and amortization, interest expense and provision (benefit) for income tax, and adjusted EBITDA as EBITDA adjusted for the items set forth in the table below. The Company defines adjusted net income as net income (loss) adjusted for the items set forth in the table below. The Company defines adjusted net income (loss) per share as adjusted net income divided by the weighted average basic shares outstanding. The Company defines adjusted net income per diluted share as adjusted net income divided by the weighted average diluted shares outstanding.
Use of these non-GAAP measures may differ from similar measures reported by other companies. Each of these non-GAAP measures has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.
The following tables present reconciliations of net income to EBITDA, adjusted EBITDA and adjusted net income, and net income (loss) per share to adjusted net income per share and adjusted net income per diluted share, for the twelve-week and fifty-two week periods ended December 31, 2017.
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Smart & Final Stores, Inc. and Subsidiaries
Reconciliation of Net Income to Non-GAAP Adjusted Net Income
(Unaudited)
(In Thousands, Except Share and Per Share Amounts)

Twelve WeeksEnded December31, 2017 Twelve WeeksEnded January 1,2017 Fifty-two WeeksEnded December31, 2017 Fifty-two WeeksEnded January 1,2017
Net (loss) income $ (146,556) $ (253) $ (138,914) $ 12,948
Income tax (benefit) (24,462) (1,650) (24,043) (2,037)
(Loss) income before income taxes (171,018) (1,903) (162,957) 10,911

Adjustments to net (loss) income
Net loss from closed stores and exit costs (a) 1,262 2,650 3,818 8,671
Goodwill impairment (b) 180,000 - 180,000 -
Loss from asset dispositions and impairment charges (c) 369 594 1,827 1,598
Share-based compensation expense (d) 3,057 2,555 11,560 9,803
Non-cash rent (e) 1,492 1,688 6,535 7,946
Pre-opening costs (f) 1,914 926 5,433 17,695
Loss on extinguishment of debt (g) - - - 4,978
Other items (h) (45) 377 3,390 (1,018)
Adjusted income tax (benefit) (5,731) (1,890) (15,951) (18,363)
Adjusted net income $ 11,300 $ 4,997 $ 33,655 $ 42,221

Adjusted Net (Loss) Income Per Share

Net (loss) income per share - basic $ (2.03) $ 0.00 $ (1.92) $ 0.18
Per share impact of net income adjustments 2.19 0.07 2.39 0.40
Adjusted net income per share - basic $ 0.16 $ 0.07 $ 0.47 $ 0.58
Net (loss) income per share - diluted $ (1.99) $ 0.00 $ (1.85) $ 0.17
Per share impact of net income adjustments 2.14 0.07 2.30 0.37
Adjusted net income per share - diluted $ 0.15 $ 0.07 $ 0.45 $ 0.54

Weighted average shares - basic 72,068,998 71,962,127 72,352,102 72,727,071
Weighted average shares - diluted 73,828,639 76,552,257 75,182,134 78,026,159
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Smart & Final Stores, Inc. and Subsidiaries
Reconciliation of EBITDA to Adjusted EBITDA
(Unaudited)
(In Thousands)

Twelve WeeksEnded December31, 2017 Twelve WeeksEnded January 1,2017 Fifty-two WeeksEnded December31, 2017 Fifty-two WeeksEnded January 1,2017
Net (loss) income $ (146,556) $ (253) $ (138,914) $ 12,948
Depreciation and amortization 23,324 22,500 98,373 87,015
Interest expense, net 8,732 7,925 36,470 32,654
Income tax (benefit) (24,462) (1,650) (24,043) (2,037)
EBITDA (138,962) 28,522 (28,114) 130,580

Adjustments to EBITDA
Net loss from closed stores and exit costs (a) 1,262 2,650 3,818 8,671
Goodwill impairment (b) 180,000 - 180,000 -
Loss from asset dispositions and impairment charges (c) 369 594 1,827 1,598
Share-based compensation expense (d) 3,057 2,555 11,560 9,803
Non-cash rent (e) 1,492 1,688 6,535 7,946
Pre-opening costs (f) 1,914 926 5,433 17,695
Loss on extinguishment of debt (g) - - - 4,978
Other items (h) (45) 377 3,390 (1,018)
Adjusted EBITDA $ 49,087 $ 37,312 $ 184,449 $ 180,253
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(a) Represents costs associated with store closure and exit costs.
(b) Represents non-cash charge associated with goodwill impairment.
(c) Represents non-cash loss associated with asset dispositions and impairment charges.
(d) Represents expenses associated with the Company's equity-based incentive award program.
(e) Represents non-cash component of recognized rent expense.
(f) Represents new store and relocation opening costs consisting primarily of rent, utilities, distribution, store labor and advertising.
(g) Represents loss on the early extinguishment of debt in the fiscal year ended January 1, 2017 in connection with amendments to the Company's First Lien Term Loan Credit Facility.
(h) Represents (i) severance costs in the twelve and fifty-two weeks ended December 31, 2017 and the twelve and fifty-two weeks ended January 1, 2017 and (ii) death benefit income from a Company-owned life insurance policy in the fifty-two weeks ended January 1, 2017.
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SOURCE Smart & Final Stores, Inc.

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