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 Smart & Final Stores, Inc. Reports Fourth Quarter and Full Year 2016 Financial Results
   Wednesday, March 08, 2017 4:15:00 PM ET

Smart & Final Stores, Inc. (the "Company") (SFS ), the value-oriented food and everyday staples retailer, today reported financial results for the fiscal fourth quarter and full year ended January 1, 2017.

Full Year Highlights:

-- Net sales increase of 9.3% to $4,341.8 million

-- Comparable store sales decrease of 0.5%, including impacts of deflation and cannibalization

-- Net income of $12.9 million, or $0.17 per diluted share

-- Adjusted net income of $42.2 million, or $0.54 per diluted share

-- Adjusted EBITDA of $180.3 million

"We are pleased with our performance in 2016, which marks a period of unprecedented store growth," said David Hirz, President and Chief Executive Officer. "Our 2016 store development included the successful integration of a major acquisition resulting in the largest number of new Smart & Final Extra! stores in a single year in the Company’s history, and we simultaneously expanded our Cash & Carry banner. We continue to build upon our differentiated brand message as the one-stop shop for business and household needs, and to communicate Smart & Final’s unique banner propositions to both new and existing customers."

Mr. Hirz added, "2016 was not without its challenges as the continued effects of deflation and anticipated impacts from cannibalization pressured comparable store sales growth and earnings. Looking ahead to 2017, we expect these pressures to ease as we move through the year and that, when combined with our merchandising and marketing initiatives, will position us to return to positive comparable store sales growth in 2017."

The Company’s fiscal year and fiscal fourth quarter ended January 1, 2017 comprised 52-week and 12-week periods respectively, and the Company’s fiscal year and fiscal fourth quarter ended January 3, 2016 comprised 53-week and 13-week periods, respectively. For comparability of net sales between periods, the Company includes in the presentation below consistent 52-week and 12-week comparisons, calculated by excluding the first week of the 53-week and 13-week periods, respectively.

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.

Fourth Quarter Fiscal 2016 Financial Results Net sales were $1,000.6 million in the 12-week quarter ended January 1, 2017, representing a 0.3% increase as compared to $997.6 million in the 13-week quarter ended January 3, 2016. On a consistent 12-week comparison basis, sales increased by 9.2% from the prior year quarter. Net sales growth was driven by the net sales contribution of new stores, partially offset by a 2.0% decrease in comparable store sales. Comparable store sales were comprised of a 0.2% increase in comparable transaction count, including the effect of anticipated cannibalization from new stores, and a 2.2% decrease in comparable average transaction size, including the impact of deflation in key product categories in both store banners.

Net sales for Smart & Final banner stores were $796.2 million for the 12-week quarter ended January 1, 2017, a 2.0% increase as compared to $780.6 million in the 13-week quarter ended January 3, 2016. On a consistent 12-week comparison basis, sales increased by 11.1% from the prior year quarter. Comparable store sales for the Smart & Final banner decreased 2.1% in the fourth quarter.

Net sales for Cash & Carry banner stores were $204.4 million for the 12-week period ended January 1, 2017, a 5.8% decrease as compared to $217.0 million in the 13-week quarter ended January 3, 2016. On a consistent 12-week comparison basis, sales increased by 2.6% from the prior year quarter. Comparable store sales for the Cash & Carry banner decreased 1.5% in the fourth quarter.

Gross margin from operations was $140.9 million, a 4.7% decrease as compared to $147.9 million in the fourth quarter of 2015. Gross margin rate was 14.1% as compared to 14.8% in the same period of 2015.

Operating and administrative expenses were $135.2 million, a 7.4% increase as compared to $125.9 million in the same period of 2015. This increase was primarily related to expenses associated with 37 new stores opened over the prior 12 months and related support costs.

Net loss was $0.3 million, including the effect of higher store development and closure expenses, and an income tax benefit of $1.7 million, as compared to net income of $10.0 million in the same period of 2015. Net loss per diluted share was $0.00 as compared to net income per diluted share of $0.13 in the same period of 2015.

Adjusted net income was $5.0 million as compared to $14.7 million for the same period of 2015. Adjusted net income per diluted share was $0.07 as compared to $0.19 in the same period of 2015.

Adjusted EBITDA was $37.3 million as compared to $47.4 million in the fourth quarter of 2015.

Fiscal 2016 Financial Results In the 52-week year ended January 1, 2017, net sales were $4,341.8 million, an increase of 9.3% as compared to $3,971.0 million in the 53-week year ended January 3, 2016. On a consistent 52-week comparison basis, sales increased by 11.2% from the prior year. Net sales growth was driven by the net sales contribution of new stores, partially offset by a 0.5% decline in comparable store sales. The decline in comparable store sales was comprised of a 0.8% increase in comparable transaction count and a 1.3% decrease in comparable average transaction size.

Net sales for Smart & Final banner stores were $3,400.8 million, a 12.0% increase as compared to $3,037.0 million in the 53-weeks of fiscal 2015. On a consistent 52-week comparison basis, sales increased by 13.9% from the prior year. Full year comparable store sales decline for the Smart & Final banner was 0.6%.

Net sales for Cash & Carry banner stores were $941.0 million, a 0.8% increase as compared to $934.0 million in the 53-weeks of fiscal 2015. On a consistent 52-week comparison basis, sales increased by 2.4% from the prior year. Full year comparable store sales decline for the Cash & Carry banner was 0.3%.

Net income was $12.9 million, including the effect of higher store development costs, as compared to $38.3 million in 2015. Net income per diluted share was $0.17 as compared to $0.50 for 2015.

Adjusted net income was $42.2 million, a 25.0% decrease as compared to $56.3 million in 2015. Adjusted net income per diluted share was $0.54 as compared to $0.73 for 2015.

Adjusted EBITDA was $180.3 million, as compared to $192.9 million in 2015.

Growth and Development During fiscal 2016, the Company opened 33 new Smart & Final Extra! stores, completed six conversions of legacy Smart & Final stores to the Smart & Final Extra! format, relocated six legacy Smart & Final stores and closed eight legacy Smart & Final stores. The Company opened four new Cash & Carry stores during fiscal 2016. As of January 1, 2017, the Company operated a total of 305 stores, including 172 Smart & Final Extra! stores, 74 legacy Smart & Final stores and 59 Cash & Carry stores.

Operating Stores at Fiscal Year End (January 1, 2017)
                   Smart & Final Banner Stores      Cash & Carry  Total
                                                    Banner Stores Company
                   Extra!  Legacy  Total
                   format  format
End of Fiscal 2015 127     94      221              55            276
New stores         33      -       33               4             37
Relocations, net   6       (6)     -                -             -
Conversions        6       (6)     -                -             -
Store closures     -       (8)     (8)              -             (8)
End of Fiscal 2016 172     74      246              59            305

Leverage and Liquidity As of January 1, 2017, the Company’s debt, net of debt issuance costs, was $678.9 million and cash and cash equivalents were $54.2 million.

In the 52-weeks ended January 1, 2017, the Company generated cash from operations of $97.1 million and invested $151.2 million in capital expenditures, primarily related to the development of Extra! format stores and to improvements of existing assets.

Outlook The Company is providing the following guidance for the full year ending December 31, 2017:

Net sales growth                                            5.5% - 6.5%
Comparable store sales growth                               1.0% - 2.0%
Unit growth (new stores)                                    15 Smart & Final Extra!
                                                            4 Cash & Carry
Relocations of existing stores to Extra! format             3 Smart & Final stores
Expansions or conversions of legacy stores to Extra! format 4 to 5 Smart & Final stores
Adjusted EBITDA                                             $185 - $195 million
Adjusted net income                                         $39 - $43 million
Adjusted diluted EPS                                        $0.50 - $0.55
Capital expenditures                                        $120 - $130 million
Fully diluted weighted average shares                       77 million

The above guidance includes certain non-GAAP financial measures (namely adjusted net income, adjusted net income per diluted share and adjusted EBITDA), 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 $6 million, non-cash rent, related to stores, of approximately $4 million and share-based compensation expense of approximately $10 million. 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.

In the first quarter of fiscal year 2017, the Company expects to open two new Smart & Final Extra! stores, and one new Cash & Carry store.

Fourth Quarter and Fiscal 2016 Conference Call The 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 2016 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 8:00 p.m. Eastern Time, by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International) and entering the replay pin number: 13653391. The telephonic replay will be available until 11:59 p.m. Eastern Time, on Wednesday, March 22, 2017.

About Smart & Final Smart & Final Stores, Inc. (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 January 1, 2017, the Company operated 305 grocery and foodservice stores under the "Smart & Final," "Smart & Final Extra!" and "Cash & Carry Smart Foodservice" banners in California, Oregon, Washington, Arizona, Nevada, Idaho and Utah, with an additional 15 stores in Northwestern Mexico operated through a joint venture. In business for over 145 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.

Smart & Final Stores, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
                                                      Twelve Weeks               Thirteen Weeks               Fifty-two Weeks                Fifty-three Weeks
                                                      Ended                      Ended                        Ended                          Ended
                                                      January 1, 2017            January 3, 2016              January 1, 2017                January 3, 2016
Net sales                                             $           1,000,632      $                997,626     $               4,341,795      $         3,970,980
Cost of sales, buying and occupancy                   859,722                    849,753                      3,712,291                      3,372,120
Gross margin                                          140,910                    147,873                      629,504                        598,860
Operating and administrative expenses                 135,183                    125,873                      582,486                        503,995
Income from operations                                5,727                      22,000                       47,018                         94,865
Interest expense, net                                 7,925                      7,680                        32,654                         32,687
Loss on early extinguishment of debt                  -                          -                            4,978                          2,192
Equity in earnings of joint venture                   295                        333                          1,525                          1,378
Income (loss) before income taxes benefit (provision) (1,903)                    14,653                       10,911                         61,364
Income tax benefit (provision)                        1,650                      (4,692)                      2,037                          (23,102)
Net income (loss)                                     $                   (253)  $                    9,961   $                    12,948    $              38,262
Net income (loss) per share:
Basic                                                 $                    0.00  $                      0.14  $                        0.18  $                  0.52
Diluted                                               $                    0.00  $                      0.13  $                        0.17  $                  0.50
Weighted average shares outstanding:
Basic                                                 71,962,127                 73,191,829                   72,727,071                     73,121,964
Diluted                                               71,962,127                 77,497,406                   78,026,159                     77,141,621
Smart & Final Stores, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
                                                                                                                                  January 1, 2017    January 3, 2016
Assets
Current assets:
Cash and cash equivalents                                                                                                         $          54,235  $          59,327
Accounts receivable, less allowances of $434 and $454 at January 1, 2017 and January 3, 2016, respectively                        31,809             27,304
Inventories                                                                                                                       278,718            234,289
Prepaid expenses and other current assets                                                                                         48,769             29,072
Deferred income taxes                                                                                                             22,105             22,471
Total current assets                                                                                                              435,636            372,463
Property, plant, and equipment:
Land                                                                                                                              9,106              10,940
Buildings and improvements                                                                                                        17,351             20,441
Leasehold improvements                                                                                                            301,522            237,820
Fixtures and equipment                                                                                                            353,764            266,080
Construction in progress                                                                                                          12,110             19,501
                                                                                                                                  693,853            554,782
Less accumulated depreciation and amortization                                                                                    249,251            174,906
                                                                                                                                  444,602            379,876
Capitalized software, net of accumulated amortization of $13,293 and $12,356 at January 1, 2017 and January 3, 2016, respectively 10,392             11,365
Other intangible assets, net                                                                                                      369,519            376,122
Goodwill                                                                                                                          611,242            611,242
Equity investment in joint venture                                                                                                14,366             12,763
Other assets                                                                                                                      66,662             53,250
Total assets                                                                                                                      $     1,952,419    $     1,817,081
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable                                                                                                                  $        225,227   $        194,149
Accrued salaries and wages                                                                                                        31,933             33,859
Accrued expenses                                                                                                                  82,925             77,374
Current portion of debt, less debt issuance costs                                                                                 62,352             3,904
Total current liabilities                                                                                                         402,437            309,286
Long-term debt, less debt issuance costs                                                                                          616,588            586,956
Deferred income taxes                                                                                                             129,902            128,752
Postretirement and postemployment benefits                                                                                        121,409            117,417
Other long-term liabilities                                                                                                       129,834            108,099
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 - 72,930,653 and 73,789,608 at January 1, 2017 and January 3, 2016, respectively                    73                 74
Additional paid-in capital                                                                                                        500,666            502,304
Retained earnings                                                                                                                 65,093             70,181
Accumulated other comprehensive loss                                                                                              (13,583)           (5,988)
Total stockholders’ equity                                                                                                        552,249            566,571
Total liabilities and stockholders’ equity                                                                                        $     1,952,419    $     1,817,081
Smart & Final Stores, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
                                                                                                Fifty-two Weeks Ended                     Fifty-three Weeks Ended
                                                                                                January 1, 2017                           January 3, 2016
Operating activities
Net income                                                                                      $                              12,948     $                                38,262
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation                                                                                    51,385                                    38,585
Amortization                                                                                    35,630                                    30,181
Amortization of debt discount and debt issuance costs                                           2,511                                     2,780
Share-based compensation                                                                        9,803                                     10,003
Excess tax benefits related to share-based payments                                             -                                         (358)
Deferred income taxes                                                                           (1,469)                                   3,325
Dividend from joint venture                                                                     769                                       -
Equity in earnings of joint venture                                                             (1,525)                                   (1,378)
Gain (loss) on disposal of property, plant, and equipment                                       282                                       (40)
Asset impairment                                                                                1,323                                     1,413
Loss on early extinguishment of debt                                                            4,978                                     2,192
Changes in operating assets and liabilities:
Accounts receivable, net                                                                        (2,726)                                   (3,637)
Inventories                                                                                     (44,429)                                  (10,885)
Prepaid expenses and other assets                                                               (23,962)                                  (1,202)
Accounts payable                                                                                31,078                                    9,252
Accrued salaries and wages                                                                      (1,926)                                   5,277
Other accrued liabilities                                                                       22,423                                    21,621
Net cash provided by operating activities                                                       97,093                                    145,391
Investing activities
Purchases of property, plant, and equipment                                                     (148,043)                                 (132,738)
Proceeds from disposal of property, plant, and equipment                                        2,265                                     8,104
Assets acquired in Haggen Transaction                                                           (2,257)                                   (66,440)
Investment in capitalized software                                                              (3,193)                                   (4,265)
Other                                                                                           (2,024)                                   (1,277)
Net cash used in investing activities                                                           (153,252)                                 (196,616)
Financing activities
Proceeds from exercise of stock options                                                         4,667                                     719
Payment of minimum withholding taxes on net share settlement of share-based compensation awards (669)                                     (694)
Fees paid in conjunction with debt financing                                                    (8,500)                                   (1,335)
Borrowings on bank line of credit                                                               97,000                                    15,000
Payments on bank line of credit                                                                 (38,000)                                  (10,000)
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                                                                               (33,524)                                  (129)
Net cash provided by financing activities                                                       51,067                                    3,705
Net (decrease) increase in cash and cash equivalents                                            (5,092)                                   (47,520)
Cash and cash equivalents at beginning of period                                                59,327                                    106,847
Cash and cash equivalents at end of period                                                      $                              54,235     $                                59,327
Cash paid during the period for:
Interest                                                                                        $                              29,750     $                                29,462
Income taxes                                                                                    $                              10,448     $                                23,729
Non-cash investing and financing activities
Software development costs incurred but not paid                                                $                                     24  $                                     310
Construction in progress costs incurred but not paid                                            $                              12,070     $                                  8,534
Smart & Final Stores, Inc. and Subsidiaries
Segment Reporting
(In Thousands)
                                                 Smart & Final            Cash & Carry             Corporate / Other                Consolidated
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
Assets acquired in Haggen Transaction            $                     -  $                     -  $                             -  $                    -
Thirteen Weeks Ended January 3, 2016
Net sales                                        $         780,592        $         217,034        $                             -  $        997,626
Cost of sales, distribution and store occupancy  662,194                  185,469                  2,090                            849,753
Operating and administrative expenses            95,089                   15,885                   14,899                           125,873
Income (loss) from operations                    $           23,309       $           15,680       $                 (16,989)       $          22,000
Capital expenditures                             $           29,393       $             1,556      $                     1,775      $          32,724
Assets acquired in Haggen Transaction            $           66,440       $                     -  $                             -  $          66,440
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
Assets acquired in Haggen Transaction            $             2,257      $                     -  $                             -  $            2,257
Fifty-three Weeks Ended January 3, 2016
Net sales                                        $      3,036,949         $         934,031        $                             -  $     3,970,980
Cost of sales, distribution and store occupancy  2,561,035                802,115                  8,970                            3,372,120
Operating and administrative expenses            372,011                  64,368                   67,616                           503,995
Income (loss) from operations                    $         103,903        $           67,548       $                 (76,586)       $          94,865
Capital expenditures                             $         122,808        $             7,616      $                     6,579      $        137,003
Assets acquired in Haggen Transaction            $           66,440       $                     -  $                             -  $          66,440

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 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 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 tables present 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 12-week and 52-week periods ended January 1, 2017, and the 13-week and 53-week periods ended January 3, 2016.

Smart & Final  Stores, Inc. and Subsidiaries
Reconciliation of EBITDA to Adjusted EBITDA
(Unaudited)
(In Thousands)
                                                          Twelve Weeks            Thirteen Weeks         Fifty-two Weeks       Fifty-three Weeks
                                                          Ended January 1,        Ended January 3,       Ended January 1,      Ended January 3,
                                                          2017                    2016                   2017                  2016
Net income (loss)                                         $                (253)  $               9,961  $             12,948  $            38,262
Depreciation and amortization                             22,500                  17,096                 87,015                68,766
Interest expense, net                                     7,925                   7,680                  32,654                32,687
Income tax (benefit) provision                            (1,650)                 4,692                  (2,037)               23,102
EBITDA                                                    28,522                  39,429                 130,580               162,817
Adjustments to EBITDA
Transaction costs (a)                                     -                       -                      -                     936
Net loss from closed stores and exit costs (b)            2,650                   332                    8,671                 2,344
Loss from asset dispositions (c)                          594                     838                    1,598                 1,396
Share-based compensation expense (d)                      2,555                   1,922                  9,803                 10,003
Non-cash rent (e)                                         442                     1,430                  2,498                 4,508
Pre-opening costs (f)                                     906                     3,369                  2,630                 8,543
Costs associated with acquired Haggen store locations (g) 1,266                   -                      20,513                -
Loss on extinguishment of debt (h)                        -                       -                      4,978                 2,192
Other items (i)                                           377                     38                     (1,018)               135
Adjusted EBITDA                                           $             37,312    $             47,358   $            180,253  $          192,874
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 Weeks            Thirteen Weeks         Fifty-two Weeks        Fifty-three Weeks
                                                          Ended January 1,        Ended January 3,       Ended January 1,       Ended January 3,
                                                          2017                    2016                   2017                   2016
Net income (loss)                                         $                (253)  $               9,961  $             12,948   $            38,262
Income tax (benefit) provision                            (1,650)                 4,692                  (2,037)                23,102
Income (loss) before income taxes (benefit)               (1,903)                 14,653                 10,911                 61,364
Adjustments to net income (loss)
Transaction costs (a)                                     -                       -                      -                      936
Net loss from closed stores and exit costs (b)            2,650                   332                    8,671                  2,344
Loss from asset dispositions (c)                          594                     838                    1,598                  1,396
Share-based compensation expense (d)                      2,555                   1,922                  9,803                  10,003
Non-cash rent (e)                                         442                     1,430                  2,498                  4,508
Pre-opening costs (f)                                     906                     3,369                  2,630                  8,543
Costs associated with acquired Haggen store locations (g) 1,266                   -                      20,513                 -
Loss on extinguishment of debt (h)                        -                       -                      4,978                  2,192
Other items (i)                                           377                     38                     (1,018)                135
Adjusted income tax provision                             (1,890)                 (7,859)                (18,363)               (35,139)
Adjusted net income                                       $               4,997   $             14,723   $             42,221   $            56,282
Adjusted Net Income Per Share
Net income (loss) per share - basic                       $                0.00   $                0.14  $                0.18  $              0.52
Per share impact of net income adjustments                $                0.07   $                0.06  $                0.40  $              0.25
Adjusted net income per share - basic                     $                0.07   $                0.20  $                0.58  $              0.77
Net income (loss) per share - diluted                     $                0.00   $                0.13  $                0.17  $              0.50
Per share impact of net income adjustments                $                0.07   $                0.06  $                0.37  $              0.23
Adjusted net income per share - diluted                   $                0.07   $                0.19  $                0.54  $              0.73
Weighted average shares - basic                           71,962,127              73,191,829             72,727,071             73,121,964
Weighted average shares - fully diluted                   76,552,257              77,497,406             78,026,159             77,141,621
(a) Represents costs primarily associated with the Company’s secondary public offering that were charged to expense in the fiscal year ended January 3, 2016.
(b) Represents costs associated with store closure and exit costs.
(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 new store opening and relocation costs and non-cash rent related to acquired former Haggen store locations.
(h) Represents loss on the early extinguishment of debt in the fiscal years ended January 1, 2017 and January 3, 2016 in connection with amendments to the Company’s First Lien Term Loan Credit Facility.
(i) Represents (i) death benefit income from a Company-owned life insurance policy in the fiscal years ended January 1, 2017 and January 3, 2016 and (ii) severance costs  in the twelve and fifty-two weeks ended January 1, 2017 and the thirteen and fifty-three weeks ended January 3, 2016.

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/smart--final-stores-inc-reports-fourth-quarter-and-full-year-2016-financial-results-300420530.html

SOURCE Smart & Final Stores, Inc.

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