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The Fresh Market, Inc. Reports Fourth Quarter And Full Year Fiscal 2012 Earnings

Stocks in this article: TFM

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 March 6, 2013, the Company operates 130 stores in 25 states, located in the Southeast, Midwest, Mid-Atlantic, Northeast, and West. 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, and include those in the "Fiscal 2013 Outlook" section above. These statements involve a number of risks and uncertainties. Any statements contained herein (including, but not limited to, 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 or contribute actual future results to differ materially from those expressed in any forward-looking statements: accounting entries and adjustments at the close of our fiscal quarter and fiscal year; 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 the outcome of negotiations surrounding U.S. fiscal policy which, even if resolved, may be adverse due to tax increases and spending cuts, 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; 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; global economies and credit and financial markets; our ability to maintain the security of electronic and other confidential 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; 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.

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 Fifty-Two Weeks Ended
  January 27, January 29, January 27, January 29,
  2013 2012 2013 2012
         
Sales  $ 369,856  $ 320,772  $ 1,329,131  $ 1,108,035
Cost of goods sold   243,948  212,654  877,433  741,184
Gross profit  125,908  108,118  451,698  366,851
         
Operating expenses:        
Selling, general and administrative expenses  82,408  68,959  303,495  247,047
Store closure and exit costs  120  99  976  437
Depreciation  12,577  9,804  45,741  36,485
Income from operations  30,803  29,256  101,486  82,882
Other (income) expense:        
Interest expense  389  408  1,498  1,858
Other income, net  --   --   --   (2)
Income before provision for income taxes  30,414  28,848  99,988  81,026
 Tax provision   9,769  10,590  35,855  29,631
         
Net income   $ 20,645  $ 18,258  $ 64,133  $ 51,395
         
Net income per share:        
Basic and diluted  $ 0.43  $ 0.38  $ 1.33  $ 1.07
         
         
Weighted average common shares outstanding:        
Basic   48,134,349  48,028,029  48,076,675  48,002,273
         
Diluted  48,338,471  48,174,636  48,294,299  48,137,519
         
Comprehensive income        
Net income  $ 20,645  $ 18,258  $ 64,133  $ 51,395
Interest rate swaps, net of tax benefit of $249 and $129 for the thirteen and fifty-two weeks ended January 29, 2012, respectively.  --   308  --   674
         
Total comprehensive income  $ 20,645  $ 18,566  $ 64,133  $ 52,069
 
 
The Fresh Market, Inc.
     
Consolidated Balance Sheets 
(In thousands, except share amounts)
(unaudited)
     
  January 27, January 29,
  2013 2012
     
Assets    
Current assets:    
Cash and cash equivalents  $ 8,737  $ 10,681
Accounts receivable, net  6,830  4,550
Inventories  43,985  37,796
Prepaid expenses and other current assets  7,675  5,595
Deferred income taxes  3,784  4,445
     
Total current assets  71,011  63,067
     
Property and equipment:    
Land  2,846  5,451
Buildings  19,106  15,077
Store fixtures and equipment  272,249  237,678
Leasehold improvements  170,483  141,391
Office furniture, fixtures, and equipment  12,224  10,175
Automobiles  1,335  1,211
Construction in progress  18,661  14,347
     
Total property and equipment  496,904  425,330
Accumulated depreciation  (207,060)  (168,518)
     
Total property and equipment, net  289,844  256,812
Restricted cash  14,205  –
Other assets  10,309  3,461
     
Total assets  $ 385,369  $ 323,340
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 35,634  $ 34,788
Accrued liabilities  54,385  46,354
     
Total current liabilities  90,019  81,142
     
Long-term debt  42,000  64,000
Deferred income taxes  24,053  31,053
Deferred rent  11,341  10,007
Other long-term liabilities  20,097  10,222
     
Total noncurrent liabilities  97,491  115,282
     
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, 48,144,620 and 48,040,083 shares issued and outstanding  at January 27, 2013 and January 29, 2012, respectively  482  481
Additional paid-in capital  105,431  98,622
Retained earnings   91,946  27,813
     
Total stockholders' equity  197,859  126,916
     
Total liabilities and stockholders' equity  $ 385,369  $ 323,340
 
 
The Fresh Market, Inc.
     
Consolidated Statements of Cash Flows 
(In thousands)
(unaudited)
     
     
  For the Fifty-Two Weeks Ended
  January 27, January 29,
  2013 2012
Operating activities    
     
Net income   $ 64,133  $ 51,395
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  45,962  36,692
Loss on disposal of property and equipment  170  130
Share-based compensation  4,259  2,269
Excess tax benefits from share-based compensation  (1,140)  (289)
Deferred income taxes  (6,339)  9,424
Change in assets and liabilities:    
Accounts receivable  (2,280)  (3,367)
Inventories  (6,189)  (6,655)
Prepaid expenses and other assets  (9,149)  (917)
Restricted cash  (14,205)  -- 
Accounts payable  846  9,390
Accrued liabilities and other long-term liabilities  15,846  10,439
Net cash provided by operating activities  91,914  108,511
     
Investing activities    
Purchases of property and equipment  (81,107)  (87,513)
Proceeds from sale of property and equipment  6,698  221
Net cash used in investing activities  (74,409)  (87,292)
     
Financing activities    
Borrowings on revolving credit note  466,324  450,782
Payments made on revolving credit note  (488,324)  (468,632)
Debt issuance costs  --   (1,056)
Proceeds from issuance of common stock pursuant to employee stock    
purchase plan  185  62
Excess tax benefits from share-based compensation  1,140  289
Payments on withholding tax for restricted stock unit vesting  (492)  (367)
Proceeds from exercise of share-based compensation awards  1,718  517
Net cash used in financing activities  (19,449)  (18,405)
     
Net (decrease) increase in cash and cash equivalents  (1,944)  2,814
Cash and cash equivalents at beginning of period  10,681  7,867
     
Cash and cash equivalents at end of period  $ 8,737  $ 10,681
     
Supplemental disclosures of cash flow information:    
Cash paid during the period for interest  $ 1,000  $ 1,591
     
Cash paid during the period for taxes  $ 41,128  $ 15,166
     
     
     
The Fresh Market, Inc.    
Calculation of Return Metrics (1)    
 (Unaudited)    
     
  January 27, 2013 January 29, 2012
  Calculated Using Calculated Using
  GAAP GAAP
Return Metrics - Trailing Four Quarters  Net Income  Net Income 
Return on assets (2) 18.4% 17.6%
Return on invested capital (3) 25.9% 25.7%
Return on equity (4) 32.4% 40.5%
     
(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 its results of operations and financial condition. In addition, management uses these measures for reviewing financial results of the Company. The financial return metrics are calculated on a trailing four quarter basis. Our 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) Net Income/Average Assets     
     
(3) (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 net income plus interest expense plus provision for income taxes.
     
(4) Net Income/Ending Equity     
     
Non-GAAP Financial Measures    
While the Company reports financial results in accordance with accounting principles generally accepted in the United States (GAAP), we also provide certain non-GAAP operating performance measures. This non-GAAP information is provided as a supplement, not as a substitute for measures of financial performance prepared in accordance with GAAP. We use this information internally to make operating decisions and believe it is helpful to investors because it allows period-to-period comparisons of our ongoing operating results.  The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by these types of items.  Finally, the Company believes such information provides a higher degree of transparency for certain items.  Investors should consider non-GAAP measures in addition to, not as a substitute for measures of financial performance prepared in accordance with GAAP.
CONTACT: Investor Relations
         (336) 615-8065
         investorrelations@thefreshmarket.com

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