A portion of the pricing for loans and commitments under the revolving credit facility will be based on Sprouts’ performance in sales of socially and environmentally sustainable products.
Sprouts Farmers Market Inc. has closed a $700 million revolving credit facility under a new credit agreement. The move refinanced the company’s previously existing $700 million revolving credit facility, which was repaid and terminated with Sprouts’ entry into this new credit agreement.
The new credit agreement contains terms and conditions substantially similar to the previous credit agreement, with a commitment expiration date of March 2027 and the addition of sustainability-linked pricing terms, revised pricing terms for loans and commitments thereunder, and additional covenant flexibility.
A portion of the pricing for loans and commitments under the revolving credit facility will be based on Sprouts’ performance in two sustainability areas: board of director diversity and sales of socially and environmentally sustainable products.
Sprouts has already made some progress in sustainable products. Earlier in the year, the healthy grocer revealed that it was now sourcing all shell and liquid eggs sold at its stores from cage-free, organic or free-range farms. The grocer’s Our Brands eggs have been “cage-free or better” since 2016, offering such attributes as being pasture-raised.
“While we plan to continue to fund operations and unit growth through our robust cash-flow generation, this facility provides Sprouts with greater financial flexibility as we grow,” said Chip Molloy, CFO of Sprouts. “As well, linking our credit agreement to sustainability objectives supports our ‘doing well by doing good’ philosophy.”
At closing, Sprouts had outstanding total borrowings of $250 million and letters of credit of $32 million outstanding under the revolving credit facility, with a remaining availability of $418 million under the revolving credit facility. Bank of America N.A. acted as the administrative agent.
Meanwhile, for its fourth quarter ended Jan. 2, Sprouts reported net sales of $1.49 billion, a 7% decrease from the same period in 2020, which the retailer attributed to the $122 million in sales during the extra week of the fourth quarter of 2020. Net sales increased 9% from the same period in 2019.
During fiscal 2021, Sprouts:
Generated cash from operations of $365 million.
Invested $81 million in capital expenditures, net of landlord reimbursement, primarily for new stores.
Repurchased 7.4 million shares of common stock, for a total investment of $188 million.
Had a $250 million balance on its revolving credit facility.
Had $245 million in cash and cash equivalents.
Had $112 million available under the current share repurchase authorization.
On March 2, Sprouts said that its board of directors had authorized a new share repurchase program of $600 million of its common shares, which replaces its current authorization with less than $100 million remaining. The shares may be purchased on a discretionary basis from time to time. This share repurchase program may be commenced, suspended or discontinued at any time, and expires on Dec. 31, 2024.
“We remain focused on driving long-term value for our investors while balancing deployment of capital to drive growth over the long term,” said Molloy.