UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended January 20, 2002; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
_________________ to _________________.
Commission File Number: 0-19797
WHOLE FOODS MARKET, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1989366
(State of (IRS employer
incorporation) identification no.)
601 N. Lamar
Suite 300
Austin, Texas 78703
(Address of principal executive offices)
Registrant's telephone number, including area code:
512-477-4455
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No____
---
The number of shares of the registrant's common stock, no par value, outstanding
as of January 20, 2002 was 55,744,475 shares.
Page 1 of 12
Whole Foods Market, Inc.
Form 10-Q
Table of Contents
Page
Number
- ------------------------------------------------------------------------------------------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited), January 20, 2002 and
September 30, 2001 3
Condensed Consolidated Income Statements (Unaudited), for the 16 weeks ended
January 20, 2002 and January 14, 2001 4
Condensed Consolidated Statements of Cash Flows (Unaudited), for the 16 weeks
ended January 20, 2002 and January 14, 2001 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
- ------------------------------------------------------------------------------------------
Page 2 of 12
Part 1. Financial Information
Item 1. Financial Statements
Whole Foods Market, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
January 20, 2002 and September 30, 2001
Assets
2002 2001
- -------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 10,549 1,843
Trade accounts receivable 24,059 24,039
Merchandise inventories 105,113 98,616
Prepaid expenses and other current assets 21,711 18,520
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 161,432 143,018
Property and equipment, net of accumulated depreciation and amortization 590,736 542,986
Long-term investments 4,834 4,706
Goodwill 79,229 67,258
Intangible assets, net of accumulated amortization 24,906 24,028
Other assets 28,602 28,800
Net assets of discontinued operations 3,000 18,375
- -------------------------------------------------------------------------------------------------------------------------
$ 892,739 829,171
- -------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
2002 2001
- -------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current installments of long-term debt and capital lease obligations 5,789 5,944
Trade accounts payable 73,574 50,468
Accrued payroll, bonus and employee benefits 50,655 41,265
Other accrued expenses 47,450 58,659
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 177,468 156,336
Long-term debt and capital lease obligations, less current installments 249,842 250,705
Other long-term liabilities 13,873 12,773
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 441,183 419,814
- -------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock, no par value, 100,000 shares authorized,
55,894 and 55,114 shares issued, 55,744 and 54,770
shares outstanding in 2002 and 2001, respectively 268,340 251,679
Common stock in treasury, at cost - (5,369)
Accumulated other comprehensive income (2) (30)
Retained earnings 183,218 163,077
- -------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 451,556 409,357
- -------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
- -------------------------------------------------------------------------------------------------------------------------
$ 892,739 829,171
- -------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 3 of 12
Whole Foods Market, Inc.
Condensed Consolidated Income Statements (Unaudited)
(In thousands, except per share data)
Sixteen weeks ended
January 20, January 14,
2002 2001
- ---------------------------------------------------------------------------------------
Sales $ 780,799 643,435
Cost of goods sold and occupancy costs 516,077 422,917
- ---------------------------------------------------------------------------------------
Gross profit 264,722 220,518
Direct store expenses 197,297 164,006
- ---------------------------------------------------------------------------------------
Store contribution 67,425 56,512
General and administrative expenses 28,180 23,533
Pre-opening and relocation costs 2,239 2,647
- ---------------------------------------------------------------------------------------
Income from operations 37,006 30,332
Other income (expense):
Interest expense (3,969) (5,810)
Investment and other income 531 552
- ---------------------------------------------------------------------------------------
Income before income taxes 33,568 25,074
Provision for income taxes 13,427 10,030
- ---------------------------------------------------------------------------------------
Net income $ 20,141 15,044
- ---------------------------------------------------------------------------------------
Basic earnings per share $ 0.36 0.28
- ---------------------------------------------------------------------------------------
Weighted average shares outstanding 55,210 53,137
- ---------------------------------------------------------------------------------------
Diluted earnings per share $ 0.34 0.27
- ---------------------------------------------------------------------------------------
Weighted average shares outstanding, diluted basis 58,974 55,711
- ---------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Whole Foods Market, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Sixteen weeks ended
January 20, January 14,
2002 2001
- ---------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Income from continuing operations $ 20,141 15,044
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities:
Depreciation and amortization 25,558 21,796
Loss on disposal of fixed assets 412 390
Rent differential 762 181
Change in LIFO reserve 1,000 600
Interest accretion on long-term debt 2,132 2,028
Tax benefit related to exercise of team member stock options 6,558 941
Net change in current assets (4,618) (11,130)
Net change in current liabilities 10,971 1,109
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 62,916 30,959
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Acquisition of property and equipment (46,807) (54,720)
Acquisition of intangible assets (1,241) -
Payment for purchase of acquired entities, net of cash acquired (34,847) -
Other investing activities (4,753) -
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (87,648) (54,720)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from long-term borrowings 32,000 25,000
Issuance of common stock 22,030 6,063
Payments on long-term debt and capital lease obligations (35,150) (787)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 18,880 30,276
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Cash flows from discontinued operations
Net cash provided by discontinued operations 14,558 199
- ---------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 8,706 6,714
Cash and cash equivalents at beginning of period 1,843 395
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Cash and cash equivalents at end of period $ 10,549 7,109
- ---------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Interest paid $ 1,968 2,468
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Federal and state income taxes paid $ 4,146 7,258
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Whole Foods Market, Inc.
Notes To Condensed Consolidated Financial Statements (Unaudited)
January 20, 2002
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Whole
Foods Market, Inc. and subsidiaries ("Company") have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the
opinion of management, all adjustments, consisting of normal recurring accruals
as well as the accounting change to adopt Statement of Financial Accounting
Standards (SFAS) 142, "Goodwill and Other Intangible Assets," considered
necessary for a fair presentation have been included. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, and expenses. Examples include
accounting for depreciation and amortization, allowance for doubtful accounts,
long-term investments, team member benefit plans, team member health insurance
plans, income taxes and contingencies. Actual results may differ from these
estimates. Interim results are not necessarily indicative of results for any
other interim period or for a full fiscal year. The information included in this
Form 10-Q should be read in conjunction with Management's Discussion and
Analysis and the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10K for the fiscal year ended September 30,
2001.
Our fiscal year ends on the last Sunday in September. The first fiscal quarter
is sixteen weeks, the second and third quarters each are twelve weeks and the
fourth quarter is twelve or thirteen weeks.
Where appropriate, we have reclassified prior year financial statements to
conform to current year presentation.
(2) Earnings Per Share
The computation of basic earnings per share is based on the number of weighted
average common shares outstanding during the period. The computation of diluted
earnings per share includes the dilutive effect of common stock equivalents
consisting of common shares deemed outstanding from the assumed exercise of
stock options. A reconciliation of the denominators of the basic and diluted
earnings per share calculations follows (in thousands):
Sixteen weeks ended
January 20, January 14,
2002 2001
==========================================================================================================================
Denominator for basic earnings per share:
weighted average shares 55,210 53,137
Additional shares deemed outstanding from the assumed
exercise of stock options 3,764 2,574
- -------------------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share: adjusted
weighted average shares and assumed exercises 58,974 55,711
==========================================================================================================================
The computations of diluted earnings per share for the sixteen week periods
ended January 20, 2002 and January 14, 2001 do not include options to purchase
approximately 5,000 shares and 2,216,000 shares, respectively, of common stock
because to do so would be antidilutive. The computations of diluted earnings per
share for both periods presented do not include approximately 3,286,000 shares
of common stock related to the zero coupon convertible subordinated debentures
because to do so would be antidilutive.
(3) Comprehensive Income
The Company's comprehensive income was comprised of net income, unrealized gains
and losses on available for sale securities and foreign currency translation
adjustment, net of income taxes. Comprehensive income, net of related tax
effects, was as follows (in thousands):
Sixteen weeks ended
January 20, January 14,
2002 2001
==========================================================================================================================
Net income $ 20,141 15,044
Unrealized gain (loss), net 77 -
Foreign currency translation adjustment, net (49) -
- -------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 20,169 15,044
=========================================================================================================================
Page 6 of 12
(4) Business Combinations
On October 31, 2001, we completed the acquisition of certain assets of Harry's
Farmer's Markets, Inc., in exchange for approximately $35 million in cash plus
the assumption of certain liabilities. The assets acquired are all assets
relating to the three perishables superstores in Atlanta, Georgia, including but
not limited to real estate, the Harry's Farmers Market trade name, distribution
center and other support and office facilities. This transaction has been
accounted for using the purchase method. Accordingly, the purchase price has
been allocated to tangible and identifiable intangible assets acquired based on
their estimated fair values at the date of acquisition. Total costs in excess of
tangible and intangible assets acquired of approximately $7.2 million have been
recorded as goodwill, pending completion of any purchase price adjustments.
Results of acquired operations are included in our condensed consolidated income
statement for the period beginning October 31, 2001 through January 20, 2002.
(5) Goodwill and Other Intangible Assets
We adopted Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," effective the beginning of the first
quarter of fiscal year 2002. SFAS No. 142 provides that separable intangible
assets that have finite lives will continue to be amortized over their useful
lives and that goodwill and indefinite-lived intangible assets will no longer be
amortized but will be reviewed for impairment annually, or more frequently if
impairment indicators arise. There was no impairment of goodwill upon adoption
of SFAS 142. During the sixteen weeks ended January 20, 2002, we acquired
goodwill totaling approximately $7.2 million in connection with the Harry's
Farmers Market acquisition.
Net income and earnings per share for the sixteen weeks ended January 14, 2001
adjusted to exclude amortization expense (net of income taxes) is as follows (in
thousands, except per share data):
Reported net income $15,044
Add back goodwill amortization, net 460
- -------------------------------------------------------------------------------------------------------------------------
Adjusted net income $15,504
=========================================================================================================================
Basic earnings per share:
Reported net income $ 0.28
Add back goodwill amortization, net 0.01
- -------------------------------------------------------------------------------------------------------------------------
Adjusted net income $ 0.29
=========================================================================================================================
Diluted earnings per share:
Reported net income $ 0.27
Add back goodwill amortization, net 0.01
- -------------------------------------------------------------------------------------------------------------------------
Adjusted net income $ 0.28
=========================================================================================================================
All of the Company's acquired intangible assets are subject to amortization.
Amortization expense is recorded on a straight-line basis over the life of the
related agreement, currently one to twenty-six years for contract-based
intangible assets and one to five years for marketing-related and other
intangible assets. During the sixteen weeks ended January 20, 2002, we acquired
intangible assets totaling approximately $1.1 million in connection with the
Harry's Farmers Market acquisition. Amortization associated with intangible
assets totaled approximately $1.3 million for the sixteen weeks ended January
20, 2002. The components of intangible assets were as follows (in thousands):
January 20, 2002 September 30, 2001
Gross carrying Accumulated Gross carrying Accumulated
amount amortization amount amortization
============================================================================================================================
Contract-based $ 29,098 (7,092) 28,098 (6,151)
Marketing-related and other $ 4,822 (1,922) 4,144 (2,063)
============================================================================================================================
Amortization associated with the net carrying amount of intangible assets at
January 20, 2002 is estimated to be $2.1 million for the remainder of fiscal
year 2002, $2.6 million in fiscal year 2003, $2.3 million in fiscal year 2004,
$2.3 million in fiscal year 2005 and $1.7 million in fiscal year 2006.
Page 7 of 12
(6) Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") issued SFAS No. 143,
"Accounting for Asset Retirement Obligations," in June 2001. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs and is effective for financial statements issued for fiscal years
beginning after June 15, 2002, with early application encouraged. We will adopt
SFAS No. 143 in the first quarter of fiscal year 2003. We are evaluating the
impact of the adoption of SFAS No. 143 on our consolidated financial statements.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," in August 2001. SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and other related accounting guidance. SFAS No. 144 is effective
for financial statements issued for fiscal years beginning after December 15,
2001, and interim periods within those fiscal years, with early application
encouraged. The provisions of this Statement generally are to be applied
prospectively. We will adopt SFAS No. 144 in the first quarter of fiscal year
2003. We are evaluating the impact of the adoption of SFAS No. 144 on our
consolidated financial statements.
Page 8 of 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Sixteen weeks ended January 20, 2002 compared to the
same period of the prior year.
General
The Company reports its results of operations on a fifty-two or fifty-three week
fiscal year ending on the last Sunday in September. The first fiscal quarter is
sixteen weeks, the second and third quarters each are twelve weeks and the
fourth quarter is twelve or thirteen weeks. The following table sets forth the
Company's results of operations data expressed as a percentage of sales:
Sixteen weeks ended
January 20, January 14,
2002 2001
=====================================================================================================
Sales 100.0% 100.0%
Cost of goods sold and occupancy costs 66.1 65.7
- -----------------------------------------------------------------------------------------------------
Gross profit 33.9 34.3
Direct store expenses 25.3 25.5
- -----------------------------------------------------------------------------------------------------
Store contribution 8.6 8.8
General and administrative expenses 3.6 3.7
Pre-opening and relocation costs 0.3 0.4
- -----------------------------------------------------------------------------------------------------
Income from operations 4.7 4.7
Other income (expense):
Interest expense (0.5) (0.9)
Investment and other income 0.1 0.1
- -----------------------------------------------------------------------------------------------------
Income before income taxes 4.3 3.9
Provision for income taxes 1.7 1.6
- -----------------------------------------------------------------------------------------------------
Net income 2.6% 2.3%
=====================================================================================================
Figures may not add due to rounding.
Sales
Sales totaled approximately $781 million for the sixteen weeks ended January 20,
2002, an increase of approximately 21% over sales of approximately $643 million
for the same period of the prior year. This increase was driven by 16%
year-over-year square footage growth and comparable store sales growth of
approximately 9.4%. Sales of a store are deemed to be comparable commencing in
the fifty-third full week after the store was opened or acquired. Sales in
identical stores, which excludes three relocated stores, increased approximately
7.5%. Comparable and identical store sales increases resulted almost entirely
from an increase in the number of customer transactions with basket size being
relatively flat. We believe this was caused by a combination of various factors,
including but not limited to: an increase in new customers who generally have a
lower average basket size, more in-store emphasis on our value image and private
label line in some parts of the country and impact from the economy on some
customers' buying habits who may be trading down to lower priced items or
perhaps shopping more often.
Gross Profit
Gross profit consists of sales less cost of goods sold and occupancy costs plus
contribution from non-retail distribution and food preparation operations. The
Company's consolidated gross profit as a percentage of sales was approximately
33.9% for the sixteen weeks ended January 20, 2002 compared to approximately
34.3% for the same period of the prior fiscal year. This decrease was primarily
due to the impact of new, acquired and two closed stores. Gross profit margins
tend to be lower for new stores and increase as stores mature, reflecting lower
shrink as volumes increase, as well as increasing experience levels and
operational efficiencies of the store teams. Gross profit margins at comparable
stores increased 20 basis points to approximately 34.5%. This increase was due
to various factors including increased national buying and private label
initiatives which continue to lower the cost of product purchased on a national
basis and continued improvement in store execution with respect to product
procurement, merchandising and controlling spoilage.
Page 9 of 12
Store Contribution
Store contribution consists of gross profit less direct store expenses. For all
stores, store contribution as a percentage of sales was approximately 8.6% for
the sixteen weeks ended January 20, 2002 compared to approximately 8.8% for the
same period of the prior fiscal year. For comparable stores, store contribution
as a percentage of sales was approximately 9.5 %, partially driven by a 44 basis
point decrease in direct store expenses. For all stores, direct store expenses
as a percentage of sales was approximately 25.3% for the sixteen weeks ended
January 20, 2002 compared to approximately 25.5% for the same period of the
prior fiscal year. This decrease was due to a focus on leveraging of labor and
other direct expenses. Higher operating expenses of new stores continue to have
a partially offsetting impact.
General and Administrative Expenses
General and administrative expenses as a percentage of sales were approximately
3.6% for the sixteen weeks ended January 20, 2002 compared to approximately 3.7%
for the same period of the prior fiscal year. This decrease is primarily due to
lower amortization expense related to the adoption of SFAS No. 142 and the
expiration or previous write-off of certain assets related to non-compete
agreements. Whole Foods Market has historically been able to expand without
significant increase in general and administrative costs.
Pre-opening and Relocation Costs
Pre-opening costs include costs associated with hiring and training personnel,
supplies and certain occupancy and miscellaneous costs related to new locations.
Relocation costs consist of moving costs, remaining lease payments, accelerated
depreciation costs and other costs associated with replaced facilities and other
related expenses. Pre-opening and relocation costs for the sixteen weeks ended
January 20, 2002 consist primarily of costs associated with the opening of one
new store and the relocation of one store during the quarter and development of
thirteen new stores scheduled to open in future periods. In the prior year,
pre-opening and relocation costs for the sixteen weeks were associated with the
openings of three new stores during the quarter and nine new stores opened or to
be opened subsequent to the end of the first quarter.
Interest Expense
Interest expense consists of costs related to the convertible subordinated
debentures, senior notes payable and bank line of credit, net of capitalized
interest associated with new store development. Net interest expense for the
sixteen weeks ended January 20, 2002 totaled approximately $4.0 million compared
to approximately $5.8 million for the same period of the prior fiscal year. This
decrease is primarily due to lower interest rates and a lower amount outstanding
under the Company's bank line of credit in fiscal 2002. Capitalized interest for
the sixteen weeks ended January 20, 2002 totaled approximately $300,000 compared
to approximately $800,000 for the same period of the prior fiscal year.
Investment and Other Income
Investment and other income for the sixteen weeks ended January 20, 2002 and
January 14, 2001 totaled approximately $500,000 and approximately $600,000,
respectively. Investment and other income consists primarily of interest, rental
and other income.
Discontinued Operations
Pursuant to a formal plan adopted in fiscal year 2000, the NatureSmart
nutritional supplements business has been segregated from continuing operations
and reported as discontinued operations in the accompanying condensed
consolidated financial statements. Discontinued operations had no impact on the
condensed consolidated income statements for the sixteen weeks ended January 20,
2002 and January 14, 2001. Cash flows from discontinued operations in the
condensed consolidated statement of cash flows for the sixteen weeks ended
January 20, 2002 includes net proceeds totaling approximately $15 million from
the sale of the facility in Thornton, Colorado that was used by NatureSmart.
Liquidity and Capital Resources and Changes in Financial Condition
We generated cash from operating activities of approximately $62.9 million and
$31.0 million for the sixteen weeks ended January 20, 2002 and January 14, 2001,
respectively. Cash flows from operating activities resulted primarily from our
net income plus non-cash expenses and changes in operating working capital.
The Company has a $220 million revolving line of credit available through June
28, 2003. The credit agreement contains certain restrictive covenants, including
the prohibition of the payment of dividends on common stock, and certain
affirmative covenants including maintenance of certain financial ratios as
defined in the agreement. All outstanding amounts borrowed under this agreement
bear interest at our option of either a defined base rate or the LIBOR rate plus
a premium. Commitment fees ranging from 0.20% to 0.30% of the undrawn amount are
payable under this agreement. At January 20, 2002, approximately $87 million was
drawn and approximately $129 million was available under the agreement. At
September 30, 2001, approximately $90 million was drawn and approximately $126
million was available under the agreement. The average
Page 10 of 12
interest rate on amounts outstanding under this agreement at January 20, 2002
was approximately 2.78%. The Company has zero coupon convertible subordinated
debentures outstanding with a carrying value of approximately $140 million at
January 20, 2002. The debentures have an effective yield to maturity of 5
percent and a principal amount at maturity on March 2, 2018 of approximately
$309 million. The debentures are convertible at the option of the holder, at any
time on or prior to maturity, unless previously redeemed or otherwise purchased.
Debentures may be redeemed at the option of the holder on March 2, 2003, March
2, 2008 or March 2, 2013 for a purchase price equal to issue price plus accrued
original issue discount totaling approximately $148 million, $189 million and
$242 million, respectively. The Company, at its option, may elect to pay any
such purchase price in cash or in shares of common stock, or any combination
thereof. We also have outstanding at January 20, 2002 approximately $28.6
million of senior unsecured notes that bear interest at 7.29% payable quarterly.
Principal on the senior notes is payable in annual installments of approximately
$5.7 million through May 16, 2006. Net cash used in financing activities was
approximately $30.2 million in fiscal year 2001. Net cash provided by financing
activities was approximately $18.9 million and $30.3 million for the sixteen
weeks ended January 20, 2002 and January 14, 2001, respectively.
Whole Foods Market's principal capital requirements have been the funding of the
development or acquisition of new stores and to lesser extent, the resultant
increase in working capital requirements. We estimate that cash requirements to
open a new store will range from $2 million to $16 million, after giving effect
to any landlord construction allowance. This excludes new store inventory of
approximately $750,000, a portion of which is financed by our vendors. As of
February 13, 2002 we had signed leases for 20 new stores averaging approximately
36,000 square feet in size. We expect to open or acquire approximately 15 to 20
new stores per year, including relocations of existing stores, in each of the
next two fiscal years. We will incur additional capital expenditures in the
current fiscal year in connection with ongoing equipment upgrades and resets at
existing stores and continued development of management information systems.
During the quarter the Company completed the acquisition of three Harry's
Farmer's Market perishables superstores in Atlanta, Georgia in exchange for
approximately $35 million in cash plus the assumption of certain liabilities.
Net cash used in investing activities, including Harry's, was approximately
$87.6 million and $54.7 million for the sixteen weeks ended January 20, 2002 and
January 14, 2001, respectively. We expect that planned expansion and other
anticipated working capital and capital expenditure requirements will be funded
by cash generated from operations and long-term debt. We continually evaluate
the need to establish other sources of working capital and will seek those
considered appropriate based upon the Company's needs and market conditions.
Risk Factors
We wish to caution you that there are risks and uncertainties that could cause
our actual results to be materially different from those indicated by
forward-looking statements that we make from time to time in filings with the
Securities and Exchange Commission, news releases, reports, proxy statements,
registration statements and other written communications, as well as oral
forward-looking statements made from time to time by representatives of our
Company. These risks and uncertainties include, but are not limited to, those
listed in the Company's Annual Report on Form 10-K for the year ended September
30, 2001. These risks and uncertainties and additional risks and uncertainties
not presently known to us or that we currently deem immaterial may cause our
business, financial condition, operating results and cash flows to be materially
adversely affected. Except for the historical information contained herein, the
matters discussed in this analysis are forward looking statements that involve
risks and uncertainties, including but not limited to general business
conditions, the timely development and opening of new stores, the impact of
competition, and other factors which are often beyond the control of the
Company. The Company does not undertake any obligation to update forward-looking
statements except as required by law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company's market risk exposures from
those reported in our Annual Report on Form 10-K for the year ended September
30, 2001.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fiscal quarter ended
January 20, 2002.
Page 11 of 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Whole Foods Market, Inc.
Registrant
Date: March 5, 2002 By: /s/ Glenda Flanagan
------------- -------------------
Glenda Flanagan
Executive Vice President and
Chief Financial Officer
(Duly authorized officer and
principal financial officer)
Page 12 of 12