Whole Foods Market Reports Third Quarter Results
Company Reports Comparable Store Sales Increase of 7.0% on Top of 9.9%
Increase in Prior Year and Diluted Earnings Per Share of $0.35; Company
Repurchases $100 Million of Stock and Pays $25 million in Cash Dividends in
Quarter; 18 New Stores Opened over Last Twelve Months
AUSTIN, Texas, July 31 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) today reported sales and earnings for the 12-week quarter ended
July 1, 2007. Sales increased 13.2% to $1.5 billion driven by 14% ending square
footage growth and a 7.0% increase in comparable store sales on top of a 9.9%
increase in the prior year. The negative impact on comparable store sales growth
of Easter shifting from the third quarter last year to the second quarter this
year was approximately 76 basis points in the quarter. Identical store sales
(excluding four relocated stores and two major expansions) increased 5.8%. Net
income was $49.1 million, diluted earnings per share were $0.35, operating cash
flow per share was $0.87, and Economic Value Added (EVA(TM)) was $15.6 million.
For the quarter, pre-opening and relocation costs were $15.0 million, or $0.06
per diluted share, compared to $7.9 million, or $0.03 per diluted share, in the
third quarter last year. Approximately $8.6 million, or $0.04 per diluted share,
relating to share-based compensation, pre-opening rent and accelerated
depreciation was expensed for accounting purposes but was non-cash, compared to
$6.3 million, or $0.03 per diluted share, in the prior year.
During the quarter, the Company produced $123 million in cash flow from
operations and received $4 million in proceeds from the exercise of stock
options. Capital expenditures in the quarter were $128 million of which $95
million was for new stores. The Company paid approximately $25 million to
shareholders in cash dividends and repurchased approximately $100 million of
common stock. The Company's remaining authorization for share repurchases is
currently $100 million. At the end of the quarter, the Company had total cash
and investments of approximately $35 million and total long-term debt of
approximately $3 million. The Company also expanded its existing $100 million
revolving credit line to $200 million during the quarter.
"As expected, fiscal year 2007 has been an investment year as we have
accelerated our new store openings while cycling over tough year-ago comparable
store sales growth comparisons. We believe that our third quarter results,
combined with our 7.6% comparable store sales increase in the fourth quarter to
date, is an indication that our comparable store sales growth has stabilized,"
said John Mackey, chairman, chief executive officer, and co-founder of Whole
Foods Market. "We are on track to deliver 18 to 20 new store openings this year.
We expect to open a greater number of stores in fiscal year 2008, but currently
do not expect the same degree of year-over-year increase in our total
pre-opening expenses. We are very excited to see the acceleration in our new
store openings materialize, as we expect these new stores to drive strong sales
and comparable store sales growth in the not-so-distant future."
For the 40-week period ended July 1, 2007, sales increased 12.3% to $4.8
billion driven by 14% ending square footage growth and comparable store sales
growth of 6.7% on top of an 11.7% increase in the prior year. Sales in identical
stores (excluding five relocated stores and three major expansions) increased
5.7%. Net income was $148.8 million, diluted earnings per share were $1.05,
operating cash flow per share was $2.12, and EVA was $38.2 million. Year to
date, pre-opening and relocation costs were $46.9 million, or $0.20 per diluted
share, compared to $23.7 million, or $0.10 per diluted share, in the prior year.
Approximately $25.2 million, or $0.11 per diluted share, relating to share-based
compensation, pre-opening rent and accelerated depreciation was expensed for
accounting purposes but was non-cash, compared to $14.6 million, or $0.06 per
diluted share, in the prior year.
The Company's Consolidated Statements of Operations on a Non-GAAP Basis
(hereinafter referred to as adjusted results) exclude pre-tax credits for
insurance proceeds and other adjustments related to Hurricane Katrina of $3.7
million in the third quarter of fiscal year 2006 and $7.2 million in the 40-week
period ended July 2, 2006. Excluding these credits, adjusted earnings per share
were $0.35 in the third quarter last year and $1.10 for the 40-week period ended
July 2, 2006.
The following table shows the Company's growth in sales, comparable store
sales, and ending square footage year to date compared to its historical
five-year ranges and average results. For fiscal year 2007, the Company has
guided to sales growth of 13% to 17%, comparable store sales growth of 6% to 8%,
and ending square footage growth of 16%.
Five-Year FY Range Five-Year YTD
Low High FY Average FY07
Sales growth 17.0% 22.8% 20.3% 12.3%
Comparable store sales growth 8.6% 14.9% 11.5% 6.7%
Two-year comps (sum of two years) 18.6% 27.8% 22.7% 18.4%
Ending square footage growth 10% 14% 12% 14%
The following table breaks out additional information on the quarter for
comparable stores and all stores.
NOPAT # of Average Total
Comparable Stores Comps ROIC Stores Size Square Feet
Over 11 years old 4.1% 91% 59 27,600 1,626,200
Between eight and
11 years old 3.7% 68% 26 31,100 807,600
Between five and eight
years old 6.1% 44% 43 34,700 1,492,400
Between two and five
years old 8.3% 29% 37 40,300 1,491,600
Less than two years old
(includes four
relocations) 22.6% 1%* 18 54,400 979,500
All comparable stores
(7.5 years old, s.f
weighted) 7.0% 40%* 183 35,000 6,406,300
All stores (6.8 years
old, s.f. weighted) 33%* 196 36,200 7,104,800
* Includes pre-opening expense for stores less than two years old. Excluding
the Kensington relocation, NOPAT ROIC was 10%, 43% and 35% for comparable
stores less than two years old, all comparable stores, and all stores,
respectively.
Note that due to certain operational changes, some expenses previously
included in cost of goods sold are now included in direct store expenses,
representing an estimated impact of approximately 16 basis points on those line
items in the quarter. For comparable stores, the following year-over-year basis
point changes in gross profit and direct store expenses as a percentage of sales
adjust for this impact.
Gross profit consists of sales less cost of goods sold and occupancy costs
plus the contribution from non-retail distribution and food preparation
operations. For the third quarter, gross profit increased 36 basis points to
35.5% of sales from an adjusted 35.2% of sales last year, which excludes
approximately $0.9 million in credits related to Hurricane Katrina. The LIFO
charge was $2.1 million in the quarter compared to $0.8 million in the prior
year. For stores in the comparable store base, gross profit improved 42 basis
points to 35.7% of sales. Historically, the Company's average weekly sales and
gross margins are strongest in the second and third quarters.
For the quarter, direct store expenses increased 90 basis points to 26.1%
of sales from an adjusted 25.2% of sales last year, which excludes approximately
$1.2 million in credits related to Hurricane Katrina. For stores in the
comparable store base, direct store expenses increased 23 basis points to 25.4%
of sales due primarily to increases in health care and share-based compensation
expense, which were partially offset by leverage in wages as a percentage of
sales. Share-based compensation expense included in direct store expenses was
approximately $2.3 million in the quarter compared to approximately $0.5 million
in the prior year.
Store contribution decreased 54 basis points to 9.5% of sales from an
adjusted 10.0% of sales last year, which excludes approximately $2.0 million in
credits related to Hurricane Katrina. For stores in the comparable store base,
store contribution increased 19 basis points to 10.3% of sales. G&A expenses
improved five basis points to 3.2% of sales. Share-based compensation expense
included in G&A was approximately $1.6 million compared to approximately $0.9
million in the prior year.
The following table shows the Company's year-to-date results for certain
line items as a percentage of sales compared to its historical five-year ranges
and averages, highlighting the consistency of these results on an annualized
basis over time. Where applicable, historical percentages have been adjusted to
exclude Hurricane Katrina charges and credits, as well as share-based
compensation expense related to the Company's September 2005 accelerated vesting
of stock options.
Five-Year FY Range Five-Year FY YTD
Low High Average FY07
Gross profit 34.2% 35.1% 34.8% 34.9%
Direct store expenses 25.2% 25.5% 25.4% 25.9%
Store contribution 9.0% 9.6% 9.4% 9.0%
G&A 3.1% 3.6% 3.2% 3.1%
For the quarter, pre-opening and relocation costs were $15.0 million, or
$0.06 per diluted share, of which approximately $4.4 million was pre-opening
rent and accelerated depreciation that was expensed for accounting purposes but
was non-cash. In the prior year, pre-opening and relocation costs were $7.9
million, or $0.03 per diluted share, of which approximately $5.4 million was
non-cash pre-opening rent and accelerated depreciation.
New Store Development
In the third quarter, the Company opened one store in El Segundo, CA, one
store in Sonoma, CA, and relocated its Notting Hill Fresh & Wild store in London
to its new Kensington Whole Foods Market location. Thus far in the fourth
quarter, the Company has opened one store in Chicago, IL and expects to open
four to six additional stores during the quarter, two of which are relocations.
As of today, the Company has opened 18 new stores over the last 12 months.
The Company has recently signed seven new store leases averaging 39,000
square feet in size which are as follows: Malibu, CA; San Francisco, CA;
Toronto, Canada; Kailua, HI; Maui, HI; Lynnfield, MA; and Rochester Hills, MI.
Since its second quarter earnings release on May 9, the Company has opened
three new stores, and 10 leases have been tendered. For accounting purposes, a
store is considered tendered on the date the Company takes possession of the
space for construction and other purposes, which is typically when the shell of
the store is complete or nearing completion. The average tender period, or
length of time between tender date and opening date, will vary depending on
several factors, one of which is the number of acquired leases, ground leases
and owned properties in development, all of which generally have longer tender
periods than standard operating leases.
The following table provides additional information about the Company's
store openings in fiscal year 2006 and thus far in fiscal year 2007, leases
currently tendered but not opened, and total development pipeline for stores
scheduled to open through fiscal year 2010. Of the Company's 25 stores currently
tendered, 23 are expected to open between now and the end of fiscal year 2008,
and the Company expects to announce additional stores over the next two quarters
tendered for openings in fiscal year 2008.
Stores Stores Current Current
Opened Opened Leases Leases
New Store Information FY06 FY07 YTD Tendered Signed(1)
Number of stores
(including relocations) 13 14 25 94
Number of relocations 2 3 3 17
Number of lease
acquisitions,
ground leases and
owned
properties 1 4 9 15
New markets 4 2 3 21
Average store size
(gross square feet) 50,200 56,600 48,400 53,000
As a percentage of
existing store
average size 147% 156% 133% 146%
Total square footage 653,000 792,000 1,210,000 5,021,000
As a percentage of
existing square
footage 10% 11% 17% 70%
Average tender
period 7.8 months 9.7 months
Average pre-opening
expense per store
(incl. rent) $1.9 million $2.4 million(2)
Average pre-opening
rent per store $0.7 million $0.9 million(2)
Average development
cost
(excl.
pre-opening) $13.0 million $15.0 million(2)
Average development
cost per square foot $258 $2822
(1) Includes leases tendered
(2) Pre-opening and development costs are estimated for stores opened
YTD and exclude Kensington in London
Growth Goals for Fiscal Year 2007 and Beyond
The Company's guidance for fiscal year 2007 excludes any impact from the
proposed merger with Wild Oats Markets, as the transaction has not closed.
The Company notes that fiscal year 2007 is a 53-week year, with the extra
week falling in the fourth quarter making it a thirteen-week quarter. For fiscal
year 2007, on a 52-week to 52-week basis, the Company expects total sales growth
of 13% to 17% and comparable store sales growth of 6% to 8%.
Year to date, the Company has opened 14 stores and expanded two stores
representing approximately 781,000 square feet net of closures related to three
relocations. In addition to one store already open in the fourth quarter, four
to six of the Company's 25 currently tendered stores, representing up to
approximately 278,000 square feet net of closures, are expected to open in the
fourth quarter, translating to an estimated year-over-year increase in ending
square footage of approximately 16%.
For fiscal year 2007, the Company expects operating income before
pre-opening and relocation costs as a percentage of sales to be in line with its
5.9% results year to date.
The Company expects share-based compensation, a non-cash expense, of
approximately $3 million to $4 million in the fourth quarter.
Capital expenditures for fiscal year 2007 are expected to be in the range
of $525 million to $575 million. Of this amount, approximately 70% to 75% is
related to new stores opening in fiscal year 2007 and beyond.
The Company has incurred materially higher pre-opening and relocation
costs of approximately $47 million year to date compared to approximately $24
million for the same period last year resulting primarily from the acceleration
in square footage opening in fiscal years 2007 and 2008. As expected, these
costs have had a significant negative impact on fiscal year 2007 diluted
earnings per share growth. For the fourth quarter, the Company expects
pre-opening and relocation costs in the range of $20 million to $24 million.
Fiscal year 2007 results are expected to include approximately $33 million
to $36 million, or approximately $0.14 or $0.15 per share, of non-cash
pre-opening rent, accelerated depreciation, and share-based compensation
expense.
Longer term, the Company's goal is to reach $12 billion in sales in fiscal
year 2010.
Proposed Merger with Wild Oats Markets
The U.S. District Court for the District of Columbia preliminary
injunction hearing to decide whether to approve the U.S. Federal Trade
Commission's (FTC) application for an injunction to block the proposed merger
between Whole Foods Market and Wild Oats Markets began today and is scheduled to
conclude on August 1, 2007. The Company expects to receive a ruling by the
middle of August.
The Company announced on June 20, 2007 that, subject to prevailing in its
current lawsuit with the FTC concerning the proposed merger, the Company plans
to transfer all 35 Henry's and Sun Harvest store locations, plus a Riverside, CA
distribution center, to a wholly owned subsidiary of Smart & Final, Inc., a Los
Angeles-based food retailer.
"We are hopeful that the court will rule in our favor and that we will be
allowed to move forward; however, we believe that merger or no merger, Whole
Foods Market has a very bright future," said Mr. Mackey. "We currently have 94
stores in our pipeline representing 70 percent of our existing square footage,
and we believe we are on track to meet our goal of $12 billion in sales in 2010.
If the merger is approved, just as we have done with our many previous
acquisitions, we will improve the Wild Oats stores to make them more profitable
and create an improved shopping experience for our customers."
About Whole Foods Market: Founded in 1980 in Austin, Texas, Whole Foods
Market(R) is a Fortune 500 company and the largest natural and organic foods
retailer. The Company had sales of $5.6 billion in fiscal year 2006 and
currently has 197 stores in the United States, Canada and the United Kingdom.
Forward-looking statements
The following constitutes a "Safe Harbor" statement under the Private
Securities Litigation Reform Act of 1995. Except for the historical information
contained herein, the matters discussed in this press release are
forward-looking statements that involve risks and uncertainties, which could
cause our actual results to differ materially from those described in the
forward-looking statements. These risks include but are not limited to general
business conditions, the timely development and opening of new stores, the
impact of competition, and other risks detailed from time to time in the SEC
reports of Whole Foods Market, including Whole Foods Market's report on Form
10-K for the fiscal year ended September 24, 2006. Whole Foods Market undertakes
no obligation to update forward-looking statements.
The Company will host a conference call today to discuss this earnings
announcement at 4:00 p.m. CT. The dial-in number is 1-800-909-5202, and the
conference ID is "Whole Foods." A simultaneous audio webcast will be available
at www.wholefoodsmarket.com.
Contact: Cindy McCann
VP of Investor Relations
512.542.0204
Whole Foods Market, Inc.
Consolidated Statements of Operations - Non-GAAP basis (unaudited)
(In thousands, except per share amounts)
Twelve weeks ended
July 1, 2007
Natural
GAAP Disaster Non-GAAP
Sales $1,514,420 $ -- $1,514,420
Cost of goods sold and occupancy
costs 976,130 -- 976,130
Gross profit 538,290 -- 538,290
Direct store expenses 394,713 -- 394,713
Store contribution 143,577 -- 143,577
General and administrative expenses 49,003 -- 49,003
Operating income before pre-opening
and relocation 94,574 -- 94,574
Pre-opening expenses 13,719 -- 13,719
Relocation costs 1,276 -- 1,276
Operating income 79,579 -- 79,579
Investment and other income, net 2,199 -- 2,199
Income before income taxes 81,778 -- 81,778
Provision for income taxes 32,711 -- 32,711
Net income $ 49,067 -- $ 49,067
Basic earnings per share $ 0.35 $ -- $ 0.35
Weighted average shares outstanding 140,061 140,061 140,061
Diluted earnings per share $ 0.35 $ -- $ 0.35
Weighted average shares outstanding,
diluted basis 141,250 141,250 141,250
Dividends per share $ 0.18 $ 0.18
Twelve weeks ended
July 2, 2006
Natural
GAAP Disaster Non-GAAP
Sales $1,337,886 $ -- $1,337,886
Cost of goods sold and occupancy
costs 866,260 879 867,139
Gross profit 471,626 (879) 470,747
Direct store expenses 335,555 1,152 336,707
Store contribution 136,071 (2,031) 134,040
General and administrative expenses 43,955 43,955
Operating income before pre-opening
and relocation 92,116 (2,031) 90,085
Pre-opening expenses 6,604 -- 6,604
Relocation costs 1,256 -- 1,256
Operating income 84,256 (2,031) 82,225
Investment and other income, net 5,573 (1,621) 3,952
Income before income taxes 89,829 (3,652) 86,177
Provision for income taxes 35,931 (1,461) 34,470
Net income $ 53,898 $ (2,191) $ 51,707
Basic earnings per share $ 0.38 $ (0.02) $ 0.37
Weighted average shares outstanding 140,712 140,712 140,712
Diluted earnings per share $ 0.37 $ (0.02) $ 0.35
Weighted average shares outstanding,
diluted basis 145,925 145,925 145,925
Dividends per share $ 0.15 $ 0.15
A reconciliation of the numerators and denominators of the basic and
diluted earnings per share calculations follows (in thousands):
Twelve weeks ended
July 1, 2007
Natural
GAAP Disaster Non-GAAP
Net income (numerator for basic
earnings per share) $ 49,067 $ -- $ 49,067
Interest on 5% zero coupon
convertible subordinated
debentures, net of income taxes 19 -- 19
Adjusted net income (numerator for
diluted earnings
per share) $ 49,086 $ -- $ 49,086
Weighted average common shares
outstanding
(denominator for basic earnings per
share) 140,061 140,061 140,061
Potential common shares outstanding:
Assumed conversion of 5% zero
coupon
convertible subordinated debentures 97 97 97
Assumed exercise of stock options 1,092 1,092 1,092
Weighted average common shares
outstanding and
potential additional common shares
outstanding
(denominator for diluted earnings
per share) 141,250 141,250 141,250
Basic earnings per share $ 0.35 $ -- $ 0.35
Diluted earnings per share $ 0.35 $ -- $ 0.35
Twelve weeks ended
July 2, 2006
Natural
GAAP Disaster Non-GAAP
Net income (numerator for basic
earnings per share) $ 53,898 $ (2,191) $ 51,707
Interest on 5% zero coupon
convertible subordinated
debentures, net of income taxes 61 -- 61
Adjusted net income (numerator for
diluted earnings
per share) $ 53,959 $ (2,191) $ 51,768
Weighted average common shares
outstanding
(denominator for basic earnings per
share) 140,712 140,712 140,712
Potential common shares outstanding:
Assumed conversion of 5% zero
coupon
convertible subordinated debentures 335 335 335
Assumed exercise of stock options 4,878 4,878 4,878
Weighted average common shares
outstanding and
potential additional common shares
outstanding
(denominator for diluted earnings
per share) 145,925 145,925 145,925
Basic earnings per share $ 0.38 $ (0.02) $ 0.37
Diluted earnings per share $ 0.37 $ (0.02) $ 0.35
Whole Foods Market, Inc.
Consolidated Statements of Operations - Non-GAAP basis (unaudited)
(In thousands, except per share amounts)
Forty weeks ended
July 1, 2007
Natural
GAAP Disaster Non-GAAP
Sales $4,848,361 $ -- $4,848,361
Cost of goods sold and occupancy
costs 3,154,840 -- 3,154,840
Gross profit 1,693,521 -- 1,693,521
Direct store expenses 1,256,805 -- 1,256,805
Store contribution 436,716 -- 436,716
General and administrative expenses 150,591 -- 150,591
Operating income before pre-opening
and relocation 286,125 -- 286,125
Pre-opening expenses 40,717 -- 40,717
Relocation costs 6,196 -- 6,196
Operating income 239,212 -- 239,212
Investment and other income, net 8,806 -- 8,806
Income before income taxes 248,018 -- 248,018
Provision for income taxes 99,207 -- 99,207
Net income $ 148,811 -- $ 148,811
Basic earnings per share $ 1.06 $ -- $ 1.06
Weighted average shares outstanding 140,411 140,411 140,411
Diluted earnings per share $ 1.05 $ -- $ 1.05
Weighted average shares outstanding,
diluted basis 142,366 142,366 142,366
Dividends per share $ 0.69 $ 0.69
Forty weeks ended
July 2, 2006
Natural
GAAP Disaster Non-GAAP
Sales $4,316,359 $ -- $4,316,359
Cost of goods sold and occupancy
costs 2,806,298 879 2,807,177
Gross profit 1,510,061 (879) 1,509,182
Direct store expenses 1,090,463 4,232 1,094,695
Store contribution 419,598 (5,111) 414,487
General and administrative expenses 138,265 -- 138,265
Operating income before pre-opening
and relocation 281,333 (5,111) 276,222
Pre-opening expenses 20,123 -- 20,123
Relocation costs 3,552 -- 3,552
Operating income 257,658 (5,111) 252,547
Investment and other income, net 15,720 (2,121) 13,599
Income before income taxes 273,378 (7,232) 266,146
Provision for income taxes 109,351 (2,893) 106,458
Net income $ 164,027 $ (4,339) $ 159,688
Basic earnings per share $ 1.18 $ (0.03) $ 1.15
Weighted average shares outstanding 139,062 139,062 139,062
Diluted earnings per share $ 1.13 $ (0.03) $ 1.10
Weighted average shares outstanding,
diluted basis 145,567 145,567 145,567
Dividends per share $ 2.45 $ 2.45
A reconciliation of the numerators and denominators of the basic and
diluted earnings per share calculations follows (in thousands):
Forty weeks ended
July 1, 2007
Natural
GAAP Disaster Non-GAAP
Net income (numerator for basic
earnings per share) $148,811 $ -- $148,811
Interest on 5% zero coupon
convertible subordinated
debentures, net of income taxes 77 -- 77
Adjusted net income (numerator for
diluted earnings
per share) $148,888 $ -- $148,888
Weighted average common shares
outstanding
(denominator for basic earnings per
share) 140,411 140,411 140,411
Potential common shares outstanding:
Assumed conversion of 5% zero coupon
convertible subordinated debentures 122 122 122
Assumed exercise of stock options 1,833 1,833 1,833
Weighted average common shares
outstanding and
potential additional common shares
outstanding
(denominator for diluted earnings
per share) 142,366 142,366 142,366
Basic earnings per share $ 1.06 $ -- $ 1.06
Diluted earnings per share $ 1.05 $ -- $ 1.05
Forty weeks ended
July 2, 2006
Natural
GAAP Disaster Non-GAAP
Net income (numerator for basic
earnings per share) $ 164,027 $ (4,339) $ 159,688
Interest on 5% zero coupon
convertible subordinated
debentures, net of income taxes 225 -- 225
Adjusted net income (numerator for
diluted earnings
per share) $ 164,252 $ (4,339) $ 159,913
Weighted average common shares
outstanding
(denominator for basic earnings per
share) 139,062 139,062 139,062
Potential common shares outstanding:
Assumed conversion of 5% zero
coupon
convertible subordinated debentures 378 378 378
Assumed exercise of stock options 6,127 6,127 6,127
Weighted average common shares
outstanding and
potential additional common shares
outstanding
(denominator for diluted earnings
per share) 145,567 145,567 145,567
Basic earnings per share $ 1.18 $ (0.03) $ 1.15
Diluted earnings per share $ 1.13 $ (0.03) $ 1.10
Whole Foods Market, Inc.
Consolidated Balance Sheets (unaudited)
July 1, 2007 and September 24, 2006
(In thousands)
Assets
2007 2006
Current assets:
Cash and cash equivalents $ 10,709 $ 2,252
Short-term investments - available-
for-sale securities 22,048 193,847
Restricted cash 2,280 60,065
Accounts receivable 84,321 87,387
Merchandise inventories 241,705 203,727
Deferred income taxes 56,738 48,149
Prepaid expenses and other current
assets 28,213 28,554
Total current assets 446,014 623,981
Property and equipment, net of
accumulated depreciation and
amortization 1,483,283 1,236,133
Goodwill 113,494 113,494
Intangible assets, net of accumulated
amortization 54,911 34,767
Deferred income taxes 34,376 29,412
Other assets 10,104 5,209
Total assets $ 2,142,182 $ 2,042,996
Liabilities And Shareholders' Equity
2007 2006
Current liabilities:
Current installments of long-term
debt and capital lease obligations $ 81 $ 49
Accounts payable 142,392 126,264
Accrued payroll, bonus and other
benefits due team members 164,990 153,014
Dividends payable 25,015 --
Other current liabilities 239,444 230,443
Total current liabilities 571,922 509,770
Long-term debt and capital lease
obligations, less current
installments 2,893 8,606
Deferred rent liability 132,564 120,421
Other long-term liabilities -- 56
Total liabilities 707,379 638,853
Shareholders' equity:
Common stock, no par value, 300,000
shares authorized;
143,534 and 142,198 shares issued;
138,987 and 139,607
shares outstanding in 2007 and 2006,
respectively 1,222,176 1,147,872
Common stock in treasury, at cost (199,961) (99,964)
Accumulated other comprehensive
income 11,243 6,975
Retained earnings 401,345 349,260
Total shareholders' equity 1,434,803 1,404,143
Commitments and contingencies
Total liabilities and shareholders'
equity $ 2,142,182 $ 2,042,996
Whole Foods Market, Inc.
Consolidated Statements of Cash Flows (unaudited)
July 1, 2007 and July 2, 2006 (In thousands)
Forty weeks ended
July 1, July 2,
2007 2006
Cash flows from operating activities
Net Income $ 148,811 $ 164,027
Adjustments to reconcile net income
to net cash provided
by operating activities
Depreciation and amortization 137,643 118,648
Loss (gain) on disposition of
assets 3,562 (1,001)
Share-based compensation 10,687 4,383
Excess tax benefit related to
exercise of employee stock
options (11,609) (55,494)
Deferred income tax benefit (13,553) (19,073)
Deferred rent 9,950 13,547
Other 3,934 797
Net change in current assets and
liabilities:
Accounts receivable 3,066 19,445
Merchandise inventories (42,278) (38,182)
Prepaid expense and other current
assets 2,828 (29,546)
Accounts payable 16,128 12,937
Accrued payroll, bonus and other
benefits due team members 11,976 23,637
Other accrued expenses 20,389 124,585
Net cash provided by operating
activities 301,534 338,710
Cash flows from investing activities
Development costs of new store
locations (272,923) (111,482)
Other property and equipment
expenditures (109,937) (86,335)
Proceeds from hurricane insurance -- 3,308
Acquisition of intangible assets (22,351) (16,204)
Purchase of available-for-sale
securities (270,206) (497,071)
Sale of available-for-sale
securities 440,818 209,110
Increase in restricted cash 57,785 (22,449)
Payment of acquisition-related costs (3,841) --
Net cash used in investing
activities (180,655) (521,123)
Cash flows from financing activities
Dividends paid (71,711) (336,889)
Issuance of common stock 47,742 208,641
Purchase of treasury stock (99,997) --
Excess tax benefit related to
exercise of employee stock options 11,609 55,494
Payments on long-term debt and
capital lease obligations (65) (5,612)
Net cash used in financing
activities (112,422) (78,366)
Net change in cash and cash
equivalents 8,457 (260,779)
Cash and cash equivalents at
beginning of period 2,252 308,524
Cash and cash equivalents at end of
period $ 10,709 $ 47,745
Supplemental disclosure of cash flow information:
Interest paid $ 232 $ 531
Federal and state income taxes paid $ 107,926 $ 18,679
Non-cash transactions:
Conversion of convertible
debentures into common stock $ 5,686 $ 4,910
Whole Foods Market, Inc.
Non-GAAP Financial Measures (unaudited)
(In thousands)
In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, the Company provides information
regarding Economic Value Added ("EVA") and Operating Cash Flow per Share in the
press release as additional information about its operating results. These
measures are not in accordance with, or an alternative to, GAAP. 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 the financial results
of the Company and EVA for incentive compensation and capital planning purposes.
The following is a tabular reconciliation of the EVA non-GAAP financial
measure to GAAP net income, which the Company believes to be the most directly
comparable GAAP financial measure.
Twelve weeks ended Forty weeks ended
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
EVA
Net income $ 49,067 $ 53,898 $148,811 $164,027
Provision for income taxes 32,711 35,931 99,207 109,351
Interest expense and other 6,760 4,176 20,542 10,780
NOPBT 88,538 94,005 268,560 284,158
Income taxes (40%) 35,415 37,602 107,424 113,663
NOPAT 53,123 56,403 161,136 170,495
Capital Charge 37,564 35,815 122,931 114,413
EVA $ 15,559 $ 20,588 $ 38,205 $ 56,082
The following is a tabular reconciliation of the numerator of the
Operating Cash Flow per Share non-GAAP financial measure to GAAP net income,
which the Company believes to be the most directly comparable GAAP financial
measure.
Twelve weeks ended Forty weeks ended
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
Operating Cash Flow per Share
Net income $ 49,067 $ 53,898 $ 148,811 $ 164,027
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 42,509 37,340 137,643 118,648
Loss (gain) on disposition of
assets 852 242 3,562 (1,001)
Share-based compensation 4,168 1,309 10,687 4,383
Excess tax benefit related to
exercise of employee stock
options (836) (12,431) (11,609) (55,494)
Deferred income tax benefit (4,169) (13,356) (13,553) (19,073)
Deferred rent 7,206 7,219 9,950 13,547
Other 3,430 (1,921) 3,934 797
Net change in current assets
and liabilities:
Accounts receivable 11,284 28,026 3,066 19,445
Merchandise inventories (6,469) (12,395) (42,278) (38,182)
Prepaid expense and other
current assets 4,684 (21,449) 2,828 (29,546)
Accounts payable (2,664) (227) 16,128 12,937
Accrued payroll, bonus and
other benefits due team
members 6,129 7,604 11,976 23,637
Other accrued expenses 7,364 50,020 20,389 124,585
Net cash provided by operating
activities $ 122,555 $ 123,879 $ 301,534 $ 338,710
Weighted average shares
outstanding, diluted basis 141,250 145,925 142,366 145,567
Operating Cash Flow per Share $ 0.87 $ 0.85 $ 2.12 $ 2.33
SOURCE Whole Foods Market, Inc.