Exhibit 99.2
WHOLE FOODS MARKET, INC. RETURNS TO PREVIOUS ACCOUNTING PRACTICE OF
CAPITALIZING RENT DURING CONSTRUCTION PERIOD; COMPANY WILL RESTATE FINANCIALS
AUSTIN, Texas, May 4 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) today announced that based on new determinations by the SEC, the
Company will return to and continue its previous practice of capitalizing rent
during the construction period.
On March 25, 2005, subsequent to filing the Company's restated financial
statements on March 7, 2005, the Company's independent registered accounting
firm notified the Company that the SEC had determined that capitalization of
land or building rent during the construction period into the historical cost of
constructed assets is acceptable. Subsequent interpretations of this SEC
guidance by the Company's and other independent registered accounting firms
indicate that a company's previous practice of accounting for rent during the
construction period should be followed in the restatement. As this guidance was
not available at the time of the Company's first restatement, the Company is
hereby restating its previously issued financial statements to return to and
continue its previous practice of capitalizing rent during the construction
period. The return of the Company to its previous accounting practice reduces
the lease accounting charge for the first quarter of fiscal year 2005 from $0.04
to $0.02 per diluted share and the charge for fiscal year 2004 from $0.11 to
$0.06 per diluted share. The remaining charge primarily reflects the additional
pre-opening costs and depreciation of assets resulting from rent allocated to
the construction period.
"We are happy to be able to return to our prior method of accounting for
rent incurred during the construction period of new stores as we believe
capitalization of such rent is the correct method of accounting and is
consistent with the accounting for other costs such as utilities and property
taxes also incurred during this period," said Glenda Flanagan, Executive Vice
President and Chief Financial Officer of Whole Foods Market. "None of the
adjustments have had or will have any impact on cash flow or the underlying
economics of the leases. It is unfortunate that the deadline for filing our
first quarter Form 10-Q fell prior to the date of the SEC's March
determinations, and therefore we completed our filing without the benefit of
information that would have enabled us to reflect the capitalization of
construction-period rent in that filing. We apologize for any confusion these
restatements have caused or may cause our shareholders."
As a result of the Company's determination to restate its consolidated
financial statements as discussed above, the financial statements included in
the Company's Annual Report on Amendment No. 1 to Form 10-K/A for fiscal 2004
and first quarter report for fiscal year 2005 on Form 10-Q should no longer be
relied upon. The Company will file Amendment No. 2 to Form 10-K/A for fiscal
year 2004 and Form 10-Q/A for the first quarter of fiscal year 2005 with
restated consolidated financial statements, and the Company's Forms 10-Q for the
second, third and fourth quarters of fiscal 2005 will reflect the restated
information for the corresponding quarters in fiscal 2004.
Prior Restatement
On February 7, 2005, the Office of the Chief Accountant of the SEC expressed
views regarding certain operating lease accounting issues, including the
recognition of rent during rent holidays, and their application under generally
accepted accounting principals. Subsequently, Company management made a
preliminary determination, in consultation with the Company's independent
registered public accounting firm and similar to determinations by many other
publicly-held retail and restaurant companies, that its methods of accounting
for rent holidays and tenant improvement allowances, and of determining lives
used in the calculation of depreciation of leasehold improvements and
straight-line rent determination for certain leased properties, were not
consistent with the views expressed by the SEC staff letter and other
interpretations. On March 2, 2005, the Company filed its first quarter report on
Form 10-Q with restated information for the corresponding quarter in fiscal year
2004. On March 7, 2005, the Company filed a form 10-K/A with restated
consolidated financial statements for fiscal years 2004, 2003 and 2002. In
connection with these restatements, the Company charged to expense rent incurred
or allocated during the store construction period. These restatements were based
on guidance and interpretations available at that time and reflected charges to
earnings which, among other items, expensed rent incurred or allocated during
the store construction period.
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 $3.9 billion in fiscal year 2004 and
currently has 169 stores in the United States, Canada and the United Kingdom.
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
integration of acquired stores, the impact of competition, and other risks
detailed from time to time in the Company's SEC reports, including the report on
Form 10-K/A for the fiscal year ended September 26, 2004. The Company does not
undertake any obligation to update forward-looking statements.
Following is a summary of the effects of this accounting restatement on the
consolidated statements of operations for the fiscal quarter ended January 16,
2005 and the fiscal quarters for the year ended September 26, 2004.
Previously
Reported
on Form 10-Q
filed on
3/2/2005 Adjustments Restated
------------ ------------ ------------
Fiscal quarter ended January 16, 2005.
Sales $ 1,368,328 $ --- $ 1,368,328
Cost of goods sold and occupancy costs 895,486 --- 895,486
Gross profit 472,842 --- 472,842
Direct store expenses 348,380 664 349,044
Store contribution 124,462 (664) 123,798
General and administrative expenses 40,401 --- 40,401
Pre-opening and relocation costs 6,599 (3,466) 3,133
Operating income 77,462 2,802 80,264
Other income (expense): ---
Interest expense (1,708) --- (1,708)
Investment and other income 1,194 --- 1,194
Income before income taxes 76,948 2,802 79,750
Provision for income taxes 30,778 1,121 31,899
Net income $ 46,170 $ 1,681 $ 47,851
Basic earnings per share $ 0.74 $ 0.02 $ 0.76
Diluted earnings per share $ 0.69 $ 0.02 $ 0.71
Previously
Reported on
First Form 10-Q Second
Originally Restatement filed on Restatement
Reported Adjustments 3/2/2005 Adjustments Restated
------------- ------------- ------------- ------------- -------------
Fiscal quarter
ended January 18,
2004.
Sales $ 1,118,148 $ --- $ 1,118,148 $ --- $ 1,118,148
Cost of goods
sold and
occupancy costs 733,003 718 733,721 --- 733,721
Gross profit 385,145 (718) 384,427 --- 384,427
Direct store
expenses 281,896 700 282,596 569 283,165
Store contribution 103,249 (1,418) 101,831 (569) 101,262
General and
administrative
expenses 35,869 --- 35,869 --- 35,869
Pre-opening and
relocation costs 1,796 2,277 4,073 (2,156) 1,917
Operating income 65,584 (3,695) 61,889 1,587 63,476
Other income
(expense): --- ---
Interest expense (2,478) --- (2,478) --- (2,478)
Investment and
other income 1,464 --- 1,464 --- 1,464
Income before
income taxes 64,570 (3,695) 60,875 1,587 62,462
Provision for
income taxes 25,828 (1,478) 24,350 635 24,985
Net income $ 38,742 $ (2,217) $ 36,525 $ 952 $ 37,477
Basic earnings
per share $ 0.64 $ (0.03) $ 0.61 $ 0.01 $ 0.62
Diluted earnings
per share $ 0.60 $ (0.03) $ 0.57 $ 0.01 $ 0.58
Previously
Reported on
First Form 10-K/A Second
Originally Restatement filed on Restatement
Reported Adjustments 3/7/2005 Adjustments Restated
------------- ------------- ------------- ------------- -------------
Fiscal quarter
ended April 11,
2004.
Sales $ 902,141 $ --- $ 902,141 $ --- $ 902,141
Cost of goods sold
and occupancy
costs 582,239 358 582,597 --- 582,597
Gross profit 319,902 (358) 319,544 --- 319,544
Direct store
expenses 229,469 526 229,995 446 230,441
Store
contribution 90,433 (884) 89,549 (446) 89,103
General and
administrative
expenses 28,783 --- 28,783 --- 28,783
Pre-opening and
relocation costs 2,536 1,504 4,040 (1,435) 2,605
Operating income 59,114 (2,388) 56,726 989 57,715
Other income
(expense): --- ---
Interest expense (1,859) --- (1,859) --- (1,859)
Investment and other
income 1,503 --- 1,503 --- 1,503
Income before income
taxes 58,758 (2,388) 56,370 989 57,359
Provision for income
taxes 23,504 (956) 22,548 396 22,944
Net income $ 35,254 $ (1,432) $ 33,822 $ 593 $ 34,415
Basic earnings
per share $ 0.58 $ (0.03) $ 0.55 $ 0.01 $ 0.56
Diluted earnings
per share $ 0.54 $ (0.02) $ 0.52 $ 0.01 $ 0.53
Previously
Reported on
First Form 10-K/A Second
Originally Restatement filed on Restatement
Reported Adjustments 3/7/2005 Adjustments Restated
------------- ------------- ------------- ------------- -------------
Fiscal quarter
ended July 4,
2004.
Sales $ 917,355 $ --- $ 917,355 $ --- $ 917,355
Cost of goods sold
and occupancy
costs 600,404 557 600,961 --- 600,961
Gross profit 316,951 (557) 316,394 --- 316,394
Direct store
expenses 232,122 527 232,649 462 233,111
Store contribution 84,829 (1,084) 83,745 (462) 83,283
General and
administrative
expenses 27,551 --- 27,551 --- 27,551
Pre-opening and
relocation costs 2,928 2,038 4,966 (1,708) 3,258
Operating income 54,350 (3,122) 51,228 1,246 52,474
Other income
(expense): --- ---
Interest expense (1,319) --- (1,319) --- (1,319)
Investment and other
income 1,782 --- 1,782 --- 1,782
Income before
income taxes 54,813 (3,122) 51,691 1,246 52,937
Provision for income
taxes 21,924 (1,248) 20,676 498 21,174
Net income $ 32,889 $ (1,874) $ 31,015 $ 748 $ 31,763
Basic earnings
per share $ 0.53 $ (0.03) $ 0.50 $ 0.01 $ 0.51
Diluted earnings
per share $ 0.50 $ (0.03) $ 0.47 $ 0.01 $ 0.48
Previously
Reported on
First Form 10-K/A Second
Originally Restatement filed on Restatement
Reported Adjustments 3/7/2005 Adjustments Restated
------------- ------------- ------------- ------------- -------------
Fiscal quarter
ended
September 26,
2004.
Sales $ 927,306 $ --- $ 927,306 $ --- $ 927,306
Cost of goods sold
and occupancy
costs 605,965 572 606,537 --- 606,537
Gross profit 321,341 (572) 320,769 --- 320,769
Direct store
expenses 240,278 522 240,800 480 241,280
Store contribution 81,063 (1,094) 79,969 (480) 79,489
General and
administrative
expenses 27,597 --- 27,597 --- 27,597
Pre-opening and
relocation costs 3,199 2,370 5,569 (1,900) 3,669
Operating income 50,267 (3,464) 46,803 1,420 48,223
Other income
(expense): --- ---
Interest expense (1,593) --- (1,593) --- (1,593)
Investment and other
income 1,707 --- 1,707 --- 1,707
Income before
income taxes 50,381 (3,464) 46,917 1,420 48,337
Provision for
income taxes 20,153 (1,386) 18,767 568 19,335
Net income $ 30,228 $ (2,078) $ 28,150 $ 852 $ 29,002
Basic earnings
per share $ 0.48 $ (0.03) $ 0.45 $ 0.02 $ 0.47
Diluted earnings
per share $ 0.46 $ (0.03) $ 0.43 $ 0.01 $ 0.44
Previously
Reported on
First Form 10-K/A Second
Originally Restatement filed on Restatement
Reported Adjustments 3/7/2005 Adjustments Restated
------------- ------------- ------------- ------------- -------------
Fiscal year ended
September 26,
2004.
Sales $ 3,864,950 $ --- $ 3,864,950 $ --- $ 3,864,950
Cost of goods
sold and
occupancy costs 2,521,611 2,205 2,523,816 --- 2,523,816
Gross profit 1,343,339 (2,205) 1,341,134 --- 1,341,134
Direct store
expenses 983,765 2,275 986,040 1,957 987,997
Store
contribution 359,574 (4,480) 355,094 (1,957) 353,137
General and
administrative
expenses 119,800 --- 119,800 --- 119,800
Pre-opening and
relocation costs 10,459 8,189 18,648 (7,199) 11,449
Operating income 229,315 (12,669) 216,646 5,242 221,888
Other income
(expense): --- ---
Interest expense (7,249) --- (7,249) --- (7,249)
Investment and
other income 6,456 --- 6,456 --- 6,456
Income before
income taxes 228,522 (12,669) 215,853 5,242 221,095
Provision for
income taxes 91,409 (5,068) 86,341 2,097 88,438
Net income $ 137,113 $ (7,601) $ 129,512 $ 3,145 $ 132,657
Basic earnings
per share $ 2.24 $ (0.13) $ 2.11 $ 0.05 $ 2.16
Diluted earnings
per share $ 2.09 $ (0.11) $ 1.98 $ 0.05 $ 2.03
Contact: Cindy McCann
VP of Investor Relations
512.477.4455
SOURCE Whole Foods Market, Inc.
-0- 05/04/2005
/CONTACT: Cindy McCann, VP of Investor Relations of Whole Foods Market,
Inc., +1-512-477-4455/
/Web site: http://www.wholefoodsmarket.com /