Exhibit 99.1
WHOLE FOODS MARKET REPORTS FIRST QUARTER RESULTS
COMPARABLE STORE SALES INCREASE 7% ON TOP OF 13% INCREASE IN PRIOR YEAR;
CASH FLOW FROM OPERATIONS INCREASES 27% TO $112 MILLION
February 21, 2007. Whole Foods Market, Inc. (NASDAQ: WFMI) today reported sales
and earnings for the 16-week quarter ended January 14, 2007. In a separate
release, the Company announced that it signed a definitive merger agreement with
Wild Oats Markets, Inc. (NASDAQ: OATS) under which Whole Foods Market will
acquire the outstanding common stock of Wild Oats Markets in a cash tender offer
of $18.50 per share.
For the quarter, sales increased 12% to $1.9 billion. Comparable store sales
increased 7.0% on top of a 13.0% increase in the prior year. Identical store
sales (excluding three relocated stores and three major expansions) increased
6.2%. Operating income before pre-opening and relocation increased 2% to $101.8
million. Net income was $53.8 million, and diluted earnings per share were
$0.38. Economic Value Added (EVA) was $10.2 million for the quarter.
During the quarter, approximately $10.2 million, or $0.07 per share, relating to
share-based compensation, pre-opening rent and accelerated depreciation was
expensed for accounting purposes but was non-cash, compared to $4.4 million, or
$0.03 per share, in the prior year. For the quarter, operating cash flow per
share increased 30% to $0.79 from $0.61 in the prior year.
During the quarter, the Company produced $112 million in cash flow from
operations and received $29 million in proceeds from the exercise of stock
options. Capital expenditures in the quarter were $153 million of which $101
million was for new stores, and the Company paid approximately $21 million to
shareholders in cash dividends. At the end of the quarter, the Company had total
cash and investments of approximately $222 million and total long-term debt of
approximately $3 million.
"We are pleased with our 7% comparable store sales growth in the first quarter,
which was in line with our expectations and against a tough 13% comparison in
the prior year," said John Mackey, chairman, chief executive officer, and
co-founder of Whole Foods Market. "We are producing higher sales growth, comps
and sales per square foot than our public competitors. Given our record store
development pipeline, continued anticipated acceleration in store openings, and
now the announcement of our pending merger with Wild Oats Markets, we believe we
are even better positioned to achieve our goal of $12 billion in sales in fiscal
year 2010. Over the longer term, however, we believe our sales potential is much
greater as the market continues to grow and as our company continues to
improve."
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.
FIVE-YEAR FY RANGE
------------------------ FIVE-YEAR Q1
LOW HIGH FY AVERAGE FY07
---------- ---------- ---------- ----------
Sales growth 17.0% 22.8% 20.3% 12.2%
Comparable store sales growth 8.6% 14.9% 11.5% 7.0%
Two-year comps (sum of two years) 18.6% 27.8% 22.7% 20.0%
Ending square footage growth 10% 14% 12% 9%
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 3.8% 77% 50 27,300 1,366,400
Between eight and 11 years old 4.6% 65% 31 30,800 953,800
Between five and eight years old 6.5% 40% 41 32,900 1,349,000
Between two and five years old 9.3% 25% 37 38,300 1,417,500
Less than two years old (includes three relocations) 15.2% 4% 20 51,100 1,022,200
---------- ---------- ---------- ---------- -----------
All comparable stores (7.4 years old, s.f. weighted) 7.0% 35% 179 34,100 6,108,900
All stores (6.9 years old, s.f. weighted) 31% 189 34,800 6,581,300
*Includes pre-opening expense
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 first quarter, gross profit decreased 24 basis points to 34.3% of sales.
These results include a LIFO charge of $1.0 million in the quarter, unchanged
from the prior year. Due to seasonality, the Company's gross margin is typically
lower in the first quarter than in the remaining three quarters of the year,
averaging 34.3% for the past five years. For stores in the comparable store
base, gross profit improved two basis points to 34.5% of sales.
Direct store expenses increased 35 basis points to 25.8% of sales. The increase
was primarily due to higher share-based compensation expense and health care
costs as a percentage of sales. For stores in the comparable store base, direct
store expenses improved six basis points to 25.4% of sales.
G&A expenses improved five basis points to 3.0% of sales.
Share-based compensation expense, a non-cash expense, was $4.8 million for the
quarter versus $1.1 million in the prior year. Of this amount, $2.6 million was
included in direct store expenses, $2.0 million was included in G&A, and $0.2
million was included in non-retail contribution.
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.
FIVE-YEAR FY RANGE
------------------------ FIVE-YEAR Q1
LOW HIGH FY AVERAGE FY07
---------- ---------- ---------- ----------
Gross profit 34.2% 35.1% 34.8% 34.3%
Direct store expenses 25.2% 25.5% 25.4% 25.8%
Store contribution 9.0% 9.6% 9.4% 8.4%
G&A 3.1% 3.6% 3.2% 3.0%
Pre-opening and relocation costs were $16.3 million of which approximately $5.4
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 $8.5 million of which approximately $3.3 million was
non-cash.
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NEW STORE DEVELOPMENT
In the first quarter, the Company opened three stores in West Orange, NJ,
Tigard, OR and Seattle, WA and relocated one store in Dallas, TX, ending the
quarter with 189 stores and approximately 6.6 million square feet in operation.
In the second quarter, the Company has opened two stores in Fairfax, VA and
Chicago, IL, relocated one store in Portland, ME, and expects to open two
additional stores in Birmingham, AL and Cleveland, OH. As of today, the Company
has opened 14 new stores over the last twelve months.
The Company has recently signed seven new store leases averaging 50,000 square
feet in size which are as follows: Mill Valley, CA; Santa Cruz, CA; Fairfield,
CT; Alpharetta, GA (a relocation); St. Louis, MO; Manhattan, NY; and
Charlottesville, VA (a relocation).
Since the Company's fourth quarter earnings release, the Company has opened five
new stores and tendered eight 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. For
accounting purposes, a store is considered tendered on the date the Company
takes possession of the leased space for construction and other purposes, which
is typically when the shell of the store is complete or nearing completion.
STORES STORES CURRENT CURRENT
OPENED OPENED LEASES LEASES
NEW STORE INFORMATION FY06 FY07 YTD TENDERED SIGNED*
- -------------------------------------------------- ------------ ------------ ------------ ------------
Number of stores (including relocations) 13 7 16 88
Number of relocations 2 2 2 16
New markets 4 0 2 21
Average store size (gross square feet) 50,000 54,000 54,000 56,000
As a percentage of existing store average size 147% 153% 154% 159%
Total square footage 653,000 378,000 870,000 4,972,000
As a percentage of existing square footage 10% 6% 13% 74%
Average pre-opening expense per store (incl. rent) $1.9 million
Average pre-opening rent per store $0.7 million
Average tender period 7.8 months
*Includes leases tendered
GROWTH GOALS FOR FISCAL YEAR 2007 AND BEYOND
The Company's guidance for fiscal year 2007 excludes any impact from the pending
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%. In fiscal year 2006, the Company produced 11.0% comparable stores
sales growth, ranging from 13.0% in the first quarter to 8.6% in the fourth
quarter. The Company expects comparable store sales growth of 6% to 8% for
fiscal year 2007.
Thus far in fiscal year 2007, the Company has opened seven stores and expanded
one store representing approximately 399,000 square feet. In addition, 13 of the
Company's 16 currently tendered stores, representing approximately 716,000
square feet, are expected to open this fiscal year, translating to an estimated
year-over-year increase in ending square footage of approximately 16%.
On a 52-week basis compared to adjusted fiscal year 2006 results, the Company
expects growth in operating income before pre-opening and relocation costs to be
in line with or slightly lower than sales growth.
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The Company expects total pre-opening and relocation costs for fiscal year 2007
to be in the range of $68 million to $74 million, including approximately $30
million to $34 million of pre-opening rent and accelerated depreciation related
to relocations, both of which are expensed for accounting purposes but primarily
non-cash. This significant year-over-year increase is due primarily to the
anticipated acceleration in leases tendered and square footage opening in fiscal
years 2007 and 2008, including the opening of 18 to 20 new stores this fiscal
year. Approximately $18 million to $24 million relates to stores expected to
open in fiscal year 2008. These ranges are based on estimated tender dates which
are subject to change. The Company expects significantly higher-than-average
pre-opening expense in fiscal year 2007 of approximately $7 million related to
its first Whole Foods Market store in London. Excluding this store, the Company
expects total pre-opening and relocation expense for stores opening in fiscal
year 2007 to average approximately $2.4 million per store, above the Company's
average for stores that opened in fiscal year 2006 due primarily to higher
accelerated depreciation related to relocations. The Company expects quarterly
pre-opening and relocation expense to be fairly even throughout the remainder of
the fiscal year.
The Company expects share-based compensation, a non-cash expense, of
approximately $2 million to $3 million in the second quarter and $3 million to
$4 million per quarter in the second half of the year following the Company's
annual grant date early in the third quarter, when the majority of options are
granted.
Capital expenditures 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 expects its materially higher pre-opening and relocation costs
resulting primarily from the anticipated acceleration in leases tendered and
square footage opening in fiscal years 2007 and 2008 to significantly impact
fiscal year 2007 diluted earnings per share growth. As noted above, diluted
earnings per share are expected to include approximately $43 million to $50
million of pre-opening rent, accelerated depreciation, and share-based
compensation expensed for accounting purposes but primarily non-cash.
Longer term, the Company's goal is to reach $12 billion in sales in fiscal year
2010.
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 191 stores in the United States, Canada and the United Kingdom.
LEGAL STATEMENTS
The tender offer described herein has not commenced. The description contained
herein is neither an offer to purchase nor a solicitation of an offer to sell
shares of Wild Oats Markets. At the time the tender offer is commenced, Whole
Foods Market, Inc. and one of its subsidiaries intend to file a Tender Offer
Statement on Schedule TO containing an offer to purchase, forms of letters of
transmittal and other documents relating to the tender offer, and Wild Oats
Markets intends to file a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the tender offer. These documents will contain important
information about the tender offer that should be read carefully before any
decision is made with respect to the tender offer. These materials will be made
available to the shareholders of Wild Oats Markets at no expense to them. In
addition, such materials (and all other documents filed with the SEC) will be
available at no charge at http://www.wildoats.com,
http://www.wholefoodsmarket.com and on the SEC's website at http://www.sec.gov.
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.
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The Company will host a conference call today to discuss this earnings
announcement, as well as its cash tender offer for Wild Oats Markets, at 4:00
p.m. CT. The dial-in number is 1-800-896-8445, and the conference ID is "Whole
Foods." A simultaneous audio webcast will be available at
www.wholefoodsmarket.com.
Whole Foods Market, Inc.
Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
Sixteen weeks ended
-------------------------
January 14, January 15,
2007 2006
----------- -----------
Sales $ 1,870,731 $ 1,666,953
Cost of goods sold and occupancy costs 1,229,972 1,092,018
Gross profit 640,759 574,935
Direct store expenses 482,797 424,438
Store contribution 157,962 150,497
General and administrative expenses 56,132 50,889
Operating income before pre-opening
and relocation 101,830 99,608
Pre-opening expenses 13,255 7,823
Relocation costs 3,029 668
Operating income 85,546 91,117
Investment and other income, net 4,045 6,079
Income before income taxes 89,591 97,196
Provision for income taxes 35,836 38,878
Net income $ 53,755 $ 58,318
Basic earnings per share $ 0.38 $ 0.42
Weighted average shares outstanding 140,267 137,532
Diluted earnings per share $ 0.38 $ 0.40
Weighted average shares outstanding,
diluted basis 142,918 145,317
Dividends per share $ 0.33 $ 2.15
A reconciliation of the numerators and denominators of the basic and diluted
earnings per share calculations follows (in thousands):
Sixteen weeks ended
-------------------------
January 14, January 15,
2007 2006
----------- -----------
Net income (numerator for basic
earnings per share) $ 53,755 $ 58,318
Interest on 5% zero coupon convertible
subordinated debentures, net of
income taxes 40 102
Adjusted net income (numerator for
diluted earnings per share) $ 53,795 $ 58,420
Weighted average common shares
outstanding (denominator
for basic earnings per share) 140,267 137,532
Potential common shares outstanding:
Assumed conversion of 5% zero coupon
convertible subordinated debentures 160 428
Assumed exercise of stock options 2,491 7,357
Weighted average common shares
outstanding and potential additional
common shares outstanding (denominator
for diluted earnings per share) 142,918 145,317
Basic earnings per share $ 0.38 $ 0.42
Diluted earnings per share $ 0.38 $ 0.40
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Whole Foods Market, Inc.
Consolidated Balance Sheets (unaudited)
January 14, 2007 and September 24, 2006
(In thousands)
Assets
2007 2006
----------- -----------
Current assets:
Cash and cash equivalents $ 43,585 $ 2,252
Short-term investments -
available-for-sale securities 104,393 193,847
Restricted cash 74,485 60,065
Trade accounts receivable 77,680 82,137
Merchandise inventories 239,943 203,727
Deferred income taxes 50,368 48,149
Prepaid expenses and other current assets 41,183 33,804
Total current assets 631,637 623,981
Property and equipment, net of accumulated
depreciation and amortization 1,323,876 1,236,133
Goodwill 113,494 113,494
Intangible assets, net of accumulated
amortization 40,167 34,767
Deferred income taxes 33,754 29,412
Other assets 5,833 5,209
Total assets $ 2,148,761 $ 2,042,996
Liabilities And Shareholders' Equity
2007 2006
----------- -----------
Current liabilities:
Current installments of long-term
debt and capital lease obligations $ 78 $ 49
Trade accounts payable 140,347 121,857
Accrued payroll, bonus and other
benefits due team members 159,876 153,014
Dividends payable 25,370 ---
Other current liabilities 240,794 234,850
Total current liabilities 566,465 509,770
Long-term debt and capital lease
obligations, less current installments 2,852 8,606
Deferred rent liability 125,547 120,421
Other long-term liabilities --- 56
Total liabilities 694,864 638,853
Shareholders' equity:
Common stock, no par value, 300,000 shares
authorized; 142,950 and 142,198 shares
issued; 140,580 and 139,607 shares
outstanding in 2007 and 2006, respectively 1,191,708 1,147,872
Common stock in treasury, at cost (99,964) (99,964)
Accumulated other comprehensive income 5,413 6,975
Retained earnings 356,740 349,260
Total shareholders' equity 1,453,897 1,404,143
Commitments and contingencies
Total liabilities and shareholders'
equity $ 2,148,761 $ 2,042,996
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Whole Foods Market, Inc.
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Sixteen weeks ended
--------------------------
January 14, January 15,
2007 2006
----------- -----------
Cash flows from operating activities
Net income $ 53,755 $ 58,318
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 52,731 46,399
Loss on disposition of assets 1,030 494
Share-based compensation 4,773 1,131
Deferred income tax benefit (6,561) (6,656)
Excess tax benefit related to exercise of
employee stock options (5,286) (31,411)
Deferred rent 4,735 3,101
Other 506 162
Net change in current assets and liabilities:
Trade accounts receivable 4,457 (8,232)
Merchandise inventories (37,216) (22,921)
Prepaid expense and other current assets (10,454) (3,352)
Trade accounts payable 18,490 4,869
Accrued payroll, bonus and other
benefits due team members 6,862 13,471
Other accrued expenses 24,607 32,871
Net cash provided by operating activities 112,429 88,244
Cash flows from investing activities
Development costs of new store locations (100,942) (35,330)
Other property, plant and equipment expenditures (52,083) (33,737)
Acquisition of intangible assets (6,246) (884)
Purchase of available-for-sale securities (145,268) ---
Sale of available-for-sale securities 234,777 ---
Increase in restricted cash (14,420) (12,111)
Net cash used in investing activities (84,182) (82,062)
Cash flows from financing activities
Dividends paid (20,971) (17,063)
Issuance of common stock 28,806 129,556
Excess tax benefit related to exercise
of employee stock options 5,286 31,411
Payments on long-term debt and capital
lease obligations (35) (56)
Net cash provided by financing activities 13,086 143,848
Net increase in cash and cash equivalents 41,333 150,030
Cash and cash equivalents at beginning of period 2,252 308,524
Cash and cash equivalents at end of period $ 43,585 $ 458,554
Supplemental disclosure of cash flow information:
Interest paid $ 124 $ 248
Federal and state income taxes paid $ 22,294 $ 5,262
Non-cash transactions:
Conversion of convertible debentures
into common stock $ 5,686 $ 3,656
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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.
Sixteen weeks ended
-------------------------
January 14, January 15,
EVA 2007 2006
- ------------------------------------------- ----------- -----------
Net income $ 53,755 $ 58,318
Provision for income taxes 35,836 38,878
Interest expense and other 7,730 4,516
NOPBT 97,321 101,712
Income taxes (40%) 38,928 40,685
NOPAT 58,393 61,027
Capital Charge 48,242 44,767
EVA $ 10,151 $ 16,260
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.
Sixteen weeks ended
-------------------------
January 14, January 15,
Operating Cash Flow per Share 2007 2006
- ------------------------------------------- ----------- -----------
Net income $ 53,755 $ 58,318
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 52,731 46,399
Loss on disposition of assets 1,030 494
Share-based compensation 4,773 1,131
Deferred income tax benefit (6,561) (6,656)
Excess tax benefit related to
exercise of employee stock options (5,286) (31,411)
Deferred rent 4,735 3,101
Other 506 162
Net change in current assets and
liabilities:
Trade accounts receivable 4,457 (8,232)
Merchandise inventories (37,216) (22,921)
Prepaid expense and other current assets (10,454) (3,352)
Trade accounts payable 18,490 4,869
Accrued payroll, bonus and other
benefits due team members 6,862 13,471
Other accrued expenses 24,607 32,871
Net cash provided by operating activities $ 112,429 $ 88,244
Weighted average shares outstanding,
diluted basis 142,918 145,317
Operating Cash Flow per Share $ 0.79 $ 0.61
SOURCE Whole Foods Market, Inc.
-0- 02/21/2007
/CONTACT: Cindy McCann, VP of Investor Relations of Whole Foods Market,
Inc., +1-512-542-0204/
/Web site: http://www.wholefoodsmarket.com /
(WFMI)
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