AUSTIN, Texas, Aug. 5 TX-WFMI-Earnings
AUSTIN, Texas, Aug. 5 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc.
(Nasdaq: WFMI) today reported results for the 12-week third quarter ended
July 6, 2008. Sales increased 21.6% to approximately $1.8 billion.
Comparable store sales increased 2.6%, and identical store sales, excluding
two relocated stores and two major expansions, increased 1.9%. Net income was
approximately $33.9 million, and diluted earnings per share were $0.24. The
Company estimates the negative impact on net income from Wild Oats was
approximately $4.9 million, or $0.03 per diluted share, in the quarter.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were
approximately $122 million, and earnings before interest, taxes, depreciation
and other non-cash expenses ("EBITANCE") were approximately $135 million.
Approximately $71 million relating to depreciation and amortization,
share-based payments, LIFO and deferred rent was expensed for accounting
purposes but was non-cash.
"Our business model has been highly successful, and we remain very bullish
on our growth prospects as the market for natural and organic products
continues to grow and as our company continues to evolve; however, the
challenging economic environment appears to be negatively impacting our
sales," said John Mackey, chairman, chief executive officer, and co-founder of
Whole Foods Market. "This, combined with our commitment to maintaining
financial flexibility and investing prudently in our long-term growth, has led
us to take a more conservative approach to our growth and business strategy
over the short term."
The key components of this strategy are as follows:
-- The Company is reducing the number of stores expected to open in fiscal
year 2009 to approximately 15 and has cut all discretionary capital
expenditure budgets not related to new stores by 50%. The Company is
committed to actively managing its capital expenditures and does not
intend to access the capital markets for additional funding in the
foreseeable future;
-- the Company has already implemented certain cost containment measures
for the remainder of this fiscal year and expects G&A expenses of
approximately 3.2% of sales in fiscal year 2009; and
-- the Company is suspending its quarterly cash dividend for the
foreseeable future.
"We have not undertaken any of these difficult decisions lightly," said
Mr. Mackey. "We are committed to improving our financial results and believe
these proactive steps are necessary to manage through the current challenging
environment, enabling us to emerge stronger and better positioned to realize
our growth potential and fulfill our long-term mission and core values."
During the quarter, the Company produced approximately $110 million in
cash flow from operations and received approximately $2 million in proceeds
from the exercise of stock options. Capital expenditures were approximately
$125 million of which approximately $110 million related to new stores and
approximately $8 million related to Wild Oats stores. In addition, the
Company paid approximately $28 million in cash dividends to shareholders. At
the end of the quarter, the Company had total debt of approximately
$840 million, including $106 million drawn on its credit line. The Company
increased its credit line to $350 million during the third quarter and
currently has $123 million available on the facility.
For the 40-week period ended July 6, 2008, sales increased 27.2% to
$6.2 billion. Comparable store sales increased 6.4%, and identical store
sales, excluding five relocated stores and three major expansions, increased
4.9%. Net income was approximately $113.0 million, and diluted earnings per
share were $0.81. The Company estimates the negative impact on net income
from Wild Oats was approximately $25.3 million, or $0.18 per diluted share.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were
approximately $403 million year to date, and earnings before interest, taxes,
depreciation and other non-cash expenses ("EBITANCE") were approximately
$446 million. Year to date, approximately $233 million relating to
share-based payments, depreciation and amortization, LIFO and deferred rent
was expensed for accounting purposes but was non-cash.
Year to date, the Company has produced approximately $267 million in cash
flow from operations and has received approximately $18 million in proceeds
from the exercise of stock options. Capital expenditures were approximately
$392 million of which $283 million related to new stores and approximately
$25 million related to Wild Oats stores. In addition, the Company has paid
approximately $81 million in cash dividends to shareholders.
Additionally, the Board of Directors has increased the Company's stock
repurchase authorization by $100 million, bringing the total current
authorization to $200 million.
Results Excluding the Impact of Wild Oats
The following information excludes the estimated quantifiable impact of
acquired operations.
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 averages. The table also 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, and the percentage of sales from
identical as well as new and relocated stores year to date compared to its
historical five-year ranges and averages. The Company believes this is
relevant information as new and relocated stores tend to have lower gross
profit and higher direct store expenses as a percentage of sales, resulting in
a lower store contribution than identical stores. Where applicable,
historical percentages have been adjusted to exclude Hurricane Katrina charges
and credits, as well as share-based payments expense incurred in fiscal year
2005 related to the Company's September 2005 accelerated vesting of stock
options.
FY03-FY07 Range FY03-FY07 FY08
LowHighAverageYTD
Sales growth 13.2% 22.8%18.8% 15.1%
Comparable store sales growth 7.1% 14.9%10.9%6.4%
Identical store sales growth 5.8% 14.5%10.0%4.9%
Ending square footage growth 10% 18% 13% 15%
Gross profit 34.2% 35.1%34.8% 34.7%
Direct store expenses25.2% 26.0%25.6% 26.3%
Store contribution8.9%9.6% 9.3%8.4%
G&A expenses 3.1%3.2% 3.2%3.5%
Percent of sales from identical stores 89% 91% 90% 88%
Percent of sales from new & relocated
stores 7% 9% 8% 10%
For the third quarter, sales increased 10.5% to approximately
$1.7 billion. Gross profit decreased 82 basis points from the prior year to
34.7% of sales. The LIFO charge was approximately $2.7 million versus
$2.1 million in the prior year. Direct store expenses increased 29 basis
points to 26.4% of sales. Store contribution decreased 111 basis points to
8.4% of sales from 9.5% of sales last year.
For stores in the identical store base, gross profit decreased 48 basis
points to 35.2% of sales against a difficult year-ago comparison of 35.6%.
Direct store expenses improved 26 basis points to 25.8% of sales due primarily
to leverage in wages and share-based payments expense, which was partially
offset by an increase in health care costs as a percentage of sales. Store
contribution decreased 22 basis points to 9.4% of sales.
G&A expenses increased 28 basis points to 3.5% of sales largely due to the
costs of integrating and supporting the Wild Oats stores, as well as front-
loaded G&A expenditures to support expected future growth.
Excluding the estimated quantifiable impact of the Wild Oats acquisition
as discussed in the following section, adjusted net income was approximately
$38.8 million, and adjusted diluted earnings per share were $0.28.
Additional information on the quarter for comparable stores, identical
stores and all stores is provided in the following table.
NOPAT # of Average Total
Comparable Stores Comps ROIC (1) Stores SizeSquare Feet
Over 11 years old
(15.1 years old,
s.f. weighted)1.6% 84% 67 28,4001,904,500
Between eight and
11 years old -1.5% 57% 31 33,8001,049,100
Between five and
eight years old 1.6% 42% 39 34,1001,331,300
Between two and
five years old4.6% 24% 40 45,5001,821,200
Less than two years
old (includes two
relocations) 10.8% 1% 18 59,5001,071,600
All comparable stores
(7.7 years old, s.f.
weighted) 2.6% 36% 195 36,8007,177,700
All identical stores
(7.7 years old, s.f.
weighted) 1.9% 37% 191 36,4006,957,000
All stores excluding
Wild Oats (6.8 years
old, s.f. weighted)27% 214 38,2008,176,300
(1) Reflects only store-level capital and NOPAT, including pre-opening
expense.
Estimated Impact of Wild Oats on the Quarter and Fiscal Year
Sales at the Wild Oats stores in operation during the third quarter were
$168.3 million, or 9.1% of total sales. The Company closed six Wild Oats
stores during the quarter, two of which were in connection with the opening of
new Whole Foods Market stores, and re-opened one Wild Oats store that had been
closed for a major renovation. Sales for the 57 continuing stores were
$164.2 million in the third quarter, and comparable store sales growth was
5.4%.
"We continue to be very pleased with the sales trends we are seeing at the
Wild Oats stores. In the third quarter, comparable store sales increased
5.4%, and we have seen a 7.2% increase for the first four weeks of the fourth
quarter," said Mr. Mackey. "In the 38 stores we have re-branded thus far, we
have seen sales growth double from 6% before re-branding to 12% after."
As highlighted in the following table, the Company estimates the negative
impact on net income from Wild Oats in the quarter was approximately
$4.9 million, or $0.03 per diluted share. This estimate excludes
unquantifiable synergies and costs in the core business.
(In millions,
except per
Dilutive Impact of Wild Oats share amount)
Store contribution/(loss) from 57 continuing locations $3.3 (1)
Store contribution/(loss) from six locations closed during
the quarter (0.8)
G&A expenses - amortization of acquired intangibles and
other misc. G&A expenses(1.9) (2)
Accretion of store closure reserve, and other store
closure costs (1.0) (3)
Interest expense related to term loan(7.8) (3)
Total pre-tax impact$(8.2)
Total after-tax impact (4.9)
Impact per diluted share $(0.03)
(1) This reflects a store contribution of 2.0% of sales, a decline of
25 basis points from the second quarter due to an increase in salaries
and benefits as a percentage of sales which was partially offset by an
improvement in gross margin.
(2) This expense will be ongoing through the end of fiscal year 2008.
Additionally, the Wild Oats home office in Boulder has become the home
office for the Company's Rocky Mountain region. Beginning in the
third quarter, the Company began recording rent and other expenses
associated with that office as global and regional G&A expenses rather
than as expenses associated directly with the Wild Oats merger.
(3) This will be an ongoing expense through fiscal year 2008 and beyond.
On July 29, 2008, the United States Court of Appeals for the District of
Columbia, in a split decision, reversed the denial of the Federal Trade
Commission's (FTC) request for an injunction regarding the Company's
acquisition of Wild Oats and remanded the case to the U.S. District Court for
further evidentiary proceedings. Whole Foods Market is disappointed with this
decision, as customers and Team Members have already received many benefits
from this merger. The Company is evaluating its legal options, which include
seeking review by the entire Court of Appeals. While the Company disagrees
with the reversal of the lower court decision denying the FTC's request for a
preliminary injunction, the decision acknowledges that neither the Court nor
the FTC has found the merger to be unlawful.
United Kingdom Operations
The Company operates six stores in the U.K., five of which were acquired
and one store in Kensington which the Company opened last June. Over the last
four quarters, these six stores, including the regional office G&A
infrastructure, had pre-tax operating losses of approximately $18.4 million,
or $0.09 per diluted share. The Company is focused on improving future
results in the U.K. and expects to reduce its pre-tax operating losses to
$13 million in fiscal year 2009, $7 million in fiscal year 2010, and to
approach break even in fiscal year 2011.
"We initially lost money when we entered into Canada as well; however, our
stores there continue to grow and improve each year and are now very
profitable, earning $14.6 million before taxes, or $0.07 per diluted share,
over the last four quarters," said Mr. Mackey. "We believe the long-term
growth potential in the U.K. is much greater than in Canada. We are carefully
evaluating all aspects of our operations in the U.K., with the intent to
improve our results over the short term and deliver strong returns over the
long term."
Growth and Development
In the third quarter, the Company opened four new stores in Hillsboro, OR;
Orlando, FL; St. Louis, MO; and Reno, NV and re-opened a remodeled Wild Oats
store in Medford, MA. The Company also closed six Wild Oats stores, two in
connection with the opening of new Whole Foods Market stores. The Company
ended the quarter with 271 stores totaling 9.6 million square feet.
Subsequent to the close of the quarter, the Company opened two new stores in
New York City, NY and Naperville, IL and closed one store in Rochester Hills,
MI which will relocate to another Rochester Hills location tomorrow.
The Company recently signed two new store leases averaging 46,000 square
feet in size in New York City, NY and Fairview, TX (a Dallas suburb). The
Company also terminated five leases in development totaling approximately
244,000 square feet for stores scheduled to open in fiscal year 2009 and
beyond. In addition, since announcing in the third quarter of 2007 the
Company's intent to decrease the size of several leases in development, the
Company has downsized eight leases by an average of 9,000 square feet each.
The following table provides additional information about the Company's
store openings last fiscal year and thus far in fiscal year 2008, leases
currently tendered but not opened, and total development pipeline for stores
scheduled to open through fiscal year 2012. 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.
Stores StoresCurrent Current
Opened Opened Leases Leases
New Store Information FY07 FY08 YTD Tendered Signed(1)
Number of stores
(including relocations) 21 14 20 80
Number of relocations 50 5 18
Number of lease
acquisitions, ground
leases and owned
properties 44 7 10
New markets 30 4 14
Average store size
(gross square feet)56,500 54,400 47,600 51,000
As a percentage of
existing store average
size 167% 153% 134%143%
Total square
footage 1,185,800 761,500952,000 4,135,000
As a percentage of
existing square
footage13% 8%10% 43%
Average tender period
in months 8.8 10.0
Average pre-opening
expense per store
(incl. rent)$2.6 mil(2) $2.3 mil(3)
Average pre-opening
rent per store $0.9 mil(2) $0.9 mil(3)
Average development
cost (excl.
pre-opening) $15.1 mil(2)
Average development
cost per square foot$278(2)
(1) Includes leases tendered
(2) Excludes Kensington in London, England
(3) For stores opened in Q1-Q3 of fiscal 2008
Growth Goals for Fiscal Year 2008
The Company notes that fiscal year 2008 is a 52-week year comparing
against 53 weeks last year, with the extra week last year falling in the
fourth quarter, making it a thirteen-week quarter.
For the first four weeks of the fourth quarter ended August 3, 2008,
comparable store sales increased 1.5%, and identical store sales grew 0.9%.
Comparable sales at the 57 continuing Wild Oats stores increased 7.2% over the
same period. If the Company's comparable store sales growth for the fourth
quarter is in line with or slightly below its quarter-to-date results, this
would result in comparable store sales growth for fiscal year 2008 of
approximately 5%. Total sales growth, on a 52-week to 52-week basis, would be
approximately 12% for the fourth quarter and approximately 23% for the fiscal
year. The Company notes that sales in the fourth quarter last year included
five weeks of the continuing Wild Oats stores, all subsequently closed Wild
Oats stores, and the divested Henry's and Sun Harvest stores.
The Wild Oats stores will only be included in the comparable store base
for the last four weeks of the fourth quarter and consequently are not
expected to have a material impact on the Company's overall comparable store
sales growth for the quarter.
In addition to the two stores that have opened so far in the fourth
quarter, five to six additional stores are expected to open in the quarter,
two of which are relocations.
The Company now expects a year-over-year decline in store contribution as
a percentage of sales in the fourth quarter similar in magnitude to the
174 basis point decline in the third quarter.
The Company has already implemented certain cost containment measures and
expects G&A in the fourth quarter to be in line with the $61 million reported
in the third quarter.
The Company expects non-cash share-based payments expense of approximately
$3 million to $4 million in the fourth quarter.
The Company expects total pre-opening and relocation costs in the range of
$20 million to $22 million for the fourth quarter, bringing the full year to
$70 million to $72 million, at the low end of the Company's prior guidance of
$70 million to $80 million.
The Company expects interest expense, net of investment and other income,
in the range of $8 million to $9 million in the fourth quarter, resulting in a
range of $31 million to $32 million for the full year, below the Company's
prior guidance of $35 million to $40 million due primarily to lower average
interest rates throughout the year.
Based on these assumptions, the Company expects diluted earnings per share
in the range of $0.13 to $0.15 for the fourth quarter, bringing the full year
to $0.93 to $0.95 per share. The Company expects EBITDA of $98 million to
$102 million for the fourth quarter, resulting in a range of $501 million to
$505 million for the fiscal year. The Company expects EBITANCE of
$113 million to $117 million in the fourth quarter, resulting in a range of
$559 million to $563 million for the fiscal year.
The Company expects capital expenditures in the range of $160 million to
$165 million in the fourth quarter, resulting in a range of $552 million to
$557 million for the full fiscal year. This is below the Company's prior
fiscal-year guidance of $575 million to $625 million due primarily to certain
measures implemented in the third quarter to reduce discretionary capital
expenditures not related to new stores.
Goals for Fiscal Year 2009
While the uncertain economic outlook makes it difficult to predict future
sales results, the Company is providing the following preliminary assumptions
and expectations for fiscal year 2009. The Company expects to update this
guidance in its fourth quarter earnings announcement in early November.
Assuming no dramatic change in economic trends, the Company expects total
sales growth in fiscal year 2009 of 6% to 10%. The Company expects comparable
store sales growth of 1% to 5%, identical store sales growth of 0% to 4%, and
approximately 15 new store openings, approximately six of which are
relocations.
The Company has committed to significant cost reductions and expects G&A
expenses of approximately 3.2% of sales in fiscal year 2009.
The Company expects total pre-opening and relocation costs in the range of
$50 million to $60 million versus the $70 million to $72 million expected in
fiscal year 2008. Approximately half of this amount relates to pre-opening
rent (primarily non-cash) for stores scheduled to open in fiscal year 2010 and
beyond.
Assuming no significant change in interest rates, the Company expects
interest expense, net of investment and other income, in the range of
$35 million to $40 million in fiscal year 2009 versus the $31 million to
$32 million expected in fiscal year 2008.
Based on these assumptions, the Company expects diluted earnings per share
in the range of $1.08 to $1.14 in fiscal year 2009, including approximately
$0.07 to $0.09 per share in dilution from Wild Oats and approximately
$0.06 per share in dilution from the Company's U.K. operations. The Company
expects EBITDA in the range of $560 million to $580 million and EBITANCE in
the range of $625 million to $650 million in fiscal year 2009.
The Company is committed to managing its capital expenditures and does not
intend to access the capital markets for additional funding in the foreseeable
future. Capital expenditures in fiscal year 2009 are expected to be in the
range of $400 million to $450 million compared to the $552 million to
$557 million in capital expenditures expected in fiscal year 2008.
About Whole Foods Market
Founded in 1980 in Austin, Texas, Whole Foods Market
(http://www.wholefoodsmarket.com) is the world's leading natural and organic
foods supermarket and America's first national certified organic grocer. In
fiscal year 2007, the Company had sales of $6.6 billion and currently has
272 stores in the United States, Canada, and the United Kingdom. Whole Foods
Market employs more than 50,000 Team Members and has been ranked for eleven
consecutive years as one of the "100 Best Companies to Work For" in America by
FORTUNE magazine.
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 successful integration of acquired businesses
into our operations, changes in overall economic conditions that impact
consumer spending, the impact of competition, changes in the Company's access
to available capital, the successful resolution of ongoing FTC matters, 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 30, 2007. 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 1-800-862-9098, and the
conference ID is "Whole Foods." A simultaneous audio webcast will be
available at http://www.wholefoodsmarket.com.
Whole Foods Market, Inc.
Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
Twelve weeks endedForty weeks ended
July 6, July 1, July 6, July 1,
2008 20072008 2007
Sales$1,841,242 $1,514,420 $6,164,993 $4,848,361
Cost of goods sold and
occupancy costs 1,208,495 976,130 4,054,2903,154,840
Gross profit 632,747 538,290 2,110,7031,693,521
Direct store expenses 490,188 394,713 1,631,4661,256,805
Store contribution142,559 143,577 479,237 436,716
General and
administrative expenses 60,689 49,003 215,759 150,591
Operating income before
pre-opening and
relocation81,870 94,574 263,478 286,125
Pre-opening expenses 15,773 13,719 41,019 40,717
Relocation costs 2,0081,276 8,7706,196
Operating income 64,089 79,579 213,689 239,212
Interest expense (8,094) (24)(28,113) (31)
Investment and other
income 1,4952,223 5,4308,837
Income before income
taxes 57,490 81,778 191,006 248,018
Provision for income
taxes 23,571 32,711 77,984 99,207
Net income$33,919 $49,067$113,022 $148,811
Basic earnings per share $0.24$0.35 $0.81$1.06
Weighted average shares
outstanding140,231 140,061 139,766 140,411
Diluted earnings per
share$0.24$0.35 $0.81$1.05
Weighted average shares
outstanding, diluted
basis 140,322 141,250 140,308 142,366
Dividends declared per
share$0.20$0.18 $0.60$0.69
A reconciliation of the numerators and denominators of the basic and
diluted earnings per share calculations follows (in thousands, except per
share amounts):
Twelve weeks ended Forty weeks ended
July 6, July 1, July 6,July 1,
2008 2007 2008 2007
Net income (numerator for basic
earnings per share) $33,919 $49,067 $113,022 $148,811
Interest on 5% zero coupon
convertible subordinated
debentures, net of income taxes181961 77
Adjusted net income (numerator for
diluted earnings per share) $33,937 $49,086 $113,083 $148,888
Weighted average common shares
outstanding (denominator
for basic earnings per share) 140,231 140,061 139,766140,411
Potential common shares
outstanding:
Assumed conversion of 5% zero
coupon convertible
subordinated debentures 919792122
Assumed exercise of stock
options - 1,092 450 1,833
Weighted average common shares
outstanding and potential
additional common shares
outstanding (denominator
for diluted earnings per share) 140,322 141,250 140,308142,366
Basic earnings per share $0.24 $0.35 $0.81 $1.06
Diluted earnings per share $0.24 $0.35 $0.81 $1.05
Whole Foods Market, Inc.
Consolidated Balance Sheets (unaudited)
July 6, 2008 and September 30, 2007
(In thousands)
Assets
2008 2007
Current assets:
Cash and cash equivalents $24,917$-
Restricted cash 2,367 2,310
Accounts receivable127,618 105,209
Proceeds receivable for divestiture - 165,054
Merchandise inventories316,086 288,112
Prepaid expenses and other current assets 35,53840,402
Deferred income taxes 73,23166,899
Total current assets 579,757 667,986
Property and equipment, net of accumulated
depreciation and amortization 1,847,178 1,666,559
Goodwill 684,027 668,850
Intangible assets, net of accumulated
amortization 81,98797,683
Deferred income taxes 112,110 104,877
Other assets10,439 7,173
Total assets $3,315,498$3,213,128
Liabilities And Shareholders' Equity
2008 2007
Current liabilities:
Current installments of long-term
debt and capital lease obligations $372 $24,781
Accounts payable 179,749 225,728
Accrued payroll, bonus and other
benefits due team members 201,124 181,290
Dividends payable 28,05725,060
Other current liabilities 305,189 315,491
Total current liabilities714,491 772,350
Long-term debt and capital lease
obligations, less current installments840,093 736,087
Deferred lease liabilities 189,664 152,552
Other long-term liabilities 66,42493,335
Total liabilities 1,810,672 1,754,324
Shareholders' equity:
Common stock, no par value, 300,000
shares authorized; 140,286 and 143,787
shares issued; 140,285 and 139,240
shares outstanding in 2008 and 2007,
respectively1,062,546 1,232,845
Common stock in treasury, at cost- (199,961)
Accumulated other comprehensive income 4,36015,722
Retained earnings 437,920 410,198
Total shareholders' equity 1,504,826 1,458,804
Commitments and contingencies
Total liabilities and shareholders'
equity $3,315,498$3,213,128
Whole Foods Market, Inc.
Consolidated Statements of Cash Flows (unaudited)
July 6, 2008 and July 1, 2007
(In thousands)
Forty weeks ended
July 6,July 1,
2008 2007
Cash flows from operating activities:
Net income$113,022 $148,811
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 189,386137,643
Loss on disposition of assets2,823 3,562
Share-based payments expense 7,599 10,687
Deferred income tax benefit (6,693) (13,553)
Excess tax benefit related to
exercise of team member stock options (5,162) (11,609)
Deferred lease liabilities 35,044 9,950
Other6,240 6,507
Net change in current assets and
liabilities:
Accounts receivable (22,382) 3,066
Merchandise inventories (36,006) (42,278)
Prepaid expense and other current assets 1,240 2,828
Accounts payable (49,335)16,128
Accrued payroll, bonus and other
benefits due team members19,144 11,976
Other current liabilities 16,990 17,460
Net change in other long-term
liabilities(4,719) 807
Net cash provided by operating activities 267,191301,985
Cash flows from investing activities:
Development costs of new store locations(282,529) (272,923)
Other property and equipment
expenditures (109,671) (109,937)
Proceeds from hurricane insurance 1,500-
Acquisition of intangible assets (1,502) (22,351)
Purchase of available-for-sale
securities (194,316) (270,206)
Sale of available-for-sale securities194,316440,818
Decrease (increase) in restricted cash (57)57,785
Payment for purchase of acquired
entities, net of cash (20,130)(3,841)
Proceeds from divestiture, net 163,913-
Other investing activities(3,175) (451)
Net cash used in investing activities (251,651) (181,106)
Cash flows from financing activities:
Dividends paid (81,015) (71,711)
Issuance of common stock 18,019 47,742
Purchase of treasury stock - (99,997)
Excess tax benefit related to
exercise of team member stock options 5,162 11,609
Proceeds from long-term borrowings 174,000-
Payments on long-term debt and
capital lease obligations (107,050) (65)
Other financing activities 261
Net cash provided by (used in)
financing activities9,377 (112,422)
Net change in cash and cash equivalents 24,917 8,457
Cash and cash equivalents at
beginning of period -2,252
Cash and cash equivalents at end of period $24,917$10,709
Supplemental disclosure of cash flow
information:
Interest paid$33,230 $232
Federal and state income taxes paid $85,119 $107,926
Non-cash transactions:
Conversion of convertible
debentures into common stock $154 $5,686
Whole Foods Market, Inc.
Non-GAAP Financial Measures (unaudited)
(In thousands, except per share amounts)
In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, the Company provides information
regarding Economic Value Added ("EVA"), Earnings before interest, taxes and
non-cash expenses ("EBITANCE"), Earnings before interest, taxes, depreciation
and amortization ("EBITDA") and consolidated results excluding the impact of
the Wild Oats acquisition on adjusted diluted earnings 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.
Management believes EBITANCE is a useful non-GAAP measure of financial
performance, helping investors more meaningfully evaluate the Company's cash
flow results by adjusting for certain non-cash expenses. These expenses
include depreciation, amortization, non-cash share-based payments expense,
deferred rent, and LIFO. Similar to EBITDA, this measure goes further by
including other non-cash expenses, primarily those which have arisen since the
use of EBITDA became common practice and because of accounting changes due to
recent accounting pronouncements. Management uses EBITANCE as a supplement to
cash flows from operations to assess the cash generated from our business
available for capital expenditures and the servicing of other requirements
including working capital. 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 6, July 1, July 6, July 1,
EVA2008 2007 2008 2007
Net income $33,919 $49,067 $113,022 $148,811
Provision for income taxes23,571 32,71177,98499,207
Interest expense and other12,2336,76042,07120,542
NOPBT 69,723 88,538 233,077 268,560
Income taxes (40%)27,889 35,41593,231 107,424
NOPAT 41,834 53,123 139,846 161,136
Capital charge54,099 37,564 175,800 122,931
EVA $(12,265) $15,559 $(35,954) $38,205
The following is a tabular presentation of the non-GAAP financial measures
EBITDA and EBITANCE, including a reconciliation to GAAP net income, which the
Company believes to be the most directly comparable GAAP financial measure.
Twelve weeks ended Forty weeks ended
July 6, July 1, July 6, July 1,
EBITDA and EBITANCE2008 2007 2008 2007
Net income $33,919 $49,067 $113,022 $148,811
Provision for income taxes23,571 32,71177,98499,207
Interest expense, net 6,599 (2,199) 22,683(8,806)
Income from operations 64,089 79,579 213,689 239,212
Depreciation and amortization 57,789 42,509 189,386 137,643
Earnings before interest, taxes,
depreciation & amortization
(EBITDA) 121,878 122,088 403,075 376,855
Non-cash expenses:
Share-based payments expense 2,2474,168 7,59910,687
LIFO expense 2,7002,100 8,032 4,300
Deferred rent8,5296,84627,584 9,318
Total non-cash expenses 13,476 13,11443,21524,305
Earnings before interest, taxes, and
non-cash expenses (EBITANCE)135,354 135,202 446,290 401,160
Weighted average shares outstanding,
diluted basis 140,322 141,250 140,308 142,366
EBITANCE per share $0.96$0.96 $3.18 $2.82
Whole Foods Market, Inc.
Non-GAAP Financial Measures (unaudited)
(In thousands, except per share amounts)
The following is a tabular presentation of the impact of Wild Oats
operations, included in GAAP net income, and a reconciliation of the numerator
of the adjusted diluted earnings 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 Forty weeks
ended ended
July 6, July 6,
Dilutive Impact of Wild Oats 2008 2008
Adjustments to exclude impact of Wild Oats
Store contribution/(loss) from
continuing locations$3,311$15,005
Store contribution/(loss) from
closed locations (812)(4,530)
Accretion of store closing reserve, and
other store closure costs (1,016)(4,236)
General and administrative
expenses, miscellaneous (504) (14,748)
Interest expense related to the
term loan agreement, net(7,797) (27,017)
Amortization expense related to
acquired intangibles(1,411)(4,704)
Write-off of Wild Oats private
label product- (2,505)
Total adjustments(8,229) (42,735)
Income taxes(3,374) (17,436)
Total adjustments, net of tax(4,855) (25,299)
Weighted average shares outstanding,
diluted basis 140,322140,308
Impact per share $(0.03)$(0.18)
Net income $33,919 $113,022
Less: Adjustments to exclude impact
of Wild Oats, net of tax (4,855) (25,299)
Adjusted net income 38,774138,321
Weighted average shares outstanding,
diluted basis 140,322140,308
Earnings per share, adjusted $0.28 $0.99
Contact: Cindy McCann
VP of Investor Relations
512.542.0204
SOURCE Whole Foods Market, Inc.
