Whole Foods Market Reports Third Quarter Results
8.8% Comparable Store Sales Growth Helps Drive 5.3% Operating Margin and $0.38 in Diluted Earnings per Share; Two-Year Identical Store Sales Growth Accelerates to 4.6%; Company Raises Outlook for Fiscal Year 2010 and Provides Initial Outlook for Fiscal Year 2011
AUSTIN, Texas, Aug. 3 /PRNewswire-FirstCall/ -- Whole Foods Market, Inc. (Nasdaq: WFMI) today reported results for the 12-week third quarter ended July 4, 2010. Sales increased 15% to $2.2 billion. Comparable store sales increased 8.8%, or 6.3% on a two-year stacked basis. Identical store sales, excluding three relocations, increased 8.4%, or 4.6% on a two-year stacked basis. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased 27% to $179.8 million from $141.4 million last year. Income available to common shareholders increased 88% to $65.7 million from $35.0 million last year, and diluted earnings per share increased 53% to $0.38. Results included relocation, store closure and lease termination costs of $0.7 million versus $18.2 million in the prior year.
“We are pleased with our results which compare very favorably to most other food retailers and show we are continuing to gain market share. Our identical store sales increased 8.4%, accelerating from the second quarter and our highest increase since 2006. Despite tougher comparisons and the recent dip in reported consumer confidence, our two-year stacked identical store sales also sequentially increased to 4.6%,” said John Mackey, co-chief executive officer and co-founder of Whole Foods Market. “Today we are also very excited to announce six new leases. We have eight leases in negotiation and expect an accelerated pace of lease signings to translate into a higher number of new store openings starting in 2012.”
The Company’s comparable and identical store sales results for the last five quarters, first four weeks of the fourth quarter, and year to date through August 1, 2010 are shown in the following table.
QTD | YTD | |||||||
3Q09 | 4Q09 | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 2010 | ||
Sales growth | 2.0% | 2.3% | 7.0% | 13.4% | 15.2% | 13.8% | 11.6% | |
Comparable store sales growth | -2.5% | -0.9% | 3.5% | 8.7% | 8.8% | 7.7% | 6.7% | |
Excluding foreign currency | -2.0% | -0.7% | 3.2% | 8.2% | 8.6% | 7.6% | 6.4% | |
Two-year comps (sum of two years) | 0.1% | -0.6% | -0.5% | 3.9% | 6.3% | 6.6% | 3.2% | |
Excluding foreign currency | 0.5% | -0.2% | -0.2% | 4.1% | 6.6% | 6.9% | 3.5% | |
Identical store sales growth | -3.8% | -2.3% | 2.5% | 7.7% | 8.4% | 7.7% | 6.0% | |
Excluding foreign currency | -3.3% | -2.0% | 2.2% | 7.3% | 8.2% | 7.6% | 5.7% | |
Two-year idents (sum of two years) | -1.9% | -2.8% | -2.4% | 1.9% | 4.6% | 5.0% | 1.3% | |
Sequential basis point change | (115) | (90) | 34 | 432 | 272 | |||
Excluding foreign currency | -1.5% | -2.4% | -2.0% | 2.2% | 4.9% | 5.3% | 1.7% | |
During the quarter, the Company produced $117.9 million in cash flow from operations and invested $52.7 million in capital expenditures, of which $32.4 million related to new stores. This resulted in free cash flow of $65.2 million. The Company also repaid the $210 million portion of its $700 million term loan that was not subject to an interest rate swap agreement, leaving $490 million outstanding and maturing in August 2012. Total cash and cash equivalents, restricted cash, and investments were $575.2 million, and total debt was $513.6 million. Currently, the Company has $341.1 million available on its credit line, net of $8.9 million in outstanding letters of credit.
For the 40-week period ended July 4, 2010, sales increased 11% to $6.9 billion. Comparable store sales increased 6.7%, or 2.9% on a two-year stacked basis, and identical store sales (excluding five relocations and two major expansions) increased 5.9%, or 1.0% on a two-year stacked basis. EBITDA increased 31% to $548.1 million, income available to common shareholders increased 103% to $182.9 million, and diluted earnings per share increased 71% to $1.10. Year-to-date results included LIFO credits of $6.5 million versus $2.2 million in the prior year, asset impairment charges of $2.0 million versus $22.2 million in the prior year, FTC-related legal costs of $3.0 million versus $14.2 million in the prior year, a gain of $3.2 million from the sale of a non-operating property, and store closure reserve adjustments of $7.6 million versus $13.5 million in the prior year.
Year to date, the Company has produced $460.9 million in cash flow from operations and invested $199.8 million in capital expenditures, resulting in free cash flow of $261.2 million.
Selected line items for the Company’s last five fiscal quarters are shown in the following table.
3Q09 | 4Q09 | 1Q10 | 2Q10 | 3Q10 | ||
Gross profit | 35.2% | 34.2% | 34.3% | 35.3% | 35.1% | |
Gross profit excluding LIFO | 34.8% | 34.0% | 34.3% | 35.1% | 35.0% | |
YOY basis point change | 33 | 46 | 84 | 37 | 13 | |
Direct store expenses | 26.6% | 26.9% | 26.6% | 26.2% | 26.2% | |
Store contribution | 8.5% | 7.3% | 7.7% | 9.1% | 8.9% | |
Store contribution excluding LIFO | 8.2% | 7.2% | 7.7% | 8.9% | 8.8% | |
G&A expenses excluding FTC legal costs | 2.8% | 2.8% | 2.8% | 2.9% | 3.1% | |
For the quarter, LIFO credits were $3.7 million versus $5.8 million in the prior year, a negative impact of 14 basis points. Excluding LIFO, gross profit increased 13 basis points to 35.0% of sales with an improvement in occupancy costs more than offsetting higher cost of goods sold as a percentage of sales. Direct store expenses improved 39 basis points to 26.2% of sales driven by leverage in depreciation, wages, healthcare and workers’ compensation expense as a percentage of sales. As a result, store contribution, excluding LIFO, improved 52 basis points to 8.8% of sales.
For stores in the identical store base, excluding LIFO, gross profit improved 34 basis points to 35.2% of sales, direct store expenses improved 63 basis points to 26.0% of sales, and store contribution improved 97 basis points to 9.2% of sales.
G&A expenses, excluding FTC-related legal costs, increased 30 basis points to 3.1% of sales. FTC-related legal costs were $1.4 million versus $0.4 million in the prior year, and share-based compensation expense was $4.0 million versus $1.2 million in the prior year.
Pre-opening expenses were $8.7 million versus $10.8 million in the prior year.
Relocation, store closure and lease termination expense was $0.7 million versus $18.2 million in the prior year. Results included a credit adjustment of $0.8 million versus a charge of $9.7 million in the prior year to the store closure reserve primarily related to changes in certain sub-tenant income estimates driven by the outlook for the commercial real estate market. The prior year also included $6.7 million in non-cash asset impairment charges primarily related to the potential sale of certain operating stores under the FTC settlement agreement.
Additional information on the quarter for comparable stores and all stores is provided in the following table.
NOPAT | # of | Average | Total | |||
Comparable Stores | Comps | ROIC(1) | Stores | Size | Square Feet | |
Over 11 years old (15.6 years old, s.f. weighted) | 6.0% | 86% | 109 | 27,100 | 2,953,400 | |
Between eight and 11 years old | 7.3% | 62% | 53 | 34,000 | 1,800,000 | |
Between five and eight years old | 7.0% | 52% | 46 | 38,500 | 1,771,300 | |
Between two and five years old | 12.0% | 13% | 52 | 53,900 | 2,800,900 | |
Less than two years old (including three relocations) | 21.7% | 6% | 20 | 53,100 | 1,062,800 | |
All comparable stores (8.3 years old, s.f. weighted) | 8.8% | 36% | 280 | 37,100 | 10,388,500 | |
All stores (7.6 years old, s.f. weighted) | 31% | 298 | 37,500 | 11,184,000 | ||
(1) Reflects store-level capital and net operating profit after taxes (“NOPAT”), including pre-opening expense | ||||||
Growth and Development
The Company opened six stores, acquired two stores, and divested two stores related to the FTC settlement agreement in the third quarter. The Company currently has 298 stores totaling approximately 11.2 million square feet. The Company expects to open one store in the fourth quarter.
Since the Company’s second quarter earnings release, the Company has terminated leases for two stores in development averaging 45,800 square feet each and reduced the size of one store in development by 10,000 square feet. The Company also recently signed six new leases averaging 33,900 square feet each in San Francisco, CA; Boise, ID; Minneapolis, MN; Austin, TX (two sites); and Washington, D.C. for stores currently scheduled to open in fiscal year 2012 and beyond.
The following table provides additional information about the Company’s store openings in fiscal years 2009 and 2010 year to date, leases currently tendered but unopened, and total development pipeline (including leases currently tendered) for stores scheduled to open through fiscal year 2014. 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 | Stores | Current | Current | ||
Opened | Opened | Leases | Leases | ||
New Store Information | FY09 | FY10 | Tendered | Signed | |
Number of stores (including relocations) | 15 | 15 | 11 | 48 | |
Number of relocations | 6 | 0 | 2 | 10 | |
Number of lease acquisitions, | |||||
ground leases and owned properties | 4 | 0 | 4 | 4 | |
New markets | 1 | 4 | 1 | 5 | |
Average store size (gross square feet) | 53,500 | 42,300 | 40,000 | 41,600 | |
Total square footage | 801,800 | 634,800 | 439,800 | 2,045,500 | |
Average tender period in months | 12.6 | 11.0 | |||
Average pre-opening expense per store (incl. rent) | $3.0 mil | $2.3 mil | |||
Average pre-opening rent per store | $1.3 mil | $1.1 mil | |||
FTC Update
On March 6, 2009, Whole Foods Market reached a settlement agreement with the FTC resolving the antitrust challenge to its merger with Wild Oats Markets, Inc. The agreement called for 19 non-operating stores, 12 acquired Wild Oats stores, one Whole Foods Market store, and the intellectual property (“IP”) currently in operation to be offered for sale. On June 18, 2010, the FTC approved the sale of two operating stores, one non-operating store, and the IP. These transactions were completed during the third quarter. All other stores remain the property of Whole Foods Market without further obligation to the FTC.
Outlook for Fiscal Years 2010 and 2011
The following table provides additional information on the Company’s year-to-date results and expectations for the fourth quarter and fiscal year 2010. While the uncertain economic outlook makes it difficult to predict future sales results, the Company also is providing its preliminary expectations for fiscal year 2011. The Company expects to update this guidance in its fourth quarter earnings announcement in early November.
1Q-3Q10(A) | 4Q10(E) | FY10(E) | FY11(E) | ||
Sales growth | 11.4% | 12.8% - 13.8% | 11.7% - 11.9% | 10% - 13% | |
Comparable store sales growth | 6.7% | 6.5% - 7.5% | 6.6% - 6.8% | 5% - 7% | |
Two-year comps | 2.9% | 5.6% - 6.6% | 3.5% - 3.7% | 11.6% - 13.8% | |
Identical store sales growth | 5.9% | 6.5% - 7.5% | 6.0% - 6.2% | 4.5% - 6.5% | |
Two-year idents | 1.0% | 4.2% - 5.2% | 1.7% - 1.9% | 10.6% - 12.7% | |
G&A excluding FTC-related legal costs | 2.9% | 3.2% | 3.0% | 3.0% | |
Pre-opening and relocation costs | $43.6 mil | $8.0 - $9.5 mil | $51 - $53 mil | $55 - $60 mil | |
Operating margin | 4.9% | 4.1% - 4.2% | 4.7% | 4.8% | |
EBITDA | $548.1 mil | $150 - $154 mil | $698 - $702 mil | $775 - $790 mil | |
Net interest expense | $20.5 mil | $4 - $6 mil | $25 - $27 mil | $4 - $6 mil | |
Diluted EPS | $1.10 | $0.27 - $0.29 | $1.37 - $1.39 | $1.59 - $1.64 | |
YOY % change at midpoint | 17% | ||||
Capital expenditures | $199.8 mil | $50 - $60 mil | $250 - $260 mil | $350 - $400 mil | |
“We are projecting steady sales growth for next year and are committed to delivering incremental operating margin improvement as well as earnings growth in excess of sales growth,” said Walter Robb, co-chief executive officer of Whole Foods Market. “We believe this guidance appropriately reflects a tempering of our enthusiasm over current sales growth trends with conservatism due to the competitive environment and the economy.”
The low end of the Company’s sales guidance for the fourth quarter assumes a deceleration in identical store sales growth on a two-year basis from the 5.0% two-year idents the Company produced in the first four weeks of the fourth quarter. The high end assumes slight momentum in two-year identical store sales throughout the remainder of the quarter.
For fiscal year 2011, the Company does not expect to generate the same year-over-year basis point improvement in gross profit as a percentage of sales, excluding LIFO, that is expected this year, as the Company has cycled over the shift in its pricing strategy that occurred in the first half of last year. In addition, the Company is committed to maintaining its relative price positioning which might require a higher level of price investments going forward if favorable buying opportunities are not available to the same extent they have been in the past.
The Company estimates a $21 million decrease in interest expense year over year in fiscal year 2011. The Company repaid $210 million of its term loan in the third quarter, and the five-year interest rate swap agreement on the remaining $490 million expires on October 1, 2010.
The Company is committed to producing positive free cash flow on an annual basis, including sufficient cash flow to fund the 48 stores in its current development pipeline. The following table provides information about the Company’s estimated store openings through 2014 based on this pipeline. These openings reflect estimated tender dates, which are subject to change, and do not incorporate any potential new leases, terminations or square footage reductions.
Total | Average Square | Ending Square | Ending Square | |||
Openings | Relocations | Feet per Store | Footage(1) | Footage Growth | ||
FY10 remaining stores in development | 1 | 0 | 48,300 | 11,232,300 | 6.3% | |
FY11 stores in development | 17 | 6 | 39,500 | 11,755,900 | 4.7% | |
FY12 stores in development | 19 | 0 | 40,400 | 12,523,100 | 6.5% | |
FY13 stores in development | 9 | 4 | 46,800 | 12,783,600 | 2.1% | |
FY14 stores in development | 2 | 0 | 44,500 | 12,872,600 | 0.7% | |
Total | 48 | 10 | 41,600 | |||
(1) Reflects year-to-date openings/closures in fiscal year 2010 and three expansions in development in fiscal year 2011 | ||||||
About Whole Foods Market
Founded in 1980 in Austin, Texas, Whole Foods Market (www.wholefoodsmarket.com) is the leading natural and organic foods supermarket, and America’s first national certified organic grocer. In fiscal year 2009, the Company had sales of approximately $8.0 billion and currently has 298 stores in the United States, Canada, and the United Kingdom. Whole Foods Market employs approximately 57,000 Team Members and has been ranked for 13 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 general business conditions, changes in overall economic conditions that impact consumer spending, including fuel prices and housing market trends, the impact of competition, changes in the Company’s access to available capital, 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 27, 2009. 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 www.wholefoodsmarket.com.
Contact: Cindy McCann | |
VP of Investor Relations | |
512.542.0204 | |
Whole Foods Market, Inc. | |||||||
Consolidated Statements of Operations (unaudited) | |||||||
(In thousands, except per share amounts) | |||||||
Twelve weeks ended | Forty weeks ended | ||||||
July 4, 2010 | July 5, 2009 | July 4, 2010 | July 5, 2009 | ||||
Sales | $ 2,163,181 | $ 1,878,338 | $ 6,908,400 | $ 6,202,391 | |||
Cost of goods sold and occupancy costs | 1,402,847 | 1,218,029 | 4,499,421 | 4,074,047 | |||
Gross profit | 760,334 | 660,309 | 2,408,979 | 2,128,344 | |||
Direct store expenses | 567,191 | 499,830 | 1,821,702 | 1,654,196 | |||
Store contribution | 193,143 | 160,479 | 587,277 | 474,148 | |||
General and administrative expenses | 68,153 | 52,592 | 206,629 | 192,024 | |||
Operating income before pre-opening and store closure | 124,990 | 107,887 | 380,648 | 282,124 | |||
Pre-opening expenses | 8,692 | 10,763 | 33,137 | 38,616 | |||
Relocation, store closure and lease termination costs | 728 | 18,209 | 10,452 | 27,937 | |||
Operating income | 115,570 | 78,915 | 337,059 | 215,571 | |||
Interest expense | (7,421) | (7,688) | (25,757) | (28,964) | |||
Investment and other income | 1,543 | 1,326 | 5,236 | 2,528 | |||
Income before income taxes | 109,692 | 72,553 | 316,538 | 189,135 | |||
Provision for income taxes | 43,963 | 29,746 | 128,203 | 78,741 | |||
Net income | 65,729 | 42,807 | 188,335 | 110,394 | |||
Preferred stock dividends | - | 7,839 | 5,478 | 20,306 | |||
Income available to common shareholders | $ 65,729 | $ 34,968 | $ 182,857 | $ 90,088 | |||
Basic earnings per share | $ 0.38 | $ 0.25 | $ 1.11 | $ 0.64 | |||
Weighted average shares outstanding | 171,653 | 140,439 | 164,529 | 140,385 | |||
Diluted earnings per share | $ 0.38 | $ 0.25 | $ 1.10 | $ 0.64 | |||
Weighted average shares outstanding, diluted basis | 172,601 | 140,439 | 171,395 | 140,385 | |||
A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows: | |||||||
Twelve weeks ended | Forty weeks ended | ||||||
July 4, 2010 | July 5, 2009 | July 4, 2010 | July 5, 2009 | ||||
Income available to common shareholders | |||||||
(numerator for basic earnings per share) | $ 65,729 | $ 34,968 | $ 182,857 | $ 90,088 | |||
Effect of redeemable preferred stock | - | - | 5,478 | - | |||
Adjusted net income (numerator for diluted earnings per share) | $ 65,729 | $ 34,968 | $ 188,335 | $ 90,088 | |||
Weighted average common shares outstanding | |||||||
(denominator for basic earnings per share) | 171,653 | 140,439 | 164,529 | 140,385 | |||
Potential common shares outstanding: | |||||||
Assumed conversion of redeemable preferred stock | - | - | 6,176 | - | |||
Incremental shares from assumed exercise of stock options | 948 | - | 690 | - | |||
Weighted average common shares outstanding and | |||||||
potential additional common shares outstanding | |||||||
(denominator for diluted earnings per share) | 172,601 | 140,439 | 171,395 | 140,385 | |||
Basic earnings per share | $ 0.38 | $ 0.25 | $ 1.11 | $ 0.64 | |||
Diluted earnings per share | $ 0.38 | $ 0.25 | $ 1.10 | $ 0.64 | |||
Whole Foods Market, Inc. | ||||
Consolidated Balance Sheets (unaudited) | ||||
July 4, 2010 and September 27, 2009 | ||||
(In thousands) | ||||
Assets | 2010 | 2009 | ||
Current assets: | ||||
Cash and cash equivalents | $ 136,144 | $ 430,130 | ||
Short-term investments - available-for-sale securities | 294,926 | - | ||
Restricted cash | 86,814 | 71,023 | ||
Accounts receivable | 122,421 | 104,731 | ||
Merchandise inventories | 333,554 | 310,602 | ||
Prepaid expenses and other current assets | 44,940 | 51,137 | ||
Deferred income taxes | 103,508 | 87,757 | ||
Total current assets | 1,122,307 | 1,055,380 | ||
Property and equipment, net of accumulated depreciation and amortization | 1,888,310 | 1,897,853 | ||
Long-term investments - available-for-sale securities | 57,364 | - | ||
Goodwill | 665,210 | 658,254 | ||
Intangible assets, net of accumulated amortization | 69,363 | 73,035 | ||
Deferred income taxes | 76,525 | 91,000 | ||
Other assets | 9,586 | 7,866 | ||
Total assets | $ 3,888,665 | $ 3,783,388 | ||
Liabilities And Shareholders' Equity | ||||
Current liabilities: | ||||
Current installments of long-term debt and capital lease obligations | $ 402 | $ 389 | ||
Accounts payable | 203,294 | 189,597 | ||
Accrued payroll, bonus and other benefits due team members | 235,934 | 207,983 | ||
Dividends payable | - | 8,217 | ||
Other current liabilities | 281,371 | 277,838 | ||
Total current liabilities | 721,001 | 684,024 | ||
Long-term debt and capital lease obligations, less current installments | 513,196 | 738,848 | ||
Deferred lease liabilities | 284,950 | 250,326 | ||
Other long-term liabilities | 69,600 | 69,262 | ||
Total liabilities | 1,588,747 | 1,742,460 | ||
Series A redeemable preferred stock, $0.01 par value, 425 shares authorized, | ||||
zero and 425 shares issued and outstanding in 2010 and 2009, respectively | - | 413,052 | ||
Shareholders' equity: | ||||
Common stock, no par value, 300,000 shares authorized, | ||||
171,899 and 140,542 shares issued and outstanding | ||||
in 2010 and 2009, respectively | 1,763,559 | 1,283,028 | ||
Accumulated other comprehensive loss | (4,713) | (13,367) | ||
Retained earnings | 541,072 | 358,215 | ||
Total shareholders' equity | 2,299,918 | 1,627,876 | ||
Commitments and contingencies | ||||
Total liabilities and shareholders' equity | $ 3,888,665 | $ 3,783,388 | ||
Whole Foods Market, Inc. | ||||||
Consolidated Statements of Cash Flows (unaudited) | ||||||
July 4, 2010 and July 5, 2009 | ||||||
(In thousands) | ||||||
Forty weeks ended | ||||||
July 4, 2010 | July 5, 2009 | |||||
Cash flows from operating activities | ||||||
Net income | $ 188,335 | $ 110,394 | ||||
Adjustments to reconcile net income to net cash provided | ||||||
by operating activities: | ||||||
Depreciation and amortization | 211,073 | 204,291 | ||||
Loss (gain) on disposition of fixed assets | (756) | 2,138 | ||||
Impairment of long-lived assets | 2,020 | 22,164 | ||||
Share-based payment expense | 15,371 | 8,829 | ||||
LIFO benefit | (6,519) | (2,177) | ||||
Deferred income tax expense (benefit) | (7,178) | 32,488 | ||||
Excess tax benefit related to exercise of team member stock options | (2,817) | - | ||||
Deferred lease liabilities | 31,322 | 39,338 | ||||
Other | (1,679) | 5,141 | ||||
Net change in current assets and liabilities: | ||||||
Accounts receivable | (17,613) | 8,912 | ||||
Merchandise inventories | (14,558) | 14,165 | ||||
Prepaid expenses and other current assets | 7,610 | 24,711 | ||||
Accounts payable | 13,722 | (9,495) | ||||
Accrued payroll, bonus and other benefits due team members | 27,771 | 9,728 | ||||
Other current liabilities | 12,023 | (270) | ||||
Net change in other long-term liabilities | 2,803 | 4,364 | ||||
Net cash provided by operating activities | 460,930 | 474,721 | ||||
Cash flows from investing activities | ||||||
Development costs of new locations | (143,379) | (196,949) | ||||
Other property and equipment expenditures | (56,388) | (55,182) | ||||
Purchase of available-for-sale securities | (888,947) | - | ||||
Sale of available-for-sale securities | 536,794 | - | ||||
Increase in restricted cash | (15,791) | (70,397) | ||||
Payment for purchase of acquired entities, net of cash acquired | (14,450) | |||||
Other investing activities | (1,075) | (884) | ||||
Net cash used in investing activities | (583,236) | (323,412) | ||||
Cash flows from financing activities | ||||||
Preferred stock dividends paid | (8,500) | (19,833) | ||||
Issuance of common stock | 43,896 | 2,705 | ||||
Excess tax benefit related to exercise of team member stock options | 2,817 | - | ||||
Proceeds from issuance of redeemable preferred stock, net | - | 413,052 | ||||
Proceeds from long-term borrowings | - | 123,000 | ||||
Payments on long-term debt and capital lease obligations | (210,228) | (320,980) | ||||
Net cash provided by (used in) financing activities | (172,015) | 197,944 | ||||
Effect of exchange rate changes on cash and cash equivalents | 335 | (2,752) | ||||
Net change in cash and cash equivalents | (293,986) | 346,501 | ||||
Cash and cash equivalents at beginning of period | 430,130 | 30,534 | ||||
Cash and cash equivalents at end of period | $ 136,144 | $ 377,035 | ||||
Supplemental disclosure of cash flow information: | ||||||
Interest paid | $ 38,494 | $ 42,059 | ||||
Federal and state income taxes paid | $ 136,195 | $ 27,647 | ||||
Non-cash transactions: | ||||||
Conversion of redeemable preferred stock into common stock | $ 418,247 | $ - | ||||
Issuance of restricted common stock as share-based payment | $ 2,266 | $ - | ||||
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 Earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA and Free cash flow 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 as well as a component of incentive compensation. The Company defines Adjusted EBITDA as EBITDA plus non-cash asset impairment charges. The Company defines Free cash flow as net cash provided by operating activities less capital expenditures. The following is a tabular presentation of the non-GAAP financial measures, EBITDA and Adjusted EBITDA 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 | |||||
EBITDA and Adjusted EBITDA | July 4, 2010 | July 5, 2009 | July 4, 2010 | July 5, 2009 | ||
Net income | $ 65,729 | $ 42,807 | $ 188,335 | $ 110,394 | ||
Provision for income taxes | 43,963 | 29,746 | 128,203 | 78,741 | ||
Interest expense, net | 5,878 | 6,362 | 20,521 | 26,436 | ||
Operating income | 115,570 | 78,915 | 337,059 | 215,571 | ||
Depreciation and amortization | 64,278 | 62,476 | 211,073 | 204,291 | ||
Earnings before interest, taxes, depreciation & amortization (EBITDA) | 179,848 | 141,391 | 548,132 | 419,862 | ||
Impairment of assets | 145 | 6,781 | 2,020 | 22,164 | ||
Adjusted EBITDA | $ 179,993 | $ 148,172 | $ 550,152 | $ 442,026 | ||
The following is a tabular reconciliation of the Free cash flow non-GAAP financial measure. | ||||||
Twelve weeks ended | Forty weeks ended | |||||
Free cash flow | July 4, 2010 | July 5, 2009 | July 4, 2010 | July 5, 2009 | ||
Net cash provided by operating activities | $ 117,947 | $ 159,625 | $ 460,930 | $ 474,721 | ||
Development costs of new locations | (32,413) | (54,487) | (143,379) | (196,949) | ||
Other property and equipment expenditures | (20,333) | (12,425) | (56,388) | (55,182) | ||
Free cash flow | $ 65,201 | $ 92,713 | $ 261,163 | $ 222,590 | ||
SOURCE Whole Foods Market, Inc.
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