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Whole Foods Market Reports First Quarter Results

About Whole Foods Market

Founded in 1980 in Austin, Texas, Whole Foods Market ( www.wholefoodsmarket.com ) is the leading retailer of natural and organic foods and America's first national "Certified Organic" grocer . In fiscal year 2012, the Company had sales of approximately $12 billion and currently has 345 stores in the United States, Canada, and the United Kingdom. Whole Foods Market employs approximately 73,000 team members and has been ranked for 16 consecutive years as one of the "100 Best Companies to Work For" in America by Fortune magazine.

The Whole Foods Market, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6063

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 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, 2012.  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 (866) 952-1906, 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 millions, except per share amounts)    
     
  16 weeks ended
  January 20, 2013 January 15, 2012
Sales  $ 3,856  $ 3,391
Cost of goods sold and occupancy costs  2,508  2,213
Gross profit 1,348 1,178
Direct store expenses  979  871
Store contribution  369  307
General and administrative expenses  116  104
Operating income before pre-opening and store closure  253  203
Pre-opening expenses  14  10
Relocation, store closure and lease termination costs  4  3
Operating income  235  190
Investment and other income, net of interest expense  3  2
Income before income taxes  238  192
Provision for income taxes  92  74
Net income  $ 146  $ 118
     
Basic earnings per share  $ 0.79  $ 0.66
Weighted average shares outstanding  185.4  179.5
     
Diluted earnings per share  $ 0.78  $ 0.65
Weighted average shares outstanding, diluted basis  187.1  181.5
     
Dividends declared per common share  $ 2.20  $ 0.14
     
A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows:    
  16 weeks ended
  January 20, 2013 January 15, 2012
Net income    
(numerator for basic and diluted earnings per share)  $ 146  $ 118
Weighted average common shares outstanding    
(denominator for basic earnings per share)  185.4  179.5
Potential common shares outstanding:    
Incremental shares from assumed exercise of stock options  1.7  2.0
Weighted average common shares outstanding and potential additional common shares outstanding    
(denominator for diluted earnings per share)  187.1  181.5
     
Basic earnings per share  $ 0.79  $ 0.66
Diluted earnings per share  $ 0.78  $ 0.65
   
Whole Foods Market, Inc.  
Consolidated Statements of Comprehensive Income (unaudited)
(In millions)    
     
  16 weeks ended
  January 20, 2013 January 15, 2012
Net income  $ 146  $ 118
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (2) 1
Other comprehensive income (loss), net of tax  (2)  1
Comprehensive income  $ 144  $ 119
     
Whole Foods Market, Inc.    
Consolidated Balance Sheets (unaudited)    
(In millions)    
     
Assets January 20, 2013 September 30, 2012
Current assets:    
Cash and cash equivalents  $ 152  $ 89
Short-term investments - available-for-sale securities  774  1,131
Restricted cash  112  103
Accounts receivable  178  197
Merchandise inventories  401  374
Prepaid expenses and other current assets  101  77
Deferred income taxes  134  132
Total current assets  1,852  2,103
Property and equipment, net of accumulated depreciation and amortization  2,228  2,193
Long-term investments - available-for-sale securities  204  221
Goodwill  679  663
Intangible assets, net of accumulated amortization  67  62
Deferred income taxes  35  43
Other assets  14  9
Total assets  $ 5,079  $ 5,294
     
Liabilities and Shareholders' Equity    
Current liabilities:    
Current installments of capital lease obligations  $ 1  $ 1
Accounts payable  244  247
Accrued payroll, bonus and other benefits due team members  336  307
Dividends payable  37  26
Other current liabilities  384  396
Total current liabilities  1,002  977
Long-term capital lease obligations, less current installments  24  23
Deferred lease liabilities  459  441
Other long-term liabilities  51  51
Total liabilities  1,536  1,492
     
Shareholders' equity:    
Common stock, no par value, 600.0 shares authorized; 186.0 and 185.8 shares issued; and 185.4 and 185.4 shares outstanding at 2013 and 2012, respectively  2,622  2,592
Common stock in treasury, at cost  (54)  (28)
Accumulated other comprehensive income  3  5
Retained earnings  972  1,233
Total shareholders' equity  3,543  3,802
Commitments and contingencies    
Total liabilities and shareholders' equity  $ 5,079  $ 5,294
     
Whole Foods Market, Inc.    
Consolidated Statements of Cash Flows (unaudited)    
(In millions)    
     
  16 weeks ended
  January 20, 2013 January 15, 2012
Cash flows from operating activities    
Net income  $ 146  $ 118
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 102 93
Share-based payment expense 17 11
Deferred income tax expense 6 1
Excess tax benefit related to exercise of team member stock options (4) (5)
Accretion of premium/discount on marketable securities 9 2
Deferred lease liabilities 16 23
Other 6 2
Net change in current assets and liabilities:    
Accounts receivable 17 1
Merchandise inventories (27) (40)
Prepaid expenses and other current assets (24) 17
Accounts payable (4) (12)
Accrued payroll, bonus and other benefits due team members 29 16
Other current liabilities 14 34
Net cash provided by operating activities 303 261
Cash flows from investing activities    
Development costs of new locations (96) (55)
Other property and equipment expenditures (59) (57)
Purchases of available-for-sale securities (366) (334)
Sales and maturities of available-for-sale securities 727 440
Increase in restricted cash (9) -- 
Payment for purchase of acquired entities (22) -- 
Other investing activities (5) (1)
Net cash provided by (used in) investing activities 170 (7)
Cash flows from financing activities    
Common stock dividends paid (397) (18)
Issuance of common stock 9 80
Purchase of treasury stock (26) (4)
Excess tax benefit related to exercise of team member stock options 4 5
Net cash (used in) provided by financing activities (410) 63
Effect of exchange rate changes on cash and cash equivalents --  1
Net change in cash and cash equivalents 63 318
Cash and cash equivalents at beginning of period 89 212
Cash and cash equivalents at end of period  $ 152  $ 530
     
Supplemental disclosure of cash flow information:    
Federal and state income taxes paid  $ 88  $ 41
     
Whole Foods Market, Inc.    
Non-GAAP Financial Measures (unaudited)    
(In millions)    
     
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 share-based payment expense and deferred rent. The following is a tabular reconciliation of the non-GAAP financial measure Adjusted EBITDA to GAAP net income, which the Company believes to be the most directly comparable GAAP financial measure.    
     
  16 weeks ended  
EBITDA and Adjusted EBITDA January 20, 2013 January 15, 2012
Net income  $ 146  $ 118
Provision for income taxes  92  74
Investment and other income, net of interest expense  (3)  (2)
Operating income  235  190
Depreciation and amortization  102  93
EBITDA  337  283
Share-based payment expense  17  11
Deferred rent  11  14
Adjusted EBITDA  $ 365  $ 308
     
The Company defines Free Cash Flow as net cash provided by operating activities less capital expenditures. The following is a tabular reconciliation of the Free Cash Flow non-GAAP financial measure.    
     
  16 weeks ended  
Free Cash Flow January 20, 2013 January 15, 2012
Net cash provided by operating activities  $ 303  $ 261
Development costs of new locations  (96)  (55)
Other property and equipment expenditures  (59)  (57)
Free Cash Flow  $ 148  $ 149
     
Whole Foods Market, Inc.    
Non-GAAP Financial Measures (unaudited)    
(In millions)    
     
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides information regarding Return on Invested Capital ("ROIC") as additional information about its operating results. This measure is not in accordance with, or an alternative to, GAAP. The Company's management believes that this presentation provides 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 this measure for reviewing the financial results of the Company as well as a component of incentive compensation. The Company defines ROIC as annualized adjusted earnings divided by average invested capital. Earnings are annualized on a 52-week basis. Adjustments to earnings are defined in the following tabular reconciliation. Invested capital represents an average of the trailing four quarters.    
     
  16 weeks ended
ROIC January 20, 2013 January 15, 2012
Net income  $ 146  $ 118
Interest expense, net of taxes  --  --
Adjusted earnings  146  118
     
Total rent expense, net of taxes 1  66  62
Estimated depreciation on capitalized operating leases, net of taxes 2  (44)  (41)
Adjusted earnings, including interest related to operating leases  168  139
     
Annualized adjusted earnings  $ 475  $ 385
Annualized adjusted earnings, including interest related to operating leases  $ 547  $ 452
     
Average working capital, excluding current portion of long-term debt  $ 973  $ 569
Average property and equipment, net  2,146  1,975
Average other assets  993  855
Average other liabilities  (480)  (403)
Average invested capital  $ 3,632  $ 2,996
Average estimated asset base of capitalized operating leases 3  2,789  2,554
Average invested capital, adjusted for capitalization of operating leases  $ 6,421  $ 5,550
     
ROIC 13.1% 12.8%
ROIC, adjusted for capitalization of operating leases 8.5% 8.1%
     
1 Total rent includes minimum base rent of all tendered leases    
2 Estimated depreciation equals 2/3 of total rent expense    
3 Estimated asset base equals 8x total rent expense    
CONTACT: Cindy McCann
         VP of Investor Relations
         512.542.0204

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