FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the period
ended January 19, 1997; or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from _________________ to _________________.
Commission File Number: 0-19797
WHOLE FOODS MARKET, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1989366
(State of (IRS employer
incorporation) identification no.)
601 N. Lamar
Suite 300
Austin, Texas 78703
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code:
512-477-4455
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes X No
The number of shares of the registrant's common stock, no par value,
outstanding as of January 19, 1997 was 19,236,000 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WHOLE FOODS MARKET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
January 19, 1997 and September 29, 1996
(In thousands, except share data)
1997 1996
ASSETS
Current assets:
Cash $8,526 $1,720
Merchandise inventories 42,430 38,077
Accounts receivable and other 23,131 21,831
Total current assets 74,087 61,628
Net property and equipment 207,621 197,178
Excess of cost over net assets acquired, net 36,371 36,722
Other assets 16,959 15,076
$335,038 $310,604
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $900 $1,014
Trade accounts payable 22,327 22,756
Accrued expenses and other 37,553 32,971
Total current liabilities 60,780 56,741
Long-term debt, less current installments 99,057 84,277
Other long-term liabilities 23,276 23,139
Total liabilities 183,113 164,157
Shareholders' equity:
Common stock, no par value, 50,000,000 shares
authorized; 19,236,000 and 19,179,000
shares issued and outstanding 170,879 170,122
Retained deficit (18,954) (23,675)
Total shareholders' equity 151,925 146,447
$335,038 $310,604
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHOLE FOODS MARKET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)
Sixteen Weeks Ended January 19, 1997 and January 14, 1996
(In thousands, except per share data)
1997 1996
Sales $297,646 $244,986
Cost of goods sold and occupancy costs 204,331 168,781
Direct expenses 72,619 61,527
Store contribution 20,696 14,678
Pre-opening costs 1,604 383
Amortization expense 721 454
General and administrative expenses 9,237 9,797
Relocation costs 0 615
Income from operations 9,134 3,429
Net interest expense 1,757 866
Income before income taxes 7,377 2,563
Income taxes 2,656 2,522
Net income $4,721 $41
Net income per common share: $0.24 $0.00
Weighted average shares outstanding 19,918 19,175
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHOLE FOODS MARKET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Sixteen Weeks Ended January 19, 1997 and January 14, 1996
(In thousands)
1997 1996
Net cash flow from operating activities $13,552 $8,022
Cash flow from investing activities:
Acquisition of property and equipment (21,668) (21,067)
Other (501) (259)
Net cash flow used by investing activities (22,169) (21,326)
Cash flow from financing activities:
Net proceeds from bank borrowings 15,000 7,000
Payments on long-term debt (334) (1,457)
Sale of common stock 757 139
Net cash flow from financing activities 15,423 5,682
Net increase (decrease) in cash and cash equivalents 6,806 (7,622)
Cash and cash equivalents at beginning of period 1,720 11,532
Cash and cash equivalents at end of period $8,526 $3,910
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WHOLE FOODS MARKET, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 19, 1997
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed financial statements of Whole Foods Market,
Inc. and subsidiaries ("Company") have been prepared in accordance with
generally accepted accounting principles for interim financial statements and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the
opinion of management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation have been included. Certain
information and footnote disclosure normally included in annual financial
statements prepared in conformity with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10K for the fiscal year ended September 29,
1996.
The Company's fiscal year ends on the last Sunday in September. The first fiscal
quarter is sixteen weeks, the second and third quarters each are twelve weeks
and the fourth quarter is twelve or thirteen weeks. Fiscal year 1997 is a
fifty-two week year and fiscal year 1996 is a fifty-three week year.
2. Long-Lived Assets
Effective September 30, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (SFAS 121), which requires
review for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of SFAS 121 did not have an impact on the Companys results of
operations, financial condition or net cash flows.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS - Sixteen weeks ended January 19, 1997 compared to the
sixteen weeks ended January 14, 1996.
The Company reports its results of operations on a fifty-two or fifty-three week
fiscal year ending on the last Sunday in September. The first fiscal quarter is
sixteen weeks, the second and third quarters each are twelve weeks and the
fourth quarter is twelve or thirteen weeks. Fiscal year 1997 is a fifty-two week
year and fiscal year 1996 is a fifty-three week year.
Overall
- -------
The Companys financial performance improved significantly in the first quarter
of the current fiscal year as compared to the same period of the prior year.
This improvement was primarily due to a decrease in general and administrative
expenses and to an increase in store contribution, both as a percentage of
sales. See below.
Sales
- -----
Sales increased 21% for the quarter compared to the same period of the prior
fiscal year. This increase reflects a same store sales increase of approximately
4.8% and a net increase of six stores since the first quarter of last year. Nine
new stores have opened, three stores have been closed and three stores have been
relocated in that time. Comparable store sales in the Southern California region
for the first fiscal quarter have been negatively affected by the July 1996 name
change from Mrs. Goochs to Whole Foods Market. Increased same store sales in
other regions resulted from both higher customer counts and average transaction
amounts, reflecting increases in market share as stores mature.
Store Contribution (Gross Profit less Direct Store Expenses)
- -----------------------------------------------------------
Gross profit consists of retail sales less retail cost of goods sold and
occupancy costs, plus the net contribution from non-retail operations (regional
distribution centers and bakehouses). The Company's gross profit as a percentage
of sales for the sixteen weeks ended January 19, 1997 increased to 31.4% from
31.1% for the same period of the prior year. Direct store expenses as a
percentage of sales were 24.4% in the current quarter compared to 25.1% in the
prior year. The resultant increase in store contribution percentage reflects
improved performance from stores open more than one year as compared to the
prior year, and in new store performance as compared to historical new store
results.
<PAGE>
Pre-opening Costs
- -----------------
Pre-opening costs recognized in the current fiscal quarter relate to store
openings in Vienna, VA, Philadelphia, PA and LaJolla, CA.. Pre-opening costs for
the first quarter of the prior year relate to a store opening in Reston, VA.
Subsequent to the end of the first fiscal quarter, the Company has relocated its
Naperville, IL store to a new store in Wheaton, IL. The Company expects to open
two new stores and to relocate one existing store during the remainder of the
current fiscal year.
General and Administrative Expenses
- -----------------------------------
General and administrative expenses, excluding amortization, decreased as a
percentage of sales from 4.0% for the first quarter of fiscal year 1996 to 3.1%
for the first quarter of fiscal year 1997. This decrease is due to reductions in
administrative staff of the Southern California region and of the former Fresh
Fields corporate office and to general increases in sales without comparable
increases in corporate staff.
Interest Expense
- ----------------
Net interest expense for the first quarter was approximately $1,757,000 compared
to approximately $866,000 in the prior year, net of capitalized interest of
approximately $270,000 and $475,000, respectively. Interest expense consists
primarily of costs related to bank debt and senior notes payable, net of
capitalized interest associated with new store development. The Company expects
to incur greater interest expense in fiscal 1997 than in the prior year due to
increased balances currently outstanding under its bank line of credit and
senior notes payable.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
LIQUIDITY AND CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
Subsequent to the first quarter of fiscal 1997, the Company entered into a
commitment to amend its bank credit agreement to increase its $75 million
expansion line of credit to $100 million. The revolving credit term, repayment
terms and interest rate election options under the bank credit agreement will
not be changed by the amendment. At January 19, 1997, approximately $59.1
million was drawn under this agreement.
The Company expects to open two new stores and to relocate one existing store
during the remainder of the current fiscal year. The Company also has four other
stores currently under development that are expected to open during the next
twenty-four months. The Company expects that cash generated from operations and
available under its bank line of credit will be sufficient to fund planned
expansion and other cash needs through the end of fiscal 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed with this report:
Exhibit 27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the fiscal quarter
ended January 19, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Whole Foods Market, Inc.
Registrant
Date: March 4, 1997 /S/ Glenda Flanagan
--------------------
Glenda Flanagan
Vice President and
Chief Financial Officer
(Duly authorized officer and
principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE WHOLE FOODS MARKET 1ST QTR FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-END> JAN-19-1997
<CASH> 8,526
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 42,430
<CURRENT-ASSETS> 74,087
<PP&E> 207,621
<DEPRECIATION> 0
<TOTAL-ASSETS> 335,038
<CURRENT-LIABILITIES> 60,780
<BONDS> 0
0
0
<COMMON> 170,879
<OTHER-SE> (18,954)
<TOTAL-LIABILITY-AND-EQUITY> 335,038
<SALES> 297,646
<TOTAL-REVENUES> 297,646
<CGS> 204,331
<TOTAL-COSTS> 276,950
<OTHER-EXPENSES> 11,562
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,757
<INCOME-PRETAX> 7,377
<INCOME-TAX> 2,656
<INCOME-CONTINUING> 4,721
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,721
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
