- Published: 05 August 2009
- Written by Editor
Whole Foods Market Reports Third Quarter 2009 Results
Company Reports Diluted EPS of $0.25, Operating Cash Flow of $160 Million, and Generates $93 Million of Free Cash Flow
Whole Foods Market, Inc. (Nasdaq: WFMI ) today reported results for the 12-week third quarter ended July 5, 2009. Sales for the quarter increased 2% to $1.9 billion. Comparable store sales decreased 2.5% versus a 2.6% increase in the prior year. Identical store sales, excluding nine relocations and two major expansions, decreased 3.8% versus a 1.9% increase in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 2.0%, and identical store sales decreased 3.3%.
"We are very pleased with our third quarter top-line and bottom-line results.
We saw our first sequential improvement in comparable store and identical store sales trends in six quarters driven by both average transaction count and basket size trends," said John Mackey, chairman, chief executive officer, and co-founder of Whole Foods Market. "We believe we are continuing to strike the right balance between sales and gross margin while exhibiting strong cost control, producing a 23% increase in income from operations. We also generated $93 million of free cash flow, ending the quarter with $448 million in total cash and $335 million available on our credit line."
For the third quarter, income from operations increased 23% to $78.9 million. The Company's effective tax rate was 41.0%, income available to common shareholders was $35.0 million, and diluted earnings per share were $0.25. These results included a LIFO credit of $5.8 million, or $0.02 per diluted share, versus a $2.7 million charge last year and $6.8 million, or $0.03 per diluted share, in non-cash asset impairment charges primarily related to the Federal Trade Commission ("FTC") settlement agreement.
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") increased 22% to $148.2 million, and earnings before interest, taxes, depreciation and other non-cash expenses ("EBITANCE") increased 14% to $153.9 million. Approximately $75.0 million relating to depreciation and amortization, asset impairments, LIFO, share-based payments, and deferred rent was expensed for accounting purposes but was non-cash in the current quarter.
During the quarter, the Company produced $159.6 million in cash flow from operations and invested $66.9 million in capital expenditures, of which $54.5 million related to new stores. This resulted in free cash flow of $92.7 million. In addition, the Company paid a cash dividend to preferred stockholders of $8.5 million. Cash and cash equivalents, including restricted cash, increased to $448.0 million, and total debt was $742.2 million. Currently, the Company has approximately $335.2 million available on its credit line, net of $14.8 million in outstanding letters of credit.
For the 40-week period ended July 5, 2009, sales increased 1% to $6.2 billion. Comparable store sales decreased 3.8% versus a 6.4% increase in the prior year, and identical store sales, excluding 12 relocations and three major expansions, decreased 4.9% versus a 4.9% increase in the prior year. Excluding the negative impact of foreign currency translation, comparable store sales decreased 3.1%, and identical store sales decreased 4.2%. The tax rate was 41.6%, income available to common shareholders was $90.1 million, and diluted earnings per share were $0.64. These results included $14.2 million, or $0.06 per diluted share, of legal costs related to the FTC lawsuit and approximately $22.2 million, or $0.09 per diluted share, of non-cash asset impairment charges. Year to date, adjusted EBITDA increased 10% to $442.0 million, and EBITANCE increased 7% to $477.0 million.
Year to date, the Company has produced $474.7 million in cash flow from operations and invested $252.1 million in capital expenditures, of which $196.9 million related to new stores. This resulted in free cash flow of $222.6 million. In addition, the Company has paid cash dividends to preferred stockholders of $19.8 million year to date.
The Company's results for the last five fiscal quarters and comparable and identical store sales results for the current quarter to date are shown in the following table. Where applicable, percentages have been adjusted to exclude asset impairment charges and FTC-related legal costs.
QTD
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
---- ---- ---- ---- ---- ----
Sales growth 21.6% 15.5% 0.4% -0.5% 2.0%
Comparable
store sales
growth 2.6% 0.4% -4.0% -4.8% -2.5% -1.1%
Two-year comps
(sum of two
years) 9.6% 8.6% 5.3% 1.9% 0.1% 0.4%
Identical store
sales growth 1.9% -0.5% -4.9% -5.8% -3.8% -2.7%
Two-year idents
(sum of two
years) 7.7% 5.6% 2.2% -0.7% -1.9% -1.9%
Gross profit 34.4% 33.3% 33.4% 34.7% 35.2%
Gross profit
excluding
LIFO 34.5% 33.6% 33.5% 34.7% 34.8%
Direct store
expenses 26.6% 26.6% 26.4% 26.2%(1) 26.6%
Store
contribution 7.7% 6.8% 6.9% 8.5% 8.5%
Store
contribution
excluding
LIFO 7.9% 7.0% 7.1% 8.5% 8.2%
G&A expenses 3.3% 2.9% 2.9% 2.9% 2.8%
(1) Unusually low number of workers' compensation claims and average cost per claim in the quarter
For the quarter, gross profit increased 79 basis points to 35.2% of sales. The LIFO adjustment was a $5.8 million credit versus a $2.7 million charge last year, a positive impact of 45 basis points. Excluding LIFO, gross profit increased 33 basis points to 34.8% of sales, with an improvement in cost of goods sold more than offsetting higher occupancy costs as a percentage of sales. Direct store expenses were even with last year at 26.6% of sales. For the third consecutive quarter, the Company generated an improvement in labor costs as a percentage of sales. This improvement partially offset increases in health care and depreciation as a percentage of sales. As a result, store contribution improved 80 basis points to 8.5% of sales.
For stores in the identical store base, gross profit, excluding LIFO, improved 59 basis points to 35.1% of sales, and direct store expenses improved 31 basis points to 26.2% of sales. As a result, store contribution improved 89 basis points to 8.9% of sales.
G&A expenses improved 50 basis points to 2.8% of sales primarily driven by cost-containment measures implemented at the Company's global and regional offices in the fourth quarter of last year. FTC-related legal costs totaled $0.4 million in the third quarter.
For the quarter, relocation, store closure and lease termination costs were $18.2 million. This 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. In addition, the Company continues to make ongoing store closure reserve adjustments primarily related to changes in certain sub-tenant income estimates driven by the outlook for the commercial real estate market. In the third quarter, these adjustments totaled $9.7 million, bringing the year-to-date adjustment to $13.5 million.
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 (15.5 years
old, s.f. weighted) -3.5% 78% 94 27,100 2,545,600
Between eight
and 11 years old -3.1% 45% 55 31,300 1,722,600
Between five
and eight years old -6.0% 46% 42 36,700 1,540,500
Between two and
five years old -3.4% 12% 50 49,100 2,455,700
Less than two
years old
(including nine
relocations) 11.6% 1% 28 54,800 1,534,200
---------------- ---- --- --- ------ ---------
All comparable
stores (7.7 years
old, s.f. weighted) -2.5% 28% 269 36,400 9,798,700
All stores (7.3
years old, s.f.
weighted) 25% 281 37,100 10,419,700
(1)Reflects store-level capital and net operating profit after taxes ("NOPAT"), including pre-opening expense
Growth and Development
The Company opened four stores in the third quarter, three of which were relocations. So far in the fourth quarter, the Company has opened one store in Capitola, CA and currently has 282 stores totaling 10.4 million square feet. Two additional stores are expected to open in the fourth quarter.
Since the Company's second quarter earnings release, the Company has terminated two leases totaling approximately 121,100 square feet for stores previously scheduled to open in fiscal years 2012 and 2013.
The following table provides additional information about the Company's store openings in fiscal year 2008 and year to date in fiscal year 2009, leases currently tendered but not opened, and total development pipeline for stores scheduled to open through fiscal year 2013. 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 FY08 FY09 YTD Tendered Signed(1)
--------------------- ---- -------- -------- --------
Number of stores
(including relocations) 20 13 19 55
Number of relocations 6 6 1 7
Number of lease acquisitions,
ground leases and owned
properties 4 4 4 4
New markets 3 1 4 8
Average store size (gross
square feet) 53,000 52,400 42,100 45,700
As a percentage of
existing store
average size 146% 142% 114% 123%
Total square footage 1,060,700 681,600 800,000 2,546,800
As a percentage of
existing square
footage 11% 7% 8% 24%
Average tender period
in months 9.7 13.2
Average pre-opening
expense per store
(incl. rent) $2.5 mil $3.0 mil(2)
Average pre-opening rent
per store $1.1 mil $1.1 mil(2)
Average development cost
(excl. pre-opening) $15.8 mil
Average development cost
per square foot $297
(1) Includes leases tendered
(2) For stores opened in Q1-Q3 of fiscal year 2009
FTC Update
As previously announced on June 1, the FTC approved a final consent order of the settlement agreement resolving its antitrust challenge to the Company's acquisition of Wild Oats Markets, Inc.
Under the terms of the agreement, a third-party divestiture trustee was appointed to market for sale: leases and related assets for 19 non-operating former Wild Oats stores; leases and related fixed assets (excluding inventory) for 12 operating acquired Wild Oats stores and one operating Whole Foods Market store; and Wild Oats® trademarks and other intellectual property associated with the Wild Oats stores.
For any good faith offers not finalized by September 6, 2009, an extension of up to six months may be granted. This twelve-month period may be extended further to allow the FTC to approve any purchase agreements submitted within that time period. The only other obligations imposed on the Company by the settlement agreement are in support of the divestiture trustee process.
Pursuant to the FTC's approval of the final consent order in the third quarter, the Company recorded a non-cash impairment charge of $4.8 million to adjust the carrying value of leases and fixed assets to fair value relating to the potential sale of certain operating stores. The Company's previously announced estimate was up to $5.5 million. Cash expenses relating to legal and trustee fees are not expected to be material. No additional material charges are expected related to the 19 non-operating properties for which a lease liability reserve is already recorded, or related to the trademarks which have been fully amortized.
Assumptions for Fiscal Year 2009
For the first four weeks of the fourth quarter ended August 2, 2009, comparable store sales decreased 1.1%, and identical store sales decreased 2.7%. Excluding the negative impact of foreign currency translation, comparable store sales decreased 0.7%, and identical store sales decreased 2.4%. Eight new stores enter the identical store base in the fourth quarter, cycling over their strong opening sales last year. In addition, further price investments could negatively impact sales. For these reasons, along with the still uncertain economic environment, the Company is maintaining a conservative outlook for sales. If the Company's comparable and identical store sales in the fourth quarter are in line with its quarter-to-date results, total sales growth would be approximately 2.9% for the fourth quarter and approximately 1% for the fiscal year.
Year to date, sales have averaged approximately $154 million per week, a level at which the Company has demonstrated strong discipline around gross margin, direct store expenses and G&A, a discipline the Company hopes to maintain. However, the Company historically has experienced lower average weekly sales in the fourth quarter, which typically results in lower gross profit and higher direct store expenses as a percentage of sales. In addition, the Company has implemented further price investments and is starting to compare against many of the cost disciplines put into effect last year. For these reasons, the Company expects store contribution as a percentage of sales, excluding LIFO and asset impairment charges, to decrease approximately 100 basis points from 8.2% in the third quarter to 7.2% in the fourth quarter. This is slightly greater than the 86 basis point sequential decrease the Company reported from the third to the fourth quarter last year, excluding LIFO and asset impairment charges.
The Company expects G&A in the fourth quarter to be higher than the $53 million reported in the third quarter.
The Company expects total pre-opening and relocation costs in the range of $15 million to $17 million for the fourth quarter based on the opening of three new stores in the fourth quarter and four to six new stores in the first quarter of fiscal year 2010.
The following table provides additional information on the Company's year-to-date results and updated expectations for Adjusted EBITDA, EBITANCE and EPS in the fourth quarter and fiscal year 2009.
(in millions,
except EPS) Adjusted EBITDA EBITANCE Diluted EPS
------------- --------------- -------- -----------
1Q09-3Q09 actuals $442 $477 $0.64
4Q09 estimates $123-$128 $133-$138 $0.16-$0.18
--------- --------- -----------
FY09 estimates $565-$570 $610-$615 $0.80-$0.82
Prior FY09 estimates $525-$545 $580-$605 $0.65-$0.70(1)
(1) Prior estimate was $0.71 to $0.76, excluding $0.06 in non-cash asset impairment charges incurred in the first half of fiscal year 2009; including asset impairment charges, the Company's prior estimate was $0.65 to $0.70.
The Company expects capital expenditures in the range of $80 million to $90 million in the fourth quarter.
Goals for Fiscal Year 2010 and Beyond
The uncertain economic outlook makes it highly difficult to predict future results. Therefore, the Company will provide preliminary assumptions and expectations for fiscal year 2010 in its fourth quarter earnings announcement in early November.
The following table, however, provides information about the Company's estimated store openings in fiscal years 2010 through 2013 based on the current development 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.
The Company is committed to producing positive free cash flow on an annual basis and is confident it will produce operating cash flow in excess of the capital expenditures needed to open the stores in its current development pipeline.
Average
Total Square
Total New Square Feet per
Openings Relocations Markets Footage Store
-------- ----------- ------- ------- -----
FY10 stores
in development 16 0 4 664,700 41,500
FY11 stores
in development 18 3 0 789,400 43,900
FY12 stores
in development 12 2 1 580,400 48,400
FY13 stores
in development 7 2 3 358,000 51,100
--------------- --- --- --- ------- ------
Total 53 7 8 2,392,500 45,100
About Whole Foods Market
Founded in 1980 in Austin, Texas, Whole Foods Market (www.wholefoodsmarket.com) is the leading natural and organic foods supermarket, America's first national certified organic grocer, and was named "America's Healthiest Grocery Store" in 2008 by Health magazine. In fiscal year 2008, the Company had sales of approximately $8 billion and currently has 282 stores in the United States, Canada, and the United Kingdom. Whole Foods Market employs more than 51,000 Team Members and has been ranked for 12 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, 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 28, 2008. 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.
Whole Foods Market, Inc.
Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
Twelve weeks ended Forty weeks ended
July 5, July 6, July 5, July 6,
2009 2008 2009 2008
----- ---- ---- ---- ----
Sales $1,878,338 $1,841,242 $6,202,391 $6,164,993
Cost of goods sold and
occupancy costs 1,218,029 1,208,495 4,074,047 4,054,290
---------------------- --------- --------- --------- ---------
Gross profit 660,309 632,747 2,128,344 2,110,703
Direct store expenses 499,705 490,188 1,639,389 1,631,466
Asset impairments from
continuing locations 125 - 14,807 -
---------------------- --- --- ------ ---
Store contribution 160,479 142,559 474,148 479,237
General and
administrative expenses 52,592 60,689 192,024 215,759
------------------------ ------ ------ ------- -------
Operating income before
pre-opening and store
closure 107,887 81,870 282,124 263,478
Pre-opening expenses 10,763 15,225 38,616 40,403
Relocation, store closure
and lease termination
costs 18,209 2,556 27,937 9,386
------------------------- ------ ----- ------ -----
Operating income 78,915 64,089 215,571 213,689
Interest expense (7,688) (8,094) (28,964) (28,113)
Investment and other
income 1,326 1,495 2,528 5,430
-------------------- ----- ----- ----- -----
Income before income
taxes 72,553 57,490 189,135 191,006
Provision for income taxes 29,746 23,571 78,741 77,984
-------------------------- ------ ------ ------ ------
Net income 42,807 33,919 110,394 113,022
------------ ------ ------ ------- -------
Preferred stock dividends 7,839 - 20,306 -
------------------------- ----- --- ------ ---
Income available to
common shareholders $34,968 $33,919 $90,088 $113,022
---------------------- ------- ------- ------- --------
Basic earnings per share $0.25 $0.24 $0.64 $0.81
------------------------ ----- ----- ----- -----
Weighted average shares
outstanding 140,439 140,231 140,385 139,766
----------------------- ------- ------- ------- -------
Diluted earnings per share $0.25 $0.24 $0.64 $0.81
-------------------------- ----- ----- ----- -----
Weighted average shares
outstanding, diluted
basis 140,439 140,322 140,385 140,308
----------------------- ------- ------- ------- -------
Common dividends declared
per share $- $0.20 $- $0.60
------------------------- --- ----- --- -----
Whole Foods Market, Inc.
Condensed Consolidated Balance Sheets (unaudited)
July 5, 2009 and September 28, 2008
(In thousands)
Assets
2009 2008
--------------- ---- ----
Current assets:
Cash and cash equivalents $377,035 $30,534
Restricted cash 71,014 617
Accounts receivable 106,191 115,424
Merchandise inventories 314,510 327,452
Prepaid expenses and other current assets 43,429 68,150
Deferred income taxes 89,382 80,429
--------------------- ------ ------
Total current assets 1,001,561 622,606
Property and equipment, net of accumulated
depreciation and amortization 1,892,812 1,900,117
Goodwill 657,281 659,559
Intangible assets, net of accumulated amortization 74,186 78,499
Deferred income taxes 72,272 109,002
Other assets 7,569 10,953
------------ ----- ------
Total assets $3,705,681 $3,380,736
-------------- ---------- ----------
Liabilities and Shareholders' Equity
2009 2008
-------------------- ---- ----
Current liabilities:
Current installments of long-term debt and
capital lease obligations $378 $380
Accounts payable 173,294 183,134
Accrued payroll, bonus and other benefits due
team members 205,607 196,233
Dividends payable 472 -
Other current liabilities 254,753 286,430
------------------------- ------- -------
Total current liabilities 634,504 666,177
Long-term debt and capital lease obligations,
less current installments 741,796 928,790
Deferred lease liabilities 240,182 199,635
Other long-term liabilities 84,202 80,110
--------------------------- ------ ------
Total liabilities 1,700,684 1,874,712
------------------- --------- ---------
Series A redeemable preferred stock, $0.01 par
value, 425 and no shares authorized, issued and
outstanding in 2009 and 2008, respectively 413,052 -
Shareholders' equity 1,591,945 1,506,024
-------------------- --------- ---------
Commitments and contingencies
----------------------------- ---------- ----------
Total liabilities and shareholders' equity $3,705,681 $3,380,736
-------------------------------------------- ---------- ----------
Whole Foods Market, Inc.
Consolidated Statements of Cash Flows (unaudited)
July 5, 2009 and July 6, 2008
(In thousands)
Forty weeks ended
July 5, July 6,
2009 2008
------------------------------------- ---- ----
Cash flows from operating activities:
Net income $110,394 $113,022
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 204,291 189,386
Loss on disposition of fixed assets 2,138 2,724
Asset impairment charge 22,164 99
Share-based payments expense 8,829 7,599
LIFO charge (2,177) 8,032
Deferred income tax expense (benefit) 32,488 (6,703)
Excess tax benefit related to exercise of team
member stock options - (5,162)
Deferred lease liabilities 39,338 35,153
Other 5,141 (1,291)
Net change in current assets and liabilities:
Accounts receivable 8,912 (22,482)
Merchandise inventories 14,165 (36,263)
Prepaid expenses and other current assets 24,711 4,724
Accounts payable (9,495) (49,112)
Accrued payroll, bonus and other benefits due
team members 9,728 19,220
Other current liabilities (270) 17,152
Net change in other long-term liabilities 4,364 (4,719)
--------------------------------------------- ----- ------
Net cash provided by operating activities 474,721 271,379
----------------------------------------- ------- -------
Cash flows from investing activities:
Development costs of new locations (196,949) (284,025)
Other property and equipment expenditures (55,182) (110,813)
Proceeds from hurricane insurance - 1,500
Acquisition of intangible assets (1,353) (1,567)
Purchase of available-for-sale securities - (194,316)
Sale of available-for-sale securities - 194,316
Increase in restricted cash (70,397) (57)
Payment for purchase of acquired entities, net of
cash - (20,130)
Proceeds from divestiture, net - 163,913
Other investing activities 469 (3,175)
---------------------------- --- ------
Net cash used in investing activities (323,412) (254,354)
------------------------------------- -------- --------
Cash flows from financing activities:
Common dividends paid - (81,015)
Preferred dividends paid (19,833) -
Issuance of common stock 2,705 18,019
Excess tax benefit related to exercise of team
member stock options - 5,162
Proceeds from issuance of redeemable preferred stock 413,052 -
Proceeds from long-term borrowings 123,000 174,000
Payments on long-term debt and capital lease
obligations (320,980) (107,050)
Other financing activities - 261
---------------------------- --- ---
Net cash provided by financing activities 197,944 9,377
----------------------------------------- ------- -----
Effect of exchange rate changes on cash and cash
equivalents (2,752) (1,485)
------------------------------------------------ ------ ------
Net change in cash and cash equivalents 346,501 24,917
Cash and cash equivalents at beginning of period 30,534 -
------------------------------------------------ ------ ---
Cash and cash equivalents at end of period $377,035 $24,917
------------------------------------------ -------- -------
------------------------------------------------- ------- -------
Supplemental disclosure of cash flow information:
Interest paid $42,059 $33,230
Federal and state income taxes paid $27,647 $85,119
Non-cash transactions:
Conversion of convertible debentures into common
stock $- $154
-------------------------------------------------- --- ----
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"), Earnings before interest, taxes
and non-cash expenses ("EBITANCE"), 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. 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, fixed asset impairment charges, non-cash share-based
payments expense, deferred rent, and LIFO charge. 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. 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. 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
EVA July 5, 2009 July 6, 2008 July 5, 2009 July 6, 2008
--- ------------ ------------ ------------ ------------
Net income $42,807 $33,919 $110,394 $113,022
Provision for
income taxes 29,746 23,571 78,741 77,984
Interest expense
and other 12,656 12,233 43,131 42,071
---------------- ------ ------ ------ ------
NOPBT 85,209 69,723 232,266 233,077
Income taxes (40%) 34,084 27,889 92,906 93,231
----------------- ------ ------ ------ ------
NOPAT 51,125 41,834 139,360 139,846
Capital charge 62,701 54,099 201,545 175,800
-------------- ------ ------ ------- -------
EVA $(11,576) $(12,265) $(62,185) $(35,954)
----- -------- -------- -------- --------
The following is a tabular presentation of the non-GAAP financial
measures, EBITDA, Adjusted EBITDA and EBITANCE including a reconciliation
to GAAP net income, which the Company believes to be the most directly
comparable GAAP financial measure.
EBITDA and Twelve weeks ended Forty weeks ended
EBITANCE July 5, 2009 July 6, 2008 July 5, 2009 July 6, 2008
---------- ------------ ------------ ------------ ------------
Net income $42,807 $33,919 $110,394 $113,022
Provision for
income taxes 29,746 23,571 78,741 77,984
Interest
expense, net 6,362 6,599 26,436 22,683
------------- ----- ----- ------ ------
Operating income 78,915 64,089 215,571 213,689
Depreciation and
amortization 62,476 57,789 204,291 189,386
---------------- ------ ------ ------- -------
Earnings before
interest, taxes,
depreciation &
amortization
(EBITDA) 141,391 121,878 419,862 403,075
Impairment of
assets 6,781 - 22,164 99
------------- ----- --- ------ ---
Adjusted EBITDA 148,172 121,878 442,026 403,174
Non-cash expenses:
Share-based
payments expense 2,687 2,247 8,829 7,599
LIFO charge (5,777) 2,700 (2,177) 8,032
Deferred rent 8,813 8,529 28,347 27,584
--------------- ----- ----- ------ ------
Total other
non-cash
expenses 5,723 13,476 34,999 43,215
------------- ----- ------ ------ ------
Earnings before
interest, taxes,
and non-cash
expenses
(EBITANCE) $153,895 $135,354 $477,025 $446,389
----------------- -------- -------- -------- --------
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 5, 2009 July 6, 2008 July 5, 2009 July 6, 2008
-------------- ------------ ------------ ------------ ------------
Net cash provided
by operating
activities $159,625 $110,102 $474,721 $271,379
Development
costs of new
locations (54,487) (109,606) (196,949) (284,025)
Other property
and equipment
expenditures (12,425) (14,876) (55,182) (110,813)
-------------- ------- ------- ------- --------
Free cash flow $92,713 $(14,380) $222,590 $(123,459)
---------------- ------- -------- -------- ---------
Contact: Cindy McCann
VP of Investor Relations
512.542.0204
