Whole Foods 2008 Annual Report Download - page 26

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Changes in the Availability of Quality Natural and Organic Products Could Impact Our Business
There is no assurance that quality natural and organic products will be available to meet our future needs. If other
supermarkets significantly increase their natural and organic product offerings or if new laws require the reformulation of
certain products to meet tougher standards, the supply of these products may be constrained. Any significant disruption in the
supply of quality natural and organic products could have a material impact on our overall sales and cost of goods sold.
Perishable Foods Product Losses Could Materially Impact Our Results
We believe our stores more heavily emphasize perishable products than other supermarket stores. Perishable products
accounted for approximately 67% of total sales at Whole Foods Market locations in fiscal year 2008. The Company’s
emphasis on perishable products may result in significant product inventory losses in the event of extended power outages,
natural disasters or other catastrophic occurrences.
Our Stock Price Is Volatile
The market price of our common stock could be subject to significant fluctuation in response to various market factors and
events. These market factors and events include variations in our sales and earnings results and any failure to meet market
expectations; changes in ratings and earnings estimates by securities analysts; publicity regarding us, our competitors, the
natural products industry generally; new statutes or regulations or changes in the interpretation of existing statutes or
regulations affecting the natural products industry specifically; sales of substantial amounts of common stock in the public
market or the perception that such sales could occur and other factors. In addition, the stock market in recent years has
experienced broad price and volume fluctuations that often have been unrelated to the operating performance of particular
companies. These market fluctuations also may adversely affect the market price of our common stock.
Future Economic Factors Could Cause Impairment of Goodwill
Our total assets included goodwill totaling approximately $659.6 million at September 28, 2008. In accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, goodwill is
reviewed for impairment annually or more frequently if impairment indicators arise. We allocate goodwill to one reporting
unit for goodwill impairment testing. As described in “Item 1B. Unresolved Staff Comments” of this Report, we continue
discussions with the Staff of the SEC’s Division of Corporation Finance regarding the Company’s goodwill impairment
testing and operation as a single operating segment. Our impairment reviews require extensive use of accounting judgment
and financial estimates. Application of alternative assumptions and definitions, such as reviewing goodwill for impairment at
a different organization level, could produce significantly different results. We may be required to recognize impairments of
goodwill based on future economic factors such as unfavorable changes in the Company’s stock price and market
capitalization, unfavorable changes in valuations of comparable companies, or unfavorable changes in estimated future
discounted cash flows of the Company’s reporting unit. Impairment of goodwill could result in material charges that would
adversely affect our results of operations and capitalization.
Future Events Could Result in Impairment of Our Long-Lived Assets
Our total assets included long-lived assets totaling approximately $1.9 billion at September 28, 2008. In accordance with
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets are evaluated for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Our impairment evaluations require use of financial estimates of future cash flows. Application of alternative
assumptions could produce significantly different results. We may be required to recognize impairments of long-lived assets
based on future economic factors such as unfavorable changes in estimated future undiscounted cash flows of an asset group.
Long-lived asset impairments could result in material charges that would adversely affect our results of operations and
capitalization.
Changes in the Number of Stock Option Exercises Could Impact Our Cash Flow
Our cash flow from the exercise of team member stock options may be adversely affected in the future by fluctuations in the
market price of our common stock, changes in income tax law, and changes in the number of stock options we grant.
Capital Needed for Expansion and General Corporate Purposes May Not Be Available
The construction and opening or acquisition of new stores and the development of new production and distribution facilities,
along with the remodeling and renovation of existing stores, require significant amounts of capital. In the past, our growth
has been funded primarily through proceeds from public offerings, bank debt, private placements of debt, internally
generated cash flow, and proceeds from stock option exercises. These and other sources of capital may not be available to us
in the future or may be more expensive to obtain. In addition, restrictive covenants that may be imposed by our lenders may
limit our ability to fund our growth. On November 5, 2008, we entered into an agreement with affiliates of Leonard Green &
Partners, L.P. to issue and sell $425 million of newly-issued shares of preferred stock to enhance our liquidity position. The
closing and funding of the transaction is subject to certain customary closing conditions, including the receipt of customary