Whole Foods 2013 Annual Report Download - page 23

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Effective tax rate changes and results of examinations by taxing authorities could materially impact our results of operations.
Our future effective tax rates could be adversely affected by the earnings mix being lower than historical results in states or
countries where we have lower statutory rates and higher-than-historical results in states or countries where we have higher
statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or interpretations
thereof. In addition, we are subject to periodic audits and examinations by the Internal Revenue Service (“IRS”) and other state
and local taxing authorities. Our results could be materially impacted by the determinations and expenses related to proceedings
by the IRS and other state and local taxing authorities. See Note 10 to the consolidated financial statements, “Income Taxes,”
in Part II, “Item 8. Financial Statements and Supplementary Data,” of this Report on Form 10-K.
Unions may attempt to organize our team members, which could harm our business.
All of our team members are non-union, and we consider our team member relations to be very strong. From time to time,
however, unions have attempted to organize all or part of our team member base at certain stores and non-retail facilities.
Responding to such organization attempts is distracting to management and team members and may have a negative financial
impact on a store, facility or the Company as a whole.
Changes in accounting standards and estimates could materially impact our results of operations.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and
interpretations for many aspects of our business, such as accounting for insurance and self-insurance, inventories, goodwill and
intangible assets, store closures, leases, income taxes and share-based payments, are highly complex and involve subjective
judgments. Changes in these rules or their interpretation or changes in underlying estimates, assumptions or judgments by our
management could significantly change or add significant volatility to our reported earnings without a comparable underlying
change in cash flow from operations.
Unfavorable changes in governmental regulation could harm our business.
The Company is subject to various local, state, federal and international laws, regulations and administrative practices affecting
our business, and we must comply with provisions regulating health and sanitation standards, food labeling, equal employment,
minimum wages, and licensing for the sale of food and, in some stores, alcoholic beverages. Our new store openings could be
delayed or prevented or our existing stores could be impacted by difficulties or failures in our ability to obtain or maintain
required approvals or licenses. Changes in existing laws or implementation of new laws, regulations and practices (e.g., health
care legislation) could have a significant impact on our business.
The USDA’s Organic Rule facilitates interstate commerce and the marketing of organically produced food, and provides assurance
to our customers that such products meet consistent, uniform standards. Compliance with this rule could pose a significant
burden on some of our suppliers, which may cause a disruption in some of our product offerings.
We cannot predict the nature of future laws, regulations, interpretations or applications, or determine what effect either additional
government regulations or administrative orders, when and if promulgated, or disparate local, state, federal and international
regulatory schemes would have on our business in the future. They could, however, require the reformulation of certain products
to meet new standards, the recall or discontinuance of certain products not able to be reformulated, additional recordkeeping,
expanded documentation of the properties of certain products, expanded or different labeling and/or scientific substantiation.
Any or all of such requirements could have an adverse effect on our operating results.
Disruptions in our information systems could harm our ability to run our business.
We rely extensively on information systems for point-of-sale processing in our stores, supply chain, financial reporting, human
resources and various other processes and transactions. Our information systems are subject to damage or interruption from
power outages, computer and telecommunications failures, computer viruses, security breaches, including breaches of our
transaction processing or other systems that could result in the compromise of confidential customer data, catastrophic events,
and usage errors by our team members. If our systems are breached, damaged or cease to function properly, we may have to
make significant investments to fix or replace them, suffer interruptions in our operations, face costly litigation, and our reputation
with our customers may be harmed. Any material interruption in our information systems may have a material adverse effect
on our operating results.
The risk associated with doing business in other countries could materially impact our results of operations.
Though only 3.3% of our total sales in fiscal year 2013, the Company’s international operations are subject to certain risks of
conducting business abroad, including fluctuations in foreign currency exchange rates, changes in regulatory requirements, and
changes or uncertainties in the economic, social and political conditions in the Company’s geographic areas, among other things.