Whole Foods 2014 Annual Report Download

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
September 28, 2014; 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 incorporation) (I.R.S. Employer Identification No.)
550 Bowie Street, Austin, Texas 78703
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: 512-477-4455
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, no par value NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
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 No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Table of contents

  • Page 1
    ... _____ Commission File Number: 0-19797 WHOLE FOODS MARKET, INC. (Exact name of registrant as specified in its charter) Texas (State of incorporation) 550 Bowie Street, Austin, Texas (Address of principal executive offices) 74-1989366 (I.R.S. Employer Identification No.) 78703 (Zip code) Registrant...

  • Page 2
    ... stock, no par value, outstanding as of November 18, 2014 was 359,747,100 shares. DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the registrant's definitive Proxy Statement for the Annual...

  • Page 3
    ... About Market Risk. Financial Statements and Supplementary Data. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Controls and Procedures. Other Information. PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate...

  • Page 4
    ... uniquely positioned as America's Healthiest Grocery Storeâ„¢. The Company incorporated in 1978, opened the first Whole Foods Market store in 1980, and is based in Austin, Texas. We completed our initial public offering in January 1992, and our common stock trades on the NASDAQ Global Select Market...

  • Page 5
    .... We create ongoing win-win partnerships with our suppliers. We promote the health of our stakeholders through healthy eating education. Our Quality Standards and Differentiated Product Offering We believe our high quality standards differentiate our stores from other supermarkets and enable...

  • Page 6
    ... unique to Whole Foods Market in terms of flavor, size or other attributes. Health Starts Here® We believe our Health Starts Here program and our positioning as America's Healthiest Grocery Store™ are key competitive advantages. Health Starts Here is a mindful approach to healthy eating rooted in...

  • Page 7
    ... color scale. We are committed to working with our suppliers to evaluate and independently audit every product in our cleaning category, and all brands in our stores meet our baseline orange standard. Growth Strategy We are a Fortune 500 company, ranking number 218 on the 2014 list. Our sales have...

  • Page 8
    ... future store growth or financial results. We have a disciplined, opportunistic real estate strategy, opening stores in existing trade areas as well as new areas, including international locations. We typically target premium real estate sites, and while new stores may be as small as 15,000 square...

  • Page 9
    ... grocery and frozen food products extends through 2020. Store Operations We strive to promote a strong company culture featuring a team approach to store operations that we believe is distinctly more empowering to team members than that of the traditional supermarket. Whole Foods Market stores each...

  • Page 10
    ...our most recent vote. Under the current medical plan, Whole Foods Market provides health care coverage at no cost to full-time team members working 30 or more hours per week and having a minimum of 20,000 service hours (approximately 10 years of full-time employment). Full-time team members with 800...

  • Page 11
    ... as well. We also regularly promote thousands of products each month, including the widest array of organic and non-GMO sale items available. Our website features budget-friendly recipes and money-saving tips, and we offer in-store value tours and The Whole Deal value guide, which features supplier...

  • Page 12
    ... organizations creating innovative solutions to food access and health in their communities. Urban farms that collaborate with nutrition education programs to offer affordable healthy food, cooking classes, and health and wellness information are one example. To date, Whole Cities Foundation...

  • Page 13
    ... Whole Foods Market was recognized on a number of lists in fiscal year 2014, including but not limited to: FORTUNE's "World's Most Admired Companies" and "100 Best Companies to Work for in America" lists. We also earned the top spot on Consumer Reports' list of "Supermarkets with the Best Food...

  • Page 14
    ... train new team members or integrate those team members into the programs and policies of the Company. We may not be able to adapt our distribution, management information and other operating systems to adequately supply products to new stores at competitive prices so that we can operate the stores...

  • Page 15
    ... foods product losses could materially impact our results of operations. Our stores offer a significant number of perishable products, accounting for approximately 66.8% of our total sales in fiscal year 2014. The Company's emphasis on perishable products may result in significant product inventory...

  • Page 16
    ... of products to our stores and by impacting our ability to appropriately staff our stores. Our stock price may be volatile and adversely affected by general market factors, including fluctuations in our quarterly results of operations. In fiscal year 2014, the closing market price per share of...

  • Page 17
    ... effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud, and could expose us to litigation or adversely affect the market price of our common stock. The Company's management concluded...

  • Page 18
    ... Jersey New Mexico Number of stores 3 2 5 1 9 29 6 6 1 2 2 5 1 12 4 Location New York North Carolina Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina Tennessee Texas United Kingdom Utah Virginia Washington Wisconsin Number of stores 15 11 6 3 8 10 3 4 4 25 9 5 10 7 2 From time to time...

  • Page 19
    ... of Whole Foods Market's common stock, and the closing stock price was $47.89. Dividends The following table provides a summary of dividends declared per common share during fiscal years 2014 and 2013 (in millions, except per share amounts): Date of declaration Fiscal year 2014: November 1, 2013...

  • Page 20
    ... qualifications, the Company currently expects to pay dividends on a quarterly basis. Performance Graph The following graph and accompanying table show the cumulative five-year total return to shareholders of Whole Foods Market, Inc.'s common stock relative to the cumulative total returns of the...

  • Page 21
    ... The following table provides information about the Company's share repurchase activity during the twelve weeks ended September 28, 2014. Total number of shares purchased as part of publicly announced plans or programs (2) 1,517,916 1,109,312 - 2,627,228 Approximate dollar value of shares that may...

  • Page 22
    ... Dividends declared per common share Consolidated Balance Sheets Data Net working capital Total assets Long-term debt (including current maturities) Shareholders' equity Operating Data Number of stores at end of fiscal year Average store size (gross square footage) Average weekly sales per store...

  • Page 23
    ... Financial Condition and Results of Operations. Overview Whole Foods Market is the leading retailer of natural and organic foods, the first national "Certified Organic" grocer, and uniquely positioned as America's Healthiest Grocery Storeâ„¢. Our Company mission is to promote the vitality and well...

  • Page 24
    ... are key to the long-term health of the Company. The Company's annual targets for fiscal year 2015 are Sales growth over 9%; Comparable store sales growth in the low to middle single digits; Square footage growth of 9% to 10% based on 38 to 42 new stores, including five to six relocations; EBITDA...

  • Page 25
    ... 2012. Share-based payment expense was included in the following line items on the Consolidated Statements of Operations for the fiscal years indicated (in millions): 2014 2 $ 34 32 68 (26) 42 $ 2013 2 $ 32 23 57 (22) 35 $ 2012 2 22 18 42 (16) 26 Cost of goods sold and occupancy costs Direct store...

  • Page 26
    ...tax positions in fiscal year 2012. Non-GAAP measures 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") margin, free cash...

  • Page 27
    ...of six retail locations. The required cash investment for new stores varies depending on the size of the new store, geographic location, degree of work performed by the landlord and complexity of site development issues. Capital expenditures for fiscal years 2014, 2013 and 2012 totaled approximately...

  • Page 28
    ... in fiscal year 2017. Longer term, the Company sees demand for 1,200 Whole Foods Market stores in the United States. We have a disciplined, opportunistic real estate strategy, opening stores in existing trade areas as well as new areas, including international locations. Our growth strategy is to...

  • Page 29
    ... price, and totaled approximately $42 million, $81 million and $370 million in fiscal years 2014, 2013 and 2012, respectively. The Company intends to keep its broad-based stock option program in place, but also intends to limit the number of shares granted in any one year so that annual earnings...

  • Page 30
    ... that are inherently uncertain. Inventories The Company values inventories at the lower of cost or market. Cost was determined using the dollar value retail last-in, firstout ("LIFO") method for approximately 93.5% and 92.8% of inventories in fiscal years 2014 and 2013, respectively. Under the LIFO...

  • Page 31
    ... determined using management's best estimate based on a discounted cash flow model based on future store operating results using internal projections or based on a review of the future benefit the Company anticipates receiving from the related assets. Additionally for closing locations, the Company...

  • Page 32
    ... in the Company's financial statements are reflected as a financing cash flow. The Company intends to keep its broad-based stock option program in place, but also intends to limit the number of shares granted in any one year so that annual earnings per share dilution from share-based payment expense...

  • Page 33
    ... years 2014 and 2013, a hypothetical 10% increase or decrease in interest rates would not have materially affected interest income earned on these investments. Foreign Currency Risk The Company is exposed to foreign currency exchange risk. We own and operate nine stores in Canada and nine stores...

  • Page 34
    ... Data. Whole Foods Market, Inc. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting Consolidated Balance Sheets at September 28, 2014...

  • Page 35
    ... also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Whole Foods Market, Inc.'s internal control over financial reporting as of September 28, 2014, based on criteria established in Internal Control - Integrated Framework issued by the...

  • Page 36
    ... standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Whole Foods Market, Inc. as of September 28, 2014 and September 29, 2013, and the related consolidated statements of operations, comprehensive income, shareholders' equity and cash flows...

  • Page 37
    Whole Foods Market, Inc. Consolidated Balance Sheets (In millions) Assets Current assets: Cash and cash equivalents Short-term investments - available-for-sale securities Restricted cash Accounts receivable Merchandise inventories Prepaid expenses and other current assets Deferred income taxes Total...

  • Page 38
    Whole Foods Market, Inc. Consolidated Statements of Operations Fiscal years ended September 28, 2014, September 29, 2013 and September 30, 2012 (In millions, except per share amounts) 2014 14,194 9,150 5,044 3,586 446 67 11 934 12 946 367 579 1.57 367.8 1.56 370.5 0.48 2013 12,917 8,288 4,629 3,285 ...

  • Page 39
    Whole Foods Market, Inc. Consolidated Statements of Comprehensive Income Fiscal years ended September 28, 2014, September 29, 2013 and September 30, 2012 (In millions) 2014 579 2013 551 2012 466 5 5 471 Net income Other comprehensive income (loss), net of tax: Foreign currency translation ...

  • Page 40
    ... 29, 2013 Net income Other comprehensive loss, net of tax Dividends ($0.48 per common share) Issuance of common stock pursuant to team member stock plans Purchase of treasury stock Tax benefit related to exercise of team member stock options Share-based payment expense Balances at September 28, 2014...

  • Page 41
    ... Net cash used in investing activities Cash flows from financing activities Common stock dividends paid Issuance of common stock Purchase of treasury stock Excess tax benefit related to exercise of team member stock options Payments on capital lease obligations Net cash provided by (used in...

  • Page 42
    ... Financial Statements Fiscal years ended September 28, 2014, September 29, 2013 and September 30, 2012 (1) Description of Business Whole Foods Market is the leading retailer of natural and organic foods. The Company's mission is to promote the vitality and well-being of all individuals by supplying...

  • Page 43
    ... accounts is calculated based on historical experience, customer credit risk and application of the specific identification method and was not material in fiscal year 2014 or 2013. Inventories The Company values inventories at the lower of cost or market. Cost was determined using the dollar value...

  • Page 44
    ... determined using management's best estimate based on a discounted cash flow model based on future store operating results using internal projections or based on a review of the future benefit the Company anticipates receiving from the related assets. Additionally for closing locations, the Company...

  • Page 45
    .... Our largest supplier, United Natural Foods, Inc., accounted for approximately 32%, 32% and 31% of our total purchases in fiscal years 2014, 2013 and 2012, respectively. Direct Store Expenses Direct store expenses consist of store-level expenses such as salaries and benefits costs, supplies...

  • Page 46
    ... cash flow. All full-time team members with a minimum of 400 hours of service may purchase our common stock through payroll deductions under the Company's Team Member Stock Purchase Plan ("TMSPP"). The TMSPP provides for a 5% discount on the shares' purchase date market value, which meets the share...

  • Page 47
    ... first quarter of fiscal year ending September 25, 2016. We do not expect the adoption of these provisions to have a significant impact on the Company's consolidated financial statements. In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating...

  • Page 48
    ... not material during fiscal year 2014, 2013 or 2012. (4) Investments The Company holds investments in marketable securities that are classified as either short- or long-term available-for-sale securities. The Company held the following investments at fair value as of the dates indicated (in millions...

  • Page 49
    .... Development costs of new locations totaled approximately $447 million, $339 million and $262 million in fiscal years 2014, 2013 and 2012, respectively. Construction accruals related to development sites, remodels, and expansions were included in the "Other current liabilities" line item on...

  • Page 50
    ...during fiscal years 2014 and 2013, respectively, were not material. Usage primarily related to ongoing cash rental payments totaled approximately $11 million for each of fiscal years 2014 and 2013. (8) Leases The Company is committed under certain capital leases for rental of certain buildings, land...

  • Page 51
    ...indefinite life. The Company provided a valuation allowance totaling approximately $30 million for deferred tax assets associated with international operating loss carryforwards, federal credit carryforwards, and deferred tax assets associated with unrecognized tax benefits, for which management has...

  • Page 52
    ...date August 1, 2016 Amount authorized $ 1,000 Cost of repurchases $ 100 Authorization available $ 900 Under the new share repurchase program, purchases can be made from time to time using a variety of methods, which may include open market purchases. The specific timing, price and size of purchases...

  • Page 53
    ... line items on the Consolidated Statements of Operations for the fiscal years indicated (in millions): 2014 2 $ 34 32 68 (26) 42 $ 2013 2 $ 32 23 57 (22) 35 $ 2012 2 22 18 42 (16) 26 Cost of goods sold and occupancy costs Direct store expenses General and administrative expenses Share-based payment...

  • Page 54
    ... 2014, 2013 and 2012, respectively. The Company realized a tax benefit from stock options exercised during fiscal years 2014, 2013 and 2012 totaling approximately $36 million, $123 million and $198 million, respectively. The total fair value of shares vested during fiscal years 2014, 2013 and 2012...

  • Page 55
    ... the Whole Foods Market 2009 Stock Incentive Plan. Fair value of the restricted share issuances on grant date for fiscal years 2014 and 2013 totaled approximately $11 million and $4 million, respectively. Total share-based payment expense related to restricted shares during fiscal year 2014 totaled...

  • Page 56
    ... selected unaudited quarterly Consolidated Statements of Operations information for the fiscal years ended September 28, 2014 and September 29, 2013 (in millions, except per share amounts): First Quarter Fiscal Year 2014 Sales Cost of goods sold and occupancy costs Gross profit Direct store expenses...

  • Page 57
    ... on developing-world communities that supply the Company's stores with product. Whole Kids Foundation is dedicated to improving children's nutrition through partnerships with schools, educators, and other organizations. Whole Cities Foundation is dedicated to supporting efforts to increase access to...

  • Page 58
    ... Statement"). The Company has adopted a Code of Business Conduct (the "Code") for all team members and directors pursuant to section 406 of the Sarbanes-Oxley Act. A copy of the Code is publicly available on our Whole Foods Market website at http:// www.wholefoodsmarket.com/sites/default/files/media...

  • Page 59
    ... by Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (14) Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (14) The following financial information from the Company's Annual Report on Form 10-K, for the period ended September 28, 2014, formatted in...

  • Page 60
    ... exhibit to Registrant's Form S-8 filed May 31, 2013 and incorporated herein by reference. Filed as an exhibit to Registrant's Form 8-K filed April 16, 2009 and incorporated herein by reference. Filed as an exhibit to Registrant's Form 8-K filed September 7, 2012 and incorporated herein by reference...

  • Page 61
    ...1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WHOLE FOODS MARKET, INC. Date: November 21, 2014 By: /s/ Glenda Flanagan Glenda Flanagan Executive Vice President and Chief Financial Officer Pursuant to the requirements of the...