Whole Foods 2007 Annual Report Download - page 36

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Natural Disaster Costs
The Company has two stores in the New Orleans area which were damaged by and closed due to Hurricane Katrina during
the fourth quarter of fiscal year 2005, and accordingly the Company recorded expenses in fiscal year 2005 totaling
approximately $16.5 million for related estimated net losses. The main components of the $16.5 million expense were
estimated impaired assets totaling approximately $12.2 million, estimated inventory losses totaling approximately $2.5
million, salaries and relocation allowances for displaced Team Members and other costs totaling approximately $3.4 million,
and a $1.0 million special donation from the Company to the American Red Cross, net of accrued estimated insurance
proceeds totaling approximately $2.6 million. In fiscal year 2005, approximately $13.4 million of net natural disaster costs is
included in “Direct store expenses” in the Consolidated Statements of Operations, approximately $1.0 million is included in
“General and administrative expenses,” and approximately $2.1 million is included in “Cost of goods sold and occupancy
costs.” In fiscal year 2006, the Company recognized approximately $7.2 million in pre-tax credits for insurance proceeds and
other adjustments related to previously estimated Hurricane Katrina losses, of which approximately $4.2 million is included
in “Direct store expenses,” approximately $0.9 million is included in “Cost of goods sold and occupancy costs,” and
approximately $2.1 million is included in “Investment and other income.”
Liquidity and Capital Resources
We generated cash flows from operating activities of approximately $398.6 million, $452.7 million and $410.8 million in
fiscal years 2007, 2006 and 2005, respectively. Cash flows from operating activities resulted primarily from our net income
less non-cash expenses, income tax benefits that resulted from the exercise of team member stock options and changes in
operating working capital. Prior to the adoption of SFAS No. 123R at the beginning of fiscal year 2006, the Company
presented the tax savings resulting from tax deductions resulting from the exercise of stock options as an operating cash
flow, in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-15, “Classification in the Statement of Cash
Flows of the Income Tax Benefit Received by a Company upon Exercise of a Nonqualified Employee Stock Option.” SFAS
No. 123R requires the Company to reflect the tax savings resulting from tax deductions in excess of expense reflected in its
financial statements as a financing cash flow. The Company’s excess tax benefit received upon exercise of nonqualified team
member stock options totaled approximately $12.8 million and $52.0 million in fiscal years 2007 and 2006, respectively.
Net cash used in investing activities was approximately $895.0 million, $569.3 million and $322.2 million for fiscal years
2007, 2006 and 2005, respectively. For fiscal year 2007, net cash used in investing activities includes approximately $596.2
million paid for the purchase of Wild Oats. Our principal historical capital requirements have been the funding of the
development or acquisition of new stores and acquisition of property and equipment for existing stores. 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 2007, 2006 and 2005 totaled
approximately $529.7 million, $340.2 million and $324.1 million, respectively, of which approximately $389.3 million,
$208.6 million and $207.8 million, respectively, was for new store development and approximately $140.3 million, $131.6
million and $116.3 million, respectively, was for remodels and other additions. The increase in capital expenditures on new
stores in fiscal year 2007 was due to the Company’s accelerated rate of new store opening in the year. The Company expects
a comparable number of new store openings in fiscal year 2008 as in fiscal year 2007. For fiscal year 2008, the Company
expects capital expenditures to be in the range of approximately $575 million to $625 million, of which approximately 65%
to 70% is related to new stores expected to open in fiscal year 2008 and beyond and approximately 7% to 8% relates to
remodels of acquired stores.