November 07, 2012 at 16:07 PM EST
Whole Foods Market Reports Fourth Quarter Results
Comparable Store Sales Increase 8.5%; Company Produces $0.60 in Earnings Per Share, Maintains Fiscal Year 2013 EPS Guidance, and Raises Quarterly Dividend 43% to $0.20 per Share

AUSTIN, Texas, Nov. 7, 2012 (GLOBE NEWSWIRE) -- Whole Foods Market, Inc. (Nasdaq:WFM) today reported results for the 13-week fourth quarter ended September 30, 2012. Year-over-year increases stated herein reflect the comparison of 13 weeks in fiscal year 2012 to 12 weeks in fiscal year 2011. Sales increased 24% to $2.9 billion. Comparable store sales increased 8.5%, and identical store sales, excluding three relocations and two expansions, increased 8.3%.  Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 36% from the prior year to $252.2 million, net income increased 49% to $112.7 million, and diluted earnings per share increased 44% to $0.60. 

"We ended the year with strong sales growth and record fourth quarter results, delivering the best year in our Company's 32-year history," said John Mackey, co-founder and co-chief executive officer of Whole Foods Market.  "The pace of new store openings and lease signings continues to increase, and our accelerated growth plans are on track. We expect healthy comparable store sales growth and continuing operating margin improvement in fiscal year 2013."

The following table shows the Company's comparable and identical store sales results for the last five quarters and for the first five weeks of the first quarter through November 4, 2012. Sales growth for the fourth quarter of fiscal year 2012 is presented on a 12-week to 12-week basis.

4Q11 1Q12 2Q12* 3Q12* 4Q12 QTD
1Q13**
Sales growth 12.2% 12.9% 13.6% 13.6% 14.1% 12.5%
Comparable store sales growth 8.7% 8.7% 9.5% 8.2% 8.5% 7.3%
Two-year comps 17.4% 17.7% 17.3% 16.6% 17.3% 15.9%
Identical store sales growth 8.4% 8.2% 9.0% 8.0% 8.3% 7.1%
Two-year idents 17.1% 17.3% 16.8% 16.1% 16.7% 15.3%
Sequential basis point change5324(48)(75)64
Three-year idents 14.8% 19.8% 24.5% 24.5% 25.4% 24.2%
Sequential basis point change206502472(2)90
*Comparable and identical store sales growth includes a positive 55 basis point impact in 2Q12 and a negative 62 basis point impact in 3Q12 from the Easter shift, calculated by excluding Easter week from both the current and prior years.
**Comparable and identical store sales growth reflects a negative impact from Hurricane Sandy.

Hurricane Sandy negatively impacted sales for the first five weeks of the first quarter, particularly in the Northeast region.    The Company has property, flood, casualty, and business interruption insurance coverage and has just started the process of working with its insurer to assess damages, a process that could take several months. The Company expects to record a one-time charge in the first quarter for estimated uninsured losses.

For the quarter, gross profit increased 76 basis points to 35.3% of sales driven by improvements in both cost of goods sold and occupancy costs as a percentage of sales. The LIFO credit was $1.9 million this year versus a charge of $3.8 million in the prior year, a positive impact of 22 basis points. Direct store expenses improved 40 basis points to 25.5% of sales due primarily to leverage in wages and depreciation as a percentage of sales.  As a result, store contribution improved 117 basis points to 9.8% of sales.

For stores in the identical store base, gross profit improved 84 basis points to 35.3% of sales, direct store expenses improved 64 basis points to 25.2% of sales, and store contribution improved 148 basis points to 10.1% of sales.

The effective tax rate was 36.4%, in line with the prior year but below the Company's year-to-date average in the third quarter of 38.6% due to an increase in state tax credits, along with a one-time reduction of reserves for tax positions related to a prior acquisition. 

During the quarter, the Company produced $188.8 million in cash flow from operations and invested $130.3 million in capital expenditures, of which $72.9 million related to new stores. This resulted in free cash flow of $58.6 million. In addition, the Company received $45.0 million in proceeds from the exercise of team member stock options and paid $25.8 million in dividends to shareholders.

Additional information on the quarter for comparable stores and all stores is provided in the following table.

# of  Total
 Comparable Stores Comps ROIC Stores Average Size Square Feet
Over 15 years old (19 years old, s.f. weighted) 6.4% 137% 72 27,400 1,971,400
Between 11 and 15 years old 8.2% 79% 73 32,000 2,337,500
Between eight and 11 years old 5.9% 85% 43 37,200 1,600,700
Between five and eight years old 8.0% 47% 53 50,700 2,687,300
Between two and five years old 11.4% 19% 51 49,700 2,533,500
Less than two years old (including three relocations) 15.9% 16% 19 38,700 734,900
All comparable stores (9.3 years old, s.f. weighted) 8.4% 52% 311 38,200 11,865,300
All stores (8.7 years old, s.f. weighted) 44% 335 38,000 12,735,100

Fiscal Year Results

For the 53 weeks ended September 30, 2012, sales increased 16% to $11.7 billion, comparable store sales increased 8.7%, and identical store sales, excluding seven relocations and three expansions, increased 8.4%. EBITDA increased 26% to $1.1 billion, net income increased 36% to $465.6 million, and diluted earnings per share increased 31% to $2.52. 

For the fiscal year, the Company produced $919.7 million in cash flow from operations and invested $456.2 million in capital expenditures, of which $261.7 million related to new stores. This resulted in free cash flow of $463.5 million. In addition, the Company received $370.2 million in proceeds from the exercise of team member stock options, paid $94.5 million in dividends to shareholders, and repurchased $28.6 million of common stock.

The Company finished the year with total cash and cash equivalents, restricted cash, and investments of $1.5 billion, a year-over-year increase of $745.4 million. Total debt (capital lease obligations) was $24.1 million.

The Company today announced that its Board of Directors declared a 43% increase in the Company's quarterly dividend to $0.20 per share from $0.14 per share. The next dividend is payable on January 29, 2013 to shareholders of record as of January 18, 2013.

"The Board's decision to increase our dividend for the second consecutive year reflects another year of record-setting financial performance, and underscores our confidence in our future growth and cash flow generation," said Walter Robb, co-chief executive officer of Whole Foods Market. "With $1.3 billion in available cash, we expect to continue to internally fund our accelerated new store growth, maintain a healthy reserve, and create additional value for our shareholders through selective share repurchases and a higher dividend."

The following table shows the Company's results for the fiscal year for certain line items compared to its historical five-year ranges and averages. Fiscal year 2012 sales growth is presented on a 52-week to 52-week basis.

FY07-FY11 Results
Low High Average FY12
Sales growth 1.0% 23.6% 12.8% 13.5%
Comparable store sales growth -3.1% 8.5% 4.9% 8.7%
Identical store sales growth -4.3% 8.4% 4.0% 8.4%
Ending square footage growth 5.3% 46.0% 14.1% 7.6%
Percent of sales from new & relocated stores 4.2% 8.8% 6.4% 5.4%
Gross profit 34.0% 35.0% 34.6% 35.5%
Direct store expenses 26.0% 26.7% 26.3% 25.5%
Store contribution 7.5% 9.0% 8.3% 10.0%
G&A expenses 3.0% 3.4% 3.2% 3.2%

Growth and Development

The Company opened seven stores in the fourth quarter and has opened seven stores so far in the first quarter. The Company expects to open three additional stores in the first quarter. The Company currently has 342 stores totaling approximately 13.0 million square feet. 

The Company recently signed 11 new leases averaging 37,500 square feet in size in Altamonte Springs, FL; Clearwater, FL; Hyannis, MA; North Carolina; Morristown, NJ; New York City, NY (two stores); Philadelphia, PA; South Hills, PA; Dallas, TX; and Seattle, WA.  These stores currently are scheduled to open in fiscal year 2014 and beyond. 

In addition, the Company recently announced plans to purchase six leases from Johnnie's Foodmaster, expanding its presence in the Greater Boston area to 26 stores. The six leases include South Weymouth, Arlington, Charlestown, Brookline, Melrose and Somerville and average 31,000 square feet in size. Johnnie's Foodmaster will close the stores prior to the November 30 transaction closing date. The Company plans to remodel and reopen the locations as Whole Foods Market stores before the end of September 2013. The Company does not expect this transaction to be material to sales or earnings in fiscal year 2013.

The following table provides additional information about the Company's store openings in fiscal years 2011, 2012 and 2013 year to date; leases currently tendered but unopened; and total development pipeline (including leases currently tendered) for stores scheduled to open through fiscal year 2016. 

Stores Stores Stores Current Current
Opened Opened Opened Leases Leases
New Store Information FY11 FY12 FY13 YTD Tendered Signed*
Number of stores (including relocations) 18 25 7 12 79
Number of relocations 6 1 0 4 10
Number of lease acquisitions, ground leases, 2 0 0 2 9
and owned properties
New markets 0 8 4 4 18
Average store size (gross square feet) 39,400 35,500 33,500 37,600 36,600
Total square footage 708,700 887,400 234,800 450,800 2,896,300
Average tender period in months 12.5 7.9 5.9
Average pre-opening expense per store (incl. rent) $2.5 mil $1.7 mil
Average pre-opening rent per store $1.2 mil $0.6 mil
*Includes six Johnnie's Foodmaster leases.

Outlook for Fiscal Year 2013

The following table provides information on the Company's estimated and actual results for fiscal year 2012, a 53-week year, as well as additional information about the Company's outlook for fiscal year 2013. The Company's outlook for fiscal year 2013 includes the recently announced acquisition of six leases from Johnnie's Foodmaster which is scheduled to close on November 30, 2012. It does not include the one-time charge the Company expects to record in the first quarter for Hurricane Sandy. On a 52-week to 52-week basis, the Company expects sales growth of 12% to 14%, comparable store sales growth of 6.5% to 8.5%, identical store sales growth of 6.0% to 8.0%, and diluted earnings per share growth of 14% to 16% to $2.83 to $2.87.

FY12 (E) FY12 (A) FY13
53 Weeks 53 Weeks 52-Week Outlook
Sales growth 15.6% - 15.8% 15.7% 10% - 12%*
Comparable store sales growth 8.6% - 8.8% 8.7% 6.5% - 8.5%
Two-year comps 17.1% - 17.3% 17.3% 15.2% - 17.2%
Identical store sales growth 8.2% - 8.4% 8.4% 6.0% - 8.0%
Two-year idents 16.6% - 16.8% 16.7% 14.4% - 16.4%
Three-year idents 23.1% - 23.3% 23.3% 22.7% - 24.7%
Number of new stores 25 25 32 - 34
% of sales from new stores 5% - 6% 5.4% 6% - 7%
Ending square footage growth 7% 7.6% 8%
G&A expenses 3.2% 3.2% 3.1%
Pre-opening and relocation costs $54.5 -- $56 mil $56.8 mil $68 -- $73 mil
Operating margin 6.4% 6.4% 6.6% - 6.7%
EBITDA $1.05 -- $1.06 bil $1.06 bil $1.18 -- $1.20 bil
Tax rate 38.6% 38.1% 38.6% - 39.0%
Diluted shares outstanding 185 mil 184 mil 188 mil
Diluted EPS $2.51 -- $2.52 $2.52 $2.83 -- $2.87
YOY % change 30% - 31% 31% 12% - 14%*
Capital expenditures $440 -- $450 mil $456.2 mil $565 -- $615 mil
*On a 52-week to 52-week basis:
Sales growth 13% - 14% 13.5% 12% - 14%
Diluted EPS growth 27% 28.2% 14% - 16%

The following table provides information about the Company's estimated store openings through fiscal year 2014. 

Estimated Openings Relocations Average Square Feet
                      per Store
Ending Square
Footage Growth
Fiscal year 2013 32 - 34 5 34,000 8%
Fiscal year 2014 33 - 38 2-3 38,000 8% - 9%

Over the long term, the Company considers 1,000 stores to be a reasonable indication of its market opportunity in the United States as the Whole Foods Market brand continues to strengthen, consumer demand for natural and organic products continues to increase, and the Company's flexibility on new store size opens up additional market opportunities. The Company believes Canada and the United Kingdom hold great promise as well.

About Whole Foods Market

Founded in 1980 in Austin, Texas, Whole Foods Market (www.wholefoodsmarket.com) is the leading retailer of natural and organic foods and America's first national "Certified Organic" grocer. In fiscal year 2012, the Company had sales of approximately $12 billion and currently has 342 stores in the United States, Canada, and the United Kingdom. Whole Foods Market employs approximately 73,000 Team Members and has been ranked for 15 consecutive years as one of the "100 Best Companies to Work For" in America by Fortune magazine.

The Whole Foods Market, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6063

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 general business conditions, changes in overall economic conditions that impact consumer spending, including fuel prices and housing market trends, the impact of competition 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 25, 2011.  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 (866) 952-1906, 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)
13-weeks ended 12-weeks ended 53-weeks ended 52-weeks ended
September 30, 2012 September 25, 2011 September 30, 2012 September 25, 2011
Sales  $ 2,910,327  $ 2,353,833  $ 11,698,828  $ 10,107,787
Cost of goods sold and occupancy costs  1,883,747  1,541,521  7,543,054  6,571,238
Gross profit 1,026,580 812,312 4,155,774 3,536,549
Direct store expenses  740,806  608,618  2,983,419  2,628,811
Store contribution  285,774  203,694  1,172,355  907,738
General and administrative expenses  94,350  73,675  372,065  310,920
Operating income before pre-opening and store closure  191,424  130,019  800,290  596,818
Pre-opening expenses  14,001  10,885  46,899  40,852
Relocation, store closure and lease termination costs  1,826  1,826  9,885  8,346
Operating income  175,597  117,308  743,506  547,620
Investment and other income, net of interest  1,786  1,443  8,538  4,092
Income before income taxes  177,383  118,751  752,044  551,712
Provision for income taxes  64,651  43,276  286,471  209,100
Net income  $ 112,732  $ 75,475  $ 465,573  $ 342,612
Basic earnings per share  $ 0.61  $ 0.42  $ 2.55  $ 1.96
Weighted average shares outstanding  184,957  177,767  182,401  175,221
Diluted earnings per share  $ 0.60  $ 0.42  $ 2.52  $ 1.93
Weighted average shares outstanding, diluted basis  186,518  179,832  184,444  177,279
Dividends declared per common share  $ 0.14  $ 0.10  $ 0.56  $ 0.40
A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows:
13-weeks ended 12-weeks ended 53-weeks ended 52-weeks ended
September 30, 2012 September 25, 2011 September 30, 2012 September 25, 2011
Net income
(numerator for basic and diluted earnings per share)  $ 112,732  $ 75,475  $ 465,573  $ 342,612
Weighted average common shares outstanding  184,962  177,767  182,406  175,221
Less: Unvested restricted stock  (5)  --   (5)  -- 
Weighted average common shares outstanding (denominator for basic earnings per share)  184,957  177,767  182,401  175,221
Potential common shares outstanding:
Dilutive impact of restricted stock  2  --   1  -- 
Incremental shares from assumed exercise of stock options  1,559  2,065  2,042  2,058
Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share)  186,518  179,832  184,444  177,279
Basic earnings per share  $ 0.61  $ 0.42  $ 2.55  $ 1.96
Diluted earnings per share  $ 0.60  $ 0.42  $ 2.52  $ 1.93
Whole Foods Market, Inc.
Consolidated Balance Sheets (unaudited)
September 30, 2012 and September 25, 2011
(In thousands)
Assets 2012 2011
Current assets:
Cash and cash equivalents  $ 89,016  $ 212,004
Short-term investments - available-for-sale securities  1,131,213  442,320
Restricted cash  102,873  91,956
Accounts receivable  196,503  175,310
Merchandise inventories  374,269  336,799
Prepaid expenses and other current assets  76,511  73,579
Deferred income taxes  132,246  121,176
Total current assets  2,102,631  1,453,144
Property and equipment, net of accumulated depreciation and amortization  2,192,683  1,997,212
Long-term investments - available-for-sale securities  221,426  52,815
Goodwill  662,938  662,938
Intangible assets, net of accumulated amortization  62,399  67,234
Deferred income taxes  42,834  50,148
Other assets  9,305  8,584
Total assets  $ 5,294,216  $ 4,292,075
Liabilities And Shareholders' Equity
Current liabilities:
Current installments of capital lease obligations  $ 1,012  $ 466
Accounts payable  247,089  236,913
Accrued payroll, bonus and other benefits due team members  307,164  281,587
Dividends payable  25,959  17,827
Other current liabilities  395,964  342,568
Total current liabilities  977,188  879,361
Long-term capital lease obligations, less current installments  23,110  17,439
Deferred lease liabilities  440,822  353,776
Other long-term liabilities  50,627  50,194
Total liabilities  1,491,747  1,300,770
Shareholders' equity:
Common stock, no par value, 600,000 and 300,000 shares authorized; 185,783 and 178,886 shares issued; and 185,437 and 178,886 shares outstanding in 2012 and 2011, respectively  2,592,369  2,120,972
Common stock in treasury, at cost  (28,599)  --
Accumulated other comprehensive income (loss)  5,266  (164)
Retained earnings  1,233,433  870,497
Total shareholders' equity  3,802,469  2,991,305
Commitments and contingencies
Total liabilities and shareholders' equity  $ 5,294,216  $ 4,292,075
Whole Foods Market, Inc.
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
53-weeks ended 52-weeks ended
September 30, 2012 September 25, 2011
Cash flows from operating activities
Net income  $ 465,573  $ 342,612
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 311,550 287,109
Loss on disposition of fixed assets 2,223 2,228
Share-based payment expense 42,288 27,259
LIFO expense 100 10,250
Deferred income tax expense (benefit) (8,039) 19,540
Excess tax benefit related to exercise of team member stock options (50,349) (22,741)
Accretion of premium/discount on marketable securities 15,710 6,164
Deferred lease liabilities 77,044 53,381
Other (1,695) 866
Net change in current assets and liabilities:
Accounts receivable (29,879) (35,422)
Merchandise inventories (37,075) (23,267)
Prepaid expenses and other current assets (1,779) (18,987)
Accounts payable 9,606 23,768
Accrued payroll, bonus and other benefits due team members 25,285 37,204
Other current liabilities 94,918 53,831
Net change in other long-term liabilities 4,234 (8,950)
Net cash provided by operating activities 919,715 754,845
Cash flows from investing activities
Development costs of new locations (261,710) (203,457)
Other property and equipment expenditures (194,539) (161,507)
Purchase of available-for-sale securities (3,009,503) (1,228,920)
Sale of available-for-sale securities 2,138,221 1,155,795
Increase in restricted cash (10,917) (5,154)
Other investing activities (2,901) (7,481)
Net cash used in investing activities (1,341,349) (450,724)
Cash flows from financing activities
Common stock dividends paid (94,505) (52,620)
Issuance of common stock 370,226 296,719
Purchase of treasury stock (28,599) -- 
Excess tax benefit related to exercise of team member stock options 50,349 22,741
Payments on long-term debt and capital lease obligations (305) (490,394)
Net cash provided by (used in) financing activities 297,166 (223,554)
Effect of exchange rate changes on cash and cash equivalents 1,480 (559)
Net change in cash and cash equivalents (122,988) 80,008
Cash and cash equivalents at beginning of period 212,004 131,996
Cash and cash equivalents at end of period  $ 89,016  $ 212,004
Supplemental disclosure of cash flow information:
Interest paid  $ 2,839  $ 15,837
Federal and state income taxes paid  $ 201,771  $ 192,485
Whole Foods Market, Inc.
Non-GAAP Financial Measures (unaudited)
(In thousands)
The Company provides certain non-GAAP financial measures when those measures provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. These measures are not in accordance with, or an alternative to, GAAP. Since the fourth quarter and fiscal year ended September 30, 2012 contained an additional week, our operating results are not directly comparable to the prior year. We believe adjusting the reported results for the 13-week and 53-week periods ended September 30, 2012 provides more comparable results quarter-over-quarter and year-over-year. For that reason, the Company reported sales growth and diluted EPS growth on 12-week and 52-week bases. The Company adjusted the 13-week and 53-week periods by removing one-thirteenth of the 13-week period results to remove the estimated impact of the additional week in the current year, as shown below.
13-weeks ended 12-weeks ended 53-weeks ended 52-weeks ended
September 30, 2012 September 25, 2011 September 30, 2012 September 25, 2011
Sales  $ 2,910,327  $ 2,353,833  $ 11,698,828  $ 10,107,787
Less: 1/13 of Q4 sales  223,871  --  223,871  --
Sales adjusted to 12-week quarter & 52-week year  $ 2,686,456  $ 2,353,833  $ 11,474,957  $ 10,107,787
Net income  $ 112,732  $ 75,475  $ 465,573  $ 342,612
Less: 1/13 of Q4 net income  8,672  --  8,672  --
Net income adjusted to 12-week quarter & 52-week year  $ 104,060  $ 75,475  $ 456,901  $ 342,612
Basic earnings per share, as reported  $ 0.61  $ 0.42  $ 2.55  $ 1.96
Basic earnings per share, adjusted  $ 0.56  $ 0.42  $ 2.50  $ 1.96
Weighted average shares outstanding  184,957  177,767  182,401  175,221
Diluted earnings per share, as reported  $ 0.60  $ 0.42  $ 2.52  $ 1.93
Diluted earnings per share, adjusted  $ 0.56  $ 0.42  $ 2.48  $ 1.93
Weighted average shares outstanding, diluted basis  186,518  179,832  184,444  177,279
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 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Return on Invested Capital ("ROIC") 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. In addition, management uses these measures for reviewing the financial results of the Company as well as a component of incentive compensation.

The Company defines Adjusted EBITDA as EBITDA plus non-cash share-based payment expense and deferred rent. The following is a tabular presentation of the non-GAAP financial measure Adjusted EBITDA including a reconciliation to GAAP net income, which the Company believes to be the most directly comparable GAAP financial measure. 
13-weeks ended 12-weeks ended 53-weeks ended 52-weeks ended
EBITDA and Adjusted EBITDA September 30, 2012 September 25, 2011 September 30, 2012 September 25, 2011
Net income  $ 112,732  $ 75,475  $ 465,573  $ 342,612
Provision for income taxes  64,651  43,276  286,471  209,100
Investment and other income, net of interest  (1,786)  (1,443)  (8,538)  (4,092)
Operating income  175,597  117,308  743,506  547,620
Depreciation and amortization  76,649  68,027  311,550  287,109
Earnings before interest, taxes, depreciation & amortization (EBITDA)  252,246  185,335  1,055,056  834,729
Deferred rent  10,201  8,799  40,958  32,818
Share-based payment expense  13,149  8,169  42,288  27,259
Adjusted EBITDA  $ 275,596  $ 202,303  $ 1,138,302  $ 894,806
The Company defines ROIC as annualized adjusted earnings divided by average invested capital. Earnings are annualized on a 52-week basis. Adjustments to earnings are defined in the following tabular reconciliation. Invested capital represents a trailing four-quarter average.
13-weeks ended 12-weeks ended 53-weeks ended 52-weeks ended
ROIC September 30, 2012 September 25, 2011 September 30, 2012 September 25, 2011
Net income  $ 112,732  $ 75,475  $ 465,573  $ 342,612
Interest expense, net of taxes  91  --  219  2,411
Adjusted earnings  112,823  75,475  465,792  345,023
Total rent expense, net of taxes1  54,473  47,176  211,344  193,609
Estimated depreciation on capitalized operating leases, net of taxes2  (36,315)  (31,451)  (140,896)  (129,073)
Adjusted earnings, including interest related to operating leases  130,981  91,200  536,240  409,559
Annualized adjusted earnings  $ 451,292  $ 327,058  $ 457,115  $ 345,023
Annualized adjusted earnings, including interest related to operating leases  $ 523,924  $ 395,200  $ 526,204  $ 409,559
Average working capital, excluding current portion of long-term debt  $ 955,973  $ 493,187  $ 955,973  $ 493,187
Average property and equipment, net  2,090,103  1,950,435  2,090,103  1,950,435
Average other assets  954,899  872,117  954,899  872,117
Average other liabilities  (460,155)  (389,198)  (460,155)  (389,198)
Average invested capital  $ 3,540,820  $ 2,926,541  $ 3,540,820  $ 2,926,541
Average estimated asset base of capitalized operating leases3  2,740,419  2,501,264  2,740,419  2,501,264
Average invested capital, adjusted for capitalization of operating leases  $ 6,281,239  $ 5,427,805  $ 6,281,239  $ 5,427,805
ROIC 12.7% 11.2% 12.9% 11.8%
ROIC, adjusted for capitalization of operating leases 8.3% 7.3% 8.4% 7.5%
1 Total rent includes minimum base rent of all tendered leases
2 Estimated depreciation equals 2/3 of total rent expense
3 Estimated asset base equals 8x total rent expense
The Company defines Free Cash Flow as net cash provided by operating activities less capital expenditures. The following is a tabular reconciliation of the Free Cash Flow non-GAAP financial measure.
13-weeks ended 12-weeks ended 53-weeks ended 52-weeks ended
Free Cash Flow September 30, 2012 September 25, 2011 September 30, 2012 September 25, 2011
Net cash provided by operating activities  $ 188,829  $ 159,642  $ 919,715  $ 754,845
Development costs of new locations  (72,940)  (47,409)  (261,710)  (203,457)
Other property and equipment expenditures  (57,314)  (45,977)  (194,539)  (161,507)
Free Cash Flow  $ 58,575  $ 66,256  $ 463,466  $ 389,881
CONTACT: Cindy McCann
         VP of Investor Relations
         512.542.0204
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