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Investment Prospectus for Chihuahua, Inc. A Comparative Financial Analysis of Whole Foods Market, Inc. vs Safeway Inc. and Investment Recommendation
March 20, 2009
Prepared by: Francis Tao, Leah Lundy and Qian Ye
Table of Contents Table of Contents---------------------------------------------------------------------------------------------1 i 1.0 Executive Summary ------------------------------------------------------------------------------------ 1 2.0 General Information -----------------------------------------------------------------------------------2.1 Whole Foods Market, Inc. -----------------------------------------------------------------------2.2 Safeway Inc. ---------------------------------------------------------------------------------------3.0 Industry Information -----------------------------------------------------------------------------------4.0 Company Information and Financial Highlights ---------------------------------------------------5.0 Comparative Financial Statement Analysis ---------------------------------------------------------5.1 Trend Analysis (Horizontal Analysis) ----------------------------------------------------------5.1.1 Whole Foods Market, Inc. ----------------------------------------------------------------5.1.2 Safeway Inc. --------------------------------------------------------------------------------5.1.3 Conclusion from Trend Analysis (Horizontal Analysis) ------------------------------5.2 Common-Sized Analysis (Vertical Analysis) -------------------------------------------------5.2.1 Whole Foods Market, Inc. ----------------------------------------------------------------5.2.2 Safeway Inc. --------------------------------------------------------------------------------5.2.3Conclusion from Common-Sized Analysis (Vertical Analysis)-----------------------6.0 Analytical Measures – Solvency and Profitability Analysis -------------------------------------6.1 Solvency Measures ------------------------------------------------------------------------------6.1.1 Working Capital ------------------------------------------------------------------------6.1.2 Current Ratio ----------------------------------------------------------------------------6.1.3 Quick Ratio ------------------------------------------------------------------------------6.1.4 Accounts Receivable Turnover -------------------------------------------------------6.1.5 Number of Days’ in Receivables -----------------------------------------------------6.1.6 Inventory Turnover ---------------------------------------------------------------------6.1.7 Number of Days Sales in Inventory --------------------------------------------------6.1.8 Ratio of Fixed Assets to Long-term Liabilities --------------------------------------6.1.9 Ration of Liabilities to Stockholders’ Equity ----------------------------------------6.1.10 Number of Times Interest Charges Earned ------------------------------------------6.2 Profitability Measures ----------------------------------------------------------------------------6.2.1 Ratio of Net Sales to Assets ------------------------------------------------------------6.2.2 Rate Earned on Total Assets -----------------------------------------------------------6.2.3 Rate Earned on Stockholders’ Equity -------------------------------------------------6.2.4 Rate earned on Common Stockholders’ Equity -------------------------------------6.2.5 Earnings per Share on Common Stock -----------------------------------------------6.2.6 Price-Earnings Ratio --------------------------------------------------------------------6.2.7 Dividend Yield ---------------------------------------------------------------------------6.2.8 Dividend Yield ---------------------------------------------------------------------------7.0 Conclusion and Recommendation --------------------------------------------------------------------Appnedix A – Description of Analytical Measures Used ----------------------------------------------Appendix B – Whole Foods Market, Inc., Comparative Balance Sheet, Horizontal Analysis ----Appendix C – Whole Foods Market, Inc., Comparative Balance Sheet, Vertical Analysis --------Appendix D – Whole Foods Market, Inc., Comparative Income Statement, Horizontal Analysis – Appendix E – Whole Foods Market, Inc., Comparative Income Statement, Vertical Analysis ----Appendix F – Safeway, Inc., Comparative Balance Sheet, Horizontal Analysis --------------------Appendix G – Safeway, Inc., Comparative Balance Sheet, Vertical Analysis -----------------------1
Appendix H – Safeway, Inc., Comparative Income Statement, Horizontal Analysis –--------------Appendix I – Safeway, Inc., Comparative Income Statement, Vertical Analysis ------------------Appendix J – Common-Sized Balance Sheet Horizontal Analysis ----------------------------------Appendix K – Common-Sized Balance Sheet Vertical Analysis -------------------------------------Appendix L – Common-Sized Income Statement Horizontal Analysis ------------------------------Appendix M – Common-Sized Income Statement Vertical Analysis --------------------------------References ---------------------------------------------------------------------------------------------------
6.0 Analytical Measures – Solvency and Profitability Analysis
Profitability Measures
Solvency Measures
Analytical Measures Working capital
Current ratio Quick ratio Accounts Receivable turnover Number of days’ sales in Receivables Inventory turnover Number of days’ in inventory Ratio of fixed assets to long-term liabilities Ratio of liabilities to stockholders’ equity Number of times interest charges are earned Ratio of net sales to assets Rate earned on total assets Rate earned on stockholders’ equity Rate earned on common stockholders’ equity Earnings per share on common stock Price-earnings ratio Dividends per share Dividend yield
Whole Foods Market, Inc. Safeway Inc. WFMI/SWY Ratios, 2007 (WFMI) (SWY) 2007 2006 2005 2007 2006 2005 -116,530 114,211 254,146 -1128.9 -561.5 103.22 1035.7 0.85 1.22 1.61 0.78 0.77 0.87 1.09 0.13 0.17 0.90 0.17 0.15 0.17 0.76 70.37 18.84 17.85 81.39 99.0 111.42 0.86 20.90
4.84
5.11
4.48
3.69
3.28
4.67
17.47 20.90
19.27 18.94
16.12 22.64
11.08 32.95
10.58 34.51
9.92 36.81
1.58 0.63
2.26
143.64
81.55
2.28
1.94
1.62
0.99
1.20
0.45
0.38
1.63
1.87
2.20
0.74
73.38
107.67
4.61
4.13
3.11
15.92
2.51
10,617.0 3 6.83
6.34
6.25
6.11
5.76
0.40
0.07
0.10
2.76
0.08
0.08
0.06
0.88
0.13
0.15
4.06
0.14
0.16
0.13
0.93
0.15
0.20
6.67
151.79
150.17
96.72
0.00
1.29
1.41
0.99
1.99
1.94
1.25
0.65
37.1 0.68 0.01
40.55 2.47 0.04
63.12 0.39 0.01
16.98 0.25 0.01
17.46 0.22 0.01
18.41 0.10 0.00
2.18 2.72 1.00
Appendix A – Description of Analytical Measures Used
Method of Computation Solvency measures: Working Capital
Current Assets – Current Liabilities
Use To indicate the ability to meet
Current Ratio Quick Ratio Accounts Receivable Turnover Numbers of Days’ Sales in Receivables Inventory Turnover Number of Days’ Sales in Inventory Ratio of Fixed Assets to Long-Term Liabilities Ratio of Liabilities to Stockholders’ Equity Number of Times Interest Charges are Earned Profitability measures: Ratio of Net Sales to Assets Rate Earned on Total Assets Rate Earned on Stockholders’ Equity Rate Earned on Common Stockholders’ Equity Earnings per Share on Common Stock Price-Earnings Ratio
Current Assets / Current Liabilities Quick Assets / Current Liabilities Net Sales / Average Accounts Receivable Average Accounts Receivable / Average Daily Sales Cost of Goods Sold / Average Inventory Average Inventory / Average Daily Cost of Goods Sold Fixed Assets (net) / Long-Term Liabilities Total Liabilities / Total Stockholders’ Equity (Income Before Income Tax + Interest Expense) / Interest Expense Net Sales / Average Total Assets (excluding long-term investments) (Net Income + Interest Expense) / Average Total Assets Net Income / Average Total Stockholders’ Equity (Net Income – Preferred Dividends) / Average Common Stockholders’ Equity (Net Income – Preferred Dividends) / Shares of Common Stock Outstanding Market Price per Share of Common Stock / Earnings per Share on Common Stock
Dividends per Share
Dividends / Shares of Common Outstanding
Dividend Yield
Dividends per Share of Common Stock / Market Price per Share of Common Stock
currently maturing obligations To indicate instant debt-paying To assess the efficiency in collecting receivables and in the management of credit To assess the efficiency in the management of inventory To indicate the margin of safety to long-term creditors To indicate the margin of safety to creditors To assess the risk to debtholders in terms of number of times interest charges were earned To assess the effectiveness in the use of assets To assess the profitability of the assets To assess the profitability of the investment by stockholders To assess the profitability of the investment by common stockholders To indicate future earnings prospects, based on the relationship between market value of common stock and earnings To indicate the extent to which earnings are being distributed to common stockholders To indicate the rate of return to common stockholders in terms of dividends
Appendix B - Whole Foods Market, Inc., Comparative Balance Sheet, Horizontal Analysis W HOLE FOODS MARKET, INC. Comparative Balance Sheet (In thousands) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 Horizontal Analysis
2007
2006
2005
Amount
Amount
Amount
2006 to 2007
2005 to 2006
Increase (Decrease)
Increase (Decrease)
Amount
Percent
Amount
-100.0%
-$306,272
-99.3%
Percent
Assets Current assets: Cash and equivalents Accounts Receivables
$0
$2,252
$308,524
-$2,252
105,209
82,137
66,682
23,072
28.1%
$15,455
23.2%
$288,112
$203,727
$174,848
$84,385
41.4%
$28,879
16.5%
Prepaid expenses and other current assets274,665
335,865
122,475
-61,200
-18.2%
$213,390
174.2%
$623,981
$672,529
44,005
7.1%
($48,548)
-7.2%
1,666,559 1,236,133 1,054,605
430,426
34.8%
$181,528
17.2%
Merchandise inventories Total current assets Property: Property and equipment, net of accumulated depreciation and amortization Goodwill
$667,986
$668,850
$113,494
$112,476 $555,356
489.3%
$1,018
0.9%
Other assets
$209,733
$69,388
$49,686 $140,345
202.3%
$19,702
39.7%
Total assets
3,213,128 2,042,996 1,889,296 1,170,132
57.3%
$153,700
8.1%
Liabilities and Stockholder's Equity Current Liabilities: Accounts payable
225,728
121,857
103,348
103,871
85.2%
18,509
17.9%
Accrued payroll
181,290
153,014
126,981
28,276
18.5%
26,033
20.5%
Other current liabilities
377,498
234,899
188,054
142,599
60.7%
46,845
24.9%
Total current liabilities
784,516
509,770
418,383
274,746
53.9%
91,387
21.8%
Long-term debt
736,087
8,606
12,932
727,481
8453.2%
-4,326
-33.5%
Other long-term debt
233,721
120,477
92,305
113,244
94.0%
28,172
30.5%
1,754,324
638,853
523,620 1,115,471
174.6%
115,233
22.0%
Total liabilities Stockholders' equity: Common stock Treasury stock at cost
1,232,845 1,147,872 -199,961
Accumulated other comprehensive income 15,722
-99,964
874,972
84,973
7.4%
272,900
31.2%
0
-99,997
100.0%
-99,964
n/a
6,975
4,405
8,747
125.4%
2,570
58.3%
349,260
486,299
60,938
17.4%
-137,039
-28.2%
1,458,804 1,404,143 1,365,676
54,661
3.9%
38,467
2.8%
Total liabilities and stockholders' equity 3,213,128 2,042,996 1,889,296 1,170,132
57.3%
153,700
8.1%
Retained earnings Total stockholders' equity
410,198
Appendix C - Whole Foods Market, Inc., Comparative Balance Sheet, Vertical Analysis WHOLE FOODS MARKET, INC. Comparative Balance Sheet (in thousand) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 Vertical Analysis
2007 Amount
2006 Percent
Amount
2005 Percent
Amount
Percent
Assets Current assets: Cash and equivalents
$0
0.0%
$2,252
0.1%
$308,524
16.3%
Accounts Receivables
105,209
3.3%
82,137
4.0%
66,682
3.5%
Merchandise inventories
288,112
9.0%
203,727
10.0%
174,848
9.3%
Prepaid expenses and other current assets
274,665
8.5%
335,865
16.4%
122,475
6.5%
$667,986
20.8%
$623,981
30.5%
$672,529
35.6%
accumulated depreciation and amortization 1,666,559 Goodwill 668,850
51.9%
1,236,133
60.5%
1,054,605
55.8%
20.8%
113,494
5.6%
112,476
6.0%
Total current assets Property: Property and equipment, net of
Other assets
209,733
6.5%
Total assets
3,213,128
100%
2,042,996
69,388
100%
3.4%
1,889,296
49,686
100%
2.6%
Accounts payable
225,728
7.0%
121,857
6.0%
103,348
5.5%
Accrued payroll
181,290
5.6%
153,014
7.5%
126,981
6.7%
Other current liabilities
377,498
11.7%
234,899
11.5%
188,054
10.0%
Total current liabilities
784,516
24.4%
509,770
25.0%
418,383
22.1%
Long-term debt
736,087
22.9%
8,606
0.4%
12,932
0.7%
Other long-term debt
233,721
7.3%
120,477
5.9%
92,305
4.9%
1,754,324
54.6%
638,853
31.3%
523,620
27.7%
1,232,845
38.4%
1,147,872
56.2%
874,972
46.3%
-199,961
-6.2%
-99,964
-4.9%
0
0.0%
15,722
0.5%
6,975
0.3%
4,405
0.2%
410,198
12.8%
349,260
17.1%
486,299
25.7%
Total stockholders' equity
1,458,804
45.4%
1,404,143
68.7%
1,365,676
72.3%
Total liabilities and stockholders' equity
3,213,128
100%
2,042,996
100%
1,889,296
100%
Liabilities and Stockholder's Equity Current Liabilities:
Total liabilities Stockholders' equity: Common stock Treasury stock at cost Accumulated other comprehensive income Retained earnings
Appendix D - Whole Foods Market, Inc., Comparative Income Statement, Horizontal Analysis W HO LE FOODS MARKET, INC. Comparative Income Statement (In thousands) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 2006 to 2007 Horizontal Analysis
2007
2006
2005
Amount
Amount
Amount
2005 to 2006
Increase (-Decrease) Increase (-Decrease) Amount
Percent
Amount
Percent
Sales and other revenue
$6,591,773 $5,607,376 $4,701,289
$984,397
17.6%
$906,087
19.3%
Cost of goods sold Gross profit
4,295,170 3,647,734 3,052,184 2,296,603 1,959,642 1,649,105
647,436 336,961
17.75% 17.2%
595,550 310,537
19.5% 18.8%
358,519 -21,558.0
21.9% -6.8%
221,261 89,276
15.6% 38.9%
-2,191.0
-98.6%
Operating and administrative expense 1,999,152 Operating profit 297,451 Interest expense
4,208
Other income, net
11,324
Income before income taxes Income taxes Net income
1,640,633 319,009 32
1,419,372 229,733 2,223
4,176
13050.0%
20,736
9,623
-9,412
-45.4%
11,113
115.5%
304,567
339,713
237,133
-35,146.0
-10.3%
102,580
43.3%
121,827 182,740
135,885 203,828
100,782 136,351
-14,058.0 -21,088.0
-10.3% -10.3%
35,103 67,477
34.8% 49.5%
Appendix E - Whole Foods Market, Inc., Comparative Income Statement, Vertical Analysis
WHOLE FOODS MARKET, INC. Comparative Income Statement (in thousands) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 Vertical Analysis
2007
2006
2005
Amount
Percent
Amount
Pecent
Amount
$6,591,773
100.0%
$5,607,376
100.0%
$4,701,289
100.0%
Cost of goods sold
4,295,170
65.2%
3,647,734
65.1%
3,052,184
64.9%
Gross profit
2,296,603
34.8%
1,959,642
34.9%
1,649,105
35.1%
Operating and administrative expense 1,999,152
30.3%
1,640,633
29.3%
1,419,372
30.2%
297,451
4.5%
319,009
5.7%
229,733
4.9%
Interest expense
-4,208
-0.1%
-32
0.0%
-2,223
0.0%
Other income, net
11,324
0.2%
20,736
0.4%
9,623
0.2%
Income before income taxes
304,567
4.6%
339,713
6.1%
237,133
5.0%
Income taxes Net income
121,827 182,740
1.8% 2.8%
135,885 203,828
2.4% 3.6%
100,782 136,351
2.1% 2.9%
Sales and other revenue
Operating profit
Pecent
Appendix F - Safeway, Inc., Comparative Balance Sheet, Horizontal Analysis SAFEW AY, INC. Comparative Balance Sheet (In millions, except per-share amounts) Year-end
Year-end
Year-end
2007
2006
2005
Amount
Amount
Amount
Horizontal Analysis
2006 to 2007
2005 to 2006
Increase (-Decrease)Increase (-Decrease) Amount
Percent
Amount
Percent
-42.0%
Assets Current assets: Cash and equivalents Accounts Receivables
$277.8
$216.6
$373.3
$61.2
28.3% -$156.70
577.9
461.2
350.6
116.7
25.3%
110.6
31.5%
2,797.8
2,642.5
2,766.0
155.3
5.9%
-123.5
-4.5%
354.0
245.4
212.5
108.6
44.3%
32.9
15.5%
4,007.5
3,565.7
3,702.4
441.8
12.4%
-136.7
-3.7%
10,622.0
9,773.3
9,097.1
848.7
8.7%
676.2
7.4%
2,406.3
2,393.5
2,402.4
12.8
0.5%
-8.9
-0.4%
615.2 17,651.0
541.3 16,273.8
555.0 15,756.9
73.9 1,377.2
13.7% 8.5%
-13.7 516.9
-2.5% 3.3%
2,825.4
2,464.4
2,151.5
361.0
14.6%
312.90
14.5%
506.7
485.8
526.1
20.9
4.3%
-40.30
-7.7%
Other current liabilities
1,804.3
1,651.2
1,586.3
153.1
9.3%
64.90
4.1%
Total current liabilities
5,136.4
4,601.4
4,263.9
535.0
11.6%
337.50
7.9%
Long-term debt
4,657.7
5,036.6
5,605.3
-378.9
-7.5%
-568.70
-10.1%
Other long-term debt
1,155.1
968.9
968.0
186.2
19.2%
0.90
0.1%
10,949.2
10,606.9
10,837.2
342.3
3.2%
-230.30
-2.1%
Merchandise inventories Prepaid expenses and other current assets Total current assets Property: Property and equipment, net of accumulated depreciation and amortization Goodwill Other assets Total assets Liabilities and Stockholder's Equity Current Liabilities: Accounts payable Accrued payroll
Total liabilities Stockholders' equity: Common stock Additional paid-in capital Treasury stock at cost
5.9
5.8
5.8
0.10
1.7%
0.00
0.0%
4,038.2
3,811.5
3,445.1
226.70
5.9%
366.40
10.6%
-229.30
5.5%
-313.00
8.1%
246.2
94.8
172.8
151.40
159.7%
-78.00
-45.1%
Retained earnings
6,829.5
5,943.5
5,171.7
886.00
14.9%
771.80
14.9%
Total stockholders' equity
6,701.8
5,666.9
4,919.7
1,034.90
18.3%
747.20
15.2%
17,651.0
16,273.8
15,756.9
1,377.20
8.5%
516.90
3.3%
Accumulated other comprehensive income
Total liabilities and stockholders' equity
-4,418.00
-4,188.70 -3,875.70
Appendix G - Safeway, Inc., Comparative Balance Sheet, Vertical Analysis SAFEWAY, INC. Comparative Balance Sheet (In millions, except per-share amounts)
Vertical Analysis
Year-end
Year-end
Year-end
2007
2006
2005
Amount
Percent
Amount
Percent
Amount
Percent
Assets Current assets: Cash and equivalents
$277.8
1.6%
$216.6
1.3%
$373.3
2.4%
Accounts Receivables
577.9
3.3%
461.2
2.8%
350.6
2.2%
2,797.8
15.9%
2,642.5
16.2%
2,766.0
17.6%
354.0
2.0%
245.4
1.5%
212.5
1.3%
4,007.5
22.7%
3,565.7
21.9%
3,702.4
23.5%
accumulated depreciation and amortization 10,622.0 Goodwill 2,406.3
60.2%
9,773.3
60.1%
9,097.1
57.7%
13.6%
2,393.5
14.7%
2,402.4
15.2%
Merchandise inventories Prepaid expenses and other current assets Total current assets Property: Property and equipment, net of
Other assets
615.2
3.5%
541.3
3.3%
555.0
3.5%
Total assets
17,651.0
100.0%
16,273.8
100.0%
15,756.9
100.0%
Liabilities and Stockholder's Equity Current Liabilities: Accounts payable Accrued payroll
2,825.4
16.0%
2,464.4
15.14%
2,151.5
13.7%
506.7
2.9%
485.8
2.99%
526.1
3.3%
Other current liabilities
1,804.3
10.2%
1,651.2
10.15%
1,586.3
10.1%
Total current liabilities
5,136.4
29.1%
4,601.4
28.27%
4,263.9
27.1%
Long-term debt
4,657.7
26.4%
5,036.6
30.95%
5,605.3
35.6%
Other long-term debt
1,155.1
6.5%
968.9
5.95%
968.0
6.1%
10,949.2
62.0%
10,606.9
65.18%
10,837.2
68.8%
Total liabilities Stockholders' equity: Common stock Additional paid-in capital Treasury stock at cost Accumulated other comprehensive income Retained earnings Total stockholders' equity Total liabilities and stockholders' equity
5.9
0.03%
5.8
0.04%
5.8
0.04%
4,038.2
22.9%
3,811.5
23.42%
3,445.1
21.9%
-4,418.00
-25.0%
-4,188.70
-25.74%
-3,875.70
-24.6%
246.2
1.4%
94.8
0.58%
172.8
1.1%
6,829.5
38.7%
5,943.5
36.52%
5,171.7
32.8%
6,701.8 17,651.0
38.0% 100%
5,666.9 16,273.8
34.82% 100%
4,919.7 15,756.9
31.2% 100.0%
Appendix H - Safeway, Inc., Comparative Income Statement, Horizontal Analysis SAF EW AY, INC . Comparative Income Statement (In millions, except per-share amounts) 52 W eeks
52 W eeks
52 W eeks
2007
2006
2005
Amount
Amount
Amount
Amount
Percent
$42,286.0
$40,185.0
$38,416.0
$2,101.0
5.2%
$1,769.0
4.6%
Cost of goods sold
-30,133.1
-28,604.0
-27,303.1
-1,529.10
5.35%
-1,300.90
4.8%
G ross profit
12,152.9
11,581.0
11,112.9
571.90
4.9%
468.10
4.2%
O perating and administrative expense -10,380.8
-9,981.2
-9,898.2
-399.60
4.0%
-83.00
0.8%
O perating profit
1,772.1
1,599.8
1,214.7
172.30
10.8%
385.10
31.7%
Interest expense
-388.9
-396.1
-402.6
7.20
-1.8%
6.50
-1.6%
O ther income, net
20.4
36.3
36.9
-15.90
-43.8%
-0.60
-1.6%
1,403.6
1,240.0
849.0
163.60
13.2%
391.00
46.1%
Income taxes
515.2
369.4
-287.90
145.80
39.5%
657.30 -228.3%
Net income
888.4
870.6
561.1
17.80
2.0%
H o rizontal Analysis
Sales and other revenue
Income before income taxes
2006 to 2007
2005 to 2006
Increase (-Decrease) Increase (-D ecrease) Amount
309.50
Percent
55.2%
Appendix I - Safeway, Inc., Comparative Income Statement, Vertical Analysis SAFEWAY, INC. Comparative Income Statement (In millions, except per-share amounts)
Vertical Analysis
52 Weeks
52 Weeks
52 Weeks
2007
2006
2005
Amount
Percent
Amount
Percent
Amount
Percent
Sales and other revenue
$42,286.0
100.0%
$40,185.0
100.0%
$38,416.0
100.0%
Cost of goods sold
-30,133.10
71.3%
-28,604.00
71.2%
-27,303.10
71.1%
12,152.90
28.7%
11,581.00
28.8%
11,112.90
28.9%
Operating and administrative expense -10,380.80
24.5%
-9,981.20
24.8%
-9,898.20
25.8%
Gross profit Operating profit
1,772.10
4.2%
1,599.80
4.0%
1,214.70
3.2%
Interest expense
-388.90
0.9%
-396.10
1.0%
-402.60
1.0%
Other income, net Income before income taxes Income taxes Net income
20.40
0.05%
36.30
0.1%
36.90
0.1%
1,403.60
3.3%
1,240.00
3.1%
849.00
2.2%
515.20 888.40
1.2% 2.1%
369.40 870.60
0.9% 2.2%
-287.90 561.10
0.7% 1.5%
Appendix J - Common-Sized Balance Sheet Horizontal Analysis Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Balance Sheet December 31, 2007 2006 to 2007 Horizontal Analysis
2005 to 2006
Increase (-Decrease) Whole Foods
Safeway
Increase (-Decrease) Whole Foods
Safeway
Assets Current assets: Cash and equivalents
-100.0%
28.3%
-99.3%
-42.0%
Accounts Receivables
28.1%
25.3%
23.2%
31.5%
Merchandise inventories
41.4%
5.9%
16.5%
-4.5%
-18.2%
44.3%
174.2%
15.5%
7.1%
12.4%
-7.2%
-3.7%
Property and equipment, net of accumulated depreciation and amortization 34.8%
8.7%
17.2%
7.4%
Goodwill
489.3%
0.5%
0.9%
-0.4%
Other assets Total assets
202.3% 57.3%
13.7% 8.5%
39.7% 8.1%
-2.5% 3.3%
Accounts payable
85.2%
14.6%
17.9%
14.5%
Accrued payroll
18.5%
4.3%
20.5%
-7.7%
Other current liabilities
60.7%
9.3%
24.9%
4.1%
Total current liabilities
53.9%
11.6%
21.8%
7.9%
8453.2%
-7.5%
-33.5%
-10.1%
94.0%
19.2%
30.5%
0.1%
174.6%
3.2%
22.0%
-2.1%
7.4%
1.7%
31.2%
0.00%
n/a
5.9%
n/a
10.6%
Treasury stock at cost
100.0%
5.5%
n/a
8.1%
Accumulated other comprehensive income
125.4%
159.7%
58.3%
-45.1%
Retained earnings
17.4%
14.9%
-28.2%
14.9%
Total stockholders' equity Total liabilities and stockholders' equity
3.9% 57.3%
18.3% 8.5%
2.8% 8.1%
15.2% 3.3%
Prepaid expenses and other current assets Total current assets Property:
Liabilities and Stockholder's Equity Current Liabilities:
Long-term debt Other long-term debt Total liabilities Stockholders' equity: Common stock Additional paid-in capital
Appendix K - Common-Sized Balance Sheet Vertical Analysis
Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Balance Sheet December 31, 2007 Vertical Analysis
2007 Whole Foods
2006 Safeway
Whole Foods
2005 Safeway
Whole Foods
Safeway
Assets Current assets: Cash and equivalents
0.0%
Accounts Receivables
3.3%
3.3%
Merchandise inventories
9.0%
15.9%
Prepaid expenses and other current assets 8.5%
2.0% 22.7%
Total current assets
20.8%
1.6%
0.1%
0.1%
16.3%
16.3%
4.0%
4.0%
3.5%
3.5%
10.0%
10.0%
9.3%
9.3%
16.4%
16.4%
6.5%
6.5%
30.5%
30.5%
35.6%
35.6%
Property: Property and equipment, net of accumulated 51.9% depreciation 60.2%and amortization 60.5%
60.5%
55.8%
55.8%
Goodwill
20.8%
13.6%
5.6%
5.6%
6.0%
6.0%
Other assets Total assets
6.5% 100%
3.5% 100%
3.4% 100%
3.4% 100%
2.6% 100%
2.6% 100%
Accounts payable
7.0%
16.0%
6.0%
15.14%
5.5%
13.7%
Accrued payroll
5.6%
2.9%
7.5%
2.99%
6.7%
3.3%
Other current liabilities
11.7%
10.2%
11.5%
10.15%
10.0%
10.1%
Total current liabilities
24.3%
29.1%
25.0%
28.27%
22.2%
27.1%
Long-term debt
22.9%
26.4%
0.4%
30.95%
0.7%
35.6%
7.3%
6.5%
5.9%
5.95%
4.9%
6.1%
54.5%
62.0%
31.3%
65.18%
27.8%
68.8%
38.4%
0.03%
56.2%
0.04%
46.3%
0.04%
n/a
22.9%
n/a
23.42%
n/a
21.9%
-6.2%
-25.0%
-4.9%
-25.74%
0.0%
-24.6%
Accumulated other comprehensive income 0.5%
1.4%
0.3%
0.58%
0.2%
1.1%
12.8%
38.7%
17.1%
36.52%
25.7%
32.8%
Total stockholders' equity 45.5% Total liabilities and stockholders' equity 100%
38.0% 100%
68.7% 100%
34.82% 100%
72.2% 100%
31.2% 100%
Liabilities and Stockholder's Equity Current Liabilities:
Other long-term debt Total liabilities Stockholders' equity: Common stock Additional paid-in capital Treasury stock at cost Retained earnings
Appendix L - Common-Sized Income Statement, Horizontal Analysis Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Income Statement December 31, 2007 Horizontal Analysis
2006 to 2007 Whole Foods
2005 to 2006
Safeway
Whole Foods
Safeway
Sales and other revenue
17.6%
5.2%
19.3%
4.6%
Cost of goods sold
17.8%
5.35%
19.5%
4.8%
Gross profit
17.2%
4.9%
18.8%
4.2%
Operating and administrative expense
21.9%
4.0%
15.6%
0.8%
Operating profit
-6.8%
10.8%
38.9%
31.7%
13050.0%
-1.8%
-98.6%
-1.6%
Other income, net
-45.4%
-43.8%
115.5%
-1.6%
Income before income taxes
-10.3%
13.2%
43.3%
46.1%
Income taxes
-10.3%
39.5%
34.8%
-228.3%
Net income
10.3%
2.0%
49.5%
55.2%
Interest expense
Appendix M - Common-Sized Income Statement Vertical Analysis Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Income Statement December 31, 2007 Vertical Analysis
2007
2006
2005
Whole Foods
Safeway
Whole Foods
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Cost of goods sold
65.2%
71.3%
65.1%
71.2%
64.9%
71.1%
Gross profit
34.8%
28.7%
34.9%
28.8%
35.1%
28.9%
Operating and administrative expense
30.3%
24.5%
29.3%
24.8%
30.2%
25.8%
Operating profit
4.5%
4.2%
5.7%
4.0%
4.9%
3.2%
Interest expense
-0.1%
0.9%
0.0%
1.0%
0.0%
1.0%
Other income, net
0.2%
0.05%
0.4%
0.1%
0.2%
0.1%
Income before income taxes
4.6%
3.3%
6.1%
3.1%
5.0%
2.2%
Income taxes
1.8%
1.2%
2.4%
0.9%
2.1%
0.7%
Net income
2.8%
2.1%
3.7%
2.2%
2.9%
1.5%
Sales and other revenue
Safeway
Whole Foods Safeway
March 20, 2009
Prepared by: Francis Tao, Leah Lundy and Qian Ye
Table of Contents Table of Contents---------------------------------------------------------------------------------------------1 i 1.0 Executive Summary ------------------------------------------------------------------------------------ 1 2.0 General Information -----------------------------------------------------------------------------------2.1 Whole Foods Market, Inc. -----------------------------------------------------------------------2.2 Safeway Inc. ---------------------------------------------------------------------------------------3.0 Industry Information -----------------------------------------------------------------------------------4.0 Company Information and Financial Highlights ---------------------------------------------------5.0 Comparative Financial Statement Analysis ---------------------------------------------------------5.1 Trend Analysis (Horizontal Analysis) ----------------------------------------------------------5.1.1 Whole Foods Market, Inc. ----------------------------------------------------------------5.1.2 Safeway Inc. --------------------------------------------------------------------------------5.1.3 Conclusion from Trend Analysis (Horizontal Analysis) ------------------------------5.2 Common-Sized Analysis (Vertical Analysis) -------------------------------------------------5.2.1 Whole Foods Market, Inc. ----------------------------------------------------------------5.2.2 Safeway Inc. --------------------------------------------------------------------------------5.2.3Conclusion from Common-Sized Analysis (Vertical Analysis)-----------------------6.0 Analytical Measures – Solvency and Profitability Analysis -------------------------------------6.1 Solvency Measures ------------------------------------------------------------------------------6.1.1 Working Capital ------------------------------------------------------------------------6.1.2 Current Ratio ----------------------------------------------------------------------------6.1.3 Quick Ratio ------------------------------------------------------------------------------6.1.4 Accounts Receivable Turnover -------------------------------------------------------6.1.5 Number of Days’ in Receivables -----------------------------------------------------6.1.6 Inventory Turnover ---------------------------------------------------------------------6.1.7 Number of Days Sales in Inventory --------------------------------------------------6.1.8 Ratio of Fixed Assets to Long-term Liabilities --------------------------------------6.1.9 Ration of Liabilities to Stockholders’ Equity ----------------------------------------6.1.10 Number of Times Interest Charges Earned ------------------------------------------6.2 Profitability Measures ----------------------------------------------------------------------------6.2.1 Ratio of Net Sales to Assets ------------------------------------------------------------6.2.2 Rate Earned on Total Assets -----------------------------------------------------------6.2.3 Rate Earned on Stockholders’ Equity -------------------------------------------------6.2.4 Rate earned on Common Stockholders’ Equity -------------------------------------6.2.5 Earnings per Share on Common Stock -----------------------------------------------6.2.6 Price-Earnings Ratio --------------------------------------------------------------------6.2.7 Dividend Yield ---------------------------------------------------------------------------6.2.8 Dividend Yield ---------------------------------------------------------------------------7.0 Conclusion and Recommendation --------------------------------------------------------------------Appnedix A – Description of Analytical Measures Used ----------------------------------------------Appendix B – Whole Foods Market, Inc., Comparative Balance Sheet, Horizontal Analysis ----Appendix C – Whole Foods Market, Inc., Comparative Balance Sheet, Vertical Analysis --------Appendix D – Whole Foods Market, Inc., Comparative Income Statement, Horizontal Analysis – Appendix E – Whole Foods Market, Inc., Comparative Income Statement, Vertical Analysis ----Appendix F – Safeway, Inc., Comparative Balance Sheet, Horizontal Analysis --------------------Appendix G – Safeway, Inc., Comparative Balance Sheet, Vertical Analysis -----------------------1
Appendix H – Safeway, Inc., Comparative Income Statement, Horizontal Analysis –--------------Appendix I – Safeway, Inc., Comparative Income Statement, Vertical Analysis ------------------Appendix J – Common-Sized Balance Sheet Horizontal Analysis ----------------------------------Appendix K – Common-Sized Balance Sheet Vertical Analysis -------------------------------------Appendix L – Common-Sized Income Statement Horizontal Analysis ------------------------------Appendix M – Common-Sized Income Statement Vertical Analysis --------------------------------References ---------------------------------------------------------------------------------------------------
6.0 Analytical Measures – Solvency and Profitability Analysis
Profitability Measures
Solvency Measures
Analytical Measures Working capital
Current ratio Quick ratio Accounts Receivable turnover Number of days’ sales in Receivables Inventory turnover Number of days’ in inventory Ratio of fixed assets to long-term liabilities Ratio of liabilities to stockholders’ equity Number of times interest charges are earned Ratio of net sales to assets Rate earned on total assets Rate earned on stockholders’ equity Rate earned on common stockholders’ equity Earnings per share on common stock Price-earnings ratio Dividends per share Dividend yield
Whole Foods Market, Inc. Safeway Inc. WFMI/SWY Ratios, 2007 (WFMI) (SWY) 2007 2006 2005 2007 2006 2005 -116,530 114,211 254,146 -1128.9 -561.5 103.22 1035.7 0.85 1.22 1.61 0.78 0.77 0.87 1.09 0.13 0.17 0.90 0.17 0.15 0.17 0.76 70.37 18.84 17.85 81.39 99.0 111.42 0.86 20.90
4.84
5.11
4.48
3.69
3.28
4.67
17.47 20.90
19.27 18.94
16.12 22.64
11.08 32.95
10.58 34.51
9.92 36.81
1.58 0.63
2.26
143.64
81.55
2.28
1.94
1.62
0.99
1.20
0.45
0.38
1.63
1.87
2.20
0.74
73.38
107.67
4.61
4.13
3.11
15.92
2.51
10,617.0 3 6.83
6.34
6.25
6.11
5.76
0.40
0.07
0.10
2.76
0.08
0.08
0.06
0.88
0.13
0.15
4.06
0.14
0.16
0.13
0.93
0.15
0.20
6.67
151.79
150.17
96.72
0.00
1.29
1.41
0.99
1.99
1.94
1.25
0.65
37.1 0.68 0.01
40.55 2.47 0.04
63.12 0.39 0.01
16.98 0.25 0.01
17.46 0.22 0.01
18.41 0.10 0.00
2.18 2.72 1.00
Appendix A – Description of Analytical Measures Used
Method of Computation Solvency measures: Working Capital
Current Assets – Current Liabilities
Use To indicate the ability to meet
Current Ratio Quick Ratio Accounts Receivable Turnover Numbers of Days’ Sales in Receivables Inventory Turnover Number of Days’ Sales in Inventory Ratio of Fixed Assets to Long-Term Liabilities Ratio of Liabilities to Stockholders’ Equity Number of Times Interest Charges are Earned Profitability measures: Ratio of Net Sales to Assets Rate Earned on Total Assets Rate Earned on Stockholders’ Equity Rate Earned on Common Stockholders’ Equity Earnings per Share on Common Stock Price-Earnings Ratio
Current Assets / Current Liabilities Quick Assets / Current Liabilities Net Sales / Average Accounts Receivable Average Accounts Receivable / Average Daily Sales Cost of Goods Sold / Average Inventory Average Inventory / Average Daily Cost of Goods Sold Fixed Assets (net) / Long-Term Liabilities Total Liabilities / Total Stockholders’ Equity (Income Before Income Tax + Interest Expense) / Interest Expense Net Sales / Average Total Assets (excluding long-term investments) (Net Income + Interest Expense) / Average Total Assets Net Income / Average Total Stockholders’ Equity (Net Income – Preferred Dividends) / Average Common Stockholders’ Equity (Net Income – Preferred Dividends) / Shares of Common Stock Outstanding Market Price per Share of Common Stock / Earnings per Share on Common Stock
Dividends per Share
Dividends / Shares of Common Outstanding
Dividend Yield
Dividends per Share of Common Stock / Market Price per Share of Common Stock
currently maturing obligations To indicate instant debt-paying To assess the efficiency in collecting receivables and in the management of credit To assess the efficiency in the management of inventory To indicate the margin of safety to long-term creditors To indicate the margin of safety to creditors To assess the risk to debtholders in terms of number of times interest charges were earned To assess the effectiveness in the use of assets To assess the profitability of the assets To assess the profitability of the investment by stockholders To assess the profitability of the investment by common stockholders To indicate future earnings prospects, based on the relationship between market value of common stock and earnings To indicate the extent to which earnings are being distributed to common stockholders To indicate the rate of return to common stockholders in terms of dividends
Appendix B - Whole Foods Market, Inc., Comparative Balance Sheet, Horizontal Analysis W HOLE FOODS MARKET, INC. Comparative Balance Sheet (In thousands) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 Horizontal Analysis
2007
2006
2005
Amount
Amount
Amount
2006 to 2007
2005 to 2006
Increase (Decrease)
Increase (Decrease)
Amount
Percent
Amount
-100.0%
-$306,272
-99.3%
Percent
Assets Current assets: Cash and equivalents Accounts Receivables
$0
$2,252
$308,524
-$2,252
105,209
82,137
66,682
23,072
28.1%
$15,455
23.2%
$288,112
$203,727
$174,848
$84,385
41.4%
$28,879
16.5%
Prepaid expenses and other current assets274,665
335,865
122,475
-61,200
-18.2%
$213,390
174.2%
$623,981
$672,529
44,005
7.1%
($48,548)
-7.2%
1,666,559 1,236,133 1,054,605
430,426
34.8%
$181,528
17.2%
Merchandise inventories Total current assets Property: Property and equipment, net of accumulated depreciation and amortization Goodwill
$667,986
$668,850
$113,494
$112,476 $555,356
489.3%
$1,018
0.9%
Other assets
$209,733
$69,388
$49,686 $140,345
202.3%
$19,702
39.7%
Total assets
3,213,128 2,042,996 1,889,296 1,170,132
57.3%
$153,700
8.1%
Liabilities and Stockholder's Equity Current Liabilities: Accounts payable
225,728
121,857
103,348
103,871
85.2%
18,509
17.9%
Accrued payroll
181,290
153,014
126,981
28,276
18.5%
26,033
20.5%
Other current liabilities
377,498
234,899
188,054
142,599
60.7%
46,845
24.9%
Total current liabilities
784,516
509,770
418,383
274,746
53.9%
91,387
21.8%
Long-term debt
736,087
8,606
12,932
727,481
8453.2%
-4,326
-33.5%
Other long-term debt
233,721
120,477
92,305
113,244
94.0%
28,172
30.5%
1,754,324
638,853
523,620 1,115,471
174.6%
115,233
22.0%
Total liabilities Stockholders' equity: Common stock Treasury stock at cost
1,232,845 1,147,872 -199,961
Accumulated other comprehensive income 15,722
-99,964
874,972
84,973
7.4%
272,900
31.2%
0
-99,997
100.0%
-99,964
n/a
6,975
4,405
8,747
125.4%
2,570
58.3%
349,260
486,299
60,938
17.4%
-137,039
-28.2%
1,458,804 1,404,143 1,365,676
54,661
3.9%
38,467
2.8%
Total liabilities and stockholders' equity 3,213,128 2,042,996 1,889,296 1,170,132
57.3%
153,700
8.1%
Retained earnings Total stockholders' equity
410,198
Appendix C - Whole Foods Market, Inc., Comparative Balance Sheet, Vertical Analysis WHOLE FOODS MARKET, INC. Comparative Balance Sheet (in thousand) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 Vertical Analysis
2007 Amount
2006 Percent
Amount
2005 Percent
Amount
Percent
Assets Current assets: Cash and equivalents
$0
0.0%
$2,252
0.1%
$308,524
16.3%
Accounts Receivables
105,209
3.3%
82,137
4.0%
66,682
3.5%
Merchandise inventories
288,112
9.0%
203,727
10.0%
174,848
9.3%
Prepaid expenses and other current assets
274,665
8.5%
335,865
16.4%
122,475
6.5%
$667,986
20.8%
$623,981
30.5%
$672,529
35.6%
accumulated depreciation and amortization 1,666,559 Goodwill 668,850
51.9%
1,236,133
60.5%
1,054,605
55.8%
20.8%
113,494
5.6%
112,476
6.0%
Total current assets Property: Property and equipment, net of
Other assets
209,733
6.5%
Total assets
3,213,128
100%
2,042,996
69,388
100%
3.4%
1,889,296
49,686
100%
2.6%
Accounts payable
225,728
7.0%
121,857
6.0%
103,348
5.5%
Accrued payroll
181,290
5.6%
153,014
7.5%
126,981
6.7%
Other current liabilities
377,498
11.7%
234,899
11.5%
188,054
10.0%
Total current liabilities
784,516
24.4%
509,770
25.0%
418,383
22.1%
Long-term debt
736,087
22.9%
8,606
0.4%
12,932
0.7%
Other long-term debt
233,721
7.3%
120,477
5.9%
92,305
4.9%
1,754,324
54.6%
638,853
31.3%
523,620
27.7%
1,232,845
38.4%
1,147,872
56.2%
874,972
46.3%
-199,961
-6.2%
-99,964
-4.9%
0
0.0%
15,722
0.5%
6,975
0.3%
4,405
0.2%
410,198
12.8%
349,260
17.1%
486,299
25.7%
Total stockholders' equity
1,458,804
45.4%
1,404,143
68.7%
1,365,676
72.3%
Total liabilities and stockholders' equity
3,213,128
100%
2,042,996
100%
1,889,296
100%
Liabilities and Stockholder's Equity Current Liabilities:
Total liabilities Stockholders' equity: Common stock Treasury stock at cost Accumulated other comprehensive income Retained earnings
Appendix D - Whole Foods Market, Inc., Comparative Income Statement, Horizontal Analysis W HO LE FOODS MARKET, INC. Comparative Income Statement (In thousands) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 2006 to 2007 Horizontal Analysis
2007
2006
2005
Amount
Amount
Amount
2005 to 2006
Increase (-Decrease) Increase (-Decrease) Amount
Percent
Amount
Percent
Sales and other revenue
$6,591,773 $5,607,376 $4,701,289
$984,397
17.6%
$906,087
19.3%
Cost of goods sold Gross profit
4,295,170 3,647,734 3,052,184 2,296,603 1,959,642 1,649,105
647,436 336,961
17.75% 17.2%
595,550 310,537
19.5% 18.8%
358,519 -21,558.0
21.9% -6.8%
221,261 89,276
15.6% 38.9%
-2,191.0
-98.6%
Operating and administrative expense 1,999,152 Operating profit 297,451 Interest expense
4,208
Other income, net
11,324
Income before income taxes Income taxes Net income
1,640,633 319,009 32
1,419,372 229,733 2,223
4,176
13050.0%
20,736
9,623
-9,412
-45.4%
11,113
115.5%
304,567
339,713
237,133
-35,146.0
-10.3%
102,580
43.3%
121,827 182,740
135,885 203,828
100,782 136,351
-14,058.0 -21,088.0
-10.3% -10.3%
35,103 67,477
34.8% 49.5%
Appendix E - Whole Foods Market, Inc., Comparative Income Statement, Vertical Analysis
WHOLE FOODS MARKET, INC. Comparative Income Statement (in thousands) For the Years Ended September 30 and 2007 and September 24, 2006 and September 25, 2005 Vertical Analysis
2007
2006
2005
Amount
Percent
Amount
Pecent
Amount
$6,591,773
100.0%
$5,607,376
100.0%
$4,701,289
100.0%
Cost of goods sold
4,295,170
65.2%
3,647,734
65.1%
3,052,184
64.9%
Gross profit
2,296,603
34.8%
1,959,642
34.9%
1,649,105
35.1%
Operating and administrative expense 1,999,152
30.3%
1,640,633
29.3%
1,419,372
30.2%
297,451
4.5%
319,009
5.7%
229,733
4.9%
Interest expense
-4,208
-0.1%
-32
0.0%
-2,223
0.0%
Other income, net
11,324
0.2%
20,736
0.4%
9,623
0.2%
Income before income taxes
304,567
4.6%
339,713
6.1%
237,133
5.0%
Income taxes Net income
121,827 182,740
1.8% 2.8%
135,885 203,828
2.4% 3.6%
100,782 136,351
2.1% 2.9%
Sales and other revenue
Operating profit
Pecent
Appendix F - Safeway, Inc., Comparative Balance Sheet, Horizontal Analysis SAFEW AY, INC. Comparative Balance Sheet (In millions, except per-share amounts) Year-end
Year-end
Year-end
2007
2006
2005
Amount
Amount
Amount
Horizontal Analysis
2006 to 2007
2005 to 2006
Increase (-Decrease)Increase (-Decrease) Amount
Percent
Amount
Percent
-42.0%
Assets Current assets: Cash and equivalents Accounts Receivables
$277.8
$216.6
$373.3
$61.2
28.3% -$156.70
577.9
461.2
350.6
116.7
25.3%
110.6
31.5%
2,797.8
2,642.5
2,766.0
155.3
5.9%
-123.5
-4.5%
354.0
245.4
212.5
108.6
44.3%
32.9
15.5%
4,007.5
3,565.7
3,702.4
441.8
12.4%
-136.7
-3.7%
10,622.0
9,773.3
9,097.1
848.7
8.7%
676.2
7.4%
2,406.3
2,393.5
2,402.4
12.8
0.5%
-8.9
-0.4%
615.2 17,651.0
541.3 16,273.8
555.0 15,756.9
73.9 1,377.2
13.7% 8.5%
-13.7 516.9
-2.5% 3.3%
2,825.4
2,464.4
2,151.5
361.0
14.6%
312.90
14.5%
506.7
485.8
526.1
20.9
4.3%
-40.30
-7.7%
Other current liabilities
1,804.3
1,651.2
1,586.3
153.1
9.3%
64.90
4.1%
Total current liabilities
5,136.4
4,601.4
4,263.9
535.0
11.6%
337.50
7.9%
Long-term debt
4,657.7
5,036.6
5,605.3
-378.9
-7.5%
-568.70
-10.1%
Other long-term debt
1,155.1
968.9
968.0
186.2
19.2%
0.90
0.1%
10,949.2
10,606.9
10,837.2
342.3
3.2%
-230.30
-2.1%
Merchandise inventories Prepaid expenses and other current assets Total current assets Property: Property and equipment, net of accumulated depreciation and amortization Goodwill Other assets Total assets Liabilities and Stockholder's Equity Current Liabilities: Accounts payable Accrued payroll
Total liabilities Stockholders' equity: Common stock Additional paid-in capital Treasury stock at cost
5.9
5.8
5.8
0.10
1.7%
0.00
0.0%
4,038.2
3,811.5
3,445.1
226.70
5.9%
366.40
10.6%
-229.30
5.5%
-313.00
8.1%
246.2
94.8
172.8
151.40
159.7%
-78.00
-45.1%
Retained earnings
6,829.5
5,943.5
5,171.7
886.00
14.9%
771.80
14.9%
Total stockholders' equity
6,701.8
5,666.9
4,919.7
1,034.90
18.3%
747.20
15.2%
17,651.0
16,273.8
15,756.9
1,377.20
8.5%
516.90
3.3%
Accumulated other comprehensive income
Total liabilities and stockholders' equity
-4,418.00
-4,188.70 -3,875.70
Appendix G - Safeway, Inc., Comparative Balance Sheet, Vertical Analysis SAFEWAY, INC. Comparative Balance Sheet (In millions, except per-share amounts)
Vertical Analysis
Year-end
Year-end
Year-end
2007
2006
2005
Amount
Percent
Amount
Percent
Amount
Percent
Assets Current assets: Cash and equivalents
$277.8
1.6%
$216.6
1.3%
$373.3
2.4%
Accounts Receivables
577.9
3.3%
461.2
2.8%
350.6
2.2%
2,797.8
15.9%
2,642.5
16.2%
2,766.0
17.6%
354.0
2.0%
245.4
1.5%
212.5
1.3%
4,007.5
22.7%
3,565.7
21.9%
3,702.4
23.5%
accumulated depreciation and amortization 10,622.0 Goodwill 2,406.3
60.2%
9,773.3
60.1%
9,097.1
57.7%
13.6%
2,393.5
14.7%
2,402.4
15.2%
Merchandise inventories Prepaid expenses and other current assets Total current assets Property: Property and equipment, net of
Other assets
615.2
3.5%
541.3
3.3%
555.0
3.5%
Total assets
17,651.0
100.0%
16,273.8
100.0%
15,756.9
100.0%
Liabilities and Stockholder's Equity Current Liabilities: Accounts payable Accrued payroll
2,825.4
16.0%
2,464.4
15.14%
2,151.5
13.7%
506.7
2.9%
485.8
2.99%
526.1
3.3%
Other current liabilities
1,804.3
10.2%
1,651.2
10.15%
1,586.3
10.1%
Total current liabilities
5,136.4
29.1%
4,601.4
28.27%
4,263.9
27.1%
Long-term debt
4,657.7
26.4%
5,036.6
30.95%
5,605.3
35.6%
Other long-term debt
1,155.1
6.5%
968.9
5.95%
968.0
6.1%
10,949.2
62.0%
10,606.9
65.18%
10,837.2
68.8%
Total liabilities Stockholders' equity: Common stock Additional paid-in capital Treasury stock at cost Accumulated other comprehensive income Retained earnings Total stockholders' equity Total liabilities and stockholders' equity
5.9
0.03%
5.8
0.04%
5.8
0.04%
4,038.2
22.9%
3,811.5
23.42%
3,445.1
21.9%
-4,418.00
-25.0%
-4,188.70
-25.74%
-3,875.70
-24.6%
246.2
1.4%
94.8
0.58%
172.8
1.1%
6,829.5
38.7%
5,943.5
36.52%
5,171.7
32.8%
6,701.8 17,651.0
38.0% 100%
5,666.9 16,273.8
34.82% 100%
4,919.7 15,756.9
31.2% 100.0%
Appendix H - Safeway, Inc., Comparative Income Statement, Horizontal Analysis SAF EW AY, INC . Comparative Income Statement (In millions, except per-share amounts) 52 W eeks
52 W eeks
52 W eeks
2007
2006
2005
Amount
Amount
Amount
Amount
Percent
$42,286.0
$40,185.0
$38,416.0
$2,101.0
5.2%
$1,769.0
4.6%
Cost of goods sold
-30,133.1
-28,604.0
-27,303.1
-1,529.10
5.35%
-1,300.90
4.8%
G ross profit
12,152.9
11,581.0
11,112.9
571.90
4.9%
468.10
4.2%
O perating and administrative expense -10,380.8
-9,981.2
-9,898.2
-399.60
4.0%
-83.00
0.8%
O perating profit
1,772.1
1,599.8
1,214.7
172.30
10.8%
385.10
31.7%
Interest expense
-388.9
-396.1
-402.6
7.20
-1.8%
6.50
-1.6%
O ther income, net
20.4
36.3
36.9
-15.90
-43.8%
-0.60
-1.6%
1,403.6
1,240.0
849.0
163.60
13.2%
391.00
46.1%
Income taxes
515.2
369.4
-287.90
145.80
39.5%
657.30 -228.3%
Net income
888.4
870.6
561.1
17.80
2.0%
H o rizontal Analysis
Sales and other revenue
Income before income taxes
2006 to 2007
2005 to 2006
Increase (-Decrease) Increase (-D ecrease) Amount
309.50
Percent
55.2%
Appendix I - Safeway, Inc., Comparative Income Statement, Vertical Analysis SAFEWAY, INC. Comparative Income Statement (In millions, except per-share amounts)
Vertical Analysis
52 Weeks
52 Weeks
52 Weeks
2007
2006
2005
Amount
Percent
Amount
Percent
Amount
Percent
Sales and other revenue
$42,286.0
100.0%
$40,185.0
100.0%
$38,416.0
100.0%
Cost of goods sold
-30,133.10
71.3%
-28,604.00
71.2%
-27,303.10
71.1%
12,152.90
28.7%
11,581.00
28.8%
11,112.90
28.9%
Operating and administrative expense -10,380.80
24.5%
-9,981.20
24.8%
-9,898.20
25.8%
Gross profit Operating profit
1,772.10
4.2%
1,599.80
4.0%
1,214.70
3.2%
Interest expense
-388.90
0.9%
-396.10
1.0%
-402.60
1.0%
Other income, net Income before income taxes Income taxes Net income
20.40
0.05%
36.30
0.1%
36.90
0.1%
1,403.60
3.3%
1,240.00
3.1%
849.00
2.2%
515.20 888.40
1.2% 2.1%
369.40 870.60
0.9% 2.2%
-287.90 561.10
0.7% 1.5%
Appendix J - Common-Sized Balance Sheet Horizontal Analysis Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Balance Sheet December 31, 2007 2006 to 2007 Horizontal Analysis
2005 to 2006
Increase (-Decrease) Whole Foods
Safeway
Increase (-Decrease) Whole Foods
Safeway
Assets Current assets: Cash and equivalents
-100.0%
28.3%
-99.3%
-42.0%
Accounts Receivables
28.1%
25.3%
23.2%
31.5%
Merchandise inventories
41.4%
5.9%
16.5%
-4.5%
-18.2%
44.3%
174.2%
15.5%
7.1%
12.4%
-7.2%
-3.7%
Property and equipment, net of accumulated depreciation and amortization 34.8%
8.7%
17.2%
7.4%
Goodwill
489.3%
0.5%
0.9%
-0.4%
Other assets Total assets
202.3% 57.3%
13.7% 8.5%
39.7% 8.1%
-2.5% 3.3%
Accounts payable
85.2%
14.6%
17.9%
14.5%
Accrued payroll
18.5%
4.3%
20.5%
-7.7%
Other current liabilities
60.7%
9.3%
24.9%
4.1%
Total current liabilities
53.9%
11.6%
21.8%
7.9%
8453.2%
-7.5%
-33.5%
-10.1%
94.0%
19.2%
30.5%
0.1%
174.6%
3.2%
22.0%
-2.1%
7.4%
1.7%
31.2%
0.00%
n/a
5.9%
n/a
10.6%
Treasury stock at cost
100.0%
5.5%
n/a
8.1%
Accumulated other comprehensive income
125.4%
159.7%
58.3%
-45.1%
Retained earnings
17.4%
14.9%
-28.2%
14.9%
Total stockholders' equity Total liabilities and stockholders' equity
3.9% 57.3%
18.3% 8.5%
2.8% 8.1%
15.2% 3.3%
Prepaid expenses and other current assets Total current assets Property:
Liabilities and Stockholder's Equity Current Liabilities:
Long-term debt Other long-term debt Total liabilities Stockholders' equity: Common stock Additional paid-in capital
Appendix K - Common-Sized Balance Sheet Vertical Analysis
Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Balance Sheet December 31, 2007 Vertical Analysis
2007 Whole Foods
2006 Safeway
Whole Foods
2005 Safeway
Whole Foods
Safeway
Assets Current assets: Cash and equivalents
0.0%
Accounts Receivables
3.3%
3.3%
Merchandise inventories
9.0%
15.9%
Prepaid expenses and other current assets 8.5%
2.0% 22.7%
Total current assets
20.8%
1.6%
0.1%
0.1%
16.3%
16.3%
4.0%
4.0%
3.5%
3.5%
10.0%
10.0%
9.3%
9.3%
16.4%
16.4%
6.5%
6.5%
30.5%
30.5%
35.6%
35.6%
Property: Property and equipment, net of accumulated 51.9% depreciation 60.2%and amortization 60.5%
60.5%
55.8%
55.8%
Goodwill
20.8%
13.6%
5.6%
5.6%
6.0%
6.0%
Other assets Total assets
6.5% 100%
3.5% 100%
3.4% 100%
3.4% 100%
2.6% 100%
2.6% 100%
Accounts payable
7.0%
16.0%
6.0%
15.14%
5.5%
13.7%
Accrued payroll
5.6%
2.9%
7.5%
2.99%
6.7%
3.3%
Other current liabilities
11.7%
10.2%
11.5%
10.15%
10.0%
10.1%
Total current liabilities
24.3%
29.1%
25.0%
28.27%
22.2%
27.1%
Long-term debt
22.9%
26.4%
0.4%
30.95%
0.7%
35.6%
7.3%
6.5%
5.9%
5.95%
4.9%
6.1%
54.5%
62.0%
31.3%
65.18%
27.8%
68.8%
38.4%
0.03%
56.2%
0.04%
46.3%
0.04%
n/a
22.9%
n/a
23.42%
n/a
21.9%
-6.2%
-25.0%
-4.9%
-25.74%
0.0%
-24.6%
Accumulated other comprehensive income 0.5%
1.4%
0.3%
0.58%
0.2%
1.1%
12.8%
38.7%
17.1%
36.52%
25.7%
32.8%
Total stockholders' equity 45.5% Total liabilities and stockholders' equity 100%
38.0% 100%
68.7% 100%
34.82% 100%
72.2% 100%
31.2% 100%
Liabilities and Stockholder's Equity Current Liabilities:
Other long-term debt Total liabilities Stockholders' equity: Common stock Additional paid-in capital Treasury stock at cost Retained earnings
Appendix L - Common-Sized Income Statement, Horizontal Analysis Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Income Statement December 31, 2007 Horizontal Analysis
2006 to 2007 Whole Foods
2005 to 2006
Safeway
Whole Foods
Safeway
Sales and other revenue
17.6%
5.2%
19.3%
4.6%
Cost of goods sold
17.8%
5.35%
19.5%
4.8%
Gross profit
17.2%
4.9%
18.8%
4.2%
Operating and administrative expense
21.9%
4.0%
15.6%
0.8%
Operating profit
-6.8%
10.8%
38.9%
31.7%
13050.0%
-1.8%
-98.6%
-1.6%
Other income, net
-45.4%
-43.8%
115.5%
-1.6%
Income before income taxes
-10.3%
13.2%
43.3%
46.1%
Income taxes
-10.3%
39.5%
34.8%
-228.3%
Net income
10.3%
2.0%
49.5%
55.2%
Interest expense
Appendix M - Common-Sized Income Statement Vertical Analysis Whole Foods Market, Inc. and Safeway, Inc. Common-Sized Income Statement December 31, 2007 Vertical Analysis
2007
2006
2005
Whole Foods
Safeway
Whole Foods
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Cost of goods sold
65.2%
71.3%
65.1%
71.2%
64.9%
71.1%
Gross profit
34.8%
28.7%
34.9%
28.8%
35.1%
28.9%
Operating and administrative expense
30.3%
24.5%
29.3%
24.8%
30.2%
25.8%
Operating profit
4.5%
4.2%
5.7%
4.0%
4.9%
3.2%
Interest expense
-0.1%
0.9%
0.0%
1.0%
0.0%
1.0%
Other income, net
0.2%
0.05%
0.4%
0.1%
0.2%
0.1%
Income before income taxes
4.6%
3.3%
6.1%
3.1%
5.0%
2.2%
Income taxes
1.8%
1.2%
2.4%
0.9%
2.1%
0.7%
Net income
2.8%
2.1%
3.7%
2.2%
2.9%
1.5%
Sales and other revenue
Safeway
Whole Foods Safeway
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