Whole Foods Market, Inc. (Nasdaq: WFMI) yesterday announced that it has retained the Investment Banking firm of Dain Rauscher Wessels to aid the Company in evaluating strategic alternatives and opportunities for its investment in Amrion, a direct marketing and nutritional supplement manufacturing company. The Company owns preferred stock representing a majority interest in Amrion and venture capital investors own Amrion’s common stock.
“Amrion continues to face many challenges. We believe that the business can be brought back to profitability in time,” said John Mackey, Chairman and Chief Executive Officer of Whole Foods Market. “However, given recent events at American WholeHealth and Real Goods in conjunction with the continued weakness in the vitamin and nutritional supplement industry, we believe it is prudent to explore all of our alternatives at this time on behalf of the shareholders of both Whole Foods and Amrion.”
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The Company recently has become aware of events and circumstances which indicate that its investment in American WholeHealth, Inc. has become permanently impaired. Accordingly, the Company will recognize a pre-tax, non- cash charge of $10 million in the fourth quarter to write-off its preferred stock investment in American WholeHealth. The Company also anticipates that Amrion will recognize fourth quarter after-tax charges of $10 million to write-off Amrion’s preferred stock investment in American WholeHealth and approximately $2 million to $3 million to reflect a loss associated with Amrion’s equity investment in Real Goods Trading Corporation as a result of the recently announced merger between Gaiam, Inc. and Real Goods.
As of the third quarter, the balance in the venture capitalists’ common equity investment in Amrion was approximately $5 million. The Company estimates Amrion’s after-tax operating losses for the fourth quarter to be approximately $4 million to $5 million. Therefore, as Amrion’s non-cash charges and after-tax losses for the fourth quarter will exceed the balance in common shareholders equity by approximately $11 million to $13 million, the Company expects to record this amount in the fourth quarter as a charge against its $46 million recorded investment in Amrion. The charge will be reported on Whole Foods’ consolidated income statement as “equity in net losses of unconsolidated affiliate”. Additionally, depending on the strategic alternative ultimately selected for Amrion, the Company anticipates that Amrion’s after-tax results for fiscal year 2001 may range from breakeven to losses of approximately $3 million. Any Amrion losses would be recorded by the Company as a reduction of its Amrion investment.
The normal year-end audit of the Company’s financial statements is in progress. Fourth quarter and fiscal year 2000 earnings results are scheduled to be released on November 21, 2000. The Company expects to report diluted earnings per share from core retail operations, excluding the charges described above, of $0.47 to $0.49 for the fourth quarter and $1.96 to $1.98 for the full fiscal year. This reflects an effective tax rate of approximately 40% for the current year versus the Company’s previously estimated rate of 42%.
For fiscal year 2001, the Company expects consolidated diluted earnings per share, including the potential impact of any operating losses from Amrion, of $2.25 to $2.40, reflecting an effective tax rate of approximately 40% to 41%.
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By GlobalDataWhole Foods Market, a Fortune 1000 company, opened its first store in Austin, Texas, in 1980. Since then, Whole Foods has grown to operate the country’s largest chain of natural foods supermarkets with 117 stores in 22 states plus the District of Columbia. We invite you to learn more about Whole Foods Market at www.wholefoodsmarket.com.
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, including but not limited to general business conditions, the timely development and opening of new stores, the impact of competition, and other risks detailed from time to time in the Company’s SEC reports, including the report on Form 10K for the fiscal year ended September 26, 1999. The Company does not undertake any obligation to update forward-looking statements.
