Whole Foods 2008 Annual Report Download - page 35

strengthening our value image throughout the store is the right strategy over the short and long term, and we are making
positive strides in differentiating our product selection, with a major emphasis on expanding offerings under our own label,
our control brands and exclusive branded products. Our SKU count for offerings under our own label increased 19% year
over year to over 2,300. We currently have over 300 exclusive-branded products across the center store.
On July 29, 2008, the United States Court of Appeals for the District of Columbia Circuit reversed the August 16, 2007
decision of the United States District Court for the District of Columbia which had denied the Federal Trade Commission's
("FTC") motion for a preliminary injunction against the acquisition of Wild Oats Markets by Whole Foods Market, and
remanded the case to the District Court for further proceedings consistent with the appellate decision. On the same day, the
Court of Appeals issued an Order directing the Clerk of the Court of Appeals to withhold issuance of the mandate in the case
until seven days after disposition of any timely petition for rehearing or petition for rehearing en banc. On August 26, 2008,
Whole Foods Market filed a petition for a rehearing en banc with the Court of Appeals, to which the Court of Appeals
ordered the FTC to respond. The FTC opposed the petition. On October 6, 2008, Whole Foods Market filed a motion for
leave to file a reply to the FTC's opposition to the petition for rehearing en banc, which motion the FTC also opposed. On
November 21, 2008 the Court of Appeals denied Whole Foods Market's petition for a rehearing en banc, amended its earlier
opinion and remanded the case to the District Court for further proceedings. On remand the FTC may renew its motion for
some preliminary injunctive relief pending resolution of the administrative action.
On August 8, 2008, the FTC issued an Order rescinding the stay of its administrative proceeding against Whole Foods
Market. The FTC had previously filed a complaint commencing its administrative proceeding on June 28, 2007 but had
stayed the proceeding on its own motion pending resolution of the federal court proceedings related to the merger. On
September 8, 2008, the FTC issued an Amended Complaint in its administrative proceeding changing the relevant
geographic markets involved and changing the notice of contemplated relief it would seek if it prevails in the administrative
trial. On September 10, 2008, the FTC issued the Scheduling Order for this matter. The trial is scheduled to commence on
February 16, 2009 and will take no more than thirty full trial days. On October 20, 2008, the FTC designated Acting Chief
Administrative Law Judge D. Michael Chappell as the Administrative Law Judge for this matter. On October 27,
2008, Whole Foods Market was served with the complaint in Kottaras v. Whole Foods Market, Inc., a putative class action
filed in the United States District Court for the District of Columbia, seeking treble damages, equitable, injunctive, and
declaratory relief and alleging that the acquisition and merger between Whole Foods Market and Wild Oats violates various
provisions of the federal antitrust laws.
Whole Foods Market cannot at this time predict the likely outcome of these judicial and administrative proceedings or
estimate the amount or range of loss or possible loss that may arise from them. The Company had not accrued any loss
related to the outcome of these proceedings as of September 28, 2008.
On November 5, 2008, the Company entered into an agreement to issue approximately 425,000 shares of Series A 8%
Redeemable, Convertible Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”) to Green Equity Investors
V, L.P., an affiliate of Leonard Green & Partners, L.P., for $425 million. The Series A Preferred Stock has an 8% dividend,
payable quarterly in cash or by increasing the liquidation preference, at the option of the Company, and will be convertible,
under certain circumstances, to common stock at an initial conversion rate of $68.9655 per $1,000 of the liquidation
preference, or an initial conversion price of $14.50 per common share. The closing and funding of the transaction is subject
to certain customary closing conditions, including the receipt of customary regulatory approvals. There can be no assurance
that these approvals will be received.
Fiscal Year 2008 Executive Summary
Sales for fiscal year 2008 totaled approximately $8.0 billion, an increase of approximately 20.7% over the prior year.
Adjusted to reflect a 52-week period in fiscal year 2007, sales increased 23.6% over the prior fiscal year. The ongoing
weakness in the economy and credit market turmoil continue to negatively impact consumer confidence and spending, and
Whole Foods Market is not immune to the country’s economic issues. For the fourth quarter of fiscal year 2008, comparable
store sales increased 0.4% compared to an increase of 8.2% for the same period of the prior fiscal year, and identical store
sales declined 0.5% compared to an increase of 6.0% for the same period of the prior fiscal year.
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