Whole Foods 2008 Annual Report Download - page 40

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exercise of stock options by team members are driven by a number of factors, including fluctuations in our stock price, and
totaled approximately $18.0 million, $54.4 million, and $222.0 million in fiscal years 2008, 2007 and 2006, respectively. The
higher rate of stock option exercises in fiscal year 2006 resulted in part from the accelerated vesting of stock options on
September 22, 2005.
On August 28, 2007, the Company entered into a $700 million, five-year term loan agreement to finance the acquisition of
Wild Oats Markets. The loan, which is secured by a pledge of substantially all of the stock of our subsidiaries, bears interest
at our option of the alternative base rate (“ABR”) plus an applicable margin or LIBOR plus an applicable margin based on
the Company’s Moody’s and S&P rating. The interest period on LIBOR borrowings may range from one to six months at
our option. The Company recorded approximately $3.4 million in debt origination fees for the term loan which are being
amortized on a straight-line basis over the life of the loan. During the first quarter of fiscal year 2008, the Company entered
into a three-year interest rate swap agreement with a notional amount of $490 million to effectively fix the interest rate on
$490 million of the term loan at 4.718%, excluding the applicable margin and associated fees, to help manage exposure to
interest rate fluctuations. The Company had accumulated net derivative losses of approximately $7.6 million, net of taxes, in
other comprehensive income as of September 28, 2008, related to this cash flow hedge. Hedge ineffectiveness was not
material during fiscal year 2008.
On August 28, 2007, we replaced our previous revolving credit facility with a new $250 million revolving line of credit that
extends to 2012. During the third quarter of fiscal year 2008, the Company exercised the accordion feature available under
the revolving credit facility to increase the aggregate commitment to $350 million and amend certain debt covenants
contained in the agreement. All outstanding amounts borrowed under this agreement bear interest at our option of the ABR
plus an applicable margin or LIBOR plus an applicable margin based on the Company’s Moody’s and S&P rating.
Commitment fees on the undrawn amount, reduced by outstanding letters of credit, are payable under this agreement. At
September 28, 2008 and September 30, 2007, the Company had $195 million and $17 million, respectively, drawn under this
agreement. The amount available to the Company under the agreement was effectively reduced to $75.9 million by
outstanding letters of credit totaling approximately $79.1 million and current borrowings at September 28, 2008. Subsequent
to the end of the fiscal year, the Company repaid certain amounts outstanding under the line and increased letters of credit
outstanding. As of November 21, 2008, the Company had $169 million outstanding and approximately $101.9 million
available on its revolving credit facility.
The average variable interest rate on the $700 million term loan, inclusive of the applicable margin, was 5.715% during
fiscal year 2008. The effective interest rate on the $490 million interest rate swap, inclusive of the applicable margin, was
5.780% during fiscal year 2008. The average variable interest rate on the amounts outstanding under the revolving line of
credit agreement, inclusive of the applicable margin, was 5.259% during fiscal year 2008. A summary of applicable interest
rates as of the end of fiscal years 2008 and 2007 follows:
2008 2007
Term loan agreement:
Variable interest rate, excluding applicable margin on non-swap portion of loan 2.469% 5.179%
Interest rate swap fixed interest rate, excluding applicable margin 4.718% n/a
Applicable margin – LIBOR, based on Moody’s and S&P ratings 1.375% 1.000%
Applicable margin – ABR, based on Moody’s and S&P ratings 0.375% n/a
Line of credit agreement:
Variable interest rate, excluding applicable margin 4.221% 6.750%
Applicable margin – LIBOR, based on Moody’s and S&P ratings 1.500% 1.000%
Applicable margin – ABR, based on Moody’s and S&P ratings 0.500% n/a
Commitment fee on undrawn amount 0.275% 0.200%
Interest paid during fiscal years 2008, 2007 and 2006 totaled approximately $36.2 million, $4.6 million and $0.6 million,
respectively. The increase in interest paid in fiscal year 2008 is due to interest costs associated with the $700 million term
loan agreement and interest costs associated with increased amounts outstanding under the revolving line of credit. Interest
paid in fiscal year 2007 includes interest costs associated with the $700 million term loan agreement for the period from
August 28, 2007 through September 30, 2007. The Company expects interest expense, net of investment and other income,
to range from approximately $35 million to $40 million in fiscal year 2009.