Whole Foods 2008 Annual Report Download - page 75

A summary of options outstanding and exercisable at September 28, 2008 follows (share amounts in thousands):
Options Outstanding
Options Exercisable
Range of Weighted Average Weighted Weighted
Exercise Prices Number Remaining Average Number Average
From To Outstanding Life (in Years) Exercise Price Exercisable Exercise Price
$ 18.08 $ 26.50 844 0.67 $ 23.41 834 $ 23.47
27.62 27.62 2,141 4.64 27.62 - -
27.82 38.31 1,246 1.57 27.98 1,221 27.97
39.61 39.61 2,055 2.55 39.61 2,055 39.61
39.74 51.83 1,753 3.55 40.08 570 40.63
54.17 60.74 3,796 3.52 54.23 3,779 54.23
66.81 66.81 4,380 3.85 66.81 4,365 66.81
68.96 73.14 1,215 2.58 69.01 613 69.02
Total 17,430 3.29 $ 48.64 13,437 $ 51.88
Share-based payment expense related to vesting stock options recognized during fiscal years 2008, 2007 and 2006 totaled
approximately $10.5 million, $8.1 million, and $4.6 million, respectively.
To adjust for actual experience, during fiscal year 2007 and fiscal year 2006 the Company recognized an additional $4.4
million and $3.0 million, respectively, as share-based payment charges related to the option acceleration that took place in
fiscal year 2005.
The Company also recognized share-based payment expense totaling approximately $0.2 million, $0.3 million, and $1.2
million for modifications of terms of certain stock option grants and other compensation during fiscal years 2008, 2007 and
2006, respectively.
The fair value of stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
2008 2007 2006
Expected dividend yield 2.90% 1.80% 1.26%
Risk-free interest rate 2.32% 4.75% 5.04%
Expected volatility 36.73% 31.22% 29.40%
Expected life, in years 3.38 3.29 3.22
Risk-free interest rate is based on the US treasury yield curve on the date of the grant for the time period equal to the
expected term of the grant. Expected volatility is calculated using a ratio of implied volatility based on comparable Long-
Term Equity Anticipation Securities (“LEAPS”) and four-year historical volatility. The Company determined the use of
implied volatility versus historical volatility represents a more accurate calculation of option fair value. Expected life is
calculated in two tranches based on weighted average percentage of unexpired options and exercise-after-vesting information
over the last five years. Unvested options are included in the term calculation using the “mid-point scenario” which assumes
that unvested options will be exercised half-way between vest and expiration date. The assumptions used to calculate the fair
value of options granted are evaluated and revised, as necessary, to reflect market conditions and experience.
In addition to the above valuation assumptions, SFAS No. 123R requires the company to estimate an annual forfeiture rate
for unvested options and true up fair value expense accordingly. The company monitors actual forfeiture experience and
adjusts the rate from time to time as necessary.
Team Member Stock Purchase Plan
Our Company offers a team member stock purchase plan to all full-time team members with a minimum of 400 hours of
service. Participating team members may purchase our common stock through payroll deductions. At the 2007 annual
meeting, shareholders approved a new TMSPP which became effective on April 1, 2007. The TMSPP replaces all previous
stock purchase plans and provides for a 5% discount on the shares purchase date market value which meets the “Safe
Harbor” provisions of SFAS No. 123R and therefore is non-compensatory. As a result, no future compensation expense will
be recognized for our employee stock purchase plan. Under the previous plans, participating team members could elect to
purchase unrestricted shares at 100% of market value or restricted shares at 85% of market value on the purchase date.
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