Whole Foods 2009 Annual Report Download - page 35

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Investment and Other Income
Investment and other income includes investment gains and losses, interest income, rental income and other income totaling
approximately $3.4 million, $6.7 million and $11.3 million in fiscal years 2009, 2008 and 2007, respectively. The decreases
in investment and other income in fiscal years 2009 and 2008 primarily resulted from lower average short-term return rates
on investments and lower average investment balances in fiscal year 2008.
Income Taxes
Income taxes resulted in an effective tax rate of approximately 41.5%, 44.5% and 40.0% in fiscal years 2009, 2008 and
2007, respectively. The increase in our effective tax rate for fiscal year 2008 resulted primarily from the repatriation of cash
from the Company’s Canadian subsidiary.
Share-Based Payments
Share-based payment expense before income taxes recognized during fiscal years 2009, 2008 and 2007 was approximately
$12.8 million, $10.5 million and $13.2 million, respectively. Share-based payment expense was included in the following
line items on the Consolidated Statements of Operations for the periods indicated (in thousands):
2009 2008 2007
Cost of goods sold and occupancy costs $ 439 $ 233 $ 475
Direct store expenses 7,152 5,300 7,093
General and administrative expenses 5,204 4,972 5,607
Share-based payment expense before income taxes 12,795 10,505 13,175
Income tax benefit (5,222) (4,815) (4,114)
Net share-based payment expense $ 7,573 $ 5,690 $ 9,061
The Company intends to keep its broad-based stock option program in place, but also intends to limit the number of shares
granted in any one year so that annual earnings per share dilution from share-based payment expense will not exceed 10%.
The Company believes this strategy is best aligned with its stakeholder philosophy because it limits future earnings per share
dilution from options and at the same time retains the broad-based stock option plan, which the Company believes is
important to team member morale, its unique corporate culture and its success.
Liquidity and Capital Resources
The Company had cash and cash equivalents totaling approximately $430.1 million and $30.5 million and restricted cash
totaling approximately $71.0 million and $0.6 million at September 27, 2009 and September 28, 2008, respectively. The
increase in restricted cash at September 27, 2009 primarily relates to cash invested as collateral to support a portion of our
projected workers’ compensation obligations that were previously collateralized by an outstanding letter of credit.
We generated cash flows from operating activities of approximately $587.7 million, $335.0 million and $391.5 million in
fiscal years 2009, 2008 and 2007, respectively. Cash flows from operating activities resulted primarily from our net income
plus non-cash expenses and changes in operating working capital.
Net cash used in investing activities was approximately $386.3 million, $372.7 million and $890.4 million for fiscal years
2009, 2008 and 2007, respectively. For fiscal year 2007, net cash used in investing activities includes approximately $596.2
million paid for the purchase of Wild Oats. Our principal historical capital requirements have been the funding of the
development or acquisition of new stores and acquisition of property and equipment for existing stores. The required cash
investment for new stores varies depending on the size of the new store, geographic location, degree of work performed by
the landlord and complexity of site development issues. Capital expenditures for fiscal years 2009, 2008 and 2007 totaled
approximately $314.6 million, $529.5 million and $524.5 million, respectively, of which approximately $248.0 million,
$357.5 million and $388.8 million, respectively, was for new store development and approximately $66.6 million, $172.0
million and $135.8 million, respectively, was for remodels and other property, plant and equipment expenditures. For fiscal
year 2010, the Company expects capital expenditures to be in the range of approximately $350 million to $400 million.
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