Whole Foods 2009 Annual Report Download - page 63

(7) Reserves for Closed Properties
Following is a summary of store closure reserve activity during the fiscal years ended September 27, 2009 and September 28,
2008 (in thousands):
2009 2008
Beginning balance $ 69,269 $ 96,967
Additions 8,276 9,092
Usage (17,841) (22,045)
Adjustments 9,524 (14,745)
Ending Balance $ 69,228 $ 69,269
Additions to store closure reserves relate to the accretion of interest on existing reserves and new closures. During fiscal year
2009, the Company recorded reserves totaling approximately $2.7 million, related to five new closures. Adjustments to
closed property reserves primarily relate to changes in existing economic conditions, subtenant income, actual exit costs
differing from original estimates, or foreign currency translation adjustments. Adjustments are made for changes in estimates
in the period in which the changes become known. During fiscal year 2009, the Company recognized charges of
approximately $12.9 million related to increases in reserves primarily due to changes in certain subtenant income estimates
related to the continued depression in the commercial real estate market, which are included on the accompanying
Consolidated Statements of Operations under the caption “Relocation, store closure and lease termination costs.” During
fiscal year 2008, the Company’s initial estimates of Wild Oats Markets store closure reserves were reduced by approximately
$28.8 million as part of the final purchase price allocation. These purchase price adjustments related primarily to the
completion of evaluations of the physical and market condition of acquired locations as of August 28, 2007, resulting in the
Company’s decision to close seven additional Wild Oats store locations and adjustments to the fair values of certain assets
and store closure reserves. Additionally, the Company recognized charges of approximately $14.1 million related to the
increases in reserves due to the downturn in the real estate market and the economy in general, during the fourth quarter of
fiscal year 2008.
(8) Long-Term Debt
We have long-term debt and obligations under capital leases as follows (in thousands):
2009 2008
Obligations under capital lease agreements,
due in monthly installments through 2029 $ 18,649 $ 19,021
Convertible debentures, including accreted interest - 2,698
Revolving line of credit - 195,000
Cash flow hedge instrument 20,588 12,451
Term loan 700,000 700,000
Total long-term debt 739,237 929,170
Less current installments 389 380
Long-term debt, less current installments $ 738,848 $ 928,790
During fiscal year 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 in our subsidiaries, bears
interest at our option of the alternative base rate (“ABR”) plus an applicable margin, currently 0.75%, or LIBOR plus an
applicable margin, currently 1.75%, based on the Company’s Moody’s and S&P rating. These applicable margins are
currently the maximum allowed under these agreements. 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 2009, as a result of
downgrades to our corporate credit ratings and as called for in the loan agreement, the participating banks obtained security
interests in certain of the Company’s assets to collateralize amounts outstanding under the term loan. The term loan
agreement contains certain affirmative covenants including maintenance of certain financial ratios and certain negative
covenants including limitations on additional indebtedness and payments as defined in the agreement. No further material
restrictive covenants or limitations on additional indebtedness and payments have been imposed as a result of the
downgrades to our corporate credit ratings. At September 27, 2009, we were in compliance with all applicable debt
covenants.
The Company also has outstanding a $350 million revolving line of credit, which is secured by a pledge of substantially all
of the stock in our subsidiaries, that extends to 2012. The credit agreement contains certain affirmative covenants including
maintenance of certain financial ratios and certain negative covenants including limitations on additional indebtedness and
payments as defined in the agreement. At September 27, 2009, we were in compliance with all applicable debt covenants. All
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