Whole Foods 2009 Annual Report Download - page 64

outstanding amounts borrowed under this agreement bear interest at our option of the ABR plus an applicable margin,
currently 0.875%, or LIBOR plus an applicable margin, currently 1.875%, based on the Company’s Moody’s and S&P
rating. These applicable margins are currently the maximum allowed under these agreements. 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 revolving credit facility. 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. Commitment fees on the undrawn amount,
reduced by outstanding letters of credit, are payable under this agreement. At September 28, 2008 the Company had $195
million drawn under this agreement. During fiscal year 2009, the Company repaid all amounts outstanding and no amounts
were drawn under this agreement at September 27, 2009. The amount available to the Company under the agreement was
effectively reduced to $335.2 million and $75.9 million by outstanding letters of credit totaling approximately $14.8 million
and $79.1 million at September 27, 2009 and September 28, 2008, respectively. This decrease in outstanding letters of credit
relates to approximately $70.4 million of cash invested as collateral to support a portion of our workers’ compensation
obligation that was previously held as a letter of credit.
A summary of applicable interest rates as of the end of fiscal years 2009 and 2008 follows:
2009 2008
Term loan agreement:
Variable interest rate, excluding applicable margin on non-swap portion of loan 0.253% 2.469%
Interest rate swap fixed interest rate, excluding applicable margin 4.718% 4.718%
Applicable margin – LIBOR, based on Moody’s and S&P ratings 1.750% 1.375%
Applicable margin – ABR, based on Moody’s and S&P ratings 0.750% 0.375%
Line of credit agreement:
Variable interest rate, excluding applicable margin n/a 4.221%
Applicable margin – LIBOR, based on Moody’s and S&P ratings 1.875% 1.500%
Applicable margin – ABR, based on Moody’s and S&P ratings 0.875% 0.500%
Commitment fee on undrawn amount 0.375% 0.275%
The Company assumed convertible debentures totaling approximately $115.0 million in the Wild Oats acquisition, of which
approximately $94.2 million was paid off during fiscal year 2007 and approximately $21.8 million, which included a related
conversion premium totaling approximately $0.9 million, was paid off during fiscal year 2008. Approximately 250 Whole
Foods Market zero coupon convertible subordinated debentures were converted at the option of the holders to approximately
6,000 shares of Company common stock during fiscal year 2008. We had outstanding convertible subordinated debentures
which had a carrying amount of approximately $2.7 million at September 28, 2008. In fiscal year 2009, the Company
redeemed all remaining debentures at a redemption price equal to the issue price plus accrued original issue discount totaling
approximately $2.7 million.
The Company is committed under certain capital leases for rental of certain equipment, buildings and land. These leases
expire or become subject to renewal clauses at various dates through 2029. Capital leases totaling approximately $19.1
million were assumed with the acquisition of Wild Oats Markets. Lease agreements are discussed further in Note 10 to the
consolidated financial statements, “Leases.”
(9) Derivatives
During 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 cash flow exposure related to interest rate fluctuations. The interest rate swap was designated
as a cash flow hedge. Hedge ineffectiveness was not material during fiscal year 2009 or 2008. The interest rate swap
agreement does not contain a credit-risk-related contingent feature.
At September 27, 2009, the carrying amount of the Company’s interest rate swap totaled approximately $20.6 million and is
included on the “Long-term debt and capital lease obligations, less current installments” line item on the Consolidated
Balance Sheets. The Company had accumulated net derivative losses of approximately $12.6 million and $7.6 million, net of
taxes, in accumulated other comprehensive income as of September 27, 2009 and September 28, 2008, respectively, related
to this cash flow hedge. These losses are being recognized as an adjustment to interest expense over the same period in
which the interest costs on the related debt are recognized. During fiscal years 2009 and 2008, the Company reclassified
approximately $14.4 million and $4.1 million, respectively, from accumulated other comprehensive income related to
ongoing interest payments that was included in the “Interest expense” line item on the Consolidated Statements of
Operations. The Company expects to reclass approximately $18.3 million from accumulated other comprehensive income to
interest expense in the next twelve months.
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