Whole Foods 2009 Annual Report Download - page 70

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(15) Earnings per Share
The computation of basic earnings per share is based on the number of weighted average common shares outstanding during
the period.
The computation of diluted earnings per share for fiscal year 2009 does not include options to purchase approximately 16.5
million shares of common stock or the conversion of Series A Preferred Stock to approximately 24.1 million shares of
common stock due to their antidilutive effect. The computation of diluted earnings per share does not include approximately
70,000 shares of common stock related to the zero coupon convertible subordinated debentures at the end of fiscal year 2008
and options to purchase approximately 13.4 million and 10.6 million shares of common stock at the end of fiscal years 2008
and 2007, respectively, due to their antidilutive effect.
A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows (in
thousands, except per share amounts):
2009 2008 2007
Income available to common shareholders
(numerator for basic earnings per share) $ 118,754 $ 114,524 $ 182,740
Interest on 5% zero coupon convertible subordinated
debentures, net of income taxes - - 98
Adjusted income available to common shareholders
(numerator for diluted earnings per share) $ 118,754 $ 114,524 $ 182,838
Weighted average common shares outstanding
(denominator for basic earnings per share) 140,414 139,886 140,088
Potential common shares outstanding:
Assumed conversion of 5% zero coupon convertible
subordinated debentures - - 116
Incremental shares from assumed exercise of stock options - 125 1,632
Weighted average common shares outstanding and
potential additional common shares outstanding
(denominator for diluted earnings per share) 140,414 140,011 141,836
Basic earnings per share $ 0.85 $ 0.82 $ 1.30
Diluted earnings per share $ 0.85 $ 0.82 $ 1.29
(16) 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
Stock Option Plan
We grant options to purchase common stock under our Whole Foods Market 2009 Stock Incentive Plan, which was
approved at our annual shareholders’ meeting on March 16, 2009 and replaces the Whole Foods Market 2007 Stock
Incentive Plan. All options outstanding are governed by the original terms and conditions of the grants. Options are granted
at an option price equal to the market value of the stock at the grant date and are generally exercisable ratably over a four-
year period beginning one year from grant date. Options granted expire five or seven years from the date of grant. The
market value of the stock is determined as the closing stock price at the grant date. At September 27, 2009, September 28,
2008 and September 30, 2007 approximately 15.4 million, 4.5 million and 5.5 million shares of our common stock,
respectively, were available for future stock option grants.