Whole Foods 2011 Annual Report Download - page 35

To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our
reserves, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax
settlement would require use of our cash and would result in an increase in our effective income tax rate in the period of
resolution. A favorable tax settlement would be recognized as a reduction in our effective income tax rate in the period of
resolution.
Disclaimer on Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in this analysis are forward-looking statements
that involve risks and uncertainties, including but not limited to general business conditions, the timely development and
opening of new stores, the integration of acquired stores, the impact of competition and changes in government regulation.
For a discussion of these and other risks and uncertainties that may affect our business, see “Item 1A. Risk Factors.” The
Company does not undertake any obligation to update forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to interest rate changes and changes in market values of our investments and long-term debt. We do not use
financial instruments for trading or other speculative purposes. We are also exposed to foreign exchange fluctuations on our
foreign subsidiaries.
The analysis presented for each of our market risk sensitive instruments is based on a 10% change in interest or currency
exchange rates. These changes are hypothetical scenarios used to calibrate potential risk and do not represent our view of
future market changes. As the hypothetical figures discussed below indicate, changes in fair value based on the assumed
change in rates generally cannot be extrapolated because the relationship of the change in assumption to the change in fair
value may not be linear. The effect of a variation in a particular assumption is calculated without changing any other
assumption. In reality, changes in one factor may result in changes in another, which may magnify or counteract the
sensitivities.
Interest Rate Risk
We seek to minimize the risks from interest rate fluctuations through ongoing evaluation of the composition of our
investments and long-term debt.
The Company holds money market fund investments that are classified as cash equivalents and restricted cash. We had cash
equivalent investments and restricted cash investments totaling approximately $75.9 million and $92.0 million, respectively,
at September 25, 2011. Cash equivalent investments and restricted cash investments totaled approximately $25.8 million and
$86.6 million, respectively, at September 26, 2010. These investments are generally short term in nature, and therefore
changes in interest rates would not have a material impact on the valuation of these investments. During fiscal year 2011 and
2010, a hypothetical 10% increase or decrease in interest rates would not have materially affected our consolidated financial
statements.
The Company also holds available-for-sale securities that are classified as short-term and long-term investments generally
consisting of state and local municipal obligations. We had short-term investments totaling approximately $442.3 million and
long-term investments totaling approximately $52.8 million at September 25, 2011. Short-term investments totaled
approximately $329.7 million and long-term investments totaled approximately $96.1 million at September 26, 2010. These
investments are recorded at fair value and are generally short term in nature, and therefore changes in interest rates would not
have a material impact on the valuation of these investments. During fiscal years 2011 and 2010, a hypothetical 10% increase
or decrease in interest rates would have resulted in an increase or decrease in interest income earned on these investments of
approximately $0.9 million and $0.2 million, respectively.
Foreign Currency Risk
The Company is exposed to foreign currency exchange risk. We own and operate seven stores in Canada and five stores in
the United Kingdom. Sales made from the Canadian and United Kingdom stores are made in exchange for Canadian dollars
and Great Britain pounds, respectively. The Company does not currently hedge against the risk of exchange rate fluctuations.
At September 25, 2011, a hypothetical 10% change in value of the U.S. dollar relative to the Canadian dollar or Great Britain
pound would not have materially affected our consolidated financial statements.
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