Whole Foods 2011 Annual Report Download - page 54

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The Company’ s total gross unrecognized tax benefits are classified in the “Other long-term liabilities” line item on the
Consolidated Balance Sheets. If the Company were to prevail on all unrecognized tax benefits recorded at September 25,
2011, the total gross unrecognized tax benefit totaling approximately $6.4 million would benefit the Company’ s effective tax
rate if recognized. In addition, associated penalties and interest previously recognized would also benefit the effective tax
rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits within its global operations
as a component of income tax expense. During the fiscal year ended September 25, 2011, we recorded approximately $0.5
million in interest and penalties. The Company had accrued approximately $3.4 million and $4.2 million for the payment of
interest and penalties at September 25, 2011 and September 26, 2010, respectively.
The Company and its domestic subsidiaries file income tax returns with federal, state and local tax authorities within the
United States. The Company’ s foreign affiliates file income tax returns in Canada and the United Kingdom. The IRS of the
United States completed its examination of the Company’ s federal tax returns for its fiscal years 2007 and 2008 during the
fourth quarter of fiscal year 2011. With limited exceptions, the Company is no longer subject to federal income tax
examinations for fiscal years before 2007 and is no longer subject to state and local income tax examinations for fiscal years
before 2001.
Although a reasonably reliable estimate of the period of cash settlement with respective taxing authorities cannot be
determined due to the high degree of uncertainty regarding the timing of future cash outflows associated with the Company’ s
unrecognized tax benefits, as of September 25, 2011, the Company does not expect tax audit resolutions will reduce its
unrecognized tax benefits in the next 12 months.
(11) Redeemable Preferred Stock
During fiscal year 2009, the Company issued 425,000 shares of Series A 8% Redeemable, Convertible Exchangeable
Participating Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”) to affiliates of Leonard Green &
Partners, L.P., for approximately $413.1 million, net of approximately $11.9 million in closing and issuance costs. The Series
A Preferred Stock was classified as temporary shareholders’ equity at September 27, 2009 since the shares were (i)
redeemable at the option of the holder and (ii) had conditions for redemption which are not solely within the control of the
Company. The holders of the Series A Preferred Stock were entitled to an 8% dividend, payable quarterly on the first day of
each calendar quarter in cash. The Company paid cash dividends on the Series A Preferred Stock totaling $8.5 million during
fiscal year 2010.
During the first quarter of fiscal year 2010, the Company announced its intention to call all 425,000 outstanding shares of the
Series A Preferred Stock for redemption on November 27, 2009 in accordance with the terms governing such Series A
Preferred Stock. On November 26, 2009 the holders converted all 425,000 outstanding shares of the Series A Preferred
Stock. At the conversion date, the liquidation preference of the Series A Preferred Stock of $425 million and accrued
dividends of approximately $5.2 million converted into approximately 29.7 million shares of common stock of the Company.
(12) Shareholders’ Equity
Dividends per Common Share
On December 8, 2010, the Company’ s Board of Directors reinstated a quarterly cash dividend to shareholders of $0.10 per
common share. During fiscal year 2011, the Company paid approximately $52.6 million in dividends to shareholders. On
September 8, 2011, the Company’ s Board of Directors declared a cash dividend to shareholders of $0.10 per common share,
payable on September 29, 2011 to shareholders of record on September 19, 2011. Approximately $17.8 million was included
in the “Dividends payable” line item on the Consolidated Balance Sheets at September 25, 2011.
Treasury Stock
During the first quarter of fiscal year 2010, the Company’ s stock repurchase program, with approximately $200 million in
remaining authorization, expired and was not renewed. Subsequent to fiscal year 2011, the Company’ s Board of Directors
authorized a new $200 million stock repurchase program through November 1, 2013. The specific timing and repurchase of
future amounts will vary based on market conditions, securities law limitations and other factors, and will be made using the
Company’ s available resources. The stock repurchase program may be suspended or discontinued at any time without prior
notice.
Comprehensive Income
Our comprehensive income is comprised of: net income; unrealized gains and losses on investments; unrealized gains and
losses on cash flow hedge instruments, including reclassification adjustments of unrealized losses to net income related to
ongoing interest payments; and foreign currency translation adjustments, net of income taxes.