Whole Foods 2013 Annual Report Download - page 63

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A summary of options outstanding and exercisable at September 29, 2013 follows (share amounts in millions):
Range of Exercise Prices Options Outstanding Options Exercisable
From To
Number
of options
outstanding
Weighted
average
exercise price
Weighted
average
remaining
life (in years)
Number
of options
exercisable
Weighted
average
exercise price
$ 5.56 $ 18.49 1.3 $ 9.60 2.64 1.2 $ 9.50
20.42 28.50 3.0 20.43 4.21 1.5 20.42
31.25 31.25 4.3 31.25 4.60 1.6 31.25
40.81 46.28 6.6 44.29 5.63 1.3 44.22
51.25 51.86 4.0 51.86 6.67 — —
Total 19.2 $ 36.90 5.20 5.6 $ 26.60
Share-based payment expense related to vesting stock options recognized during fiscal years 2013, 2012 and 2011 totaled
approximately $56 million, $42 million and $27 million, respectively.
The fair value of stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:
2013 2012 2011
Expected dividend yield 0.880% 0.800% 0.698%
Risk-free interest rate 0.77% 0.58% 1.76%
Expected volatility 31.25% 40.89% 43.84%
Expected life, in years 3.96 4.14 4.18
Risk-free interest rate is based on the U.S. Treasury yield curve on the date of the grant for the time period equal to the expected
term of the grant. Expected volatility is calculated using a ratio of implied volatility based on the Newton-Raphson method of
bisection, and four or six year historical volatilities based on the expected life of each tranche of options. The Company determined
the use of implied volatility versus historical volatility represents a more accurate calculation of option fair value. Expected life
is calculated in two tranches based on weighted average percentage of unexpired options and exercise-after-vesting information
over the last five or seven years. Unvested options are included in the term calculation using the “mid-point scenario” which
assumes that unvested options will be exercised halfway between vest and expiration date. The assumptions used to calculate
the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and experience. In addition
to the above valuation assumptions, the Company estimates an annual forfeiture rate for unvested options and adjusts fair value
expense accordingly. The Company monitors actual forfeiture activity and adjusts the rate from time to time as necessary.
Restricted Stock
During fiscal year 2013, the Company awarded approximately 83,000 shares of restricted common stock pursuant to the Whole
Foods Market 2009 Stock Incentive Plan. Fair value of the restricted share issuance on grant date totaled approximately $4
million. Restricted shares vest over a three-, four- or six-year term. Share-based payment expense related to restricted shares,
included in the “General and administrative expenses” line item on the Consolidated Statements of Operations, was not material
during fiscal year 2013. At September 29, 2013, there was approximately $3 million of unrecognized share-based payment
expense related to unvested restricted stock. The number of shares, grant date fair value, and share-based payment expense
related to the issuance of restricted common stock were not material during fiscal year 2012 or 2011.
Team Member Stock Purchase Plan
Under the Team Member Stock Purchase Plan, the Company issued approximately 80,000, 120,000 and 120,000 shares of
common stock in fiscal years 2013, 2012 and 2011, respectively. At September 29, 2013, September 30, 2012 and September 25,
2011, approximately 540,000, 620,000 and 740,000 shares of our common stock, respectively, were available for future issuance.
(14) Team Member 401(k) Plan
The Company offers a team member 401(k) plan to all team members with a minimum of 1,000 service hours in one year. In
fiscal years 2013, 2012 and 2011, the Company made cash contributions to the plan of approximately $6 million, $5 million
and $5 million, respectively.