Whole Foods 2007 Annual Report Download - page 62

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option of the holder, at any time on or prior to maturity, unless previously redeemed or otherwise purchased. The debentures
may be redeemed at the option of the holder on March 2, 2008 or March 2, 2013 at the issue price plus accrued original
discount to the date of redemption. Subject to certain limitations, at our option, we may elect to pay this purchase price in
cash, shares of common stock or any combination thereof. The debentures may also be redeemed in cash at the option of the
holder if there is a change in control at the issue price plus accrued original discount to the date of redemption. The Company
may redeem the debentures for cash, in whole or in part, at redemption prices equal to the issue price plus accrued original
discount to the date of redemption. The debentures are subordinated in the right of payment to all existing and future senior
indebtedness. The debentures have a conversion rate of 21.280 shares of Company common stock per $1,000 principal
amount at maturity, or approximately 97,000 shares and 311,000 shares at September 30, 2007 and September 24, 2006,
respectively. Approximately $5.8 million and $5.0 million of the carrying amount of the debentures were voluntarily
converted by holders to shares of Company common stock during fiscal years 2007 and 2006, respectively.
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 2028. Capital leases totaling approximately $19.1
million were assumed with the acquisition of Wild Oats Markets. Lease agreements are discussed further in Note 9 to the
consolidated financial statements, “Leases.”
(9) Leases
The Company is committed under certain capital leases for rental of equipment, buildings, and land and certain operating
leases for rental of facilities and equipment. These leases expire or become subject to renewal clauses at various dates from
2007 to 2043. Amortization of equipment under capital lease is included with depreciation expense.
Rental expense charged to operations under operating leases for fiscal years 2007, 2006 and 2005 totaled approximately
$201.0 million, $153.1 million and $124.8 million, respectively. Minimum rental commitments required by all noncancelable
leases are approximately as follows (in thousands):
Capital Operating
2008 $ 1,787 $ 212,711
2009 2,029 269,386
2010 2,039 303,931
2011 2,049 311,785
2012 2,045 308,690
Future fiscal years 26,517 4,622,944
36,466 $ 6,029,447
Less amounts representing interest 17,082
Net present value of capital lease obligations 19,384
Less current installments 297
Long-term capital lease obligations, less current installments $ 19,087
The present values of future minimum obligations for capital leases shown above are calculated based on interest rates
determined at the inception of the lease, or upon acquisition of the original lease.
During fiscal years 2007, 2006 and 2005, we paid contingent rentals totaling approximately $9.9 million, $9.6 million and
$7.6 million, respectively. At September 30, 2007, we recorded an asset retirement obligation associated with operating
leases totaling approximately $825,000. No asset retirement obligations associated with operating leases were incurred
during fiscal years 2006 and 2005. Sublease rental income totaled approximately $3.9 million, $1.6 million and $1.3 million
during fiscal years 2007, 2006 and 2005, respectively. John Mackey and Glenda Chamberlain, executive officers of the
Company, own approximately 51% and 2%, respectively, of BookPeople, Inc., a retailer of books and periodicals that is
unaffiliated with the Company, which leases retail space in Austin, Texas from the Company. The lease provides for an
aggregate annual minimum rent of approximately $0.4 million which the Company received in rental income in fiscal years
2007, 2006 and 2005.