Whole Foods 2010 Annual Report Download - page 47

41
All full-time team members with a minimum of 400 hours of service may purchase our common stock through payroll
deductions under the Company’s Team Member Stock Purchase Plan (“TMSPP”). The TMSPP provides for a 5% discount
on the shares purchase date market value which meets the share-based payment, “Safe Harbor” provisions, and therefore is
non-compensatory. As a result, no compensation expense will be recognized for our employee stock purchase plan.
Income Taxes
We recognize deferred income tax assets and liabilities by applying statutory tax rates in effect at the balance sheet date to
differences between the book basis and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
reverse. Deferred tax assets and liabilities are adjusted to reflect changes in tax laws or rates in the period that includes the
enactment date. Significant accounting judgment is required in determining the provision for income taxes and related
accruals, deferred tax assets and liabilities. The Company believes that its tax positions are consistent with applicable tax
law, but certain positions may be challenged by taxing authorities. In the ordinary course of business, there are transactions
and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations
by the Internal Revenue Service (“IRS”) and other state and local taxing authorities. Although we believe that our estimates
are reasonable, actual results could differ from these estimates.
In fiscal year 2008, the Company adopted amendments to ASC 740, “Income Taxes,” which clarify the accounting for
uncertainty in tax positions recognized in the financial statements. Under these provisions, the Company may recognize the
tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. The related amendments also provide guidance on measurement,
classification, interest and penalties associated with tax positions, and income tax disclosures.
Treasury Stock
The Company maintained a stock repurchase program which expired on November 8, 2009. Under that program, the
Company could repurchase shares of the Company’s common stock on the open market that are held in treasury at cost. The
subsequent retirement of treasury stock is recorded as a reduction in retained earnings at cost. The Company’s common stock
has no par value.
Earnings per Share
Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted average
number of common shares outstanding during the fiscal period. Net income available to common shareholders in fiscal years
2010 and 2009 is calculated using the two-class method, which is an earnings allocation method for computing earnings per
share when an entity’s capital structure includes common stock and participating securities. The two-class method
determines earnings per share based on dividends declared on common stock and participating securities (i.e., distributed
earnings) and participation rights of participating securities in any undistributed earnings. The application of the two-class
method is required since the Company’s redeemable preferred shares contained a participation feature.
Diluted earnings per share is based on the weighted average number of common shares outstanding plus, where applicable,
the additional common shares that would have been outstanding as a result of the conversion of convertible debt, dilutive
options, and redeemable preferred stock.
During fiscal year 2010, the Company adopted ASU No. 2009-08, “Earnings per Share – Amendments to Sections 260-10-
S99.” The amended guidance represents technical changes to ASC 260, “Earnings per Share,” to reflect SEC staff
pronouncements on EITF Topic D-53, “Computation of Earnings Per Share for a Period that Includes a Redemption or an
Induced Conversion of a Portion of a Class of Preferred Stock,” and EITF Topic D-42, “The Effect of the Calculation of
Earnings per Share for the Redemption or Induced Conversion of Preferred Stock.” The update consisted principally of
formatting changes and removing out-of-date guidance. The adoption of ASU No. 2009-08 had no impact on our
consolidated financial statements.
Comprehensive Income
Comprehensive income consists of net income; unrealized gains and losses on marketable securities; 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. Comprehensive income is
reflected in the Consolidated Statements of Shareholders’ Equity and Comprehensive Income.