Whole Foods 2014 Annual Report Download - page 55

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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:
2014 2013 2012
Expected dividend yield 0.950% 0.880% 0.800%
Risk-free interest rate 1.18% 0.77% 0.58%
Expected volatility 30.96% 31.25% 40.89%
Expected life, in years 4.04 3.96 4.14
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 both implied volatility and 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 experience and adjusts the rate from time to time as
necessary.
Restricted Stock
During fiscal years 2014 and 2013, the Company awarded approximately 0.2 million shares and 0.1 million shares of restricted
common stock, respectively, pursuant to the Whole Foods Market 2009 Stock Incentive Plan. Fair value of the restricted share
issuances on grant date for fiscal years 2014 and 2013 totaled approximately $11 million and $4 million, respectively.
Total share-based payment expense related to restricted shares during fiscal year 2014 totaled approximately $5 million and is
included in the “General and administrative expenses” line item on the Consolidated Statements of Operations. Share-based
payment expense related to restricted shares was not material during fiscal year 2013. At September 28, 2014 and September 29,
2013, there was approximately $10 million and $3 million of unrecognized share-based payment expense, respectively, related
to unvested restricted stock. The Company anticipates this expense to be recognized over a weighted average period of 3.9 years.
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.
Team Member Stock Purchase Plan
Under the Team Member Stock Purchase Plan, the Company issued approximately 135,000 shares, 80,000 shares and 120,000
shares of common stock in fiscal years 2014, 2013 and 2012, respectively. At September 28, 2014, September 29, 2013 and
September 30, 2012, approximately 405,000 shares, 540,000 shares and 620,000 shares of our common stock, respectively, were
available for future issuance.
(13) 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 2014, 2013 and 2012, the Company made cash contributions to the plan of approximately $6 million, $6 million
and $5 million, respectively.
(14) Quarterly Results (unaudited)
The Company’s first fiscal quarter consists of 16 weeks, the second and third fiscal quarters each are 12 weeks, and the fourth
fiscal quarter is 12 or 13 weeks. Fiscal years 2014 and 2013 were 52-week years with twelve weeks in the fourth quarter. Because
the first fiscal quarter is longer than the remaining quarters, it typically represents a larger share of the Company’s annual sales
from existing stores. Quarter-to-quarter comparisons of results of operations have been and may be materially impacted by the
timing of new store openings. The Company believes that the following information reflects all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation. The operating results for any quarter are not necessarily indicative of results
for any future period.