##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 Commission file number 0-21577
 WILD OATS MARKETS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
Incorporation or organization)
    
    84-1100630(I.R.S. Employer Identification Number)
 1821 30th Street
Boulder, Colorado 80301  (Address of principal executive offices, including zip code)
 (303) 440-5220  (Registrants telephone number, including area code)
   Title of Each Class
   o þ
  o þ
  þ o
 o
  o þ o
 o þ




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##### 



PAGEPART I.Item 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    7Item 1B.
    
    Unresolved Staff Comments
    
    
    9Item 2.
    
    Properties
    
    
    9Item 3.
    
    Legal Proceedings
    
    
    11Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    11PART II.Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    12Item 6.
    
    Selected Financial Data
    
    
    14Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 8.
    
    Financial Statements and Supplementary Data
    
    
    32Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    66Item 9A.
    
    Controls and Procedures
    
    
    67Item 9B.
    
    Other Information
    
    
    67PART III.Item 10.
    
    Directors, Executive Officers, and Corporate Governance
    
    
    68Item 11.
    
    Executive Compensation
    
    
    70Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    87Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    90Item 14.
    
    Principal Accountant Fees and Services
    
    
    90PART IV.Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    92Exhibit 10.27Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I.
 
 Item 1.
 BUSINESS
 Who We Are
  
    
    Wild Oats Marketplace (nationwide)
    
    Henrys Farmers Market (southern California)
    
    Sun Harvest (Texas)
    
    Capers Community Market (British Columbia, Canada)
  Natural Products Industry
 Natural Foods Merchandiser, June 2006).
 Operating Strategy
  Destination format.
 High product standards.
  3




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Educational and entertaining store environment.
 Extensive community involvement.
 Multiple store formats.
 Competitive pricing.
 Products
 Overview
  Quality standards.
 
    
    foods free of hydrogenated oils and synthetic additives, such as artificial colors, flavors, and preservatives;
    
    meats that are humanely raised and contain no antibiotics or added growth hormones;
    
    locally and organically grown produce, unique regional products; and
    
    natural personal care and household items that are not tested on animals.
 Corporate brands.
  4




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Store Operations
 Management and employees.
 Purchasing and Distribution
      5




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Marketing
   Management Information Systems
  
    
    implementation of a store-level perpetual inventory system;
    
    upgrade of our store data networks with additional bandwidth at reduced unit cost;
    
    implementation of thin client technology in store locations to reduce operating costs and improve data security;
    
    implementation of security infrastructure, policies and procedures to comply with
Payment Card Industry mandate; and
    
    relocation to new corporate headquarters with no business interruption
  
    
    implemention of store-level labor standards to increase labor efficiency;
    
    implementation of pricing and promotion optimization applications;
    
    completion of upgrades to our enterprise resource planning financial systems and data warehouse applications;
    
    rollout of electronic store ordering; and
    
    evaluation of a future replacement point of sale platform.
 Competition
   6




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Employees
   Available Information
 http://www.wildoats.com http://www.sec.gov
 
 Item 1A.
 RISK FACTORS
   
    
    the successful opening and operating of new stores, and remodels/remerchandising of existing stores,
    
    fluctuations in quarterly results of operations and stock price,
    
    economic conditions,
    
    competition,
    
    labor issues,
    
    loss of key management,
    
    government regulations, and
    
    changes in and performance by suppliers, distributors and manufacturers.
 The successful opening and operating of new stores, and remodels/remerchandising of existing
stores
  7




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Managements Discussion and
Analysis of Financial Condition and Results of Operations  Liquidity and Capital Resources
 Fluctuations in quarterly results of operations and stock price.
  Economic conditions.
 Competition
 Loss of key management.
 Government regulations
  8




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Changes in and performance by suppliers, distributors and manufacturers
 
 Item 1B.
 UNRESOLVED STAFF COMMENTS
  
 Item 2.
 PROPERTIES
    9




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Store Locations
  
 Arizona:
    
    Tucson (2), Phoenix, ScottsdaleArkansas:
    
    Little RockCalifornia:
    
    Orange County (6), metro Los Angeles (5), metro San Diego (15), Riverside County (3), San Bernardino County (3)Colorado:
    
    Boulder (3), Colorado Springs, metro Denver (8)Connecticut:
    
    West Hartford, WestportFlorida:
    
    Melbourne, Miami, Miami Beach, Tampa, NaplesIllinois:
    
    Evanston, HinsdaleIndiana:
    
    Indianapolis (2)Kansas:
    
    Kansas City (2)Kentucky:
    
    Lexington, LouisvilleMaine:
    
    PortlandMassachusetts:
    
    Boston (3)Missouri:
    
    Kansas City, St. LouisNebraska:
    
    OmahaNevada:
    
    Las Vegas (2), RenoNew Jersey:
    
    PrincetonNew Mexico:
    
    Albuquerque (3), Santa FeOhio:
    
    Cincinnati (2), Cleveland, ColumbusOklahoma:
    
    TulsaOregon:
    
    Bend, Portland (5)Tennessee:
    
    Memphis, Nashville (2)Texas:
    
    Austin (2), Corpus Christi, El Paso, McAllen, San Antonio (3)Utah:
    
    Park City, Salt Lake City (3)Washington:
    
    VancouverBritish Columbia, Canada:
    
    Vancouver (4)
  10




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Item 3.
 LEGAL PROCEEDINGS
 Tim Auchterlonie, individually and on behalf of all others similarly situated and the
general public, and Roes 1 to 1000 vs. Wild Oats Markets, Inc. and Does 1 through 100
 Hoeppner Puerto Auchterlonie Ana Marie Hoeppner et al. v. Wild Oats Markets, Inc. and Does 1
through 100 Jason Puerto, et al. v. Wild Oats Markets, Inc.
and Does 1 through 100 Hoeppner
 3601 Group Inc. v. Wild Oats Northwest,
Inc., Wild Oats, Inc. and Wild Oats Markets, Inc.
   
 Item 4.
 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   11




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PART II.
 
 Item 5.
 MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
   HIGH
    
    
    LOWFirst Quarter 2005
    
    $
    10.80
    
    
    $
    6.11Second Quarter 2005
    
    
    12.34
    
    
    
    9.81Third Quarter 2005
    
    
    13.88
    
    
    
    11.57Fourth Quarter 2005
    
    
    12.92
    
    
    
    10.91First Quarter 2006
    
    $
    20.33
    
    
    $
    11.75Second Quarter 2006
    
    
    19.49
    
    
    
    15.70Third Quarter 2006
    
    
    20.27
    
    
    
    15.35Fourth Quarter 2006
    
    
    18.67
    
    
    
    14.02
  Performance Chart
   12




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Cautionary Statement Regarding Forward-Looking Statements
   13




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Item 6.
 SELECTED FINANCIAL DATA  (in thousands, except per-share amounts, number of stores, and debt to EBITDA, as adjusted, ratio)
 Managements Discussion and Analysis of Financial Condition and Results of
Operations
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002STATEMENT OF OPERATIONS DATA:Sales
    
    $
    1,183,022
    
    
    $
    1,123,957
    
    
    $
    1,048,164
    
    
    $
    969,204
    
    
    $
    919,130Cost of goods sold and occupancy costs
    
    
    827,827
    
    
    
    796,396
    
    
    
    751,314
    
    
    
    683,480
    
    
    
    643,769Gross profit
    
    
    355,195
    
    
    
    327,561
    
    
    
    296,850
    
    
    
    285,724
    
    
    
    275,361Direct store expenses
    
    
    277,043
    
    
    
    264,074
    
    
    
    257,254
    
    
    
    233,580
    
    
    
    224,942Store contribution
    
    
    78,152
    
    
    
    63,487
    
    
    
    39,596
    
    
    
    52,144
    
    
    
    50,419Selling, general and administrative expenses
    
    
    54,848
    
    
    
    45,307
    
    
    
    40,625
    
    
    
    39,987
    
    
    
    28,623Loss on disposal of assets, net
    
    
    1,116
    
    
    
    187
    
    
    
    187
    
    
    
    2,087
    
    
    
    21Pre-opening expenses
    
    
    5,209
    
    
    
    3,419
    
    
    
    5,265
    
    
    
    3,490
    
    
    
    2,737Restructuring and asset impairment charges
(income), net
    
    
    28,170
    
    
    
    3,967
    
    
    
    2,461
    
    
    
    (1,259
    )
    
    
    (775
    )Income (loss) from operations
    
    
    (11,191
    )
    
    
    10,607
    
    
    
    (8,942
    )
    
    
    7,839
    
    
    
    19,813Loss on early extinguishment of debt
    
    
    
    
    
    
    559
    
    
    
    
    
    
    
    186
    
    
    
    Interest expense, net
    
    
    4,740
    
    
    
    6,294
    
    
    
    5,239
    
    
    
    4,966
    
    
    
    11,077Income (loss) before income taxes
    
    
    (15,931
    )
    
    
    3,754
    
    
    
    (14,181
    )
    
    
    2,687
    
    
    
    8,736Income tax expense
    
    
    657
    
    
    
    569
    
    
    
    25,838
    
    
    
    1,094
    
    
    
    3,666Net income (loss)
    
    $
    (16,588
    )
    
    $
    3,185
    
    
    $
    (40,019
    )
    
    $
    1,593
    
    
    $
    5,070Basic net income (loss) per common share
    
    $
    (0.57
    )
    
    $
    0.11
    
    
    $
    (1.37
    )
    
    $
    0.05
    
    
    $
    0.19Weighted-average number of common shares
outstanding, basic
    
    
    29,359
    
    
    
    28,812
    
    
    
    29,219
    
    
    
    29,851
    
    
    
    26,481Diluted net income (loss) per common share
    
    $
    (0.57
    )
    
    $
    0.11
    
    
    $
    (1.37
    )
    
    $
    0.05
    
    
    $
    0.19Weighted-average number of common shares
outstanding, assuming dilution
    
    
    29,359
    
    
    
    29,249
    
    
    
    29,219
    
    
    
    30,258
    
    
    
    27,082Number of stores at end of period
    
    
    109
    
    
    
    113
    
    
    
    108
    
    
    
    103
    
    
    
    99BALANCE SHEET DATA:Working capital deficit
    
    $
    (12,445
    )
    
    $
    (10,601
    )
    
    $
    (24,936
    )
    
    $
    (35,558
    )
    
    $
    (25,541
    )Total assets
    
    $
    446,638
    
    
    $
    418,870
    
    
    $
    405,560
    
    
    $
    373,428
    
    
    $
    361,454Long-term debt (including capitalized leases)
    
    $
    147,662
    
    
    $
    148,181
    
    
    $
    148,675
    
    
    $
    64,042
    
    
    $
    77,217Stockholders equity
    
    $
    108,596
    
    
    $
    109,542
    
    
    $
    101,101
    
    
    $
    162,373
    
    
    $
    156,187NON GAAP FINANCIAL DATA (1) :EBITDA, as adjusted
    
    $
    46,927
    
    
    $
    41,556
    
    
    $
    22,333
    
    
    $
    36,518
    
    
    $
    43,712Debt to EBITDA, as adjusted
    
    
    3.2
    
    
    
    3.6
    
    
    
    6.9
    
    
    
    1.8
    
    
    
    1.8
 (1)
    
    For an explanation of EBITDA, as adjusted, see Managements Discussion and Analysis of Financial Condition and Results of
Operations  Non GAAP Financial Information.
  14




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Item 7.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Item IA. Risk Factors Managements Discussion and Analysis of Financial
Condition and Results of Operations  Cautionary Statement Regarding Forward-Looking Statements.
 Executive Summary
 Managements Discussion and Analysis of Financial Condition
and Results of Operations
    TOTAL STORE COUNTFiscal Year Ending
    
    
    Period Ending2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    Feb 26, 2007Store count at beginning of
period
    
    
    107
    
    
    
    99
    
    
    
    103
    
    
    
    108
    
    
    
    113
    
    
    
    109Stores opened
    
    
    1
    
    
    
    8
    
    
    
    12
    
    
    
    8
    
    
    
    7
    
    
    
    1Stores closed
    
    
    (5
    )
    
    
    (4
    )
    
    
    *(6
    )
    
    
    (3
    )
    
    
    (11
    )
    
    
    Stores sold
    
    
    (4
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Store count at end of period
    
    
    99
    
    
    
    103
    
    
    
    108
    
    
    
    113
    
    
    
    109
    
    
    
    110
   15




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Outlook
    Note 18  Subsequent Event
  16




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Results of Operations
 percentages may not add due to rounding)
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Sales
    
    $
    1,183,022
    
    
    
    100.0
    %
    
    $
    1,123,957
    
    
    
    100.0
    %
    
    $
    1,048,164
    
    
    
    100.0
    %Cost of goods sold and occupancy costs
    
    
    827,827
    
    
    
    70.0
    %
    
    
    796,396
    
    
    
    70.9
    %
    
    
    751,314
    
    
    
    71.7
    %Gross profit
    
    
    355,195
    
    
    
    30.0
    %
    
    
    327,561
    
    
    
    29.1
    %
    
    
    296,850
    
    
    
    28.3
    %Direct store expenses
    
    
    277,043
    
    
    
    23.4
    %
    
    
    264,074
    
    
    
    23.5
    %
    
    
    257,254
    
    
    
    24.5
    %Store contribution
    
    
    78,152
    
    
    
    6.6
    %
    
    
    63,487
    
    
    
    5.6
    %
    
    
    39,596
    
    
    
    3.8
    %Selling, general and administrative
expenses
    
    
    54,848
    
    
    
    4.6
    %
    
    
    45,307
    
    
    
    4.0
    %
    
    
    40,625
    
    
    
    3.9
    %Loss on disposal of assets, net
    
    
    1,116
    
    
    
    0.1
    %
    
    
    187
    
    
    
    
    %
    
    
    187
    
    
    
    
    %Pre-opening expenses
    
    
    5,209
    
    
    
    0.4
    %
    
    
    3,419
    
    
    
    0.3
    %
    
    
    5,265
    
    
    
    0.5
    %Restructuring and asset impairment
charges (income), net
    
    
    28,170
    
    
    
    2.4
    %
    
    
    3,967
    
    
    
    0.4
    %
    
    
    2,461
    
    
    
    0.2
    %Income (loss) from operations
    
    
    (11,191
    )
    
    
    (0.9
    )%
    
    
    10,607
    
    
    
    0.9
    %
    
    
    (8,942
    )
    
    
    (0.9
    )%Loss on early extinguishment of debt
    
    
    
    
    
    
    
    %
    
    
    (559
    )
    
    
    
    %
    
    
    
    
    
    
    
    %Interest income
    
    
    2,647
    
    
    
    0.2
    %
    
    
    1,669
    
    
    
    0.1
    %
    
    
    1,070
    
    
    
    0.1
    %Interest expense
    
    
    (7,387
    )
    
    
    (0.6
    )%
    
    
    (7,963
    )
    
    
    (0.7
    )%
    
    
    (6,309
    )
    
    
    (0.6
    )%Income (loss) before income taxes
    
    
    (15,931
    )
    
    
    (1.3
    )%
    
    
    3,754
    
    
    
    0.3
    %
    
    
    (14,181
    )
    
    
    (1.4
    )%Income tax expense
    
    
    657
    
    
    
    0.1
    %
    
    
    569
    
    
    
    
    %
    
    
    25,838
    
    
    
    2.5
    %Net income (loss)
    
    $
    (16,588
    )
    
    
    (1.4
    )%
    
    $
    3,185
    
    
    
    0.3
    %
    
    $
    (40,019
    )
    
    
    (3.9
    )%
 Year over Year 2006 v. 2005 Comparisons of Certain Selected Income Statement Data
  Sales
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    1,183,022
    
    
    $
    1,123,957
    
    
    
    5.3
    %
  Gross profit
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    355,195
    
    
    $
    327,561
    
    
    
    8.4
    %As a percent of sales for the year ended:
    
    
    30.0
    %
    
    
    29.1
    %
    
    
    0.9
    %
   17




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Direct store expenses
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    277,043
    
    
    $
    264,074
    
    
    
    4.9
    %As a percent of sales for the year ended:
    
    
    23.4
    %
    
    
    23.5
    %
    
    
    (0.1
    )%
  Selling, general and administrative expenses
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    54,848
    
    
    $
    45,307
    
    
    
    21.1
    %As a percent of sales for the year ended:
    
    
    4.6
    %
    
    
    4.0
    %
    
    
    0.6
    %
 Share-based Payment
 Loss on disposal of assets, net
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    1,116
    
    
    $
    187
    
    
    
    496.8
    %As a percent of sales for the year ended:
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.1
    %
  Pre-opening expenses
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    5,209
    
    
    $
    3,419
    
    
    
    52.4
    %As a percent of sales for the year ended:
    
    
    0.4
    %
    
    
    0.3
    %
    
    
    0.1
    %
   18




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Restructuring and asset impairment charges, net
 (in thousands):
 Year EndedDecember 30,
    
    
    December 31,2006
    
    
    2005Change in estimate related to lease-related liabilities for sites
previously closed
    
    $
    483
    
    
    $
    (239
    )Lease-related liability for sites closed during the current period
    
    
    11,487
    
    
    
    1,273Accretion expense on lease-related liabilities
    
    
    618
    
    
    
    469Severance for employees terminated during the period
    
    
    809
    
    
    
    134Asset impairment charges
    
    
    14,773
    
    
    
    1,370Write off of goodwill
    
    
    
    
    
    
    960$
    28,170
    
    
    $
    3,967
 Note 11  Restructuring and Asset Impairment Charges
 Interest income
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    2,647
    
    
    $
    1,669
    
    
    
    58.6
    %As a percent of sales for the year ended:
    
    
    0.2
    %
    
    
    0.1
    %
    
    
    0.1
    %
  Interest expense
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    7,387
    
    
    $
    7,963
    
    
    
    (7.2
    )%As a percent of sales for the year ended:
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    (0.1
    )%
  Income tax expense
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    657
    
    
    $
    569
    
    
    
    1.5
    %As a percent of sales for the year ended:
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.1
    %Effective tax rate for the year ended:
    
    
    (4.1
    )%
    
    
    15.2
    %
    
    
    (19.3
    )%
  19




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##### Table of Contents



Net income (loss).
 Earnings before interest, taxes, depreciation and amortization, loss on early extinguishment of
debt, loss (gain) on asset disposals, net, restructuring and asset impairment charges (income),
net, and stock-based compensation expense, as adjusted (EBITDA, as adjusted )
 % ChangeDecember 30,
    
    
    December 31,
    
    
    2005 to2006
    
    
    2005
    
    
    2006For the year ended (in thousands):
    
    $
    46,927
    
    
    $
    41,556
    
    
    
    12.9
    %As a percent of sales for the year ended:
    
    
    4.0
    %
    
    
    3.7
    %
    
    
    0.3
    %
 Non GAAP Financial Information.
 Year over Year 2005 v. 2004
  Sales
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    1,123,957
    
    
    $
    1,048,164
    
    
    
    7.2
    %
 rd
  20




---



##### Table of Contents



Gross profit
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    327,561
    
    
    $
    296,850
    
    
    
    10.3
    %As a percent of sales for the year ended:
    
    
    29.1
    %
    
    
    28.3
    %
    
    
    0.8
    %
  Direct store expenses
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    264,074
    
    
    $
    257,254
    
    
    
    2.7
    %As a percent of sales for the year ended:
    
    
    23.5
    %
    
    
    24.5
    %
    
    
    (1.0
    )%
  Selling, general and administrative expenses
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    45,307
    
    
    $
    40,625
    
    
    
    11.5
    %As a percent of sales for the year ended:
    
    
    4.0
    %
    
    
    3.9
    %
    
    
    0.1
    %
  Pre-opening expenses
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    3,419
    
    
    $
    5,265
    
    
    
    (35.1
    )%As a percent of sales for the year ended:
    
    
    0.3
    %
    
    
    0.5
    %
    
    
    (0.2
    )%
   21




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##### Table of Contents



Restructuring and asset impairment charges, net
 (in thousands):
 Year EndedDecember 31,
    
    
    January 1,2005
    
    
    2005Change in estimate related to lease-related liabilities for sites
previously closed
    
    $
    (239
    )
    
    $
    (427
    )Lease-related liability for sites closed during the current period
    
    
    1,273
    
    
    
    566Accretion expense on lease-related liabilities
    
    
    469
    
    
    
    531Severance for employees terminated during the period
    
    
    134
    
    
    
    754Asset impairment charges
    
    
    1,370
    
    
    
    1,037Write off of goodwill
    
    
    960
    
    
    
    $
    3,967
    
    
    $
    2,461
 Note 11  Restructuring and Asset Impairment Charges
 Interest income
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    1,669
    
    
    $
    1,070
    
    
    
    56.0
    %As a percent of sales for the year ended:
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.0
    %
  Interest expense
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    7,963
    
    
    $
    6,309
    
    
    
    26.2
    %As a percent of sales for the year ended:
    
    
    0.7
    %
    
    
    0.6
    %
    
    
    0.1
    %
  Income tax expense
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    569
    
    
    $
    25,838
    
    
    
    (97.8
    )%As a percent of sales for the year ended:
    
    
    0.0
    %
    
    
    2.5
    %
    
    
    (2.5
    )%Effective tax rate for the year ended:
    
    
    15.2
    %
    
    
    (182.2
    )%
    
    
    197.4
    %
  22




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##### Table of Contents



Net income (loss).
 Earnings before interest, taxes, depreciation and amortization, loss on early extinguishment of
debt, loss (gain) on asset disposals, net, restructuring and asset impairment charges (income),
net, and stock-based compensation expense, as adjusted (EBITDA, as adjusted )
 % ChangeDecember 31,
    
    
    January 1,
    
    
    2004 to2005
    
    
    2005
    
    
    2005For the year ended (in thousands):
    
    $
    41,556
    
    
    $
    22,333
    
    
    
    86.1
    %As a percent of sales for the year ended:
    
    
    3.7
    %
    
    
    2.1
    %
    
    
    1.6
    %
 Non GAAP Financial Information
 Off-Balance Sheet Arrangements
  New Accounting Pronouncements
 The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of FASB Statement No. 115
 Considering the Effect of Prior Year Misstatements when Qualifying Misstatements
in Current Year Financial Statements
 Fair Value Measurement
  23




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##### Table of Contents



Accounting for Uncertainty in Income
Taxes  An Interpretation of FASB Statement No. 109
 How Taxes Collected from Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation)
 Liquidity and Capital Resources
        24




---



##### Table of Contents



EBITDA Non GAAP Financial Information
 Contingent convertible senior debentures
    25




---



##### Table of Contents



Credit facility.
     26




---



##### Table of Contents



in thousands)
 EXPECTED FUTURE CASH PAYMENTSTotal
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterContractual Obligations:Long-term debt
    
    $
    132,476
    
    
    $
    3,987
    
    
    $
    3,988
    
    
    $
    3,988
    
    
    $
    3,800
    
    
    $
    1,713
    
    
    $
    115,000Capital lease and
financing lease
obligations
    
    
    74,462
    
    
    
    3,378
    
    
    
    3,333
    
    
    
    3,396
    
    
    
    3,446
    
    
    
    3,496
    
    
    
    57,413Operating leases
    
    
    450,661
    
    
    
    41,870
    
    
    
    39,740
    
    
    
    36,538
    
    
    
    35,174
    
    
    
    34,200
    
    
    
    263,139Construction commitments
    
    
    9,102
    
    
    
    9,102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    666,701
    
    
    $
    58,337
    
    
    $
    47,061
    
    
    $
    43,922
    
    
    $
    42,420
    
    
    $
    39,409
    
    
    $
    435,552
 AMOUNT OF COMMITMENT EXPIRATION PER PERIODTotal
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterCommercial Commitments:Letters of credit
    
    $
    15,378
    
    
    $
    15,378
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Long-term debt.
 Capital lease and financing lease obligations.
 Operating leases. Note 10  Leases and Other Commitments and Contingencies
 Construction commitments.
 Other obligations.
 Letters of credit
 Critical Accounting Policies and Estimates
   
  27




---



##### Table of Contents



Goodwill. Goodwill and Other Intangible Assets
   Impairment of long-lived assets.
   Restructuring and store closure costs.
  28




---



##### Table of Contents



Accounting for Costs Associated with Exit of Disposal
Activities
   Inventory.
   Self-insurance.
  29




---



##### Table of Contents



Tax valuation allowances. Accounting
for Income Taxes
  Stock-based compensation expense.
  Note 8  Stock-Based
Compensation
  Cautionary Statement Regarding Forward-Looking Statements
   30




---



##### Table of Contents



Non GAAP Financial Information
 in
thousands
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    (16,588
    )
    
    $
    3,185
    
    
    $
    (40,019
    )Interest expense, net of interest income
    
    
    4,740
    
    
    
    6,294
    
    
    
    5,239Income tax expense
    
    
    657
    
    
    
    569
    
    
    
    25,838Depreciation and amortization
    
    
    26,057
    
    
    
    26,288
    
    
    
    27,917EBITDA
    
    
    14,866
    
    
    
    36,336
    
    
    
    18,975Loss on early extinguishment of debt
    
    
    
    
    
    
    559
    
    
    
    Loss on asset disposals, net
    
    
    1,116
    
    
    
    187
    
    
    
    187Stock-based compensation expense
    
    
    2,775
    
    
    
    507
    
    
    
    710Restructuring and asset impairment charges
(income), net
    
    
    28,170
    
    
    
    3,967
    
    
    
    2,461EBITDA, as adjusted
    
    $
    46,927
    
    
    $
    41,556
    
    
    $
    22,333EBITDA, as a percentage of sales
    
    
    1.3
    %
    
    
    3.2
    %
    
    
    1.8
    %EBITDA, as adjusted, as a percentage of sales
    
    
    4.0
    %
    
    
    3.7
    %
    
    
    2.1
    %
  Comparable stores sales
  31




---



##### Table of Contents



Item 7A.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
    
 Item 8.
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    PAGEReports of Independent Registered Public Accounting Firm
    
    
    33Consolidated Statements of Operations for Fiscal Years 2006, 2005 and 2004
    
    
    35Consolidated Statements of Comprehensive Income (Loss) for Fiscal Years Ended 2006, 2005 and 2004
    
    
    35Consolidated Balance Sheets for Fiscal Years 2006 and 2005
    
    
    36Consolidated Statements of Stockholders Equity for Fiscal Years Ended 2006, 2005, and 2004
    
    
    37Consolidated Statements of Cash Flows for Fiscal Years Ended 2006, 2005 and 2004
    
    
    38Notes to Consolidated Financial Statements
    
    
    39
  32




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
  33




---



##### Table of Contents



34




---



##### Table of Contents



WILD OATS MARKETS, INC  CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands, except per-share amounts)
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Sales
    
    $
    1,183,022
    
    
    $
    1,123,957
    
    
    $
    1,048,164Cost of goods sold and occupancy costs
    
    
    827,827
    
    
    
    796,396
    
    
    
    751,314Gross profit
    
    
    355,195
    
    
    
    327,561
    
    
    
    296,850Operating expenses:Direct store expenses
    
    
    277,043
    
    
    
    264,074
    
    
    
    257,254Selling, general and administrative expenses
    
    
    54,848
    
    
    
    45,307
    
    
    
    40,625Loss on disposal of assets, net
    
    
    1,116
    
    
    
    187
    
    
    
    187Pre-opening expenses
    
    
    5,209
    
    
    
    3,419
    
    
    
    5,265Restructuring and asset impairment charges (income), net
    
    
    28,170
    
    
    
    3,967
    
    
    
    2,461Income (loss) from operations
    
    
    (11,191
    )
    
    
    10,607
    
    
    
    (8,942
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (559
    )
    
    
    Interest income
    
    
    2,647
    
    
    
    1,669
    
    
    
    1,070Interest expense
    
    
    (7,387
    )
    
    
    (7,963
    )
    
    
    (6,309
    )Income (loss) before income taxes
    
    
    (15,931
    )
    
    
    3,754
    
    
    
    (14,181
    )Income tax expense
    
    
    657
    
    
    
    569
    
    
    
    25,838Net income (loss)
    
    $
    (16,588
    )
    
    $
    3,185
    
    
    $
    (40,019
    )Net income (loss) per common share:Basic
    
    $
    (0.57
    )
    
    $
    0.11
    
    
    $
    (1.37
    )Diluted
    
    $
    (0.57
    )
    
    $
    0.11
    
    
    $
    (1.37
    )Weighted-average common shares outstanding, basic
    
    
    29,359
    
    
    
    28,812
    
    
    
    29,219Dilutive effect of stock options and restricted stock units
    
    
    
    
    
    
    437
    
    
    
    Weighted-average common shares outstanding, assuming
dilution
    
    
    29,359
    
    
    
    29,249
    
    
    
    29,219
 The accompanying notes are an integral part of these consolidated financial statements.
 
 WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  (In thousands)
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    (16,588
    )
    
    $
    3,185
    
    
    $
    (40,019
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    112
    
    
    
    294
    
    
    
    681Unrealized (loss) gain on available-for-sale securities
    
    
    (17
    )
    
    
    (20
    )
    
    
    37Other comprehensive income
    
    
    95
    
    
    
    274
    
    
    
    718Comprehensive income (loss)
    
    $
    (16,493
    )
    
    $
    3,459
    
    
    $
    (39,301
    )
 The accompanying notes are an integral part of these consolidated financial statements.
  35




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##### Table of Contents



WILD OATS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS  (In thousands, except share data)
 FISCAL YEAR ENDED
    
    2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    40,420
    
    
    $
    35,250Short-term investments
    
    
    13,675
    
    
    
    14,522Inventories (net of reserves of $1,032 and $960, respectively)
    
    
    67,753
    
    
    
    63,056Accounts receivable (net of allowance for doubtful accounts of $288
and $190, respectively)
    
    
    7,581
    
    
    
    4,006Prepaid expenses and other current assets
    
    
    10,204
    
    
    
    5,962Total current assets
    
    
    139,633
    
    
    
    122,796Property and equipment, net
    
    
    192,061
    
    
    
    178,867Goodwill, net
    
    
    105,124
    
    
    
    105,124Other intangible assets, net
    
    
    4,810
    
    
    
    6,122Deposits and other assets
    
    
    4,831
    
    
    
    5,897Deferred tax asset, net
    
    
    179
    
    
    
    64$
    446,638
    
    
    $
    418,870LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    57,147
    
    
    $
    56,078Book overdraft
    
    
    29,888
    
    
    
    23,351Accrued liabilities
    
    
    64,470
    
    
    
    53,354Current portion of debt, capital leases and financing obligations
    
    
    573
    
    
    
    614Total current liabilities
    
    
    152,078
    
    
    
    133,397Long-term debt, capital leases and financing obligations
    
    
    147,662
    
    
    
    148,181Other long-term obligations
    
    
    38,302
    
    
    
    27,750338,042
    
    
    
    309,328Commitments and contingencies (Note 10)Stockholders equity:Preferred stock, $0.001 par value; 5,000,000 shares authorized; no
shares issued and outstanding
    
    
    
    
    
    
    Common stock; $0.001 par value; 60,000,000 shares authorized;
32,454,554 and 31,036,834 issued; 29,795,291 and 29,059,034
outstanding, respectively
    
    
    32
    
    
    
    31Treasury stock, at cost: 2,659,263 and 1,977,800 shares, respectively
    
    
    (37,181
    )
    
    
    (24,999
    )Additional paid-in capital
    
    
    242,322
    
    
    
    226,645Note receivable, related party
    
    
    
    
    
    
    (12,051
    )Accumulated deficit
    
    
    (97,912
    )
    
    
    (81,324
    )Accumulated other comprehensive income
    
    
    1,335
    
    
    
    1,240Total stockholders equity
    
    
    108,596
    
    
    
    109,542$
    446,638
    
    
    $
    418,870
 The accompanying notes are an integral part of these consolidated financial statements.
  36




---



##### Table of Contents



WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY  (In thousands, except share and per-share amounts
 Note
    
    
    
    
    
    
    AccumulatedTreasury
    
    
    Additional
    
    
    Receivable,
    
    
    
    
    
    
    Other Comp.Common Stock
    
    
    Stock
    
    
    Paid-In
    
    
    Related
    
    
    Accumulated
    
    
    IncomeShares
    
    
    Amount
    
    
    Amount
    
    
    Capital
    
    
    Party
    
    
    Deficit
    
    
    (Loss)Balance at December 27, 2003
    
    
    30,063,421
    
    
    $
    30
    
    
    $
    
    
    
    $
    217,400
    
    
    $
    (10,815
    )
    
    $
    (44,490
    )
    
    $
    248Accrued interest on note receivable, related party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (601
    )
    
    
    
    
    
    
    Issuance of common stock ($9.37 to $10.92 per share), net of issuance costs
    
    
    76,676
    
    
    
    
    
    
    
    
    
    
    
    771
    
    
    
    
    
    
    
    
    
    
    
    Common stock options exercised ($4.25 to $12.56 per share)
    
    
    326,604
    
    
    
    
    
    
    
    
    
    
    
    2,858
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,019
    )
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    681Purchase of outstanding shares
    
    
    (1,977,800
    )
    
    
    
    
    
    
    (24,999
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Balance at January 1, 2005
    
    
    28,488,901
    
    
    
    30
    
    
    
    (24,999
    )
    
    
    221,029
    
    
    
    (11,416
    )
    
    
    (84,509
    )
    
    
    966Accrued interest on note receivable, related party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (635
    )
    
    
    
    
    
    
    Issuance of common stock ($7.30 to $7.49 per share), net of issuance costs
    
    
    120,521
    
    
    
    
    
    
    
    
    
    
    
    1,399
    
    
    
    
    
    
    
    
    
    
    
    Common stock options exercised ($4.25 to $12.63 per share)
    
    
    449,068
    
    
    
    1
    
    
    
    
    
    
    
    4,217
    
    
    
    
    
    
    
    
    
    
    
    Conversion of restricted stock units to shares
    
    
    544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,185
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294Unrealized loss on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Balance at December 31, 2005
    
    
    29,059,034
    
    
    
    31
    
    
    
    (24,999
    )
    
    
    226,645
    
    
    
    (12,051
    )
    
    
    (81,324
    )
    
    
    1,240Accrued interest on note receivable, related party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    Repayment of note receivable, related party
    
    
    (678,530
    )
    
    
    
    
    
    
    (12,139
    )
    
    
    
    
    
    
    12,139
    
    
    
    
    
    
    
    Issuance of common stock ($9.77 to $19.31 per share), net of issuance costs
    
    
    71,388
    
    
    
    
    
    
    
    
    
    
    
    939
    
    
    
    
    
    
    
    
    
    
    
    Common stock options exercised ($4.25 to $18.00 per share)
    
    
    1,280,553
    
    
    
    1
    
    
    
    
    
    
    
    11,963
    
    
    
    
    
    
    
    
    
    
    
    Conversion of restricted stock units to shares
    
    
    31,822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock
    
    
    33,957
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Taxes related to issuance of restricted stock
    
    
    (2,933
    )
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,775
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,588
    )
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112Unrealized loss on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )Balance at December 30, 2006
    
    
    29,795,291
    
    
    $
    32
    
    
    $
    (37,181
    )
    
    $
    242,322
    
    
    $
    
    
    
    $
    (97,912
    )
    
    $
    1,335
 The accompanying notes are an integral part of these consolidated financial statements
  37




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##### Table of Contents



WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (16,588
    )
    
    $
    3,185
    
    
    $
    (40,019
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    26,057
    
    
    
    26,288
    
    
    
    27,917Loss on disposal of property and equipment
    
    
    1,153
    
    
    
    187
    
    
    
    187Deferred tax expense (benefit)
    
    
    (115
    )
    
    
    402
    
    
    
    26,851Restructuring and asset impairment charges, net
    
    
    28,170
    
    
    
    3,967
    
    
    
    2,461Interest on related party note
    
    
    (88
    )
    
    
    (635
    )
    
    
    (601
    )Stock-based compensation
    
    
    2,775
    
    
    
    507
    
    
    
    710Accretion on debt issuance costs
    
    
    623
    
    
    
    709
    
    
    
    Loss on early extinguishment of debt
    
    
    
    
    
    
    559
    
    
    
    Change in assets and liabilities:Inventories, net
    
    
    (4,712
    )
    
    
    (8,055
    )
    
    
    (8,223
    )Receivables, net and other assets
    
    
    (8,041
    )
    
    
    1,125
    
    
    
    (1,831
    )Accounts payable
    
    
    (5,193
    )
    
    
    1,573
    
    
    
    3,844Accrued liabilities and other liabilities
    
    
    8,347
    
    
    
    1,630
    
    
    
    5,301Net cash provided by operating activities
    
    
    32,388
    
    
    
    31,442
    
    
    
    16,597CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (47,689
    )
    
    
    (28,345
    )
    
    
    (49,105
    )Purchase of short-term investments
    
    
    (245,580
    )
    
    
    (3,398
    )
    
    
    (26,797
    )Proceeds from sale of short-term investments
    
    
    246,410
    
    
    
    
    
    
    
    15,653Proceeds from sale of property and equipment
    
    
    547
    
    
    
    96
    
    
    
    1,012Net cash used in investing activities
    
    
    (46,312
    )
    
    
    (31,647
    )
    
    
    (59,237
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net repayments under line-of-credit agreement
    
    
    
    
    
    
    
    
    
    
    (30,179
    )Net increase (decrease) in book overdraft
    
    
    6,537
    
    
    
    26
    
    
    
    (3,402
    )Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    115,150Repayments on notes payable, long-term debt and capital leases
    
    
    (560
    )
    
    
    (285
    )
    
    
    (226
    )Payment of debt issuance costs
    
    
    
    
    
    
    (331
    )
    
    
    (3,717
    )Proceeds from issuance of common stock, net
    
    
    12,903
    
    
    
    5,110
    
    
    
    2,858Purchase of treasury stock
    
    
    (43
    )
    
    
    
    
    
    
    (24,999
    )Net cash provided by financing activities
    
    
    18,837
    
    
    
    4,520
    
    
    
    55,485Effect of foreign exchange rates on cash
    
    
    257
    
    
    
    264
    
    
    
    426Net increase in cash and cash equivalents
    
    
    5,170
    
    
    
    4,579
    
    
    
    13,271Cash and cash equivalents at beginning of year
    
    
    35,250
    
    
    
    30,671
    
    
    
    17,400Cash and cash equivalents at end of year
    
    $
    40,420
    
    
    $
    35,250
    
    
    $
    30,671SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest, net of amounts capitalized
    
    $
    6,746
    
    
    $
    4,294
    
    
    $
    2,108Cash paid for income taxes
    
    $
    157
    
    
    $
    867
    
    
    $
    161
 The accompanying notes are an integral part of these consolidated financial statements.
  38




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WILD OATS MARKETS, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Summary of Significant Accounting Policies
 Acquisition Note 18  Subsequent Event
 Organization.
 Basis of presentation.
 Reclassifications.
 Principles of consolidation.
 Fiscal year.
 Cash and cash equivalents.
 Short-term investments.
  39




---



##### Table of Contents



in thousands
 FISCAL
    
    
    FISCALINVESTMENT TYPE
    
    2006
    
    
    2005Mortgage-backed securities
    
    $
    
    
    
    $
    5,583Corporate debt securities
    
    
    2,450
    
    
    
    5,583Auction rate securities
    
    
    11,225
    
    
    
    3,356Total available-for- sale investments
    
    $
    13,675
    
    
    $
    14,522
  Inventories.
 Property and equipment.
 Goodwill. Goodwill and Other Intangible Assets
  40




---



##### Table of Contents



ther intangible assets.
 Debt issuance costs.
 Impairment of long-lived assets.
 Restructuring and asset impairment costs. Restructuring and Asset Impairment Charges Accounting for Costs Associated with Exit or
Disposal Activities,
   Leases Accounting for Leases.
 Pre-opening expenses.
 Concentration of risk.
  41




---



##### Table of Contents



Revenue recognition.
 Cost of goods sold and occupancy costs. Accounting By a Customer
(Including a Reseller) for Cash Consideration Received from a Vendor
 Advertising.
 Fair value of financial instruments.
 Use of estimates.
 Foreign currency translation
 Self-insurance
 Earnings per share. Earnings Per Share The
Effect of Contingently Convertible Debt on Diluted Earnings per Share
  42




---



##### Table of Contents



Income taxes Accounting for Income Taxes
 Stock-based compensation Note 8  Stock-Based Compensation
 Share-Based Payment Accounting for Stock
Issued to Employees,
   Derivatives and hedging activities Accounting for
Derivative Instruments and Hedging Activities.
 New accounting pronouncements. The Fair Value Option for
Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
  43




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##### Table of Contents



Considering the Effect of Prior Year Misstatements when Qualifying Misstatements
in Current Year Financial Statements
 Fair Value Measurement
 Accounting for Uncertainty in Income
Taxes  An Interpretation of FASB Statement No. 109
 How Taxes Collected from Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation).
 2. Property and Equipment
 in thousands
 FISCAL YEAR ENDED
    
    2006
    
    
    2005Machinery and equipment
    
    $
    150,005
    
    
    $
    140,171Buildings and leasehold improvements
    
    
    167,276
    
    
    
    167,265Construction in progress
    
    
    31,740
    
    
    
    10,784349,021
    
    
    
    318,220Less accumulated depreciation
    
    
    (156,960
    )
    
    
    (139,353
    )Property and equipment, net
    
    $
    192,061
    
    
    $
    178,867
   44




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##### Table of Contents



3. Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets,
 in thousands
 FISCAL YEAR ENDED
    
    2006
    
    
    2005Leasehold interests (amortizable)
    
    $
    6,598
    
    
    $
    8,374Less accumulated amortization
    
    
    (2,093
    )
    
    
    (2,576
    )Leasehold interests, net
    
    
    4,505
    
    
    
    5,798Liquor licenses (indefinite lived)
    
    
    305
    
    
    
    324$
    4,810
    
    
    $
    6,122
   in thousands
 AMORTIZATIONFISCAL YEAR
    
    EXPENSE2007
    
    $
    3582008
    
    $
    3582009
    
    $
    3582010
    
    $
    3582011
    
    $
    353
 4. Accrued Liabilities
 in thousands
 FISCAL YEAR ENDED
    
    2006
    
    
    2005Wages and employee costs
    
    $
    25,332
    
    
    $
    24,185Self-insurance liabilities
    
    
    16,955
    
    
    
    14,578Sales and personal property taxes
    
    
    5,258
    
    
    
    4,448Real estate costs
    
    
    9,459
    
    
    
    4,285Deferred charges and other accruals
    
    
    7,466
    
    
    
    5,858$
    64,470
    
    
    $
    53,354
  45




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##### Table of Contents



5. Long-Term Debt
 in thousands
 FISCAL YEAR ENDED
    
    2006
    
    
    2005Capital leases
    
    $
    19,850
    
    
    $
    20,165Financing lease obligations
    
    
    13,248
    
    
    
    13,488Contingent convertible senior debentures due May
15, 2034, bearing interest at an annual rate of
3.25%, issued at a premium
    
    
    115,137
    
    
    
    115,142148,235
    
    
    
    148,795Less current portion
    
    
    (573
    )
    
    
    (614
    )$
    147,662
    
    
    $
    148,181
 in thousands
 FISCAL YEAR
    
    MATURITIES2007
    
    $
    5732008
    
    
    5042009
    
    
    5672010
    
    
    6662011
    
    
    743Thereafter
    
    
    145,182Total
    
    $
    148,235
 Financing lease obligations. Accounting for Leases.
 Contingent convertible senior debentures Note 1 Organization and Summary of Significant Accounting Policies
   46




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Credit facility.
  47




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##### Table of Contents



6. Income Taxes
 in thousands
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Domestic
    
    $
    (17,632
    )
    
    $
    2,291
    
    
    $
    (15,388
    )Foreign
    
    
    1,701
    
    
    
    1,463
    
    
    
    1,207$
    (15,931
    )
    
    $
    3,754
    
    
    $
    (14,181
    )
 in
thousands
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State and foreign
    
    
    772
    
    
    
    158
    
    
    
    247772
    
    
    
    158
    
    
    
    247Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    23,498State and foreign
    
    
    (115
    )
    
    
    411
    
    
    
    2,093(115
    )
    
    
    411
    
    
    
    25,591$
    657
    
    
    $
    569
    
    
    $
    25,838
  FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Statutory tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    35.0
    %State income taxes , net of federal
income tax expense and valuation
allowance
    
    
    4.4
    %
    
    
    3.0
    %
    
    
    2.8
    %Foreign income taxes
    
    
    (0.2
    )%
    
    
    2.0
    %
    
    
    (0.3
    )%Expired tax attributes
    
    
    (3.5
    )%
    
    
    12.8
    %
    
    
    (1.7
    )%State net operating loss true-up
    
    
    (0.3
    )%
    
    
    (7.1
    )%
    
    
    
    %Valuation allowance
    
    
    (40.7
    )%
    
    
    (24.3
    )%
    
    
    (216.1
    )%Tax rate change
    
    
    2.1
    %
    
    
    (4.6
    )%
    
    
    
    %Permanent items
    
    
    (0.6
    )%
    
    
    3.6
    %
    
    
    
    %Other, net
    
    
    0.7
    %
    
    
    (4.2
    )%
    
    
    (1.9
    )%Effective tax rate
    
    
    (4.1
    )%
    
    
    15.2
    %
    
    
    (182.2
    )%
    48




---



##### Table of Contents



in thousands
 FISCAL YEAR
    
    2006
    
    
    2005Deferred tax assets:Inventory-related
    
    $
    383
    
    
    $
    354Vacation accrual
    
    
    2,441
    
    
    
    2,304Real estate accruals
    
    
    15,907
    
    
    
    14,340Net operating loss carryforward
    
    
    22,034
    
    
    
    19,392Contribution and credit carryforward
    
    
    2,184
    
    
    
    2,240Canadian property related
    
    
    179
    
    
    
    64Workers compensation accrual
    
    
    3,047
    
    
    
    2,615Compensation related
    
    
    1,186
    
    
    
    General liability accrual
    
    
    2,050
    
    
    
    Stock-based compensation related
    
    
    949
    
    
    
    Other
    
    
    1,202
    
    
    
    3,470Valuation allowance
    
    
    (37,522
    )
    
    
    (35,636
    )Total deferred tax assets
    
    
    14,040
    
    
    
    9,143Deferred tax liabilities:Property-related
    
    
    (7,937
    )
    
    
    (5,169
    )Mark-to-market of short-term investments
    
    
    
    
    
    
    (1
    )Convertible debt
    
    
    (5,769
    )
    
    
    (3,328
    )Other
    
    
    (155
    )
    
    
    (581
    )Total deferred tax liabilities
    
    
    (13,861
    )
    
    
    (9,079
    )Net deferred tax asset
    
    $
    179
    
    
    $
    64
      49




---



##### Table of Contents



Accounting for Income Taxes.
  7. Capital Stock
 Note 8  Stock-Based
Compensation
 Treasury stock.
 8. Stock-Based Compensation
 Accounting for Stock Issued to Employees
  50




---



##### Table of Contents



FISCAL YEAR
    
    2005
    
    
    2004Net income (loss), as reported
    
    $
    3,185
    
    
    $
    (40,019
    )Add: Stock-based employee compensation expense
included in reported net income (loss), net of
tax*
    
    
    507
    
    
    
    457Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of tax*
    
    
    (2,420
    )
    
    
    (1,829
    )Pro forma net income (loss)
    
    $
    1,272
    
    
    $
    (41,391
    )Earnings (loss) per share:Basic  as reported
    
    $
    0.11
    
    
    $
    (1.37
    )Basic  pro forma
    
    $
    0.04
    
    
    $
    (1.42
    )Diluted  as reported
    
    $
    0.11
    
    
    $
    (1.37
    )Diluted  pro forma
    
    $
    0.04
    
    
    $
    (1.42
    )
   Employee Stock Purchase Plan.
 Note 18- Subsequent Event
 1996 Equity Incentive Plan.
  51




---



##### Table of Contents



Note 18- Subsequent Event
 2001 Non-Officer/Non-Director Equity Incentive Plan. Note 18- Subsequent Event
 2006 Equity Incentive Plan. Note 18- Subsequent Event
 Individual stock option plans. Note 18- Subsequent Event
  52




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##### Table of Contents



Fair values.
 FISCAL YEAR
    
    2005
    
    
    2004Estimated dividends
    
    None
    
    NoneExpected volatility
    
    
    70
    %
    
    
    73
    %Risk-free interest rate
    
    
    3.95
    %
    
    
    3.11
    %Expected life (years)
    
    
    0.5
    
    
    
    0.5Weighted-average fair value per share
    
    $
    3.55
    
    
    $
    2.10
  FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Estimated dividends
    
    None
    
    None
    
    NoneExpected volatility
    
    
    49% - 56
    %
    
    
    70
    %
    
    
    73
    %Risk-free interest rate
    
    
    4.34% - 5.08
    %
    
    
    3.99
    %
    
    
    2.86
    %Expected life (years)
    
    
    4.0
    
    
    
    4.2
    
    
    
    4.0Weighted-average fair value per share
    
    $
    7.15
    
    
    $
    5.52
    
    
    $
    5.90
  53




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##### Table of Contents



Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Life
    
    
    Value(in years)
    
    
    (in thousands)Outstanding as of December 27, 2003
    
    
    3,346,285
    
    
    $
    10.30Granted
    
    
    412,338
    
    
    $
    11.50Forfeited
    
    
    (308,400
    )
    
    $
    11.04Expired
    
    
    (160,912
    )
    
    $
    13.37Exercised
    
    
    (326,604
    )
    
    $
    8.19Outstanding as of January 1, 2005
    
    
    2,962,707
    
    
    $
    10.55Granted
    
    
    481,168
    
    
    $
    9.10Forfeited
    
    
    (198,942
    )
    
    $
    11.25Expired
    
    
    (226,165
    )
    
    $
    11.94Exercised
    
    
    (448,569
    )
    
    $
    9.39Outstanding as of December 31, 2005
    
    
    2,570,199
    
    
    $
    10.19Granted
    
    
    449,166
    
    
    $
    15.89Forfeited
    
    
    (89,637
    )
    
    $
    8.71Expired
    
    
    (50,821
    )
    
    $
    16.50Exercised
    
    
    (1,280,947
    )
    
    $
    9.33Outstanding as of December 30, 2006
    
    
    1,597,960
    
    
    $
    12.35
    
    
    
    5.85
    
    
    $
    5,086Exercisable as of December 30, 2006
    
    
    982,533
    
    
    $
    11.46
    
    
    
    4.85
    
    
    $
    3,869
   OPTIONS OUTSTANDING
    
    
    OPTIONS EXERCISABLERemaining
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange Of
    
    Number
    
    
    Contractual
    
    
    Average
    
    
    Number
    
    
    AverageExercise Prices
    
    Outstanding
    
    
    Life (years)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$4.25  7.00
    
    
    173,935
    
    
    
    6.78
    
    
    $
    6.25
    
    
    
    104,078
    
    
    $
    6.31$7.01  8.50
    
    
    141,877
    
    
    
    5.59
    
    
    $
    7.89
    
    
    
    132,285
    
    
    $
    7.90$8.51  10.00
    
    
    333,549
    
    
    
    3.86
    
    
    $
    9.46
    
    
    
    275,215
    
    
    $
    9.34$10.01  12.00
    
    
    186,073
    
    
    
    5.92
    
    
    $
    10.80
    
    
    
    178,204
    
    
    $
    10.79$12.01  16.00
    
    
    342,734
    
    
    
    7.78
    
    
    $
    13.32
    
    
    
    119,225
    
    
    $
    13.39$16.01  26.50
    
    
    419,792
    
    
    
    5.53
    
    
    $
    18.59
    
    
    
    173,526
    
    
    $
    20.001,597,960
    
    
    
    5.85
    
    
    $
    12.35
    
    
    
    982,533
    
    
    $
    11.46
   54




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##### Table of Contents



Weighted-Number of
    
    
    Average Grant-shares
    
    
    Date Fair ValueNonvested at December 31, 2005
    
    
    406,086
    
    
    $
    4.30Granted
    
    
    449,166
    
    
    $
    7.15Vested
    
    
    (150,188
    )
    
    $
    4.62Forfeited
    
    
    (89,637
    )
    
    $
    4.56Nonvested at December 30, 2006
    
    
    615,427
    
    
    $
    6.33
   9. Litigation
 Tim Auchterlonie, individually and on behalf of all others similarly situated and the
general public, and Roes 1 to 1000 vs. Wild Oats Markets, Inc. and Does 1 through 100
 Hoeppner Puerto Auchterlonie Ana Marie Hoeppner et al. v. Wild Oats Markets, Inc. and Does 1
through 100 Jason Puerto, et al. v. Wild Oats
Markets, Inc. and Does 1 through 100 Hoeppner
  55




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##### Table of Contents



3601 Group Inc. v. Wild Oats
Northwest, Inc., Wild Oats, Inc. and Wild Oats Markets, Inc.
   10. Leases and Other Commitments and Contingencies
  in thousands
 FISCAL YEAR
    
    Operating Leases
    
    
    Capital Leases
    
    
    Financing Leases2007
    
    $
    41,870
    
    
    $
    1,935
    
    
    $
    1,4432008
    
    
    39,740
    
    
    
    1,890
    
    
    
    1,4432009
    
    
    36,538
    
    
    
    1,946
    
    
    
    1,4502010
    
    
    35,174
    
    
    
    1,961
    
    
    
    1,4852011
    
    
    34,200
    
    
    
    2,011
    
    
    
    1,485Thereafter
    
    
    263,139
    
    
    
    37,723
    
    
    
    19,690Total minimum lease payments
    
    $
    450,661
    
    
    
    47,466
    
    
    
    26,996Less amount representing interest
    
    
    
    
    
    
    (27,616
    )
    
    
    (13,748
    )Present value of net minimum lease payments
    
    
    19,850
    
    
    
    13,248Less current portion
    
    
    
    
    
    
    (312
    )
    
    
    (261
    )Long term portion
    
    
    
    
    
    $
    19,538
    
    
    $
    12,987
    56




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##### Table of Contents



in thousands
 Sublease RentalFiscal Year
    
    Income2007
    
    
    2,3712008
    
    
    1,7882009
    
    
    1,6202010
    
    
    1,0672011
    
    
    816Thereafter
    
    
    5,500Total
    
    $
    13,162
  11. Restructuring and Asset Impairment Charges
 Fiscal 2006
 in thousands
 Change in estimate related to lease-related liabilities for sites previously closed
    
    $
    483Lease-related liabilities for sites closed during fiscal 2006
    
    
    11,487Accretion expense on lease-related liabilities
    
    
    618Severance for employees terminated during the year ended December 30, 2006
    
    
    809Asset impairment charges
    
    
    14,773Total restructuring and asset impairment expense
    
    $
    28,170
  Change in estimate related to lease-related liabilities for sites previously closed.
 Lease-related liabilities for sites closed during fiscal 2006.
 Severance for employees terminated during 2006.
  57




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##### Table of Contents



Asset impairment charges
 Accounting
for the Impairment or Disposal of Long-Lived Assets
  Fiscal 2005
 in thousands
 Change in estimate related to lease-related liabilities for sites previously closed
    
    $
    (239
    )Lease-related liabilities for sites closed during fiscal 2005
    
    
    1,273Accretion expense on lease-related liabilities
    
    
    469Severance for employees terminated during the year ended December 31, 2005
    
    
    134Asset impairment charges
    
    
    1,370Write off of goodwill
    
    
    960Total restructuring and asset impairment expense
    
    $
    3,967
  Change in estimate related to lease-related liabilities for sites previously closed.
 Estimates related to lease-related liabilities for closed during 2005.
 Severance for employees terminated during 2005.
  58




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##### Table of Contents



Asset impairment charges Accounting for the Impairment or Disposal of Long-Lived Assets
 Fiscal 2004
 in thousands
 Changes in estimate related to lease-related liabilities for sites previously closed
    
    $
    (427
    )Lease-related liabilities for sites closed during fiscal 2004
    
    
    566Accretion expense on lease-related liabilities
    
    
    531Severance for employees terminated during the year ended January 1, 2005
    
    
    754Asset impairment charges
    
    
    1,037Total restructuring and asset impairment expense
    
    $
    2,461
  Changes in estimates related to lease-related liabilities for sites previously closed.
 Lease-related liabilities for sites closed during 2004.
 Severance for employees terminated during 2004.
 Asset impairment charges. Accounting for the Impairment or Disposal of
Long-Lived Assets
  59




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##### Table of Contents



in thousands
 FISCAL YEAR
    
    2006
    
    
    2005
    
    
    2004Sales
    
    $
    42,626
    
    
    $
    5,884
    
    
    $
    13,043Store contribution to profit
    
    $
    (9,077
    )
    
    $
    (137
    )
    
    $
    (999
    )
 in
thousands
 2003
    
    
    
    
    
    
    
    
    
    
    (Unaudited)And
    
    
    
    
    
    
    
    
    
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4EXIT PLANS
    
    Prior
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    TOTALBALANCE, 12-31-05
    
    $
    5,949
    
    
    $
    287
    
    
    $
    1,183
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,419Severance expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114Lease-related expense
    
    
    185
    
    
    
    
    
    
    
    9
    
    
    
    1,362
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,556Cash paid :Severance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )Lease-related
liabilities
    
    
    (378
    )
    
    
    
    
    
    
    (177
    )
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (602
    )Provision adjustments
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28BALANCE, 04-01-06
    
    $
    5,776
    
    
    $
    287
    
    
    $
    1,015
    
    
    $
    1,332
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8,410Severance expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Lease-related expense
    
    
    186
    
    
    
    
    
    
    
    21
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254Cash paid:Severance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lease-related
liabilities
    
    
    (338
    )
    
    
    
    
    
    
    (197
    )
    
    
    (81
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (616
    )Provision adjustments
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )BALANCE, 07-01-06
    
    $
    5,624
    
    
    $
    280
    
    
    $
    839
    
    
    $
    1,290
    
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    8,038Severance expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    1
    
    
    
    8
    
    
    
    
    
    
    
    (2
    )Lease-related expense
    
    
    (113
    )
    
    
    
    
    
    
    684
    
    
    
    (318
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    253Cash Paid:Severance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (2
    )
    
    
    
    
    
    
    (8
    )Lease related
liabilities
    
    
    (237
    )
    
    
    
    
    
    
    (176
    )
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (590
    )Provision adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BALANCE, 09-30-06
    
    $
    5,274
    
    
    $
    280
    
    
    $
    1,347
    
    
    $
    784
    
    
    $
    
    
    
    $
    6
    
    
    $
    
    
    
    $
    7,691Severance expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    691
    
    
    
    692Lease-related expense
    
    
    (204
    )
    
    
    
    
    
    
    10
    
    
    
    (377
    )
    
    
    
    
    
    
    36
    
    
    
    11,061
    
    
    
    10,526Cash paid:Severance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (329
    )
    
    
    (336
    )Lease-related
liabilities
    
    
    (194
    )
    
    
    
    
    
    
    (274
    )
    
    
    (562
    )
    
    
    
    
    
    
    (11
    )
    
    
    (317
    )
    
    
    (1,358
    )Provision adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    936
    
    
    
    936BALANCE, 12-30-2006
    
    $
    4,876
    (1)
    
    $
    280
    (1)
    
    $
    1,083
    (1)
    
    $
    (155
    )(1)
    
    $
    
    
    
    $
    25
    (1)
    
    
    $12,042(2)
    
    
    $
    18,151
 (1)  (2)
   60




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##### Table of Contents



12. 401(k) Plan
  .
 13. Stockholder Rights Plan
 Note 18  Subsequent Event
 14. Deferred Compensation Plan
   61




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##### Table of Contents



Note 18  Subsequent Event
 15. Comprehensive Income
  in thousands
 Foreign
    
    
    Unrealized GainCurrency
    
    
    (Loss) OnTranslation
    
    
    Available-ForAdjustments
    
    
    Sale Securities
    
    
    TotalBalance at December 27, 2003
    
    $
    248
    
    
    $
    
    
    
    $
    248Foreign currency translation
adjustment
    
    
    681
    
    
    
    
    
    
    
    681Unrealized gain on available-for-sale
securities
    
    
    
    
    
    
    37
    
    
    
    37Balance at January 1, 2005
    
    
    929
    
    
    
    37
    
    
    
    966Foreign currency translation
adjustment
    
    
    294
    
    
    
    
    
    
    
    294Unrealized loss on available-for-sale
securities
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )Balance at December 31, 2005
    
    
    1,223
    
    
    
    17
    
    
    
    1,240Foreign currency translation
adjustment
    
    
    112
    
    
    
    
    
    
    
    112Unrealized loss on
available-for-sale securities
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )Balance at December 30, 2006
    
    $
    1,335
    
    
    $
    
    
    
    $
    1,335
 16. Related Party Transactions
 Perry D. Odak.
  62




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63




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##### Table of Contents



Other.
 17. Quarterly Information (Unaudited)
 in thousands, except per-share amounts
 QUARTER ENDEDApril 1,
    
    
    July 1,
    
    
    September 30,
    
    
    December 30,Statement of Operations Data
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006Sales
    
    $
    298,357
    
    
    $
    296,561
    
    
    $
    291,804
    
    
    $
    296,300Gross profit
    
    $
    91,372
    
    
    $
    89,685
    
    
    $
    85,673
    
    
    $
    88,465Net income (loss)
    
    $
    2,885
    
    
    $
    4,870
    
    
    $
    3,108
    
    
    $
    (27,451
    )Basic net income (loss) per
common share
    
    $
    0.10
    
    
    $
    0.17
    
    
    $
    0.11
    
    
    $
    (0.92
    )Diluted net income (loss)
per common share
    
    $
    0.10
    
    
    $
    0.16
    
    
    $
    0.10
    
    
    $
    (0.92
    )Basic weighted-average
number of common shares
    
    
    28,970
    
    
    
    29,236
    
    
    
    29,521
    
    
    
    29,689Diluted weighted-average
number of common shares
    
    
    29,542
    
    
    
    29,966
    
    
    
    30,155
    
    
    
    29,689
  64




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##### Table of Contents



QUARTER ENDEDApril 2,
    
    
    July 2,
    
    
    October 1,
    
    
    December 31,Statement of Operations Data
    
    2005
    
    
    2005
    
    
    2005
    
    
    2005Sales
    
    $
    278,079
    
    
    $
    284,608
    
    
    $
    278,522
    
    
    $
    282,748Gross profit
    
    $
    80,256
    
    
    $
    82,559
    
    
    $
    80,737
    
    
    $
    84,009Net income (loss)
    
    $
    (1,151
    )
    
    $
    922
    
    
    $
    82
    
    
    $
    3,332Basic net income (loss) per
common share
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    0.00
    
    
    $
    0.11Diluted net income (loss)
per common share
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    0.00
    
    
    $
    0.11Basic weighted-average
number of common shares
    
    
    28,554
    
    
    
    28,667
    
    
    
    28,928
    
    
    
    29,089Diluted weighted-average
number of common shares
    
    
    28,554
    
    
    
    29,185
    
    
    
    29,694
    
    
    
    29,661
 18. Subsequent Event
       65




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##### Table of Contents



Item 9.
 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
   66




---



##### Table of Contents



Item 9A.
 CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Report of Management on Internal Control over Financial Reporting
     Changes in Internal Control over Financial Reporting
  
 Item 9B.
 OTHER INFORMATION
    67




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##### Table of Contents



PART III.
 
 Item 10.
 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNACE
 CURRENT BOARD OF DIRECTORS
 http://www.wildoats.com
 Name
    
    Age
    
    Principal Occupation/ Employment
    
    Term ExpirationGregory Mays
    
    
    60
    
    
    Chairman of the Board; Interim Chief Executive Officer; Acting
Chief Financial Officer
    
    
    2009Stacey J. Bell
    
    
    54
    
    
    Senior Innovations Scientist, Ideasphere, Inc.
    
    
    2007Hal Brice
    
    
    50
    
    
    Co-Chief Executive Office of HEILBrice
    
    
    2008Brian K. Devine
    
    
    64
    
    
    Chairman of Petco Animal Supplies, Inc.
    
    
    2007David J. Gallitano
    
    
    58
    
    
    President of Tucker, Inc.
    
    
    2008John A. Shields
    
    
    62
    
    
    Former Chief Executive Officer, First National Supermarkets, Inc.
    
    
    2007
  Gregory Mays
 Dr. Stacey J. Bell
 Hal Brice
 Brian K. Devine
  68




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##### Table of Contents



David J. Gallitano
 John A. Shields
 THE AUDIT COMMITTEE
  EXECUTIVE OFFICERS
  Freya R. Brier
 Roger Davidson
 Samuel Martin
  69




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##### Table of Contents



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
  
 Item 11.
 EXECUTIVE COMPENSATION
 THE COMPENSATION COMMITTEE
  Role of the Compensation Committee
  Authority of the Compensation Committee
  Roles of Executives and Compensation Consultant in Assisting the Committee
   70




---



##### Table of Contents



COMPENSATION DISCUSSION AND ANALYSIS
 Introduction
  General Compensation Philosophy for Executive Officers
  
   71




---



##### Table of Contents



Name of Company
    
    Business Operations
    
    2004 Fiscal RevenuesArden Group, Inc.
    
    Gibsons and Mayfair
supermarkets in Los Angeles, CA
    
    $503MThe Kroger Company
    
    Dillon Food Stores, City Market,
Sav-Mor, Kwik Shop, Mini Mart
and King Soopers
    
    $56.4BPathmark Stores, Inc.
    
    regional supermarkets primarily
in the northeastern US
    
    $3.9BPublix Supermarkets, Inc.
    
    supermarkets in FL, SC, GA and AL
    
    $18.7BSafeway, Inc.
    
    Carr-Gottstein, Dominicks,
Genuardis, Randall/Tom Thumb,
and Vons supermarkets
    
    $35.8BSUPERVALU, Inc.
    
    superstores, combination of food
and drug stores and wholesale
operations
    
    $19.5BWeis Markets, Inc.
    
    PA, MD, NJ, NY, VA, WV grocery
stores and SuperPetz
    
    $2.1BWhole Foods Market, Inc.
    
    National natural food markets
    
    $4.7B
    2006 Activities of the Compensation Committee
   72




---



##### Table of Contents



Normal Course Activities:
 
 Extraordinary Activities:
 
     73




---



##### Table of Contents



Summary Compensation Table
  Non-Equity
    
    
    Change in Pension ValueIncentive Plan
    
    
    and Nonqualified
    
    
    All OtherStock
    
    
    Option
    
    
    Compensation
    
    
    Deferred Compensation
    
    
    CompensationName and Principal Position
    
    Year
    
    
    Salary ($)
    
    
    Bonus($)
    
    
    Awards($)
    
    
    Awards($)
    
    
    ($)1
    
    
    Earnings ($)
    
    
    ($)2
    
    
    Total ($)PEO (Former) Perry Odak
    
    
    2006
    
    
    
    403,847
    
    
    
    1,943,346
    3
    
    
    132,507
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,629,168
    5
    
    
    4,108,868PEO (Interim) Gregory Mays
    
    
    2006
    
    
    
    70,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,968PFO (Former) Robert Dimond
    
    
    2006
    
    
    
    336,539
    
    
    
    
    
    
    
    83,953
    
    
    
    206,247
    
    
    
    
    
    
    
    
    
    
    
    83,400
    6
    
    
    710,139A. Sam Martin, Sr. VP
Operations
    
    
    2006
    
    
    
    283,654
    
    
    
    100,000
    7
    
    
    
    
    
    
    
    
    
    
    167,500
    
    
    
    
    
    
    
    123,735
    8
    
    
    674,889B. Freya Brier,
Senior VP & General Counsel
    
    
    2006
    
    
    
    286,154
    
    
    
    
    
    
    
    50,604
    
    
    
    53,370
    
    
    
    179,000
    
    
    
    
    
    
    
    51,421
    9
    
    
    620,549C. Roger Davidson, Sr. VP
Merchandising & Marketing
    
    
    2006
    
    
    
    60,577
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,750
    
    
    
    
    
    
    
    53,607
    11
    
    
    157,934Peter Williams, Sr. VP Human
Resources (Former)
    
    
    2006
    
    
    
    215,481
    
    
    
    
    
    
    
    50,604
    
    
    
    44,473
    
    
    
    
    
    
    
    
    
    
    
    260,688
    12
    
    
    571,246Bruce Bowman, Sr. VP
Business Development Former)
    
    
    2006
    
    
    
    145,000
    13
    
    
    
    
    
    
    50,604
    
    
    
    17,835
    
    
    
    
    
    
    
    
    
    
    
    32,512
    14
    
    
    245,945
  (1)
    
    Cash bonuses paid pursuant to Cash Incentive Plan described in Annual Cash Incentives
below, for 2006 performance.(2)
    
    Includes matching contributions by the Company to its deferred compensation program for
Perry Odak and Freya Brier.(3)
    
    Payments received under the Resignation Agreement. See Potential Payments Upon
Termination or Change in Control  Employee Agreements  Perry D. Odak.(4)
    
    Includes restricted stock for which vesting was accelerated pursuant to the Resignation
Agreement.(5)
    
    Includes $1.5 million, which is three times Mr. Odaks annual base salary of $500,000,
payable under the Resignation Agreement in bi-weekly amounts over three years, as well as
the value of a leased automobile and the value of upgrades to an incentive trip.(6)
    
    Relocation expense paid pursuant to Mr. Dimonds offer letter.(7)
    
    Guaranteed bonus under Mr. Martins offer letter.(8)
    
    Includes a $45,373 cash payment in lieu of a grant of stock and options under the LTIP
for 2006 performance, and relocation expense plus the payment of mortgage and other expenses
on Mr. Martins former residence.(9)
    
    Includes a $45,373 cash payment in lieu of a grant of stock and options under the LTIP
for 2006 performance.(10)
    
    Partial year compensation. Mr. Davidson began employment in October 2006.(11)
    
    Includes a $45,373 cash payment in lieu of a grant of stock and options under the LTIP
for 2006 performance.(12)
    
    Severance for Mr. Williams, who separated employment in November 2006, including 2006
bonus and COBRA coverage for the severance period.(13)
    
    Partial year compensation. Mr. Bowman retired in June 2006.(14)
    
    The value of upgrades to an incentive trip.
  74




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##### Table of Contents



Base Salaries
   Annual Cash Incentives
  Equity Incentives
  
   75




---



##### Table of Contents



Long-Term Incentive Plan
  Wild Oats Markets, Inc. 2006 Equity Incentive Plan
 Individual Equity Incentive Plans
  76




---



##### Table of Contents



Grants of Plan-Based Awards


All Other
    
    
    All OtherStock
    
    
    OptionAwards:
    
    
    Awards:Number of
    
    
    Number of
    
    
    Exercise orEstimated Future Payouts Under Non-Equity
    
    
    Estimated Future Payouts Under Equity
    
    
    Shares of
    
    
    Securities
    
    
    Base Price ofGrant
    
    
    Incentive Plan Awards
    
    
    Incentive Plan Awards1
    
    
    Stock or
    
    
    Underlying
    
    
    Option AwardsName
    
    Date
    
    
    Threshold ($)2
    
    
    Target ($)3
    
    
    Maximum ($)4
    
    
    Threshold (#)
    
    
    Target (#)
    
    
    Maximum(#)
    
    
    Units (#)
    
    
    Options (#)
    
    
    ($/sh)PEO  Perry Odak
    
    
    02-08-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,667
    
    
    
    
    
    
    
    PEO  Greg Mays
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    PFO  Bob Dimond
    
    
    02-08-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,334
    
    
    
    
    
    
    
    08-07-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    60,000
    
    
    
    16.85A. Sam Martin
    
    
    01-05-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    5
    
    
    12.1903-15-07
    
    
    
    73,750
    
    
    
    147,500
    
    
    
    221,250
    
    
    
    82,500
    
    
    
    165,000
    
    
    
    247,500
    
    
    
    
    
    
    
    
    
    
    
    B. Freya Brier
    
    
    02-08-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,334
    
    
    
    
    
    
    
    03-15-07
    
    
    
    78,750
    
    
    
    157,500
    
    
    
    236,250
    
    
    
    82,500
    
    
    
    165,000
    
    
    
    247,500
    
    
    
    
    
    
    
    
    
    
    
    C. Roger Davidson
    
    
    10-30-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    5
    
    
    18.1703-15-07
    
    
    
    
    
    
    
    43,750
    6
    
    
    
    
    
    
    82,500
    
    
    
    165,000
    
    
    
    247,500
    
    
    
    
    
    
    
    
    
    
    
    Peter Williams
    
    
    02-08-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,334
    
    
    
    
    
    
    
    Bruce Bowman
    
    
    02-08-06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,334
    
    
    
    
    
    
    
    


(1)
    
    Assumes full potential vesting of stock and options that could be granted under the LTIP
for 2006 performance. For 2006, employee will receive $45,373 cash payment in lieu of a
grant of stock and options under the LTIP.(2)
    
    Minimum payment under Cash Incentive Plan of 25% of employees base wage.(3)
    
    Target payment under Cash Incentive Plan of 50% of employees base wage.(4)
    
    Maximum payment under Cash Incentive Plan of 75% of employees base wage.(5)
    
    Option grant under separate incentive plan as inducement to accept employment with the
Company.(6)
    
    Guaranteed 2006 bonus under Mr. Davidsons offer letter.
  77




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##### Table of Contents



Outstanding Equity Awards at Fiscal Year-End


Stock AwardsOption Awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity IncentiveEquity Incentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan Awards: MarketPlan Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market Value
    
    
    Equity Incentive
    
    
    or Payout Value ofNumber of
    
    
    Number of
    
    
    Number Of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    of
    
    
    Plan Awards Number
    
    
    UnearnedSecurities
    
    
    Securities
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares or Units
    
    
    of
    
    
    Shares, Units orUnderlying
    
    
    Underlying
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    Number of Shares
    
    
    of
    
    
    Unearned Shares,
    
    
    Other RightsUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    Option
    
    
    Option
    
    
    or Units of Stock
    
    
    Stock That
    
    
    Units or Other Rights
    
    
    That HaveOptions (#)
    
    
    Options (#)
    
    
    Unearned
    
    
    Exercise
    
    
    Expiration
    
    
    That Have Not
    
    
    Have Not
    
    
    That Have Not
    
    
    NotName
    
    Exercisable
    
    
    Unexercisable
    
    
    Options (#)1
    
    
    Price ($)
    
    
    Date
    
    
    Vested (#)
    
    
    Vested ($)
    
    
    Vested (#)
    
    
    Vested ($)PEO  P. Odak
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179,750
    2
    
    
    PEO  G. Mays
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    PFO  B. Dimond
    
    
    
    
    
    
    60,000
    
    
    
    
    
    
    
    16.85
    
    
    
    08-07-16
    
    
    
    20,000
    
    
    
    287,600
    2
    
    
    26,666
    
    
    
    58,334
    
    
    
    
    
    
    
    10.00
    
    
    
    04-28-15
    
    
    
    6,251
    
    
    
    89,889
    2
    
    
    Sam Martin
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    12.19
    
    
    
    01-05-16
    
    
    
    
    
    
    
    
    
    
    
    Freya Brier
    
    
    645
    
    
    
    
    
    
    
    
    
    
    
    16.00
    
    
    
    12-26-07
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    17.17
    
    
    
    02-09-09
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    9.06
    
    
    
    05-26-10
    
    
    
    
    
    
    
    
    
    
    
    55,231
    
    
    
    
    
    
    
    
    
    
    
    9.40
    
    
    
    08-02-11
    
    
    
    
    
    
    
    
    
    
    
    20,912
    
    
    
    
    
    
    
    
    
    
    
    9.40
    
    
    
    08-02-11
    
    
    
    
    
    
    
    
    
    
    
    11,666
    
    
    
    
    
    
    
    
    
    
    
    11.12
    
    
    
    09-04-12
    
    
    
    
    
    
    
    
    
    
    
    11,667
    
    
    
    
    
    
    
    
    
    
    
    11.12
    
    
    
    09-04-12
    
    
    
    
    
    
    
    
    
    
    
    17,708
    
    
    
    7,292
    
    
    
    
    
    
    
    12.63
    
    
    
    02-26-14
    
    
    
    
    
    
    
    
    
    
    
    2,499
    
    
    
    
    
    
    
    
    
    
    
    6.10
    
    
    
    02-24-15
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    6,501
    
    
    
    
    
    
    
    6.10
    
    
    
    02-14-15
    
    
    
    6,251
    
    
    
    89,889
    
    
    
    Roger Davidson
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    18.17
    
    
    
    10-30-16
    
    
    
    
    
    
    
    
    
    
    
    Peter Williams
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,251
    
    
    
    89,889
    2
    
    
    Bruce Bowman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,251
    
    
    
    89,889
    2
    
    
    


(1)
    
    For 2006, employee will receive $45,373 cash payment in lieu of a grant of stock and
options under the LTIP.(2)
    
    Value of restricted stock that will not vest as a result of the termination of the former
executives employment at or prior to year end.
  78




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##### Table of Contents



Option Exercises and Stock Vested
  Option Awards
    
    
    Stock AwardsNumber of Shares
    
    
    
    
    
    
    Number of SharesAcquired on
    
    
    Value Realized on
    
    
    Acquired On
    
    
    Value Realized OnName
    
    Exercise (#)
    
    
    Exercise ($)
    
    
    Vesting (#)
    
    
    Vesting ($)PEO  Perry Odak
    
    
    182,501
    
    
    
    669,097
    
    
    
    4,167
    
    
    
    60,213PEO  Greg Mays
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    PFO  Bob Dimond
    
    
    15,000
    
    
    
    71,579
    
    
    
    2,083
    
    
    
    30,099A. Sam Martin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    B. Freya Brier
    
    
    13,000
    
    
    
    105,560
    
    
    
    2,083
    
    
    
    30,099C. Roger Davidson
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Peter Williams
    
    
    82,125
    
    
    
    463,293
    
    
    
    2,083
    
    
    
    30,099Bruce Bowman
    
    
    216,082
    
    
    
    1,898,183
    
    
    
    2,083
    
    
    
    30,099
 Other Benefits
    79




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##### Table of Contents



Nonqualified Deferred Compensation
  Executive
    
    
    Registrant
    
    
    Aggregate
    
    
    Aggregate
    
    
    AggregateContributions in
    
    
    Contributions in
    
    
    Earnings in Last
    
    
    Withdrawals/
    
    
    Balance atName
    
    Last FY ($)
    
    
    Last FY ($)1
    
    
    FY ($)2
    
    
    Distributions ($)
    
    
    Last FY($)PEO  Perry Odak
    
    
    72,000
    
    
    
    12,500
    
    
    
    11,885
    
    
    
    
    
    
    
    138,299PEO  Greg Mays
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    PFO  Bob Dimond
    
    
    51,317
    
    
    
    
    
    
    
    2,034
    
    
    
    
    
    
    
    53,352A. Sam Martin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    B. Freya Brier
    
    
    67,821
    
    
    
    6,048
    
    
    
    27,022
    
    
    
    
    
    
    
    300,445C. Roger Davidson
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Peter Williams
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bruce Bowman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  (1)
    
    Matching contributions by the Company to the Deferred Compensation Plan are included in
All Other Compensation in the Summary Compensation Table above.(2)
    
    Aggregate earnings are not included in All Other Compensation in the Summary
Compensation Table above.
 Potential Payments Upon Termination or Change in Control
 Employment Agreements
 Perry D. Odak
  80




---



##### Table of Contents



Bruce Bowman
 Stephen Kaczynski
  81




---



##### Table of Contents



Robert Dimond
 Roger Davidson
 Sam Martin
 Named Executive Severance Agreements
    82




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##### Table of Contents



Director Compensation
   Annual Service
    
    Annual Chairman
    
    Meeting ParticipationFee(1)
    
    Fee(2)
    
    Fee(3)Board of Directors
    
    RSUs(4) equal in value to$
    90,000
    
    
    $
    75,000
    
    
    $
    3,000Audit Committee
    
    $
    10,000
    (2)(5)
    
    $
    20,000
    
    
    $
    2,000Compensation Committee
    
    $
    5,000
    (2)(5)
    
    $
    10,000
    
    
    $
    2,000Real Estate Committee
    
    $
    5,000
    (2)(5)
    
    $
    10,000
    
    
    $
    2,000Nominating Committee
    
    $
    2,500
    (2)(5)
    
    $
    5,000
    
    
    $
    2,000
 (1)
    
    One-year service period is measured from the date of Annual Meeting of Shareholders (Annual
Meeting) each year, vesting quarterly from the date of grant, with the remainder vesting on
April 30 of the following year.(2)
    
    Payable on the last business day of each of the Companys fiscal quarters, convertible at the
annual election of the director to vested RSUs valued at the closing price of the Companys
common stock as reported by NASDAQ (the Closing Price) on the trading day immediately prior
to each quarterly grant date.(3)
    
    Board members annually may elect to convert the cash fee to a number of RSUs equal to 115% of
the cash value, with the RSUs valued at the Closing Price on the last trading day prior to the
relevant meeting and vested on the date of the grant.(4)
    
    The value of each restricted stock unit (RSU) is equal to the Closing Price on the trading
day immediately prior to the grant date. The RSUs are exchanged for an equal number of shares
of unrestricted common stock of the Company that the director will own outright. The RSU
exchange for common stock occurs after expiration of a period occurring after the directors
service on the Board ends, such time period having been previously selected by
the director prior to the first RSU grant to such director. The RSUs are issued from the
Companys 2006 Equity Incentive Plan and subject to the terms of the same.(5)
    
    The chairman of a committee does not receive the annual service fee for membership on the
same committee.
  83




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##### Table of Contents



Director Long-term Incentive Equity Grants
  One-time grant of stock options. A one-time grant of 20,000 stock options is made to a
member on the date of joining the Board, at one share of the Companys common stock per
stock option, vesting quarterly over one year from the date of the grant, with an exercise
price equal to the Closing Price on the trading day immediately prior to the date of the
grant. The stock options are issued from the Companys 2006 Plan and are subject to the
terms of the same. Under the prior compensation arrangement new members of the Board
received the stock option grant but not the RSU Annual Service Fee grant, identified in the
table above, in the first year of service; under the new arrangement Board members receive
both in the first year of service.
 Joining on a date other than the date of Annual Meeting. Board members who join the
Board after the date of the Annual Meeting will receive an Annual Service Fee for Board
membership, pro rated to reflect the remaining days of service in the year ending on the
anniversary date of the last Annual Meeting.
    84




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##### Table of Contents



Director Compensation
 Change in PensionValue andFees
    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    
    NonqualifiedEarned or
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Deferred
    
    
    All OtherPaid in
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    CompensationName
    
    Cash ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Earnings ($)
    
    
    ($)
    
    
    Total ($)Stacey J. Bell
    
    
    
    
    
    
    101,920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,920Brian K. Devine
    
    
    
    
    
    
    99,655
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,655Hal Brice
    
    
    
    
    
    
    65,543
    
    
    
    41,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,643John Shields1
    
    
    6,000
    
    
    
    97,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,000
    
    
    
    228,855David J. Gallitano
    
    
    
    
    
    
    123,916
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,916Gregory Mays
    
    
    
    
    
    
    81,645
    
    
    
    41,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,745David
Chamberlain2
    
    
    
    
    
    
    3,439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,439Robert Miller3
    
    
    
    
    
    
    26,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,922Mark Retzloff4
    
    
    
    
    
    
    3,439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,439
  (1)
    
    In February of 2007, Mr. Shields received $250,000 for services rendered to the CEO and
the CEO Search Committee for the period from November of 2006 through February of 2007.(2)
    
    Mr. Chamberlain declined to stand for reelection to the Companys Board of Directors in
May 2006.(3)
    
    Mr. Miller resigned from the Companys board of Directors in May 2006, due to a
conflict of interest.(4)
    
    Mr. Retzloff declined to stand for reelection to the Companys Board of Directors in
May 2006.
 Interim CEO Compensation
   85




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##### Table of Contents



TAX DEDUCTIBILITY OF PAY
  Compensation Committee Interlocks and Insider Participation
  REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
  Compensation Committee
  86




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##### Table of Contents



Item 12.
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS
  Number of Shares
    
    
    PercentBeneficially
    
    
    BeneficiallyName of Beneficial Owner
    
    Owned(1)
    
    
    Owned (%)(2)Yucaipa Group (3)
    
    
    5,375,600
    
    
    
    18.0
    %c/o The Yucaipa Companies LLC, 9130 W. Sunset Boulevard,
Los Angeles, California 90069T. Rowe Price Associates, Inc (4)
    
    
    2,438,990
    
    
    
    8.2
    %100 E. Pratt Street, Baltimore, MD 21202Aletheia Research and Management, Inc. (5)
100 Wilshire Boulevard, Suite 1960, Santa Monica, CA 90401
    
    
    1,995,327
    
    
    
    6.8
    %The TCW Group, Inc. (6)
    
    
    1,790,870
    
    
    
    6.0
    %865 South Figueroa Street, Los Angeles, CA 90017The Sultan Center for Trading and General contracting W.L.L. (7)
    
    
    1,662,000
    
    
    
    5.6
    %P.O. Box 26567, 13126 Safat, KuwaitGreg Mays (8)
    
    
    42,633
    
    
    
    *Stacey J. Bell (9)
    
    
    55,524
    
    
    
    *Hal Brice (10)
    
    
    21,168
    
    
    
    *Brian D. Devine (11)
    
    
    117,892
    
    
    
    *David J. Gallitano (12)
    
    
    62,234
    
    
    
    *John A. Shields (13)
    
    
    264,220
    
    
    
    *Freya R. Brier (14)
    
    
    157,901
    
    
    
    *Roger Davidson
    
    
    0
    
    
    
    *Sam Martin (15)
    
    
    31,249
    
    
    
    *All executive officers and directors as a group (9 persons) (16)
    
    
    752,821
    
    
    
    2.5
    %
 *
    
    Less than one percent.(1)
    
    Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting
or investment power with respect to securities. Beneficial ownership information is based on most recent Form 3, 4 and 5 and 13D and 13G
filings with the Securities and Exchange Commission and reports made directly to the Company. Shares of common stock subject to options,
restricted stock, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days of
February 20, 2007, are deemed outstanding for computing the percentage of the person or entity holding such securities but are not
outstanding for computing the percentage of any other person or entity. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them.(2)
    
    Percentage of ownership is based on 29,844,796 shares of common stock outstanding as of February 20, 2007. Percentage of ownership and
shares outstanding reflect the acquisition of shares of common stock by the Company, as discussed in Management Indebtedness.(3)
    
    The Yucaipa Group consists of the following: (i) Ronald W. Burkle, (ii) Yucaipa American Management, LLC, a Delaware limited liability
company (Yucaipa American), (iii) Yucaipa American Funds, LLC, a Delaware limited liability company (Yucaipa American Funds), (iii)
Yucaipa American Alliance Fund I, LLC, a Delaware limited liability company (YAAF LLC), (iv) Yucaipa American Alliance Fund I, LP, a
Delaware limited partnership (YAAF) and (v) Yucaipa American Alliance (Parallel) Fund I, LP (YAAF Parallel) and, together with Mr.
Burkle, Yucaipa American, Yucaipa American Funds, YAAF LLC and YAAF, the Reporting Persons). Mr. Burkle is the managing member of
Yucaipa American, which is the managing member of Yucaipa American Funds, which is the managing member of YAAF LLC, which, in turn, is
the general partner of each of YAAF and YAAF Parallel. Mr. Burkle, Yucaipa American, Yucaipa American Funds, YAAF LLC have shared voting
power and shared dispositive power over the full number of shares. YAAF is the direct beneficial owner of 2,999,564 shares. YAAF
Parallel is the direct beneficial owner of 2,102,636 shares. Mr. Burkle disclaims any beneficial ownership of the shares (except to the
extent of his pecuniary interest in YAAF and YAFF Parallel.(4)
    
    T. Rowe Price Associates, Inc. has sole voting power over 592,800 shares and sole dispositive power over 2,438,990 shares, and disclaims
that it is the beneficial owner of such securities.(5)
    
    Consists of 1,995,327 shares of which of which Aletheia Research and Management, Inc. has sole voting and dispositive power and disclaims
beneficial ownership as to certain or all shares being reported as beneficially owned for Section 13(g) filing purposes.
  87




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##### Table of Contents



(6)
    
    The TCW Group, Inc., is the parent holding company and is the beneficial owner, along with its relevant subsidiaries: Trust Company of
the West, TWC Asset Management Company, TCW Investment Management Company (collectively, the TCW Business Unit). The TCW Group, Inc.
has shared power to vote 909,570 shares and shared dispositive power over 1,790,870 shares.(7)
    
    Consists of 1,662,000 shares of which The Sultan Center for Trading and General Contracting W.L.L. has sole voting and dispositive power.(8)
    
    Consists of 42,633 restricted stock units (RSUs) and shares subject to stock options that are exercisable within 60 days of February
20, 2007 held by Mr. Mays.(9)
    
    Consists of 55,524 RSUs and shares subject to stock options that are exercisable within 60 days of February 20, 2007 held by Dr. Bell.(10)
    
    Consists of 21,168 RSUs and shares subject to stock options that are exercisable within 60 days of February 20, 2007 held by Mr. Brice.(11)
    
    Consists of 117,892 RSUs and shares subject to stock options that are exercisable within 60 days of February 20, 2007 held by Mr. Devine.(12)
    
    Consists of 1,000 shares and 61,234 RSUs and shares subject to stock options that are exercisable within 60 days of February 20, 2007
held by Mr. Gallitano.(13)
    
    Consists of 41,761 shares and 222,459 RSUs and shares subject to stock options that are exercisable within 60 days of February 20, 2007,
held by Mr. Shields.(14)
    
    Consists of 12,679 shares and 145,224 shares subject to stock options exercisable within 60 days of February 20, 2007, held by Ms. Brier.(15)
    
    Consists of 31,249 shares subject to stock options exercisable within 60 days of February 20, 2007, held by Mr. Martin.(16)
    
    Includes shares directly and indirectly owned, restricted stock units, and options exercisable within 60 days of February 20, 2007, for
executive officers and directors as a group.
  Securities Authorized for Issuance Under Equity Compensation Plans
    88




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##### Table of Contents



Number ofSecurities tobe Issued
    
    
    
    
    
    
    Number ofUpon Exercise
    
    
    Weighted-
    
    
    Securitiesof
    
    
    Average
    
    
    RemainingOutstanding
    
    
    Exercise Price
    
    
    Available for FutureOptions,
    
    
    of Outstanding
    
    
    Issuance UnderRSUs, and
    
    
    Options, RSUs,
    
    
    EquityRestricted
    
    
    and Restricted
    
    
    CompensationStock(1)
    
    
    Stock (1)(2)
    
    
    Plans (3)Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders (two
plans)
    
    
    949,409
    
    
    $
    10.89
    
    
    
    2,164,570Equity compensation
plans not approved by
security holders
(four
plans)(4)
    
    
    97,937
    
    
    $
    9.42
    
    
    
    311,891TOTAL
    
    
    1,047,346
    
    
    $
    10.75
    
    
    
    2,476,461
  (1)
    
    Includes outstanding awards under the 1996 Plan.(2)
    
    In dollars per share.(3)
    
    Excludes securities reflected in column (a) above.(4)
    
    See Equity Compensation Plans Adopted without the Approval of
Security Holder, for a narrative summary of the material features
of each plan.
 EQUITY COMPENSATION PLANS ADOPTED WITHOUT THE APPROVAL OF SECURITY HOLDERS
    89




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##### Table of Contents



Item 13.
 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
 Certain Relationships and Related Transactions
   Director Independence
  
 Item 14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2006
    
    
    2005Audit Fees (1)
    
    $
    785,460
    
    
    $
    1,233,335Audit Related Fees (2)
    
    
    79,265
    
    
    
    50,350$
    864,725
    
    
    $
    1,283,685
  90




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##### Table of Contents



(1)
    
    Audit Fees consist of fees for professional services rendered for
the audit of our annual consolidated financial statements and
review of the interim consolidated financial statements included
in quarterly reports on Form 10-Q, and with regard to EY, are
agreed to amounts, regardless of when paid. This category
included fees relating to issuance of convertible debentures and
fees for professional services rendered by EY for the audits of
(i) managements assessment of the effectiveness of internal
control over financial reporting and (ii) the effectiveness of
internal control over financial reporting.(2)
    
    AuditRelated Fees consist of fees for assurance and related
services that are reasonably related to the performance of the
audit or review of our consolidated financial statements and are
not reported in Audit Fees. This category included fees for the
consent of audit opinion in the filing of forms S-8 and S-3, store sales audits as required by certain store leases, and
other accounting related consultations.
 Pre-approval Policies and Procedures.
  91




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##### Table of Contents



Item 15.
 EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
 (a)
    
    The following are filed as a part of this Report on Form 10-K:
 (1)
    
    Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Changes in Stockholders Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements(2)
    
    Financial Statement Schedules  No schedules are required.(3)
    
    The following exhibits to this Form 10-K are filed pursuant to the requirements of Item
601 of Regulation S-K:
 ExhibitNumber
    
    Description of Document2.1**
    
    Agreement and Plan of Merger, dated as of February 21, 2007, by and among Whole Foods
Market, Inc., WFMI Merger Co., and Wild Oats Markets, Inc. (1)3(i).1.(a)**
    
    Amended and Restated Certificate of Incorporation of the Registrant (2)3(i).1.(b)**
    
    Certificate of Correction to Amended and Restated Certificate of Incorporation of the
Registrant (2)3(i).1.(c)**
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation of the
Registrant (3)3(i) 1.(d)**
    
    Amended Certificate of Designations of Series A Junior Participating Preferred Stock of
Wild Oats Markets, Inc. (4)3(ii).1.(a)**
    
    Amended and Restated By-Laws of the Registrant (2)3(ii).1.(b)**
    
    First Amendment to Amended and Restated By-Laws of the Registrant, adopted March 24, 2006
(5)4.1**
    
    Reference is made to Exhibits 3(i) through 3(ii).14.2**
    
    Specimen stock certificate (6)4.3**
    
    Rights Agreement dated May 22, 1998 between Registrant and Norwest Bank Minnesota (7)4.4**
    
    Amendment No. 1 to Rights Agreement dated February 26, 2002 between Registrant and Wells
Fargo Bank, N.A. (8)4.5**
    
    Amendment No. 2 to Rights Agreement dated March 24, 2006, between Registrant and Wells
Fargo Bank, N.A. (9)4.6**
    
    Amendment No. 3 to Rights Agreement, dated as of February 21, 2007, between Wild Oats
Markets, Inc. and Wells Fargo, N.A., as successor in interest to Norwest Bank Minneapolis,
N.A., as rights agent. (1)4.7**
    
    Indenture, dated as of June 1, 2004, between Wild Oats Markets, Inc. and U.S. Bank
National Association, as Trustee, and Form of 3.25% Senior Convertible Debenture due 2034
of Wild Oats Markets, Inc. (10)4.8**
    
    Registration Rights Agreement, dated as of June 1, 2004, between Wild Oats Markets, Inc.
and J. P. Morgan Securities Inc., as representative of the initial purchasers of the
debentures. (10)10.1**
    
    Form of Indemnity Agreement between the Registrant and its directors and executive
officers, with related schedule (6)10.2#**
    
    1996 Equity Incentive Plan, including forms of Options granted to employees and
non-employee directors thereunder (6)10.3#**
    
    Amendment to 1996 Equity Incentive Plan (11)10.4#**
    
    Second Amendment to 1996 Equity Incentive Plan (8)10.5#**
    
    Form of Restricted Stock Unit Agreement under the 1996 Equity Incentive Plan (12)10.6#**
    
    Form of Restricted Stock Unit Agreement for Directors granted under the 2006 Equity
Incentive Plan (5)10.7#**
    
    Form of Restricted Stock Agreement under the 1996 Equity Incentive Plan (5)10.8#**
    
    2006 Equity Incentive Plan (13)10.9#**
    
    Form of Incentive Stock Agreement granted under the 2006 Equity Incentive Plan (5)10.10#**
    
    Form of Incentive Stock Option Agreement granted under the 2006 Equity Incentive Plan (5)10.11#**
    
    Form of Non-Qualified Stock Agreement granted under the 2006 Equity Incentive Plan (5)10.12#**
    
    Form of Restricted Stock Unit Agreement granted under the 2006 Equity Incentive Plan (5)
  92




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.13#**
    
    1996 Employee Stock Purchase Plan (6)10.14#**
    
    Amendment to 1996 Employee Stock Purchase Plan (8)10.15#**
    
    1993 Stock Option Plan (6)10.16#**
    
    1991 Stock Option Plan (6)10.17#**
    
    Employee Stock Ownership Plan (6)10.18#**
    
    Wild Oats Markets, Inc. Deferred Compensation Plan (14)10.19#**
    
    Employment Agreement dated March 6, 2001 between Perry D. Odak and the Registrant (15)10.20#**
    
    Stock Purchase Agreement dated March 6, 2001 between Perry D. Odak and the Registrant (15)10.21#**
    
    Amendment to Employment Agreement dated March 6, 2001 between Perry D. Odak and the
Registrant (8)10.22#**
    
    Second Amendment to Employment Agreement between Wild Oats Markets, Inc. and Perry D.
Odak, dated June 19, 2002 (16)10.23#**
    
    Third Amendment to Employment Agreement between Wild Oats Markets, Inc. and Perry D. Odak,
dated August 12, 2002 (16)10.24#**
    
    Fourth Amendment to Employment Agreement, dated May 10, 2005, between Perry D. Odak and
the Registrant (17)10.25#**
    
    Fifth Amendment to Employment Agreement, dated June 16, 2006, between Perry D. Odak and
the Registrant (18)10.26#**
    
    Sixth Amendment to Employment Agreement, dated August 14, 2006, between Perry D. Odak and
the Registrant (19)10.27#+
    
    Resignation, Waiver, Settlement Agreement and General Release, dated October 23, 2006,
between Perry D. Odak and the Registrant10.28#**
    
    Stephen Kaczynski Equity Incentive
Plan (20)10.29#**
    
    Employment Agreement dated April 24, 2001 between Stephen P. Kaczynski and the Registrant
(20)10.30#**
    
    Assignment of Kaczynski Employment Agreement dated June 29, 2002, between Registrant and
Sparky, Inc. (16)10.31#**
    
    Employment Agreement dated
May 21, 2001 between Bruce Bowman and the Registrant (20)10.32#**
    
    Bruce Bowman Equity Incentive Plan
(20)10.33#**
    
    Amendment to Employment Agreement dated May 21, 2001 between Bruce Bowman and the
Registrant (8)10.34#**
    
    Severance Agreement dated
November 7, 2002 between Bruce Bowman and the Registrant (21)10.35#**
    
    Severance Agreement dated
November 7, 2002 between Freya Brier and the Registrant (21)10.36#**
    
    Severance Agreement dated November 7, 2002 between Stephen Kaczynski and the Registrant
(21)10.37#**
    
    Severance Agreement dated
November 7, 2002 between Peter Williams and the Registrant (21)10.38#**
    
    Severance Agreement dated May 9, 2005 between Robert B. Dimond and Registrant (17)10.39#**
    
    Severance Agreement dated January 12, 2006 between Samuel M. Martin and Registrant (5)10.40#**
    
    Severance Agreement dated
October 30, 2006 between Roger E. Davidson and Registrant (22)10.41**
    
    Wild Oats Markets, Inc. 2001 Non-officer/Non-director Equity Incentive Plan (8)10.42**
    
    Amended and Restated Stockholders Agreement between the Registrant and certain parties
named therein dated August 1996 (6)10.43**
    
    Registration Rights Agreement between the Registrant and certain parties named therein
dated July 12, 1996 (6)10.44#**
    
    Employment Agreement dated April 26, 2005 between Robert B. Dimond and the Registrant (16)10.45#**
    
    Robert B. Dimond Equity Incentive Plan (17)10.46#**
    
    First Amendment To Employment Agreement dated August 24, 2006 between Registrant and
Robert B. Dimond (24)10.47#**
    
    Employment Agreement dated January 12, 2006 between Samuel M. Martin and Registrant (5)10.48#**
    
    Samuel M. Martin Equity Incentive Plan (5)10.49#**
    
    Employment Agreement dated
October 4, 2006 between Roger E. Davidson and Registrant (22)10.50#**
    
    Roger E. Davidson Equity Incentive
Plan (22)10.51#**
    
    Loan and Security Agreement, dated March 31, 2005, by and among Wild Oats Markets, Inc.,
Bank of America, N.A., as agent, and the lenders identified therein (17)10.52**
    
    Termination and Release Agreement, dated March 31, 2005, under the Second Amended and
Restated Credit Agreement, dated as of February 26, 2003, as amended by and among Wild
Oats Markets, Inc., the lenders identified therein and Wells Fargo Bank National
Association, as administrative agent (17)10.53**
    
    Agreement for Distribution of Product between Wild Oats Markets, Inc. and United Natural
Foods, Inc. dated January 9, 2004. Portions have been omitted pursuant to a request for
confidential treatment. (23)
  93




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.54**
    
    Memorandum of Understanding between Tree of Life, Inc. and Wild Oats Markets, Inc. dated
November 19, 2003. Portions have been omitted pursuant to a request for confidential
treatment. (23)10.55**
    
    Tender and Support Agreement, dated as of February 21, 2007, by and among Whole Foods
Market, Inc., WFMI Merger Co., Wild Oats Markets, Inc., Yucaipa American Alliance Fund I,
L.P., and Yucaipa American Alliance (Parallel) Fund I, L.P. (1)10.56#**
    
    Incentive Bonus Agreement between Wild Oats Markets, Inc. and Gregory Mays, dated
February 20, 2007 (25)21.1**
    
    List of subsidiaries (12)23.1+
    
    Consent of Ernst & Young LLP.31.1+
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) under
the Securities Exchange Act of 1934, as amended.31.2+
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) under
the Securities Exchange Act of 1934, as amended.32.1+
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).32.2+
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).
  #
    
    Management Compensation Plan.**
    
    Previously filed.+
    
    Included herewith.(1)
    
    Incorporated by reference from the Registrants Form 8-K dated February 22, 2007 (File No. 0-21577).(2)
    
    Incorporated by reference from the Registrants Form 10-K for the year ended December 28, 1996 (File No.
0-21577).(3)
    
    Incorporated by reference from the Registrants Amendment No. 2 to the Registration Statement on Form S-3 filed
with the Commission on November 10, 1999 (File No. 333-88011).(4)
    
    Incorporated by reference from the Registrants Form 8-K dated May 25, 2004 (File No. 0-21577).(5)
    
    Incorporated by reference from the Registrants Form 10-Q for the period ended April 1, 2006 (File No. 0-21577).(6)
    
    Incorporated by reference from the Registrants Registration Statement on Form S-1 (File No. 333-11261) filed
on August 30, 1996.(7)
    
    Incorporated by reference from the Registrants Form 8-K dated on May 5, 1998 (File No. 0-21577).(8)
    
    Incorporated by reference from the Registrants Form 10-K for the year ended December 29, 2001 (File No.
0-21577), filed on March 27, 2002.(9)
    
    Incorporated by reference from the Registrants Form 8-K dated March 24, 2006 (File No. 0-21577).(10)
    
    Incorporated by reference from the Registrants Registration Statement on Form S-3 filed with the Commission on
August 20, 2004 (File No. 333-18406).(11)
    
    Incorporated by reference from the Registrants Registration Statement on Form S-8 (File No. 333-66347) filed
on October 30, 1998.(12)
    
    Incorporated by reference from the Registrants Form 10-Q for the period ended September 25, 2004 (File No.
0-21577).(13)
    
    Incorporated by reference from the Registrants Registration Statement on Form S-8 effective May 11, 2006 (File
No. 333-134003).(14)
    
    Incorporated by reference from the Registrants Form 10-K for the year ended January 1, 2000 (File No. 0-21577).(15)
    
    Incorporated by reference from the Registrants Form 10-Q for the period ended March 31, 2001 (File No.
0-21577).(16)
    
    Incorporated by reference from the Registrants Form 10-Q for the period ended June 29, 2002 (File No. 0-21577).(17)
    
    Incorporated by reference from the Registrants Form 10-Q for the period ended April 2, 2005 (File No. 0-21577).(18)
    
    Incorporated by reference from the Registrants Form 8-K dated June 19, 2006 (File No. 0-21577).(19)
    
    Incorporated by reference from the Registrants Form 8-K dated August 15, 2006 (File No. 0-21577).(20)
    
    Incorporated by reference from the Registrants Form 10-Q for the period ended June 30, 2001 (File No. 0-21577).(21)
    
    Incorporated by reference from the Registrants Form 10-K for the year ended December 28, 2002 (File No.
0-21577).(22)
    
    Incorporated by reference from the Registrants Form 10-Q for the period ended September 30, 2006 (File No.
0-21577).(23)
    
    Incorporated by reference from the Registrants Form 10-K for the year ended December 27, 2003 (File No.
0-21577).(24)
    
    Incorporated by reference from the Registrants Form 8-K dated August 24, 2006 (File No. 0-21577).(25)
    
    Incorporated by reference from the Registrants Form 8-K dated February 26, 2007 (File No. 0-21577).
  94




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##### Table of Contents



SIGNATURES
  Wild Oats Markets, Inc.
(Registrant)Date:  March 14, 2007
    By:
    /s/   Gregory MaysGregory MaysInterim Chief Financial Officer
(Principal Financial and Accounting Officer)  95




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Document10.27
    
    Resignation, Waiver, Settlement
Agreement and General Release, dated October 23, 2006, between Perry
D. Odak and the Registrant23.1
    
    Consent of Ernst & Young LLP.31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) under
the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) under
the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).32.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).
  96