Starbucks 1999 Annual Report Download - page 18

NOTE 2: BUSINESS COMBINATIONS
During the second quarter of fiscal 1999, Starbucks acquired the net assets of Tazo, L.L.C.
(“Tazo”), a Portland, Oregon-based tea company that produces premium tea products, and the
stock of Pasqua Inc. (“Pasqua”), a San Francisco, California-based roaster and retailer of specialty
coffee. The combined purchase price for these two acquisitions was $16.5 million. The excess
purchase price over the net assets acquired was recorded to goodwill and is being amortized over
a period of ten to twenty years. Both of these acquisitions were accounted for under the purchase
method of accounting. The results of operations of Tazo and Pasqua have been included in the
consolidated financial statements of the Company from the dates of acquisition. Pro forma results
of operations have not been presented because the effects of these acquisitions were not material
on either an individual or aggregate basis.
On May 28, 1998, the Company acquired all of the equity interests of Seattle Coffee Holdings
Limited (“Seattle Coffee Company”), a United Kingdom-based roaster and retailer of specialty
coffee, in exchange for 3.6 million shares of Starbucks common stock.This business combination
(the “Transaction”) was accounted for as a pooling-of-interests for accounting and financial reporting
purposes. Accordingly, the historical financial statements for the periods prior to the business
combination were restated as though the companies had always been combined. The restated
financial statements were adjusted to conform the accounting policies and fiscal reporting periods
of Seattle Coffee Company to Starbucks accounting policies and fiscal reporting periods. The
Transaction resulted in pre-tax charges of $8.9 million in direct merger costs and $6.6 million in
other costs associated with the integration of Seattle Coffee Company.
The following summarizes the Company’s net revenues, net earnings and earnings per share for
the periods prior to and following the Transaction (in thousands, except earnings per share):


  
1998
34 Weeks prior to the Transaction
Net revenues $ 805,151 $ 15,675 $ 820,826
Net earnings 45,811 (3,312) 42,499
Net earnings per share – diluted 0.25 (0.02) 0.23
18 Weeks after the Transaction
Net revenues $ 487,876
Net earnings 25,873
Net earnings per share – diluted 0.15
1997
Net revenues $ 966,946 $ 8,443 $ 975,389
Net earnings 57,412 (2,201) 55,211
Net earnings per share – diluted 0.35 (0.02) 0.33
.  STARBUCKS COFFEE COMPANY