Starbucks 1999 Annual Report Download - page 26

NOTE 12: INCOME TAXES
A reconciliation of the statutory federal income tax rate with the Company’s effective income tax
rate is as follows:
Fiscal year ended  ,   ,   , 
Statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit 3.7 3.8 3.6
Non deductible losses and merger costs – 2.6 1.0
Other, net (0.7) (0.2) (0.1)
Effective tax rate 38.0% 41.2% 39.5%
The provision for income taxes consists of the following (in thousands):
Fiscal year ended  ,   ,   , 
Currently payable
Federal $ 52,207 $ 39,267 $ 25,884
State 9,332 6,586 4,725
Deferred liability 794 2,125 5,490
$ 62,333 $ 47,978 $ 36,099
Deferred income taxes (benefits) reflect the tax effect of temporary differences between the
amounts of assets and liabilities for financial reporting purposes and amounts as measured for tax
purposes.The tax effect of temporary differences and carryforwards that cause significant portions
of deferred tax assets and liabilities are as follows (in thousands):
 ,   , 
Depreciation $ 29,826 $ 24,240
Accrued rent (8,234) (6,252)
Investments in joint ventures 3,990 2,400
Accrued compensation and related costs (5,622) (4,096)
Other, net (8,207) (5,757)
$ 11,753 $ 10,535
Taxes payable of $16.3 million and $8.7 million are included in “Accrued taxes” in the accompanying
consolidated balance sheets as of October 3,1999, and September 27,1998, respectively.
NOTE 13: COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company has various legal claims and other contingent
matters outstanding. Management believes that any ultimate liability arising from these actions
would not have a material adverse effect on the Company’s results of operations or financial
condition as of and for the fiscal year ended October 3, 1999.
NOTE 14: SEGMENT REPORTING
In fiscal 1999, the Company adopted SFAS No. 131, “Disclosures about Segments of an Enterprise and
Related Information”, which establishes reporting and disclosure standards for an enterprise’s operating
segments. Operating segments are defined as components of an enterprise for which separate financial
information is available and regularly reviewed by the Company’s senior management.
The Company is organized into a number of business units.The Company’s North American retail
business sells coffee beverages, whole bean coffees and related hardware and equipment through
Company-operated retail stores in the United States and Canada. The Company also has a
subsidiary that owns and operates retail stores in the United Kingdom.These two retail segments
are managed by different presidents within the Company and are measured and evaluated sepa-
rately by senior management.
The Company operates through several other business units, each of which is managed and evaluated
independently. These other business units are organized around the strategic relationships that
govern the distribution of products to the customer. These relationships include domestic
.  STARBUCKS COFFEE COMPANY