Starbucks 2001 Annual Report Download - page 10

contributed $12.1 million primarily due to an increase in the number of employees. Higher
receivables, from domestic licensees resulting from business growth and from insurance recoveries
directly related to the fiscal 2001 Nisqually earthquake, as well as higher inventory levels resulted in
an increased use of cash of $36.9 million.
Cash used by investing activities for fiscal 2001 totaled $433.1 million.This included capital additions
to property, plant and equipment of $384.2 million related to opening 647 new Company-operated
retail stores,remodeling certain existing stores,enhancing information systems,purchasing roasting and
packaging equipment for the Company’s roasting and distribution facilities and expanding existing
office space.The net activity in the Company’s marketable securities portfolio during fiscal 2001 used
$43.8 million of cash. Excess cash was invested primarily in short-term, investment-grade securities.
During fiscal 2001, the Company made equity investments of $12.6 million in its international joint
ventures, excluding the effects of foreign currency fluctuations.The Company received $16.8 million
in distributions from the North American Coffee Partnership and $0.1 million from its international
joint ventures.
Cash provided by financing activities for fiscal 2001 totaled $14.8 million.This included $46.7 million
generated from the exercise of employee stock options and $13.0 million generated from the
Company’s employee stock purchase plan.As options granted under the Company’s stock option plans
are exercised, the Company will continue to receive proceeds and a tax deduction;however,neither the
amounts nor the timing thereof can be predicted.The increase in checks issued but not presented for
payment provided $5.7 million. On September 17, 2001, the Company announced a share repurchase
program to acquire up to $60.0 million of the Company’s common stock from time to time on the
open market. Share repurchases are at the discretion of management and depend on market conditions,
capital requirements and such other factors as the Company may consider relevant. As of September
30, 2001, the Company had repurchased 3.4 million shares, which used $49.8 million of cash, at an
average price of $14.75 per share.
Cash requirements for fiscal 2002,other than normal operating expenses, are expected to consist primarily
of capital expenditures related to the addition of new Company-operated retail stores.The Company plans
to open at least 625 Company-operated stores during fiscal 2002.The Company also anticipates incurring
additional expenditures for remodeling certain existing stores and enhancing its production capacity and
information systems. While there can be no assurance that current expectations will be realized,
management expects capital expenditures for fiscal 2002 to be in the range of $450 million to $475 million.
Management believes that existing cash and investments plus cash generated from operations should
be sufficient to finance capital requirements for its core businesses through fiscal 2002. New joint
ventures, other new business opportunities or store expansion rates substantially in excess of that
presently planned may require outside funding.
Coffee Prices, Availability and General Risk Conditions
The supply and price of coffee are subject to significant volatility.Although most coffee trades in the
commodity market, coffee of the quality sought by the Company tends to trade on a negotiated basis
at a substantial premium above commodity coffee prices, depending upon the supply and demand at
the time of purchase.Supply and price can be affected by multiple factors in the producing countries,
including weather, political and economic conditions. In addition, green coffee prices have been
affected in the past, and may be affected in the future, by the actions of certain organizations and
associations that have historically attempted to influence commodity prices of green coffee through
agreements establishing export quotas or restricting coffee supplies worldwide.The Company’s ability
to raise sales prices in response to rising coffee prices may be limited, and the Company’s profitability
could be adversely affected if coffee prices were to rise substantially.
The Company enters into fixed-price purchase commitments in order to secure an adequate supply
of quality green coffee and bring greater certainty to the cost of sales in future periods. As of
September 30, 2001, the Company had approximately $283.8 million in fixed-price purchase
commitments which, together with existing inventory, is expected to provide an adequate supply of
green coffee through 2002.The Company believes, based on relationships established with its suppliers
in the past, that the risk of non-delivery on such purchase commitments is low.