Starbucks 2001 Annual Report Download - page 21

Fiscal 2001 Annual Report 37
Note 4: Short-term Investments
The Company’s investments consist of the following (in thousands):
GROSS GROSS
UNREALIZED UNREALIZED
FAIR AMORTIZED HOLDING HOLDING
September 30, 2001: VALUE COST GAINS LOSSES
Short-term investments – available-for-sale securities:
U.S. Government obligations $ 2,017 $ 1,999 $ 18 $ -
Mutual funds 99,332 98,000 1,332 -
Marketable equity securities 50 250 - (200)
Total $ 101,399 $ 100,249 $ 1,350 $ (200)
Short-term investments – trading securities 5,913
_________
Total short-term investments $ 107,312
GROSS GROSS
UNREALIZED UNREALIZED
FAIR AMORTIZED HOLDING HOLDING
October 1, 2000: VALUE COST GAINS LOSSES
Short-term investments – available-for-sale securities:
U.S. Government obligations $ 10,990 $ 10,996 $ 3 $ (9)
Commercial paper 45,356 45,373 1 (18)
Marketable equity securities 1,227 1,227 - -
Total $ 57,573 $ 57,596 $ 4 $ (27)
Short-term investments – trading securities 3,763
_________
Total short-term investments $ 61,336
Available-for-sale securities with remaining maturities of one year or less are classified as short-term
investments. Securities with remaining maturities longer than one year are classified as long-term and
are included in the line item “Other investments” on the accompanying consolidated balance sheets.The
specific identification method is used to determine a cost basis for computing realized gains and losses.
In fiscal 2001,2000 and 1999,proceeds from the sale of investment securities were $46.9 million,$49.2
million and $3.6 million, respectively. Gross realized gains and losses from the sale of securities were
not material in 2001, 2000 and 1999.
During fiscal 2001 and 2000, the Company recognized losses of $0.9 million and $6.8 million,
respectively, on its investment in the common stock of Liveworld,Inc. (previously known as Talk City,
Inc.), due to impairments that were determined by management to be other than temporary. The
remaining fair value of the investment was $50 thousand as of September 30, 2001, and $1.2 million
as of October 1, 2000.
Trading securities are classified as short-term investments.The trading securities are comprised mainly
of marketable equity mutual funds designated to approximate the Company’s liability under the
Management Deferred Compensation Plan. The corresponding deferred compensation liability of
$6.0 million in fiscal 2001 and $3.8 million in fiscal 2000 is included in “Accrued compensation and
related costs” on the accompanying consolidated balance sheets. In fiscal 2001 and fiscal 2000, the
change in net unrealized holding gains or (losses) in the trading portfolio included in earnings were
($1.9) million and $0.3 million, respectively. Gross gains included in earnings associated with the
transfer of securities from the available-for-sale category to the trading category were $0.5 million in
fiscal 2000.
Note 5: Derivative Financial Instruments
The Company manages its exposure to foreign currency risk within the consolidated financial
statements according to a hedging policy. Under the policy, the Company may engage in transactions
involving various derivative instruments with maturities generally not longer than five years, to hedge
assets, liabilities, revenues and purchases denominated in foreign currencies.
On October 2, 2000, the Company adopted SFAS No. 133,“Accounting for Derivative Instruments
and Hedging Activities,” as amended and interpreted, which requires that all derivatives be recorded