Starbucks 2001 Annual Report Download - page 23

Fiscal 2001 Annual Report 39
The Company is a partner in several other joint ventures that operate licensed Starbucks retail stores,
including Starbucks Coffee Japan, Ltd., a 50/ 50 joint venture partnership with Japanese retailer and
restauranteur SAZABY Inc. to develop Starbucks retail stores in Japan (See Note 17), and Starbucks
Coffee Korea Co., Ltd., a 50/ 50 joint venture partnership with Shinsegae Department Store Co., Ltd.,
to develop retail stores in the Republic of Korea.The Company also has interests in joint ventures to
develop Starbucks retail stores in Hawaii,Taiwan,Shanghai,Hong Kong,Austria,Switzerland and Israel.
The Company accounts for these investments using the equity method when Starbucks is deemed to
have significant influence over the investee but is not the controlling or managing partner; otherwise,
the investment is accounted for using the cost method.The Company’s share of income and losses for
equity method joint ventures is included in “Joint venture income” on the accompanying consolidated
statements of earnings. This line includes both the Company’s proportionate share of gross margin
resulting from coffee and other product sales to the joint ventures and royalty and license fee revenues.
The Company’s investments in these joint ventures are as follows (in thousands):
EQUITY COST
METHOD METHOD
JOINT JOINT
VENTURES VENTURES TOTAL
Balance, September 27, 1998 $ 38,558 $ 359 $ 38,917
Allocated share of income 2,318 - 2,318
Distributions from joint ventures (8,983) - (8,983)
Capital contributions 10,466 - 10,466
Balance, October 3, 1999 $ 42,359 $ 359 $ 42,718
Allocated share of income 15,139 - 15,139
Distributions from joint ventures (14,279) - (14,279)
Capital contributions 8,049 424 8,473
Balance, October 1, 2000 $ 51,268 $ 783 $ 52,051
Allocated share of income 15,630 - 15,630
Distributions from joint ventures (16,863) - (16,863)
Capital contributions 7,723 2,335 10,058
Balance, September 30, 2001 $ 57,758 $ 3,118 $ 60,876
The Company has a consolidated joint venture with Starbucks Coffee Company (Australia) Pty Ltd.
to develop retail stores in Australia. In addition, the Company has a consolidated joint venture, Urban
Coffee Opportunities LLC, with Johnson Development Corporation to develop retail stores in
underserved urban communities.
Note 8: Other Investments
In fiscal 1999, the Company invested $20.3 million in living.com Inc. (“living.com”), an online
furniture retailer, and $10.0 million in Cooking.com, Inc. (“Cooking.com”), a privately held Web-
based retailer of cookware,accessories and specialty foods and provider of information about cooking.
During fiscal 2000, the Company invested $25.0 million in Kozmo.com, an Internet-to-door delivery
service for food, entertainment and convenience items. Starbucks and Kozmo.com also entered into
a commercial agreement to provide in-store return boxes in Starbucks stores in exchange for cash, a
channel for selling the Company’s products and other marketing opportunities. In connection with
this agreement, Starbucks received a $15.0 million payment that was recognized as revenue on a
straight-line basis over twelve months.
During fiscal 2001 and 2000, the Company determined that its investments in Internet-related
companies had suffered declines in value that were other than temporary. As a result, the Company
recognized a loss totaling $2.0 million to write off its remaining investment in Kozmo.com as of
September 30, 2001, and recognized losses of $52.0 million to reduce its investments in living.com,
Cooking.com and Kozmo.com to their aggregate fair value of $3.6 million as of October 1, 2000.
The Company also had various other investments recorded at their estimated aggregate fair value of
$1.9 million as of September 30, 2001, and $0.2 million as of October 1, 2000.