Starbucks 2001 Annual Report Download - page 29

Fiscal 2001 Annual Report 45
Note 15: Earnings Per Share
The following table represents the calculation of net earnings per common share—basic (in thousands,
except earnings per share):
Fiscal year ended Sept 30, 2001 Oct 1, 2000 Oct 3, 1999
Net earnings $ 181,210 $ 94,564 $ 101,693
Weighted average common shares and
common stock units outstanding 380,566 371,191 363,683
Net earnings per common share – basic $ 0.48 $ 0.25 $ 0.28
The following table represents the calculation of net earnings per common and common equivalent
share—diluted (in thousands, except earnings per share):
Fiscal year ended Sept 30, 2001 Oct 1, 2000 Oct 3, 1999
Net earnings $ 181,210 $ 94,564 $ 101,693
Weighted average common shares and common
stock units outstanding 380,566 371,191 363,683
Dilutive effect of outstanding common stock options 13,783 14,808 13,379
Weighted average common and common
equivalent shares outstanding 394,349 385,999 377,062
Net earnings per common and common
equivalent share – diluted $ 0.46 $ 0.24 $ 0.27
Options with exercise prices greater than the average market price were not included in the
computation of diluted earnings per share. These options totaled 0.9 million, 0.3 million and 0.6
million for fiscal 2001, 2000 and 1999, respectively.
Note 16: Commitments and Contingencies
In connection with various bank loans entered into by Starbucks Coffee Japan, Ltd., the Company has
guaranteed $13.6 million of the outstanding debt in the event of default by Starbucks Coffee Japan, Ltd.
On June 20, 2001, and July 2, 2001, two purported class action lawsuits against the Company entitled
James Carr, et.al. v. Starbucks Corporation and Olivia Shields, et.al. v. Starbucks Corporation were filed in the
Superior Courts of California, Alameda and Los Angeles Counties, respectively. Each lawsuit
subsequently was removed to the United States District Court, Northern District of California and
Central District of California, respectively. Each of the lawsuits was filed by two plaintiffs who are
current or former store managers and assistant store managers on behalf of themselves and other
similarly situated store managers, assistant store managers and retail management trainees.The lawsuits
allege that the Company improperly classified such employees as exempt under California’s wage and
hour laws and seek damages, restitution, reclassification and attorneys fees and costs. Starbucks is
vigorously investigating and defending this litigation and is also pursuing alternative dispute resolution
possibilities with the plaintiffs. Because the cases are in the very early stages, the financial impact to
the Company, if any, cannot be predicted.
In addition to the California lawsuits described above, the Company is party to various legal
proceedings arising in the ordinary course of its business, but it is not currently a party to any legal
proceeding that management believes would have a material adverse effect on the financial position
or results of operations of the Company.
Note 17: Subsequent Events
On October 10, 2001, the Company sold 30,000 of its existing shares of Starbucks Coffee Japan, Ltd.
(“Starbucks Japan”) at approximately $495.00 per share, net of related costs. In connection with this
sale, the Company received cash proceeds of $15 million. The Company’s ownership interest in
Starbucks Japan was reduced from 50.0% to 47.5% following the sale of the aforementioned shares.
The Company recorded a gain from this sale of $13 million.
Also on October 10, 2001, Starbucks Japan issued and sold 220,000 shares of common stock at
approximately $495.00 per share, net of related costs, in an initial public offering in Japan. In
connection with this offering, the Company’s ownership interest in Starbucks Japan was reduced from
47.5% to 40.1%.The Company recorded a credit to shareholders’equity of $39 million, reflecting the
increase in value of its share of the net assets of Starbucks Japan related to the stock offering.