Starbucks 2003 Annual Report Download - page 20

32฀ Fiscal฀2003฀Annual฀Report
Fiscal฀2003฀Annual฀Report฀ 33
Depending฀ on฀ investee฀ operating฀ conditions,฀ Starbucks฀ may฀
contribute฀capital฀resources฀to฀its฀equity฀method฀and฀cost฀method฀
investees฀in฀proportion฀to฀the฀Company’s฀ownership.
Other฀Investments
Starbucks฀has฀investments฀in฀privately฀held฀equity฀securities฀
that฀are฀recorded฀at฀their฀estimated฀fair฀values.
Note฀8:฀Property,฀Plant฀and฀Equipment
Property,฀plant฀and฀equipment฀are฀recorded฀at฀cost฀and฀consist฀
of฀the฀following฀(in฀thousands):
Fiscal฀year฀ended฀ Sept฀28,฀2003฀ Sept฀29,฀2002
Land฀ $฀ 11,414฀ $฀ 11,310
Buildings฀ ฀ 64,427฀ ฀ 30,961
Leasehold฀improvements฀ ฀ 1,311,024฀ ฀ 1,131,382
Roasting฀and฀store฀equipment฀ ฀ 613,825฀ ฀ 516,129
Furniture,฀fixtures฀and฀other฀ ฀ 375,854฀ ฀ 282,068
฀ ฀ 2,376,544฀ ฀ 1,971,850
Less฀accumulated฀depreciation฀
฀ and฀amortization฀ ฀ (1,049,810฀)฀ ฀ (814,427฀)
฀ ฀ 1,326,734฀ ฀ 1,157,423
Work฀in฀progress฀ ฀ 58,168฀ ฀ 108,333
Property,฀plant฀and฀equipment,฀net฀ $฀ 1,384,902฀ $฀ 1,265,756
Note฀9:฀Other฀Intangible฀Assets฀and฀Goodwill
As฀ of฀ September฀ 28,฀ 2003,฀ indefinite-lived฀ intangibles฀
were฀$23.3฀million฀and฀definite-lived฀intangibles฀were฀$1.6฀
million,฀ net฀ of฀ accumulated฀ amortization฀ of฀ $0.9฀ million.฀
As฀of฀September฀29,฀2002,฀indefinite-lived฀intangibles฀were฀
$8.9฀million฀and฀definite-lived฀intangibles฀were฀$1.0฀million,฀
net฀of฀accumulated฀amortization฀of฀$0.4฀million.฀Indefinite-
lived฀ intangibles฀ increased฀ by฀ $14.4฀ million฀ during฀ fiscal฀
2003,฀ primarily฀ due฀ to฀ the฀ acquisition฀ of฀ Seattle฀ Coffee฀
Company.฀ During฀ fiscal฀ 2003฀ and฀ 2002,฀ amortization฀
expense฀ for฀ definite-lived฀ intangibles฀ was฀ $0.4฀ million฀ and฀
$0.1฀million,฀respectively.฀Amortization฀expense฀is฀estimated฀
to฀be฀$0.3฀million฀for฀each฀of฀the฀next฀five฀fiscal฀years.
During฀ fiscal฀ 2003,฀ goodwill฀ increased฀ by฀ approximately฀
$43.4฀million฀primarily฀due฀to฀the฀acquisition฀of฀the฀Seattle฀
Coffee฀ Company.฀ There฀ were฀ no฀ acquisitions฀ during฀ fiscal฀
2002,฀and฀no฀impairment฀was฀recorded฀during฀fiscal฀2003฀or฀
2002.฀The฀following฀table฀summarizes฀goodwill฀by฀operating฀
segment฀(in฀thousands):
Fiscal฀year฀ended฀ Sept฀28,฀2003฀ Sept฀29,฀2002
United฀States฀ $฀ 60,965฀ $฀ 17,705
International฀ ฀ 2,379฀ ฀ 2,197
Total฀ $฀ 63,344฀ $฀ 19,902
Note฀10:฀Long-Term฀Debt
In฀ September฀ 1999,฀ the฀ Company฀ purchased฀ the฀ land฀ and฀
building฀comprising฀its฀York฀County,฀Pennsylvania,฀roasting฀
plant฀ and฀ distribution฀ facility.฀ The฀ total฀ purchase฀ price฀
was฀ $12.9฀ million.฀ In฀ connection฀ with฀ this฀ purchase,฀ the฀
Company฀assumed฀loans฀totaling฀$7.7฀million฀from฀the฀York฀
County฀Industrial฀Development฀Corporation.฀The฀remaining฀
maturities฀of฀these฀loans฀range฀from฀6฀to฀7฀years,฀with฀interest฀
rates฀from฀0.0%฀to฀2.0%.฀
Scheduled฀ principal฀ payments฀ on฀ long-term฀ debt฀ are฀ as฀
follows฀(in฀thousands):
Fiscal฀year฀ending
2004฀ $฀ 722
2005฀ ฀ 735
2006฀ ฀ 748
2007฀ ฀ 762
2008฀ ฀ 776
Thereafter฀ ฀ 1,333
Total฀principal฀payments฀ $฀ 5,076
Starbucks฀ has฀ a฀ $20.0฀ million฀ unsecured฀ revolving฀ credit฀
agreement฀with฀a฀bank,฀which฀matures฀in฀March฀2004.฀There฀
have฀been฀no฀borrowings฀under฀this฀agreement.
Note฀11:฀Leases
The฀Company฀leases฀retail฀stores,฀roasting฀and฀distribution฀facilities฀and฀office฀space฀under฀operating฀leases฀expiring฀through฀
2027.฀Most฀lease฀agreements฀contain฀renewal฀options฀and฀rent฀escalation฀clauses.฀Certain฀leases฀provide฀for฀contingent฀rentals฀
based฀upon฀gross฀sales.
Rental฀expense฀under฀these฀lease฀agreements฀was฀as฀follows฀(in฀thousands):
Fiscal฀year฀ended฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ Sept฀28,฀2003 ฀฀฀฀฀฀฀฀ Sept฀29,฀2002 ฀฀฀฀฀฀฀฀฀฀Sept฀30,฀2001
Minimum฀rentals฀–฀Retail ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $ ฀฀฀฀ 237,742฀฀฀฀฀฀฀ $ ฀฀฀฀200,827฀฀฀฀฀฀฀ $ ฀฀฀฀ 150,510
Minimum฀rentals฀–฀Other ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀22,887฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀19,143฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀16,033
Contingent฀rentals ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀12,274฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 5,415฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 4,018
Total ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $ ฀฀฀฀ 272,903฀฀฀฀฀฀฀ $ ฀฀฀฀225,385฀฀฀฀฀฀฀ $ ฀฀฀฀ 170,561
Minimum฀ future฀ rental฀ payments฀ under฀ non-cancelable฀
lease฀ obligations฀ as฀ of฀ September฀ 28,฀ 2003,฀ are฀ as฀ follows฀
(in฀thousands):
Fiscal฀year฀ending
2004฀ $฀ 293,912
2005฀ ฀ 284,401
2006฀ ฀ 270,261
2007฀ ฀ 253,944
2008฀ ฀ 232,713
Thereafter฀ ฀ 924,203
Total฀minimum฀lease฀payments฀ $฀ 2,259,434
Note฀12:฀Shareholders’฀Equity
In฀ addition฀ to฀ 600.0฀ million฀ shares฀ of฀ authorized฀ common฀
stock฀ with฀ $0.001฀ par฀ value฀ per฀ share,฀ the฀ Company฀ has฀
authorized฀ 7.5฀ million฀ shares฀ of฀ preferred฀ stock,฀ none฀ of฀
which฀was฀outstanding฀at฀September฀28,฀2003.฀
During฀ fiscal฀ 2003,฀ the฀ Starbucks฀ Board฀ of฀ Directors฀
authorized฀management฀to฀repurchase฀shares฀under฀any฀of฀the฀
Company’s฀ programs฀ pursuant฀ to฀ a฀ contract,฀ instruction฀ or฀
written฀plan฀meeting฀the฀requirements฀of฀Rule฀10b5-1(c)(1)฀
of฀the฀Securities฀Exchange฀Act฀of฀1934.฀
Pursuant฀ to฀ the฀ Company’s฀ authorized฀ share฀ repurchase฀
programs,฀Starbucks฀acquired฀3.3฀million฀shares฀at฀an฀average฀
price฀of฀$22.95฀for฀a฀total฀cost฀of฀$75.7฀million฀during฀fiscal฀
2003,฀and฀acquired฀2.6฀million฀shares฀at฀an฀average฀price฀of฀
$19.81฀for฀a฀total฀cost฀of฀$52.2฀million฀in฀fiscal฀2002.฀All฀share฀
repurchases฀were฀effected฀through฀either฀Morgan฀Stanley฀&฀
Co.฀ Incorporated฀ or฀ Citigroup฀ Global฀ Markets,฀ Inc.฀ As฀ of฀
September฀28,฀2003,฀there฀were฀approximately฀14.6฀million฀
additional฀shares฀authorized฀for฀repurchase.฀Share฀repurchases฀
were฀ funded฀ through฀ cash,฀ cash฀ equivalents฀ and฀ available-
for-sale฀securities฀and฀were฀primarily฀intended฀to฀help฀offset฀
dilution฀from฀stock-based฀compensation฀and฀employee฀stock฀
purchase฀plans.฀
Comprehensive฀Income฀
Comprehensive฀income฀includes฀all฀changes฀in฀equity฀during฀
the฀ period,฀ except฀ those฀ resulting฀ from฀ transactions฀ with฀
shareholders฀ and฀ subsidiaries฀ of฀ the฀ Company.฀ It฀ has฀ two฀
components:฀net฀earnings฀and฀other฀comprehensive฀income.฀