Starbucks 2003 Annual Report Download - page 6

18฀ Fiscal฀2003฀Annual฀Report
Fiscal฀2003฀Annual฀Report฀ 19
Net฀ interest฀ and฀ other฀ income,฀ which฀ primarily฀ consists฀ of฀
interest฀ income,฀ increased฀ to฀ $11.6฀ million฀ in฀ fiscal฀ 2003,฀
from฀$9.3฀million฀in฀fiscal฀2002.฀The฀growth฀was฀a฀result฀of฀
increased฀ interest฀ received฀ on฀ higher฀ balances฀ of฀ cash,฀ cash฀
equivalents฀and฀liquid฀securities฀during฀fiscal฀2003,฀compared฀
to฀the฀prior฀year,฀and฀gains฀realized฀on฀market฀revaluations฀of฀
the฀Company’s฀trading฀securities,฀compared฀to฀realized฀losses฀
on฀this฀portfolio฀in฀the฀prior฀year.
The฀Company’s฀effective฀tax฀rate฀for฀fiscal฀2003฀was฀38.5%฀
compared฀to฀37.3%฀in฀fiscal฀2002฀as฀a฀result฀of฀a฀shift฀in฀the฀
composition฀of฀the฀Company’s฀pretax฀earnings฀in฀fiscal฀2003.฀
Operations฀ based฀ in฀ the฀ United฀ States฀ had฀ higher฀ pretax฀
earnings฀and฀comprised฀a฀higher฀proportion฀of฀consolidated฀
pretax฀earnings฀during฀fiscal฀2003.฀In฀addition,฀international฀
operations,฀ which฀ are฀ in฀ various฀ phases฀ of฀ development,฀
generated฀ greater฀ nondeductible฀ losses฀ than฀ anticipated.฀
Management฀ expects฀ the฀ effective฀ tax฀ rate฀ to฀ be฀ 38.0%฀ for฀
fiscal฀2004.
Operating฀Segments
Segment฀ information฀ is฀ prepared฀ on฀ the฀ basis฀ that฀ the฀
Company’s฀ management฀ internally฀ reviews฀ financial฀
information฀ for฀ operational฀ decision฀ making฀ purposes.฀
Starbucks฀ revised฀ its฀ segment฀ reporting฀ into฀ two฀ distinct,฀
geographically฀ based฀ operating฀ segments:฀ United฀ States฀
and฀ International.฀ This฀ change฀ was฀ in฀ response฀ to฀ internal฀
management฀realignments฀in฀the฀fiscal฀first฀quarter฀of฀2004฀
and฀ management’s฀ evaluation฀ of฀ the฀ requirements฀ of฀ SFAS฀
No.฀ 131,฀“Disclosures฀about฀Segments฀of฀an฀ Enterprise฀ and฀
Related฀Information.”฀
United฀States
The฀ Company’s฀ United฀ States฀ operations฀ (“United฀ States”)฀
represent฀ 86%฀ of฀ retail฀ revenues,฀ 81%฀ of฀ specialty฀ revenues฀
and฀ 85%฀ of฀ total฀ net฀ revenues.฀ Company-operated฀ retail฀
stores฀ sell฀ coffee฀ and฀ other฀ beverages,฀ whole฀ bean฀ coffees,฀
complementary฀ food,฀ coffee฀ brewing฀ equipment฀ and฀
merchandise.฀ Non-retail฀ activities฀ within฀ the฀ United฀ States฀
include:฀licensed฀operations,฀foodservice฀accounts฀and฀other฀
initiatives฀related฀to฀the฀Company’s฀core฀businesses.
International฀
The฀ Company’s฀ international฀ operations฀ (“International”)฀
represent฀ the฀ remaining฀ 14%฀ of฀ retail฀ revenues,฀ 19%฀
of฀ specialty฀ revenues฀ and฀ 15%฀ of฀ total฀ net฀ revenues.฀
International฀ sells฀ coffee฀ and฀ other฀ beverages,฀ whole฀ bean฀
coffees,฀ complementary฀ food,฀ coffee฀ brewing฀ equipment฀
and฀ merchandise฀ through฀ Company-operated฀ retail฀ stores฀
in฀Canada,฀the฀United฀Kingdom,฀Thailand฀and฀Australia,฀as฀
well฀as฀through฀licensed฀operations฀and฀foodservice฀accounts฀
in฀these฀and฀other฀countries.฀Because฀International฀operations฀
are฀in฀an฀early฀phase฀of฀development฀and฀have฀country-specific฀
regulatory฀ requirements,฀ they฀ require฀ a฀ more฀ extensive฀
administrative฀support฀organization,฀compared฀to฀the฀United฀
States,฀to฀provide฀resources฀and฀respond฀to฀business฀needs฀in฀
each฀region.
Segment฀Results฀of฀Operations
The฀following฀tables฀summarize฀the฀Company’s฀results฀of฀operations฀by฀segment฀for฀fiscal฀2003฀and฀2002฀(in฀thousands):฀
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀%฀of ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ %฀of
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ United฀States฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ International฀ Unallocated ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
Fiscal฀year฀ended฀September฀28,฀2003฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀United฀States ฀฀฀฀฀฀ Revenue฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀International ฀฀฀฀฀฀฀ Revenue฀ Corporate ฀฀฀฀฀฀฀฀฀฀฀฀ Consolidated
Net฀revenues:
฀ Retail฀ $฀ 2,965,618฀ 85.4%฀ $฀ 484,006฀ 80.3%฀ $฀ –฀ ฀ ฀ ฀ $฀3,449,624
฀ Specialty฀ ฀ 506,834฀ 14.6฀ ฀ 119,064฀ 19.7฀ ฀ –฀ ฀ ฀ ฀ ฀ 625,898
Total฀net฀revenues฀ ฀ 3,472,452฀ 100.0฀ ฀ 603,070฀ 100.0฀ ฀ –฀ ฀ ฀ ฀ ฀4,075,522
Cost฀of฀sales฀and฀related฀occupancy฀costs฀ ฀ 1,363,267฀ 39.3฀ ฀ 322,661฀ 53.5฀ ฀ –฀ ฀ ฀ ฀ ฀1,685,928
Store฀operating฀expenses฀฀ ฀ 1,199,020฀ 40.4฀(1)฀ ฀ 180,554฀ 37.3฀(1)฀ ฀ –฀ ฀ ฀ ฀ ฀1,379,574
Other฀operating฀expenses฀฀ ฀ 119,960฀ 23.7฀(2)฀ ฀ 21,386฀ 18.0฀(2)฀ ฀ –฀ ฀ ฀ ฀ ฀ 141,346
Depreciation฀and฀amortization฀expenses฀ ฀ 167,138฀ 4.8฀ ฀ 38,563฀ 6.4฀ ฀ 32,106฀ ฀ 237,807
General฀and฀administrative฀expenses฀ ฀ 45,007฀ 1.3฀ ฀ 44,352฀ 7.4฀ ฀ 155,191฀ ฀ 244,550
Income฀from฀equity฀investees฀ ฀ 28,484฀ 0.8฀ ฀ 9,912฀ 1.6฀ ฀ –฀ ฀ ฀ ฀ ฀ 38,396
฀ Operating฀income฀ $฀ 606,544฀ 17.5%฀ $฀ 5,466฀ 0.9%฀ $฀(187,297฀)฀ $฀ 424,713
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀%฀of ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ %฀of
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ United฀States฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ International฀ Unallocated ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
Fiscal฀year฀ended฀September฀29,฀2002฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀United฀States ฀฀฀฀฀฀ Revenue฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀International ฀฀฀฀฀฀฀ Revenue฀ Corporate ฀฀฀฀฀฀฀฀฀฀฀฀ Consolidated
Net฀revenues:
฀ Retail฀ $฀ 2,425,163฀ 85.7%฀ $฀ 367,741฀ 79.8%฀ $฀ –฀ ฀ ฀ ฀ $฀2,792,904
฀ Specialty฀ ฀ 403,090฀ 14.3฀ ฀ 92,914฀ 20.2฀ ฀ –฀ ฀ ฀ ฀ ฀ 496,004
Total฀net฀revenues฀ ฀ 2,828,253฀ 100.0฀ ฀ 460,655฀ 100.0฀ ฀ –฀ ฀ ฀ ฀ ฀3,288,908
Cost฀of฀sales฀and฀related฀occupancy฀costs฀ ฀ 1,114,535฀ 39.4฀ ฀ 235,476฀ 51.1฀ ฀ –฀ ฀ ฀ ฀ ฀1,350,011
Store฀operating฀expenses฀฀ ฀ 961,617฀ 39.7฀(1)฀ ฀ 148,165฀ 40.3฀(1)฀ ฀ –฀ ฀ ฀ ฀ ฀1,109,782
Other฀operating฀expenses฀฀ ฀ 87,718฀ 21.8฀(2)฀ ฀ 18,366฀ 19.8฀(2)฀ ฀ –฀ ฀ ฀ ฀ ฀ 106,084
Depreciation฀and฀amortization฀expenses฀ ฀ 142,752฀ 5.0฀ ฀ 34,069฀ 7.4฀ ฀ 28,736฀ ฀ 205,557
General฀and฀administrative฀expenses฀ ฀ 33,928฀ 1.2฀ ฀ 35,007฀ 7.6฀ ฀ 165,646฀ ฀ 234,581
Income฀from฀equity฀investees฀ ฀ 19,182฀ 0.7฀ ฀ 14,263฀ 3.1฀ ฀ -฀ ฀ 33,445
Operating฀income฀ $฀ 506,885฀ 17.9%฀ $฀ 3,835฀ 0.8%฀ $฀(194,382฀)฀ $฀ 316,338
(1) ฀฀ Shown฀as฀a฀percentage฀of฀retail฀revenues.
(2) ฀฀ Shown฀as฀a฀percentage฀of฀specialty฀revenues.
United฀States
United฀States฀total฀net฀revenues฀increased฀by฀$644.2฀million,฀
or฀ 22.8%,฀ to฀ $3.5฀ billion฀ in฀ fiscal฀ 2003฀ from฀ $2.8฀ billion฀
in฀ fiscal฀ 2002.฀ United฀ States฀ retail฀ revenues฀ increased฀
$540.5฀million,฀or฀22.3%,฀to฀$3.0฀billion,฀primarily฀due฀to฀the฀
opening฀of฀506฀new฀Company-operated฀retail฀stores฀in฀fiscal฀
2003฀and฀comparable฀store฀sales฀growth฀of฀9%.฀The฀increase฀
in฀ comparable฀ store฀ sales฀ was฀ almost฀ entirely฀ due฀ to฀ higher฀
transaction฀volume.฀Management฀believes฀increased฀customer฀
traffic฀ continues฀ to฀ be฀ driven฀ by฀ new฀ product฀ innovation,฀
continued฀popularity฀of฀core฀products,฀a฀high฀level฀of฀customer฀
satisfaction฀and฀improved฀speed฀of฀service฀through฀enhanced฀
technology,฀ training฀ and฀ execution฀ at฀ Company-operated฀
retail฀stores.
United฀States฀specialty฀revenues฀increased฀by฀$103.7฀million,฀
or฀ 25.7%,฀ to฀ $506.8฀ million฀ in฀ fiscal฀ 2003.฀ Of฀ the฀ total฀
growth,฀ expanded฀ retail฀ licensing฀ operations฀ provided฀
$50.0฀million,฀or฀48.2%,฀broader฀distribution฀and฀additional฀
accounts฀ in฀ foodservice฀ provided฀ $24.5฀ million,฀ or฀ 23.6%,฀
and฀an฀increase฀in฀the฀grocery฀and฀warehouse฀club฀business฀
provided฀$22.0฀million,฀or฀21.2%.