Starbucks 2004 Annual Report Download

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NET REVENUES (in billions) & NET REVENUE GROWTH PERCENTAGES
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$0.3
$0.5
$0.7 $1.0
$1.3
$1.7
$2.2
$2.6
$3.3
$4.1
$5.3
63% 50% 40%
34%
29% 29%
22%
24%
24%
30%
NET EARNINGS (in millions)
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$10.2 $26.1 $41.7 $55.2 $68.3
$101.6 $94.5
$180.3
$212.7
$268.3
$391.8
STORES OPEN AT YEAR END
(Company-operated and licensed stores)
COMPARABLE STORE SALES
(Company-operated stores open 13 months or longer)
The end of fiscal 2004 marked 153 consecutive months of positive
comparable store sales growth.
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
425 677 1,015 1,412 1,886 2,498
3,501
4,709
5,886
7,225
8,569
SHAREHOLDERS’ EQUITY
(in billions)
International
United States
Starbucks Corporation
FINANCIAL HIGHLIGHTS
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
10%
8%
6%
5%
9%
6%
5%
5%
7%
9%9%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$0.1 $0.3 $0.5 $0.5
$0.8 $1.0 $1.1
$1.4
$1.7
$2.5
$2.1
FISCAL 2004 ACCOMPLISHMENTS
• Attained record net revenues and net earnings
• Marked first full year of double-digit comparable
store sales increase in more than a decade
• Opened a record 1,344 net locations worldwide
• Posted full year profitability for Starbucks
International Operations, both including and
excluding Canada
• Opened first store in France
• Expanded International infrastructure with
the opening of a second distribution center for
the Asia Pacific region, located in Hong Kong
• Continued product innovation with new
Frappuccino® beverages, reduced fat pastries
and high-quality seasonal offerings
• Reached approximately $1 billion in total
life-to-date activations and reloads on
Starbucks Cards
• Opened our Farmer Support Center in Costa
Rica to support existing and potential Starbucks
Coffee suppliers and their communities
• Launched industry-leading Coffee and Farmer
Equity (C.A.F.E.) Practices, strengthening the
requirements for third party verification and
economic transparency, and establishing more
specific social and environmental indicators
• Co-produced Ray Charles’ Genius Loves
Company, which became a multiplatinum
album with nearly 30 percent of total album
sales from Starbucks stores
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year

Table of contents

  • Page 1
    ...billion in total life-to-date activations and reloads on Starbucks Cards 425 677 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Fiscal Year COMPARABLE STORE SALES (Company-operated stores open 13 months or longer) The end of fiscal 2004 marked 153 consecutive months of positive...

  • Page 2
    ... retail store data for the periods indicated: Net stores opened during the fiscal year ended Oct 3, 2004 Sept 28, 2003 (53 Wks) (52 Wks) Stores open as of Oct 3, 2004 Sept 28, 2003 United States International: United Kingdom Canada Thailand Australia Singapore Total International Total Company...

  • Page 3
    ... managers and employees. During fiscal 2004, Starbucks opened 417 licensed retail stores in the United States. As of October 3, 2004, the Company had 1,839 licensed stores in the United States. Product sales to and royalty and license fees from these stores accounted for 24% of specialty revenues...

  • Page 4
    ..., the website contains information about the Company's coffee products, brewing equipment and store locations. In fiscal 2004, the Company entered into a strategic marketing alliance with XM Satellite Radio related to the debut of the 24-hour Starbucks Hear Music™ channel 75. This channel is...

  • Page 5
    ... per share BALANCE SHEET DATA Working capital Total assets Long-term debt (including current portion) Shareholders' equity STORE OPERATING DATA Percentage change in comparable store sales (5) United States International Consolidated Stores opened during the year: (6) (7) United States Company...

  • Page 6
    ... the level of customer service, maintaining a steady stream of product innovation and improving the speed of service through training, technology and process improvement. For U.S. Company-operated stores opened in fiscal 2004, first year sales volumes are currently estimated at greater than...

  • Page 7
    ... foodservice accounts, which benefited from the July 2003 acquisition of Seattle Coffee Company. Cost of sales and related occupancy costs increased to 41.5% of total net revenues in fiscal 2004, from 41.4% in fiscal 2003. The increase was primarily due to higher dairy and green coffee commodity...

  • Page 8
    ... United States International Consolidated Net revenues: Company-operated retail Specialty: Licensing Foodservice and other Total specialty Total net revenues Cost of sales and related occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General...

  • Page 9
    ...17% of total specialty revenues and 15% of total net revenues. International sells coffees and other beverages, whole bean coffees, complementary food, coffee brewing equipment and merchandise through Company-operated retail stores in Canada, the United Kingdom, Thailand, Australia and Singapore, as...

  • Page 10
    ... 2002 period. The increase was due to higher product sales and royalty revenues from opening 599 new licensed retail stores during the previous 12 months and growth in the licensed grocery and warehouse club businesses. Foodservice and other revenues increased 17.5% to $216.3 million for the fiscal...

  • Page 11
    ... United States International Consolidated Net revenues: Company-operated retail Specialty: Licensing Foodservice and other Total specialty Total net revenues Cost of sales and related occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General...

  • Page 12
    ... business opportunities related to its core businesses. The Company may use its available cash resources to make proportionate capital contributions to its equity method and cost method investees. Depending on market conditions, Starbucks may acquire additional shares of its common stock. Management...

  • Page 13
    ...ended October 3, 2004. FINANCIAL RISK MANAGEMENT The Company is exposed to market risk related to foreign currency exchange rates, equity security prices and changes in interest rates. Foreign Currency Exchange Risk The majority of the Company's revenue, expense and capital purchasing activities is...

  • Page 14
    ... consolidated statements of earnings. Interest Rate Risk The Company's diversified available-for-sale portfolios consist mainly of fixed income instruments. The primary objectives of these investments are to preserve capital and liquidity. Availablefor-sale securities are investment grade...

  • Page 15
    ... Oct 3, 2004 Sept 28, 2003 Sept 29, 2002 Net revenues: Company-operated retail Specialty: Licensing Foodservice and other Total specialty Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and...

  • Page 16
    ... - trading securities Accounts receivable, net of allowances of $2,231 and $4,809, respectively Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments - available-for-sale securities Equity and other investments Property, plant and...

  • Page 17
    ..., net of cash acquired Net additions to equity, other investments and other assets Distributions from equity investees Net additions to property, plant and equipment Net cash used by investing activities FINANCING ACTIVITIES Proceeds from issuance of common stock Principal payments on long-term debt...

  • Page 18
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY In thousands, except share data Common Stock Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income/(Loss) Total Balance, September 30, 2001 Net earnings Unrealized holding losses, net Translation adjustment...

  • Page 19
    ... food items, coffee-related accessories and equipment, a selection of premium teas and a line of compact discs, primarily through its Company-operated retail stores. Starbucks sells coffee and tea products through other channels and, through certain of its equity investees, Starbucks also produces...

  • Page 20
    ... their estimated useful lives or the related lease life, generally 10 years. The portion of depreciation expense related to production and distribution facilities is included in "Cost of sales and related occupancy costs" on the accompanying consolidated statements of earnings. The costs of repairs...

  • Page 21
    ... value method prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, because the grant price equals the market price on the date of grant, no compensation expense is recognized by the Company for stock...

  • Page 22
    ... Company did not have any equity ownership interests in these entities. The results of operations for Singapore are included in the accompanying consolidated financial statements from the date of acquisition. For its investment in Malaysia, management applied the equity method of accounting from...

  • Page 23
    ... Method The Company's equity investees and ownership interests are as follows: Fiscal year ended Oct 3, 2004 Sept 28, 2003 The North American Coffee Partnership Starbucks Ice Cream Partnership Starbucks Coffee Korea Co., Ltd. Starbucks Coffee Austria GmbH Starbucks Coffee Switzerland AG Starbucks...

  • Page 24
    ... market price. Cost Method The Company has equity interests in entities to develop Starbucks licensed retail stores in certain Chinese markets and in Puerto Rico, Germany, Mexico, Chile, Cyprus and Greece. As of October 3, 2004, management determined that the estimated fair value of each cost method...

  • Page 25
    ... net investment hedges. Comprehensive income, net of related tax effects, is as follows (in thousands): During fiscal 2004, the Starbucks Board of Directors authorized an additional program for the repurchase of up to 9.0 million shares of the Company's common stock and also authorized management...

  • Page 26
    ...of the Company's common stock. The employee's purchase price is 85% of the fair value of the stock on the first business day of a three-year offering period. No compensation expense was recorded in connection with the plan during fiscal years 2004, 2003 or 2002. The total number of shares issuable...

  • Page 27
    ... Accrued occupancy costs Accrued compensation and related costs Other accrued expenses Foreign tax credits Other Total Valuation allowance Total deferred tax asset, net of valuation allowance Deferred tax liabilities: Property, plant and equipment Other Total Net deferred tax asset $ 10,766 4,223...

  • Page 28
    ... Event In November 2004, Starbucks increased its equity ownership from 18% to 100% for its licensed operations in Germany. For these operations, management determined that a change in accounting method, from the cost method to the consolidation method, will be required. This accounting change will...

  • Page 29
    ... presents information by operating segment (in thousands): Fiscal year ended United States (1) International (1) Unallocated Corporate (2) Total Fiscal 2004: Total net revenues Earnings/(loss) before income taxes Depreciation and amortization Income from equity investees Equity method investments...

  • Page 30
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Starbucks Corporation Seattle, Washington We have audited the accompanying consolidated balance sheets of Starbucks Corporation and subsidiaries (the "Company") as of October 3, 2004, and September 28, 2003, and the related...

  • Page 31
    ... customers, suppliers, shareholders, community members and others - while distinguishing Starbucks as a leader within the coffee industry. Providing open communication and transparency helps the Company be accountable to its stakeholders. To support this goal, Starbucks publishes a CSR Annual Report...

  • Page 32
    ...฀Behar Starbucks฀Corporation director executive฀vice฀president, general฀counsel฀and฀secretary Katharine฀Lindemann senior฀vice฀president, Store฀Operations฀Services Michael฀Casey William฀W.฀(Bill)฀Bradley Allen฀&฀Company฀LLC managing฀director executive...

  • Page 33
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