Starbucks 2005 Annual Report Download - page 36

for the foreseeable future. Significant new joint ventures, acquisitions, share repurchases and/or other new
business opportunities may require additional outside funding.
Other than normal operating expenses, cash requirements for fiscal 2006 are expected to consist primarily of
capital expenditures for new Company-operated retail stores and the remodeling and refurbishment of existing
Company-operated retail stores, as well as for additional share repurchases, if any. For fiscal 2006,
management expects capital expenditures to be in the range of $700 million to $725 million, related to opening
approximately 850 Company-operated stores on a global basis, remodeling certain existing stores and
enhancing its production capacity and information systems.
In August 2005, the Company entered into a $500 million unsecured five-year revolving credit facility (the
""Facility'') with various banks, of which $100 million may be used for issuances of letters of credit. The
Facility is scheduled to expire in August 2010 and is available for working capital, capital expenditures and
other corporate purposes, which may include acquisitions and share repurchases. The Company may request
an increase up to an additional $500 million under the credit facility, provided there is no existing default,
which would increase total availability to $1 billion.
The interest rate for borrowings under the Facility ranges from 0.150% to 0.275% over LIBOR or an alternate
base rate, which is the greater of the bank prime rate or the Federal Funds Rate plus 0.50%. The specific
spread over LIBOR will depend upon the Company's performance under specified financial criteria. The
Facility contains provisions that require the Company to maintain compliance with certain covenants,
including the maintenance of certain financial ratios. As of October 2, 2005, the Company was in compliance
with each of these covenants. There were borrowings of $277 million outstanding under the Facility as of
October 2, 2005, with a weighted average contractual interest rate of 4.0%.
Cash provided by operating activities totaled $924 million in fiscal 2005 and was generated primarily by net
earnings of $494 million and noncash depreciation and amortization expenses of $367 million.
Cash used by investing activities totaled $221 million in fiscal 2005. Net capital additions to property, plant
and equipment used $644 million, primarily from opening 735 new Company-operated retail stores and
remodeling certain existing stores. Gross capital additions for fiscal 2005 were $668 million and were offset by
impairment provisions and foreign currency translation adjustments totaling $24 million. During fiscal 2005,
the Company increased its equity ownership in its licensed operations in Germany, Southern China and Chile
and also acquired substantially all of the assets of Ethos Brands, LLC, which together used $22 million, net of
cash acquired. Partially offsetting these uses of cash, the net activity in the Company's portfolio of available-
for-sale securities provided $452 million for the fiscal year ended October 2, 2005.
Cash used by financing activities in fiscal 2005 totaled $674 million. During fiscal 2005, the Company
repurchased 45 million shares of its common stock at an average price of $25.26 per share, using $1.1 billion.
Share repurchases, up to the limit authorized by the Board of Directors, are at the discretion of management
and depend on market conditions, capital requirements and other factors. The total remaining amount of
shares authorized for repurchase as of October 2, 2005 was 22 million. Partially offsetting cash used for share
repurchases were borrowings of $277 million under the Facility and $164 million of proceeds from the exercise
of employee stock options and the sale of the Company's common stock from employee stock purchase plans.
As options granted are exercised, the Company will continue to receive proceeds (financing activity) and a tax
deduction (operating activity); however, the amounts and the timing cannot be predicted.
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