Starbucks 2005 Annual Report Download - page 37

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The following table summarizes the Company's contractual obligations and borrowings as of October 2, 2005,
and the timing and effect that such commitments are expected to have on the Company's liquidity and capital
requirements in future periods (in thousands):
Payments Due by Period
Less Than More Than
Contractual Obligations Total 1 Year 1-3 Years 3-5 Years 5 Years
Debt obligations(1) ÏÏÏÏÏÏÏÏÏÏÏÏ $ 280,618 $277,748 $ 1,537 $ 1,127 $ 206
Operating lease obligations(2) ÏÏÏ 3,097,493 423,564 804,055 690,838 1,179,036
Purchase obligations ÏÏÏÏÏÏÏÏÏÏ 384,588 279,076 82,887 20,449 2,176
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,762,699 $980,388 $888,479 $712,414 $1,181,418
(1) Debt amounts include principal maturities only. The amount due in less than one year includes
$277 million of short term borrowings under the Facility.
(2) Amounts include the direct lease obligations, excluding any taxes, insurance and other related expenses.
Starbucks expects to fund these commitments primarily with operating cash flows generated in the normal
course of business.
Off-Balance Sheet Arrangement
The Company has unconditionally guaranteed the repayment of certain Japanese yen-denominated bank loans
and related interest and fees of an unconsolidated equity investee, Starbucks Coffee Japan, Ltd. (""Starbucks
Japan''). The guarantees continue until the loans, including accrued interest and fees, have been paid in full,
with the final loan amount due in 2014. The maximum amount is limited to the sum of unpaid principal and
interest amounts, as well as other related expenses. These amounts will vary based on fluctuations in the yen
foreign exchange rate. As of October 2, 2005, the maximum amount of the guarantees was approximately
$9.0 million. Since there has been no modification of these loan guarantees subsequent to the Company's
adoption of Financial Accounting Standards Board (""FASB'') Interpretation No. 45, ""Guarantor's Account-
ing and Disclosure Requirements for Guarantees, Including Indebtedness of Others,'' Starbucks has applied
the disclosure provisions only and has not recorded the guarantees on its balance sheet.
Product Warranties
Coffee brewing and espresso equipment sold to customers through Company-operated and licensed retail
stores, as well as equipment sold to the Company's licensees for use in retail licensing operations, are under
warranty for defects in materials and workmanship for a period ranging from 12 to 24 months. The Company
establishes an accrual for estimated warranty costs at the time of sale, based on historical experience. The
following table summarizes the activity related to product warranty reserves during fiscal 2005 and 2004 (in
thousands):
Fiscal Year Ended Oct 2, 2005 Oct 3, 2004
Balance at beginning of fiscal yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3,091 $ 2,227
Provision for warranties issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,494 5,093
Warranty claims ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,827) (4,229)
Balance at end of fiscal yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,758 $ 3,091
35