Starbucks 2005 Annual Report Download - page 62

develops and distributes superpremium ice creams. The remaining entities, including Coffee Partners Hawaii,
which is a general partnership, operate licensed Starbucks retail stores.
During fiscal 2004, Starbucks acquired an equity interest in its licensed operations of Malaysia. During fiscal
2003, Starbucks increased its ownership of its licensed operations in Austria, Shanghai, Spain, Switzerland
and Taiwan. The carrying amount of these investments was $24.3 million more than the underlying equity in
net assets due to acquired goodwill, which is not subject to amortization in accordance with SFAS No. 142
""Goodwill and Other Intangible Assets.'' The goodwill is evaluated for impairment in accordance with
APB No. 18. No impairment was recorded during fiscal years 2005, 2004 or 2003.
The Company's share of income and losses is included in ""Income from equity investees'' on the consolidated
statements of earnings. Also included is the Company's proportionate share of gross margin resulting from
coffee and other product sales to, and royalty and license fee revenues generated from, equity investees.
Revenues generated from these related parties, net of eliminations, were $86.1 million, $80.7 million and
$71.9 million in fiscal years 2005, 2004 and 2003, respectively. Related costs of sales, net of eliminations, were
$43.3 million, $41.2 million and $37.5 million in fiscal years 2005, 2004 and 2003, respectively. As of
October 2, 2005 and October 3, 2004, there were $16.7 million and $15.5 million of accounts receivable,
respectively, on the consolidated balance sheets from equity investees related to product sales and store license
fees.
As of October 2, 2005, the aggregate market value of the Company's investment in Starbucks Coffee Japan,
Ltd., was approximately $174.8 million based on its available quoted market price.
Cost Method
The Company has equity interests in entities to develop Starbucks licensed retail stores in Hong Kong, Puerto
Rico, Mexico, Cyprus and Greece. As of October 2, 2005, and October 3, 2004, management determined that
the estimated fair values of each cost method investment exceeded the related carrying values (no unrealized
fair value losses). There were no realized losses recorded for other than temporary impairments during 2005 or
2004. During fiscal 2003, $2.0 million in other than temporary impairment was recorded for the Company's
equity interest in its licensed retail stores in Israel, which were fully closed by the end of fiscal 2003.
Starbucks has the ability to acquire additional interests in some of its cost method investees at certain
intervals. Depending on the Company's total percentage of ownership interest and its ability to exercise
significant influence over financial and operating policies, additional investments may require the retroactive
application of the equity method of accounting.
Other Investments
Starbucks has investments in privately held equity securities that are recorded at their estimated fair values.
As of October 2, 2005, and October 3, 2004, management determined that the estimated fair values of each
investment exceeded the related carrying values (no unrealized fair value losses). There were no realized
losses generated from other than temporary impairment during 2005, 2004 or 2003.
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