Starbucks 2005 Annual Report Download - page 74

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On March 11, 2005, a former employee of the Company filed a lawsuit, entitled James Falcon v. Starbucks
Corporation and Does 1 through 100, in the U.S. District Court for the Southern District of Texas claiming
that the Company violated requirements of the FLSA. Specifically, the plaintiff claims that the Company
misclassified its retail assistant store managers as exempt from the overtime provisions of the FLSA and that
the assistant managers are therefore entitled to overtime compensation for any week in which they worked
more than 40 hours during the past three years. On August 18, 2005, the plaintiff amended his complaint to
include allegations that he and other retail assistant store managers were not paid overtime compensation for
all hours worked in excess of forty (40) hours in a work week after they were re-classified as non-exempt
employees in September 2002. In both claims, Plaintiff seeks to represent himself and a putative class of all
current and former assistant store managers employed by the Company in the United States from March 11,
2002 until the present. He also seeks, on behalf of himself and the class, reimbursement for an unspecified
amount of unpaid overtime compensation, liquidated damages, injunctive relief, and attorney's fees and costs.
On September 13, 2005, the plaintiff filed a motion for conditional collective action treatment and court-
supervised notice to all putative class members under the opt-in procedures in section 16(b) of the FLSA. On
November 29, 2005, the court entered an order authorizing notice to the class of the existence of the lawsuit
and their opportunity to join as plaintiffs. The Company has a policy requiring that all non-exempt partners,
including assistant store managers, be paid for all hours worked, including any hours worked in excess of
40 per week. The Company also believes that this policy is, and at all relevant times has been, communicated
and followed consistently. Further, the Company believes that the plaintiff and other assistant store managers
were properly classified as exempt under the FLSA prior to September 2002. At this early stage of the case,
the Company cannot estimate the possible loss to the Company, if any, and believes that a loss in this case is
unlikely. No trial date has been set. The Company intends to vigorously defend the lawsuit.
The Company is party to various other legal proceedings arising in the ordinary course of its business, but it is
not currently a party to any legal proceeding that management believes would have a material adverse effect
on the consolidated financial position or results of operations of the Company.
Note 19: Segment Reporting
Segment information is prepared on the same basis that the Company's management reviews financial
information for operational decision making purposes. Starbucks segment reporting is based on two distinct,
geographically defined operating segments: United States and International.
United States
The Company's United States operations (""United States'') represent 84% of total retail revenues, 81% of
specialty revenues and 84% of total net revenues. Company-operated retail stores sell coffee and other
beverages, whole bean coffees, complementary food, coffee brewing equipment and merchandise. Activities
outside the Company-operated retail stores 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 16% of retail revenues,
19% of specialty revenues and 16% 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 the United Kingdom, Canada, Thailand, Australia, Germany, Singapore, China, Chile and
Ireland, as well as through retail store licensing operations and foodservice accounts in these and more than 20
other countries. International operations are in various early stages of development and have country-specific
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