Starbucks 2006 Annual Report Download - page 32

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Operating income increased 29% to $781 million in the 52-week period of fiscal 2005, from $606 million in the
53-week period of fiscal 2004. The operating margin increased to 12.3% of total net revenues in the 52-week period of
fiscal 2005, compared to 11.5% in the 53-week period of fiscal 2004, primarily due to strong revenue growth.
Net interest and other income, which primarily consists of interest income, increased to $16 million in the 52-week
period of fiscal 2005, from $14 million in the 53-week period of fiscal 2004. The increase was primarily due to higher
interest income earned due to higher interest rates in fiscal 2005 compared to fiscal 2004 and to foreign exchange gains in
fiscal 2005 compared to losses in fiscal 2004. Partially offsetting these increases were higher realized losses on sales of
available-for-sale securities. Starbucks funded the majority of its share repurchases during fiscal 2005 through sales of its
available-for-sale securities.
Income taxes for the 52 weeks ended October 2, 2005, resulted in an effective tax rate of 37.9%, compared to 37.3% in
fiscal 2004. The effective tax rate differs from the statutory rate of 35% due to a variety of factors, including state income
taxes, the impact from foreign operations, tax credits and other provision adjustments.
OPERATING SEGMENTS
Segment information is prepared on the same basis that the Company’s management reviews financial information for
operational decision-making purposes. The following tables summarize the Company’s results of operations by segment
for fiscal 2005 and 2004 (in thousands):
UNITED STATES
As a % of U.S.
Total Net Revenues
Oct 2, 2005 Oct 3, 2004 % Change Oct 2, 2005 Oct 3, 2004
52 Weeks
Ended
53 Weeks
Ended
52 Weeks
Ended
53 Weeks
Ended
Net revenues:
Company-operated retail $4,539,455 $3,800,367 19.4% 89.1% 89.1%
Specialty:
Licensing 277,987 211,269 31.6 5.4 5.0
Foodservice and other 280,073 253,502 10.5 5.5 5.9
Total specialty 558,060 464,771 20.1 10.9 10.9
Total net revenues 5,097,515 4,265,138 19.5 100.0 100.0
Cost of sales including occupancy costs 1,944,356 1,642,745 38.1 38.5
Store operating expenses 1,848,836 1,546,871 40.7
(1)
40.7
(1)
Other operating expenses 150,712 122,335 27.0
(2)
26.3
(2)
Depreciation and amortization expenses 250,339 209,586 4.9 4.9
General and administrative expenses 85,362 80,221 1.7 1.9
Income from equity investees 592 564 — —
Operating income $ 818,502 $ 663,944 23.3% 16.1% 15.6%
(1) Shown as a percentage of related Company-operated retail revenues.
(2) Shown as a percentage of related total specialty revenues.
28 STARBUCKS CORPORATION, FORM 10-K