Starbucks 2006 Annual Report Download - page 35

Global Consumer Products Group
CPG total net revenues increased 6% to $249 million for the fiscal year ended 2005, compared to $235 million for the
53-week period of fiscal 2004, due to the national rollout of the Starbucks
TM
Coffee Liqueur during the fiscal second
quarter of 2005 and growth in the licensed grocery and warehouse club business.
CPG operating income increased by 26% to $131 million for the fiscal year ended 2005, compared to $104 million for
the 53-week period of fiscal 2004. Operating margin increased to 52.7% of related revenues from 44.4% in fiscal 2004,
primarily due to lower other operating expenses from reduced expenditures within the grocery and warehouse club
channels and higher equity investee income from volume-driven operating results for The North American Coffee
Partnership, which produces ready-to-drink beverages which include, among others, bottled Frappuccino»coffee drinks
and Starbucks DoubleShot»espresso drinks.
Unallocated Corporate
Unallocated corporate expenses increased to $252 million for the fiscal year ended 2005, from $208 million in the
53-week period of fiscal 2004, primarily due to increased charitable commitments as well as higher payroll-related
expenditures. Total unallocated corporate expenses as a percentage of total net revenues remained unchanged at 3.9% for
the fiscal year ended 2005 and the 53-week period of fiscal 2004.
LIQUIDITY AND CAPITAL RESOURCES
Components of the Company’s most liquid assets are as follows (in thousands):
FISCAL YEAR ENDED Oct 1, 2006 Oct 2, 2005
Cash and cash equivalents $312,606 $173,809
Short-term investments — available-for-sale securities 87,542 95,379
Short-term investments — trading securities 53,496 37,848
Long-term investments — available-for-sale securities 5,811 60,475
Total cash, cash equivalents and liquid investments $459,455 $367,511
The Company manages its cash, cash equivalents and liquid investments in order to internally fund operating needs and
pay down short-term borrowings. The $92 million increase in total cash and cash equivalents and liquid investments
from October 2, 2005 to October 1, 2006, was primarily due to strong operating cash flows.
The Company intends to use its cash and liquid investments, including any borrowings under its $1 billion revolving
credit facility, to invest in its core businesses and other new business opportunities related to its core businesses. The
Company may use its available cash resources to make proportionate capital contributions to its equity method and cost
method investees, as well as purchase larger ownership interests in selected equity method investees and licensed
operations, particularly in international markets. Depending on market conditions, Starbucks may repurchase shares of
its common stock under its authorized share repurchase program. Management believes that strong cash flow generated
from operations, existing cash and liquid investments, as well as borrowing capacity under the revolving credit facility,
should be sufficient to finance capital requirements for its core businesses 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 2007 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 potential increased investments in International licensees and for additional share
repurchases, if any. Management expects capital expenditures to be in the range of $950 million to $1.0 billion in fiscal
2007, primarily driven by new store development and existing store renovations.
STARBUCKS CORPORATION, FORM 10-K 31