Starbucks 2006 Annual Report Download - page 36

Cash provided by operating activities totaled $1.1 billion for fiscal 2006. Net earnings provided $564 million and
noncash depreciation and amortization expenses further increased cash provided by operating activities by $413 million.
In addition, an increase in accrued taxes payable due to the timing of payments provided $133 million.
Cash used by investing activities for fiscal 2006 totaled $841 million. Net capital additions to property, plant and
equipment used $771 million, primarily from opening 1,040 new Company-operated retail stores and remodeling
certain existing stores. During fiscal 2006, the Company used $92 million for acquisitions, net of cash acquired. In
addition, the net activity in the Company’s portfolio of available-for-sale securities provided $61 million.
Cash used by financing activities for fiscal 2006 totaled $155 million. Cash used to repurchase shares of the Company’s
common stock totaled $854 million. This amount includes the effect of the net change in unsettled trades from
October 2, 2005. Share repurchases, up to the limit authorized by the Board of Directors, are at the discretion of
management and depend on market conditions, capital requirements and other factors. Approximately 21.5 million
shares remained available for repurchase as of October 1, 2006.
The Company had net borrowings under its credit facility of $423 million during fiscal 2006, which consisted of
additional gross borrowings of $1.4 billion offset by gross principal repayments of $993 million. Management increased
the Company’s borrowing capacity under its credit facility during the fiscal fourth quarter of 2006, from $500 million to
$1.0 billion, as provided in the original credit facility. As of October 1, 2006, a total of $700 million was outstanding
under the facility.
Partially offsetting cash used for share repurchases were proceeds of $159 million from the exercise of employee stock
options and the sale of the Company’s common stock from employee stock purchase plans. As options granted are
exercised, the Company will continue to receive proceeds and a tax deduction; however, the amounts and the timing
cannot be predicted.
The following table summarizes the Company’s contractual obligations and borrowings as of October 1, 2006, 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):
CONTRACTUAL OBLIGATIONS Total
Less than
1 Year
1–3
Years
3–5
Years
More than
5 Years
PAYMENTS DUE BY PERIOD
Debt obligations
(1)
$ 740,480 $ 738,405 $ 1,660 $ 415 $ —
Operating lease obligations
(2)
3,892,938 531,634 1,013,312 861,271 1,486,721
Purchase obligations
(3)
619,862 440,720 153,044 21,761 4,337
Total $5,253,280 $1,710,759 $1,168,016 $883,447 $1,491,058
(1) Debt amounts include principal maturities and expected interest payments. Rates utilized to determine interest payments for
variable rate debt are based on an estimate of future interest rates. The amount due in less than one year includes $700 million of
short term borrowings under the facility.
(2) Amounts include the direct lease obligations, excluding any taxes, insurance and other related expenses.
(3) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on Starbucks and
that specify all significant terms. Purchase obligations relate primarily to green coffee and other commodities.
Starbucks expects to fund these commitments primarily with operating cash flows generated in the normal course of
business, as well as ongoing borrowings under the facility.
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
32 STARBUCKS CORPORATION, FORM 10-K