Starbucks 2006 Annual Report Download - page 63

Comprehensive income, net of related tax effects, is as follows (in thousands):
FISCAL YEAR ENDED Oct 1, 2006 Oct 2, 2005 Oct 3, 2004
Net earnings $564,259 $494,370 $388,880
Unrealized holding gains/(losses) on available-for-sale securities, net of tax
benefit/(provision) of ($1,298), $889 and $618 in 2006, 2005 and 2004,
respectively 2,164 (1,482) (1,005)
Unrealized holding losses on cash flow hedges, net of tax benefit of $1,646, $2,268 and
$2,801 in 2006, 2005 and 2004, respectively (2,803) (3,861) (4,769)
Unrealized holding gains/(losses) on net investment hedges, net of tax
benefit/(provision) of ($21), ($609) and $328 in 2006, 2005 and 2004, respectively 35 1,037 (558)
Reclassification adjustment for net (gains)/losses realized in net earnings for
available-for-sale securities, net of tax provision/(benefit) of $1,060, ($812) and
($127) in 2006, 2005 and 2004, respectively (1,767) 1,354 207
Reclassification adjustment for net losses realized in net earnings for cash flow hedges,
net of tax benefit of $2,430, $1,939 and $705 in 2006, 2005 and 2004, respectively 4,138 3,302 1,200
Net unrealized gain/(loss) 1,767 350 (4,925)
Translation adjustment 14,592 (8,677) 19,892
Total comprehensive income $580,618 $486,043 $403,847
The favorable translation adjustment change during fiscal 2006 of $14.6 million was primarily due to the weakening of
the U.S. dollar against the British pound sterling, euro and Canadian dollar. The unfavorable translation adjustment
change during fiscal 2005 of $8.7 million was primarily due to the strengthening of the U.S. dollar against the euro,
British pound sterling and Japanese yen. The favorable translation adjustment change during fiscal 2004 of $19.9 million
was primarily due to the weakening of the U.S. dollar against several currencies, such as the British pound sterling, euro,
Australian dollar and Canadian dollar.
The components of accumulated other comprehensive income, net of tax, were as follows (in thousands):
FISCAL YEAR ENDED Oct 1, 2006 Oct 2, 2005
Net unrealized holding losses on available-for-sale securities $ (254) $ (651)
Net unrealized holding losses on hedging instruments (6,416) (7,786)
Translation adjustment 43,943 29,351
Accumulated other comprehensive income $37,273 $20,914
As of October 1, 2006, the translation adjustment of $43.9 million was net of tax provisions of $7.3 million. As of
October 2, 2005, the translation adjustment of $29.4 million was net of tax provisions of $5.5 million.
Note 14: Employee Stock and Benefit Plans
Stock Option Plans
Stock options to purchase the Company’s common stock are granted at prices at or above the fair market value on the date
of grant. Options generally become exercisable in three or four equal installments beginning a year from the date of grant
and generally expire 10 years from the date of grant. Options granted to non-employee directors generally vest over one
year. Nearly all outstanding stock options are non-qualified stock options.
The fair value of each stock option granted is estimated on the date of grant using the BSM option valuation model. The
assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market
conditions and the Company’s experience. Options granted are valued using the multiple option valuation approach, and
the resulting expense is recognized using the graded, or accelerated, attribution method, consistent with the multiple
option valuation approach. Compensation expense is recognized only for those options expected to vest, with forfeitures
STARBUCKS CORPORATION, FORM 10-K 59