Starbucks 2007 Annual Report Download - page 26

These cost pressures were offset in part by leveraging general and administrative expenses, store operating
expenses, and other operating expenses as a percentage of total net revenues.
Net interest and other income was $2 million for the fiscal year ended 2007, compared to $12 million for fiscal 2006.
The decrease was primarily due to increased interest expense resulting from a higher level of borrowings
outstanding, which include the $550 million of senior notes issued in August 2007, offset in part by a higher
amount of income recognized on unredeemed stored value card and gift certificate balances in fiscal 2007 compared
to fiscal 2006.
Income taxes for the fiscal year ended 2007 resulted in an effective tax rate of 36.3%, compared to 35.8% for fiscal
2006. The effective tax rate for fiscal 2008 is expected to be approximately in line with fiscal 2007, with quarterly
variations.
Net earnings for the fiscal year ended 2007, increased 19% to $673 million from $564 million for fiscal 2006.
Diluted earnings per share increased to $0.87 for the fiscal year ended 2007, compared to $0.71 per share for fiscal
2006. Excluding the cumulative effect of adopting FIN 47 in fourth quarter 2006, earnings before cumulative effect
of change in accounting principle grew 16% and diluted earnings per share increased 19%.
Operating Segments
Segment information is prepared on the same basis that the Company’s management reviews financial information
for operational decision-making purposes. Starbucks has three reportable operating segments: United States,
International and CPG. “Unallocated Corporate” includes expenses pertaining to corporate administrative functions
that support the operating segments but are not specifically attributable to or managed by any segment and are not
included in the reported financial results of the operating segments. Operating income represents earnings before
“Net interest and other income” and “Income taxes.” The following tables summarize the Company’s results of
operations by segment for fiscal 2007 and 2006 (in thousands):
United States
Sept 30,
2007
Oct 1,
2006
%
Change
Sept 30,
2007
Oct 1,
2006
52 Weeks Ended 52 Weeks Ended
As a % of U.S. total
net revenues
Net revenues:
Company-operated retail .................... $6,560,864 $5,495,240 19.4% 89.3% 88.9%
Specialty:
Licensing ............................. 439,161 369,155 19.0 6.0 6.0
Foodservice and other .................... 348,968 314,162 11.1 4.7 5.1
Total specialty ........................ 788,129 683,317 15.3 10.7 11.1
Total net revenues ......................... 7,348,993 6,178,557 18.9 100.0 100.0
Cost of sales including occupancy costs .......... 2,956,231 2,374,485 24.5 40.2 38.4
Store operating expenses(1) ................... 2,684,196 2,280,044 17.7 36.5 36.9
Other operating expenses(2) ................... 204,672 190,624 7.4 2.8 3.1
Depreciation and amortization expenses .......... 348,199 284,625 22.3 4.7 4.6
General and administrative expenses ............. 85,948 93,754 (8.3) 1.2 1.5
Total operating expenses ................ 6,279,246 5,223,532 20.2 85.4 84.5
Income from equity investees .................. 768 151 nm — —
Operating income .................... $1,070,515 $ 955,176 12.1% 14.6% 15.5%
(1) As a percentage of related Company-operated retail revenues, store operating expenses were 40.9% and 41.5%
for the fiscal years ended September 30, 2007 and October 1, 2006, respectively.
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