Starbucks 2007 Annual Report Download - page 59

United States
The $1.7 million increase in goodwill was primarily due to a contingent payment for the Company’s fiscal 2006
acquisition of its licensed operations in Hawaii.
International
During fiscal 2007, the International segment completed a majority stake acquisition of its licensed Beijing
operations (See Note 2) and acquired an additional equity interest in its South China operations, which increased
goodwill by $46.2 million and $5.1 million, respectively. The increase related to “Other” was due to foreign
currency fluctuations.
Note 9: Debt
Revolving Credit Facility and Commercial Paper Program
The Company has a $1 billion unsecured credit facility (the “facility”) with various banks, of which $100 million
may be used for issuances of letters of credit. The facility is available for working capital, capital expenditures and
other corporate purposes, which may include acquisitions and share repurchases. The facility is currently set to
terminate in August 2011. The interest rate for borrowings under the facility ranges from 0.11% to 0.27% over
LIBOR or an alternate base rate, which is the greater of the bank prime rate or the Federal Funds Rate plus 0.50%.
The specific spread over LIBOR will depend upon the Company’s long-term credit ratings assigned by Moody’s
and Standard and Poor’s rating agencies and the Company’s coverage ratio. The facility contains provisions
requiring the Company to maintain compliance with certain covenants, including a minimum fixed charge coverage
ratio which measures the Company’s ability to cover financing expenses. As of September 30, 2007 and October 1,
2006, the Company was in compliance with each of these covenants.
As of September 30, 2007, the Company had no borrowings under this credit facility. As of October 1, 2006, the
Company had $700 million outstanding under the facility with a weighted average interest rate of 5.5%.
In March 2007, the Company established a commercial paper program (the “program”). Under the program the
Company may issue unsecured commercial paper notes, up to a maximum aggregate amount outstanding at any
time of $1 billion, with individual maturities that may vary, but not exceed 397 days from the date of issue. The
program is backstopped by the Company’s revolving credit facility, and the combined borrowing limit is $1 billion
for the program and the facility. The Company may issue commercial paper from time to time, and the proceeds of
the commercial paper financing will be used for working capital, capital expenditures and other corporate purposes,
which may include acquisitions and share repurchases.
As of September 30, 2007, the Company had $710 million in borrowings outstanding under the program with a
weighted average interest rate of 5.4%.
As of September 30, 2007, the Company also had $12.9 million in letters of credit outstanding under the revolving
credit facility, leaving a total of $275 million in remaining borrowing capacity under the combined revolving credit
facility and commercial paper program. As of October 1, 2006, a letter of credit of $11.9 million was outstanding.
Long-term Debt
In August 2007, the Company issued $550 million of 6.25% Senior Notes (the “notes”) due in August 2017, in an
underwritten registered public offering. Interest is payable semi-annually on February 15 and August 15 of each
year, commencing February 15, 2008. The notes require the Company to maintain compliance with certain
covenants, which limit future liens and sale and leaseback transactions on certain material properties. As of
September 30, 2007, the Company was in compliance with each of these covenants. The notes were priced at a
discount, resulting in proceeds to the Company of $549 million, before expenses.
In 1999, Starbucks purchased the land and building comprising its York County, Pennsylvania roasting plant and
distribution facility and assumed certain related loans from the York County Industrial Development Corporation.
As of September 30, 2007, $2.0 million remained outstanding on these loans. The remaining maturities of these
loans range from three to four years, with interest rates from 0.0% to 2.0%.
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