Starbucks 2008 Annual Report Download - page 60

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date, the Company recognized $206.3 million of restructuring charges in fiscal 2008, comprised of $169.6 million
of store asset impairments, lease exit costs of $33.6 million, and severance totaling $3.1 million. The Company
expects to complete the remainder of the closures by the end of fiscal 2009, and recognize the total remaining lease
exit costs and related severance during that time.
Australia Store Closures — To address the difficulties specific to its Australia market, Starbucks closed 61
Company-operated stores in the fourth quarter of fiscal 2008. As a result of these store closures, the Company
recognized $16.9 million of restructuring charges in fiscal 2008, comprised of $1.5 million of store asset
impairments, lease exit costs of $11.6 million, and severance totaling $3.8 million. Starbucks continues to have
wholly owned operations in Australia but with a more focused presence with 23 Company-operated stores as of
September 28, 2008.
Reduction in Force within the Non-store Organization — To address its global cost structure, on July 29, 2008,
Starbucks announced the reduction of approximately 1,000 open and filled positions within its leadership structure
and its non-store organization. As a result, the Company recognized, in fiscal 2008, $10.7 million in employee
termination benefits expense as well as $33.0 million related to consolidation of support facilities, primarily at the
corporate headquarters in Seattle.
Restructuring charges by reportable segment were as follows (in millions):
US International
Unallocated
Corporate Total
Total expected costs ......................... $345.3 $25.1 $37.4 $407.8
Expenses recognized in fiscal 2008
(1)
............ 210.9 19.2 36.8 266.9
Costs incurred in fiscal 2008
(1)
................. 225.7 19.2 36.8 281.7
Costs incurred to date........................ 225.7 19.2 36.8 281.7
Restructuring charges by type and a reconciliation of the associated accrued liability were as follows (in millions):
Lease Exit
and Other
Related Costs
Asset
Impairments
Employee
Termination
Costs Total
Total expected costs ..................... $185.0 $202.5 $ 20.3 $407.8
Expenses recognized in fiscal 2008
(1)
........ 47.8 201.6 17.5 266.9
Costs incurred in fiscal 2008
(1)
............. 62.6 201.6 17.5 281.7
Costs incurred to date .................... 62.6 201.6 17.5 281.7
Accrued liability as of September 30, 2007 .... $ — $ — $ — $ —
Costs incurred in fiscal 2008, excluding non-
cash charges and credits
(2)
............... 72.4 — 17.5 89.9
Cash payments ......................... (24.4) — (12.1) (36.5)
Accrued liability as of September 28, 2008 .... $ 48.0 $ — $ 5.4 $ 53.4
(1)
The difference between expenses recognized and costs incurred in fiscal 2008 represents deferred termination
fees related to stores not yet closed, for which termination agreements had been finalized as of the end of the
fiscal year. These costs are being amortized to the date of closure.
(2)
Non-cash charges and credits for “Lease Exit and Other Related Costs” represent deferred rent balances
recognized as expense credits at the cease-use date.
54