Starbucks 2008 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2008 Starbucks annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 95

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95

• final payments are made according to the contractual maturities of the debt issues which range from 22 to
37 years.
The Company intends to hold the ARS until it can recover the full principal amount and has the ability to do so based
on other sources of liquidity. The Company expects such recoveries to occur prior to the contractual maturities. In
July 2008, one of the Company’s ARS was called at its par value of $4.7 million.
The Company recorded $6.0 million of unrealized losses on ARS in fiscal 2008, determined to be temporary, which
is included in accumulated other comprehensive income as a reduction in shareholders’ equity. The Company’s
ARS are collateralized by portfolios of student loans, substantially all of which are guaranteed by the United States
Department of Education. As of September 28, 2008, approximately $4.4 million in ARS was rated AA/Aa3 by
Standard & Poor’s and Moody’s, respectively. All of the remaining securities were rated triple-A by two or more of
the following major rating agencies: Moody’s, Standard & Poor’s and Fitch Ratings.
The following table presents the length of time available-for-sale securities were in continuous unrealized loss
positions but were not deemed to be other-than-temporarily impaired (in millions):
Consecutive Monthly Unrealized Losses
Gross
Unrealized
Holding
Losses
Fair
Value
Gross
Unrealized
Holding
Losses
Fair
Value
Less Than
12 Months
Greater Than
or Equal to
12 months
September 28, 2008
State and local government obligations ............... $(6.0) $59.8 $— $ —
Corporate debt securities .......................... (0.5) 11.6 — —
Total ......................................... $(6.5) $71.4 $— $ —
September 30, 2007
State and local government obligations ............... $ — $ — $— $5.8
Total ......................................... $ — $ — $— $5.8
Gross unrealized holding losses on the state and local obligations consist of unrealized losses on the Company’s
twelve ARS. Gross unrealized holding losses on the corporate debt pertain to five fixed income securities and were
primarily caused by interest rate increases subsequent to the date of purchase. The contractual terms of the non-ARS
fixed income securities do not permit the issuer to settle at a price less than the par value of the investment, which is
the equivalent of the amount due at maturity. As Starbucks has the ability and intent to hold its available-for-sale
securities until a recovery of fair value, which may be at maturity, the Company does not consider these securities to
be other-than-temporarily impaired. Long-term corporate debt securities generally mature in less than five years.
There were no realized losses recorded for other than temporary impairments during fiscal years 2008, 2007 or
2006.
Trading securities are comprised mainly of marketable equity mutual funds that approximate a portion of the
Company’s liability under the Management Deferred Compensation Plan (“MDCP”), a defined contribution plan.
The corresponding deferred compensation liability of $68.0 million in fiscal 2008 and $86.4 million in fiscal 2007 is
included in “Accrued compensation and related costs” on the consolidated balance sheets. In fiscal years 2008 and
56