Starbucks 2009 Annual Report Download - page 68

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StarCon, LLC was a joint venture formed in March 2007 with Concord Music Group, Inc. (“Concord”). The
Company sold its 50% ownership interest to Concord in early fiscal 2009. The International entities operate
licensed Starbucks retail stores. See Note 19 for a discussion of a transaction affecting the Company’s ownership
related to its markets in France, Spain and Portugal. The Company also has licensed the rights to produce and
distribute Starbucks branded products to two partnerships in which the Company holds 50% equity interests. The
North American Coffee Partnership with the Pepsi-Cola Company develops and distributes bottled Frappuccino»
beverages and Starbucks DoubleShot»espresso drinks. Starbucks Ice Cream Partnership developed and distributed
super premium ice creams, and was in the process of being dissolved at the end of fiscal 2009. It was replaced by a
licensing agreement with Unilever for the manufacturing, marketing and distribution of Starbucks super-premium
ice cream products in the US.
Prior to fiscal 2005, Starbucks acquired equity interest in its licensed operations of Malaysia, Austria, Shanghai,
Spain, Switzerland and Taiwan. The carrying amount of these investments was $24.3 million more than the
underlying equity in net assets due to acquired goodwill, which is evaluated for impairment annually. No
impairments were recorded during fiscal years 2009, 2008 or 2007.
The Company’s share of income and losses from its equity method investments is included in Income from equity
investees on the consolidated statements of earnings. Also included in this line item is the Company’s proportionate
share of gross margin resulting from coffee and other product sales to, and royalty and license fee revenues
generated from, equity investees. Revenues generated from these related parties, net of eliminations, were
$125.3 million, $128.1 million and $107.9 million in fiscal years 2009, 2008 and 2007, respectively. Related
costs of sales, net of eliminations, were $64.9 million, $66.2 million and $57.1 million in fiscal years 2009, 2008
and 2007, respectively. As of September 27, 2009 and September 28, 2008, there were $37.6 million and
$40.6 million of accounts receivable, respectively, on the consolidated balance sheets from equity investees
primarily related to product sales and store license fees.
As of September 27, 2009, the aggregate market value of the Company’s investment in Starbucks Japan was
approximately $241 million, based on its available quoted market price.
Summarized combined financial information of the Company’s equity method investees, which represent 100% of
the investees’ financial information (in millions):
Financial Position as of Sep 27, 2009 Sep 28, 2008
Current assets ............................................. $315.8 $247.2
Noncurrent assets .......................................... 657.6 604.9
Current liabilities .......................................... 292.0 273.5
Noncurrent liabilities........................................ 76.5 59.8
Results of Operations for Fiscal Year Ended Sep 27, 2009 Sep 28, 2008 Sep 30, 2007
Net revenues ................................... $2,100.1 $1,961.0 $1,452.9
Operating income ............................... 192.5 171.3 186.2
Net earnings ................................... 155.8 136.9 159.5
Cost Method Investments
The Company has equity interests in entities that develop and operate Starbucks licensed retail stores in several
global markets. The value of these investments was $36.6 million and $31.9 million as of September 27, 2009 and
September 28, 2008, respectively. Additionally, Starbucks has investments in privately held equity securities
unrelated to Starbucks licensed retail stores. The value of these investments was $2.5 million at September 27, 2009
and $2.8 million at September 28, 2008. As of September 27, 2009 and September 28, 2008, management
determined that the estimated fair values of each cost method investment exceeded the related carrying values. In
the third quarter of fiscal 2009 Starbucks recognized a loss of $0.3 million on one of the investments that is unrelated
to Starbucks licensed retail stores. There were no realized losses recorded for other-than-temporary impairment of
the Company’s cost method investments during fiscal years 2008 or 2007.
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