Starbucks 2009 Annual Report Download - page 80

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As of September 27, 2009, the Company had $49.1 million of gross unrecognized tax benefits of which
$25.4 million, if recognized, would affect the effective tax rate. The Company recognizes interest and penalties
related to income tax matters in income tax expense. As of September 27, 2009 and September 28, 2008, the
Company had accrued interest and penalties of $9.9 million and $9.1 million, respectively, before benefit of federal
tax deduction, recorded on its consolidated balance sheets.
The following table summarizes the activity related to the Company’s unrecognized tax benefits from October 1,
2007 to September 27, 2009 (in millions):
Sep 27, 2009 Sep 28, 2008
Beginning balance ......................................... $52.6 $ 58.3
Increase related to prior year tax positions ........................ 4.2 64.9
Decrease related to prior year tax positions ....................... (11.6) (37.2)
Increase related to current year tax positions ...................... 8.4 17.0
Decrease related to current year tax positions...................... (0.9) (5.4)
Decreases related to settlements with taxing authorities .............. (3.0) (11.1)
Decreases related to lapsing of statute of limitations ................ (0.6) (33.9)
Ending balance ............................................ $49.1 $ 52.6
Starbucks is currently under routine audit by various jurisdictions outside the US as well as US state taxing
jurisdictions for fiscal years 2003 through 2008. The Company is no longer subject to US federal or state
examination for years before fiscal year 2005, with the exception of three states. The Company is subject to income
tax in many jurisdictions outside the US, none of which are individually material to the consolidated financial
statements.
There is a reasonable possibility that the unrecognized tax benefits will change within the next 12 months, but the
Company does not expect this change to be material to the consolidated financial statements.
Note 16: Earnings per Share
Calculation of net earnings per common share (“EPS”) — basic and diluted (in millions, except EPS):
Fiscal Year Ended Sep 27, 2009 Sep 28, 2008 Sep 30, 2007
Net earnings ................................... $390.8 $315.5 $672.6
Weighted average common shares and common stock
units outstanding (for basic calculation) ........... 738.7 731.5 749.8
Dilutive effect of outstanding common stock options and
RSUs..................................... 7.2 10.2 20.3
Weighted average common and common equivalent
shares outstanding (for diluted calculation) . . . ...... 745.9 741.7 770.1
EPS — basic ................................... $ 0.53 $ 0.43 $ 0.90
EPS — diluted.................................. $ 0.52 $ 0.43 $ 0.87
Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock
options (both vested and non-vested) and unvested RSUs, using the treasury stock method. Potential dilutive shares
are excluded from the computation of earnings per share if their effect is antidilutive. The number of antidilutive
options totaled 16.6 million, 40.4 million and 10.4 million, in fiscal years 2009, 2008 and 2007, respectively.
Note 17: Commitments and Contingencies
Guarantees
The Company has unconditionally guaranteed the repayment of certain Japanese yen-denominated bank loans and
related interest and fees of an unconsolidated equity investee, Starbucks Japan. The guarantees continue until the
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