Starbucks 2011 Annual Report Download - page 23

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injunctive relief. Kraft appealed the District Court’s decision to the Second Circuit Court of Appeals. On
February 25, 2011, the Second Circuit Court of Appeals affirmed the District Court’s decision. As a result,
Starbucks is in full control of our packaged coffee business as of March 1, 2011.
While Starbucks believes we have valid claims of material breach by Kraft under the Agreement that allowed us to
terminate the Agreement and certain other relationships with Kraft without compensation to Kraft, there exists the
possibility of material adverse outcomes to Starbucks in the arbitration or to resolve the matter. At this time, the
Company is unable to estimate the range of possible outcomes with respect to the arbitration as we have not received
any statement or articulation of damages from Kraft nor have we estimated the damages to Starbucks caused by
Kraft’s breaches. Information in this regard will be provided during the discovery process and is currently expected
to be available in late March or early April 2012. And, although Kraft disclosed to the press and in federal court
filings a $750 million offer Starbucks made to Kraft in August 2010 to avoid litigation and ensure a smooth
transition of the business, the figure is not a proper basis upon which to estimate a possible outcome of the
arbitration but was based upon facts and circumstances at the time. Kraft rejected the offer immediately and did not
provide a counter-offer, effectively ending the discussions between the parties with regard to any payment.
Moreover, the offer was made prior to our investigation of Kraft’s breaches and without consideration of Kraft’s
continuing failure to comply with material terms of the agreements.
Starbucks is party to various other legal proceedings arising in the ordinary course of business, including certain
employment litigation cases that have been certified as class or collective actions, but, except as noted above, is not
currently a party to any legal proceeding that management believes could have a material adverse effect on our
consolidated financial position, results of operations or cash flows.
Item 4. (Removed and Reserved)
17