Starbucks 2012 Annual Report Download - page 48

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exceed 397 days from the date of issue. The program is backstopped by the credit facility and the combined
borrowing limit is $500 million for the commercial paper program and the credit facility. Starbucks may issue
commercial paper from time to time, and the proceeds of the commercial paper financing may be used for
working capital needs, capital expenditures and other corporate purposes, including acquisitions and share
repurchases. During fiscal 2012 and fiscal 2011, there were no borrowings under the credit facility or commercial
paper programs. As of September 30, 2012 and October 2, 2011, a total of $18 million and $17 million,
respectively, in letters of credit were outstanding under the revolving credit facility.
The $550 million of 10-year 6.25% Senior Notes also require us to maintain compliance with certain covenants,
including limits on future liens and sale and leaseback transactions on certain material properties. As of
September 30, 2012 and October 2, 2011, we were in compliance with each of these covenants.
Use of Cash
We expect to use our cash and short-term investments, including any potential future borrowings under the credit
facility and commercial paper program, to invest in our core businesses, including new product innovations and
related marketing support, as well as other new business opportunities related to our core businesses. We believe
that future cash flows generated from operations and existing cash and short-term investments both domestically
and internationally will be sufficient to finance capital requirements for our core businesses in those respective
markets as well as shareholder distributions for the foreseeable future.
We consider the majority of undistributed earnings of our foreign subsidiaries and equity investees as of
September 30, 2012 to be indefinitely reinvested and, accordingly, no US income and foreign withholding taxes
have been provided on such earnings. We have not, nor do we anticipate the need to, repatriate funds to the US to
satisfy domestic liquidity needs; however, in the event that we need to repatriate all or a portion of our foreign
cash to the US we would be subject to additional US income taxes, which could be material. We do not believe it
is practical to calculate the potential tax impact of repatriation, as there is a significant amount of uncertainty
around the calculation, including the availability and amount of foreign tax credits at the time of repatriation, tax
rates in effect, and other indirect tax consequences associated with repatriation.
We may use our available cash resources to make proportionate capital contributions to our equity method and
cost method investees. We may also seek strategic acquisitions to leverage existing capabilities and further build
our business in support of our growth agenda. Acquisitions may include increasing our ownership interests in our
equity method and cost method investees. Any decisions to increase such ownership interests will be driven by
valuation and fit with our ownership strategy. Significant new joint ventures, acquisitions and/or other new
business opportunities may require additional outside funding.
As discussed further in Note 15, we are in arbitration with Kraft Foods Global, Inc. (“Kraft”) for a commercial
dispute relating to a distribution agreement we previously held with Kraft. As a part of those proceedings Kraft
has claimed damages inclusive of a premium and interest for terminating the arrangement. We believe we have
valid claims of material breach by Kraft under the Agreement. We also believe Kraft’s claim is highly inflated and
based upon faulty analysis. However, should the arbitration result in an unfavorable outcome, we believe we have
adequate liquidity.
Other than normal operating expenses, cash requirements for fiscal 2013 are expected to consist primarily of
capital expenditures for remodeling and refurbishment of, and equipment upgrades for, existing company-operated
stores; systems and technology investments in the stores and in the support infrastructure; new company-operated
stores; and additional investments in manufacturing capacity. Total capital expenditures for fiscal 2013 are
expected to be approximately $1.2 billion.
During the first three quarters of fiscal 2011, we declared and paid a cash dividend to shareholders of $0.13 per
share. In the fourth quarter of fiscal 2011 and the first three quarters of fiscal 2012 we declared and paid a cash
dividend of $0.17 per share. Cash dividends paid in fiscal 2012 and 2011 totaled $513 million and $390 million,
respectively. In the fourth quarter, we declared a cash dividend of $0.21 per share to be paid on November 30,
2012 with an expected payout of $157 million.