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57
purchase price of $30 million in cash. The fair value of the net assets acquired on the acquisition date included $18 million of
goodwill. Evolution Fresh is reported in “All Others Segments.”
In the fourth quarter of fiscal 2011, we acquired the 50% ownership interest in Switzerland and Austria from our joint venture
partner, Marinopoulos Holdings S.A.R.L, converting these markets to 100% owned company-operated markets, for a purchase
price of $65.5 million. As a result of this acquisition, we adjusted the carrying value of our previous equity investment to fair
value, resulting in a gain of approximately $55 million which was included in net interest income and other on our consolidated
statements of earnings. The fair value of 100% of the net assets of these markets on the acquisition date was $131 million and
was recorded on our consolidated balance sheets. Included in these net assets were $63.8 million of goodwill and $35.1 million
in definite-lived intangible assets.
In the third quarter of fiscal 2011, we acquired the remaining 30% ownership of our business in the southern portion of China
from our noncontrolling partner, Maxim’s Caterers Limited (Maxim’s). We simultaneously sold our 5% ownership interest in
the Hong Kong market to Maxim’s.
The following table shows the effects of the change in Starbucks ownership interest in our business in South China on
Starbucks equity:
Fiscal Year Ended
Sep 29,
2013
Sep 30,
2012
Oct 2,
2011
Net earnings attributable to Starbucks $ 8.3 $ 1,383.8 $ 1,245.7
Transfers (to) from the noncontrolling interest:
Decrease in additional paid-in capital for purchase of interest
in subsidiary — — (28.0)
Change from net earnings attributable to Starbucks and transfers to
noncontrolling interest $ 8.3 $ 1,383.8 $ 1,217.7
Note 3: Derivative Financial Instruments
Interest Rates
During the third quarter of fiscal 2013, we entered into forward-starting interest rate swap agreements with an aggregate
notional amount of $750 million. These swaps hedged the variability in cash flows due to changes in the benchmark interest
rate related to the $750 million of 10-year 3.85% Senior Notes due in October 2023 issued in the fourth quarter of 2013. We
cash settled these swap agreements at the time of the pricing of the $750 million in Senior Notes, effectively locking in the
benchmark interest rate in effect at the time the swap agreements were initiated. The resulting net gains from these agreements
are included in accumulated other comprehensive income and amortized using the constant effective yield method as a
reduction to interest expense over the life of these Senior Notes, as the underlying interest expense is recognized in the
consolidated statements of earnings.
Net derivative gains from these cash flow hedges of $41.4 million, net of taxes, were included in accumulated other
comprehensive income as of September 29, 2013. We had no outstanding forward-starting interest rate swaps as of
September 30, 2012. Of the net derivative gains accumulated as of September 29, 2013, $3.6 million is expected to be
reclassified into earnings within 12 months.
Foreign Currency
We enter into forward and swap contracts to hedge portions of cash flows of anticipated revenue streams and inventory
purchases in currencies other than the entity's functional currency. Net derivative losses from cash flow hedges of $0.3 million
and $2.9 million, net of taxes, were included in accumulated other comprehensive income as of September 29, 2013 and
September 30, 2012, respectively. Of the net derivative losses accumulated as of September 29, 2013, $0.1 million of net gains
are expected to be reclassified into earnings within 12 months and will also continue to experience fair value changes before
affecting earnings. Outstanding contracts will expire within 21 months.
We also enter into net investment derivative instruments to hedge our equity method investment in Starbucks Coffee Japan,
Ltd., to minimize foreign currency exposure. Net derivative losses from net investment hedges of $12.9 million and $33.6
million, net of taxes, were included in accumulated other comprehensive income as of September 29, 2013 and September 30,
2012, respectively. Outstanding contracts will expire within 29 months.
2013 10-K
Starbucks Corporation Form