Starbucks 2013 Annual Report Download - page 69

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defined contribution plan. The corresponding deferred compensation liability of $101.6 million and $94.8 million as of
September 29, 2013 and September 30, 2012, respectively, is included in accrued compensation and related costs on the
consolidated balance sheets. The changes in net unrealized holding gains/losses in the trading portfolio included in earnings for
fiscal years 2013, 2012 and 2011 were a net gain of $11.7 million, a net gain of $10.9 million, and a net loss of $2.1 million,
respectively.
Derivative Assets and Liabilities
Derivative assets and liabilities include foreign currency forward contracts, commodity swaps and futures contracts. Where
applicable, we use quoted prices in active markets for identical derivative assets and liabilities that are traded on exchanges.
Derivative assets and liabilities included in Level 2 are over-the-counter currency forward contracts and commodity swaps
whose fair values are estimated using industry-standard valuation models. Such models project future cash flows and discount
the future amounts to a present value using market-based observable inputs, including interest rate curves and forward and spot
prices for currencies and commodities.
Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis
Financial instruments measured using Level 3 inputs described above are comprised entirely of our ARS. Changes in this
balance related primarily to calls of certain of our ARS. In fiscal 2013 and 2012, $5.0 million and $10.7 million, respectively,
of our ARS were called at par.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as property, plant and
equipment, goodwill and other intangible assets, equity and cost method investments, and other assets. These assets are
measured at fair value if determined to be impaired. During fiscal 2013 and 2012, there were no material fair market value
adjustments.
Fair Value of Other Financial Instruments
The estimated fair value of the $750 million of 3.85% Senior Notes was approximately $762 million as of September 29, 2013,
determined using Level 2 inputs.
The estimated fair value of the $550 million of 6.25% Senior Notes was approximately $644 million and $674 million as of
September 29, 2013 and September 30, 2012, respectively, determined using Level 2 inputs.
Note 5: Inventories (in millions)
Sep 29, 2013 Sep 30, 2012
Coffee:
Unroasted $ 493.0 $ 711.3
Roasted 235.4 222.2
Other merchandise held for sale 243.3 181.6
Packaging and other supplies 139.5 126.4
Total $ 1,111.2 $ 1,241.5
Other merchandise held for sale includes, among other items, serveware and tea. Inventory levels vary due to seasonality,
commodity market supply and price fluctuations.
As of September 29, 2013, we had committed to purchasing green coffee totaling $588 million under fixed-price contracts and
an estimated $294 million under price-to-be-fixed contracts. As of September 29, 2013, approximately $0.3 million of our
price-to-be-fixed contracts were effectively fixed through the use of futures contracts. Price-to-be-fixed contracts are purchase
commitments whereby the quality, quantity, delivery period, and other negotiated terms are agreed upon, but the date, and
therefore the price, at which the base “C” coffee commodity price component will be fixed has not yet been established. For
these types of contracts, either Starbucks or the seller has the option to “fix” the base “C” coffee commodity price prior to the
delivery date. Until prices are fixed, we estimate the total cost of these purchase commitments. We believe, based on
relationships established with our suppliers in the past, the risk of non-delivery on such purchase commitments is remote.
2013 10-K
Starbucks Corporation Form