Starbucks 2014 Annual Report Download - page 41

Starbucks Corporation 2014 Form 10-K 37
All Other Segments
Fiscal Year Ended Sep 29, 2013 Sep 30, 2012 % Change
Net revenues:
Company-operated stores $ 150.4 $ — nm
Licensed stores 9.5 12.8 (25.8)%
CPG, foodservice and other 230.2 192.3 19.7
Total net revenues 390.1 205.1 90.2
Cost of sales 239.8 140.1 71.2
Store operating expenses 66.5 — nm
Other operating expenses 71.7 70.9 1.1
Depreciation and amortization expenses 11.7 2.5 368.0
General and administrative expenses 34.9 19.7 77.2
Total operating expenses 424.6 233.2 82.1
Income from equity investees —0.7 (100.0)
Operating loss $ (34.5) $ (27.4) 25.9%
All Other Segments includes Teavana, Seattle’s Best Coffee, Evolution Fresh, and Digital Ventures.
Total net revenues for All Other Segments increased $185 million, driven by incremental revenues from the acquisition of
Teavana in the second quarter of fiscal 2013 (approximately $156 million).
Total operating expenses increased $191 million, largely due to incremental expenses from the acquisition of Teavana.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and Investment Overview
Starbucks cash and investments were $2.2 billion and $3.3 billion as of September 28, 2014 and September 29, 2013,
respectively. In the first quarter of fiscal 2014, we paid $2.8 billion for the Kraft arbitration matter that was accrued in the
fourth quarter of fiscal 2013. We actively manage our cash and investments in order to internally fund operating needs, make
scheduled interest and principal payments on our borrowings, and return cash to shareholders through common stock cash
dividend payments and share repurchases. Our investment portfolio primarily includes highly liquid available-for-sale
securities, including government treasury securities (foreign and domestic), corporate bonds, mortgage and asset-backed
securities, state and local government obligations, agency obligations and certificates of deposit. During the fourth quarter of
fiscal 2014, a significant portion of our offshore investment portfolio was liquidated in anticipation of funding the acquisition
of Starbucks Japan, Ltd ("Starbucks Japan") in fiscal 2015, discussed further in Note 18, Subsequent Event. As of
September 28, 2014, approximately $1.4 billion of cash and investments were held in foreign subsidiaries.
Borrowing capacity
In December 2013, we issued $400 million of 3-year 0.875% Senior Notes ("the 2016 notes") due December 2016, and $350
million of 5-year 2.000% Senior Notes ("the 2018 notes") due December 2018, in an underwritten registered public offering, to
fund a portion of the payment required by the arbitration award in the Kraft litigation matter. Interest on the notes is payable
semi-annually on June 5 and December 5 of each year, commencing on June 5, 2014. See Note 9, Debt, to the consolidated
financial statements included in Item 8 of Part II of this 10-K for details of the components of our long-term debt.
The indentures under which all of our Senior Notes were issued 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 28, 2014,
we were in compliance with all applicable covenants.
Our $750 million unsecured, revolving credit facility with various banks, of which $150 million may be used for issuances of
letters of credit, is available for working capital, capital expenditures and other corporate purposes, including acquisitions and
share repurchases, and is currently set to mature on February 5, 2018. We may request, and the banks may grant, at their
discretion, increases to the credit facility by a total additional amount of up to $750 million. Borrowings under the credit
facility will bear interest at a variable rate based on LIBOR, and, for US dollar-denominated loans under certain circumstances,
a Base Rate (as defined in the credit facility), in each case plus an applicable margin. The applicable margin is based on the