Starbucks 2014 Annual Report Download - page 65

Starbucks Corporation 2014 Form 10-K 61
Fiscal 2012
On July 3, 2012, we acquired 100% ownership interest in Bay Bread, LLC and its La Boulange bakery brand (collectively "La
Boulange") to elevate our core food offerings and build a premium, artisanal bakery brand. We acquired La Boulange for a
purchase price of approximately $100 million in cash. The following table summarizes the allocation of the purchase price to
the fair values of the assets acquired and liabilities assumed on the closing date (in millions):
Fair Value at
July 3, 2012
Property, plant and equipment $ 18.1
Intangible assets 24.3
Goodwill 58.7
Other current and noncurrent assets 5.1
Current liabilities (6.4)
Total cash paid $ 99.8
The assets acquired and liabilities assumed are included in our Americas operating segment. Other current assets acquired
primarily include cash, trade receivables, and inventory. In addition, we assumed various current liabilities primarily consisting
of accounts payable and accrued payroll related liabilities. The intangible assets acquired as part of the transaction include the
La Boulange trade name and proprietary recipes and processes. The La Boulange trade name was valued at $9.7 million and
determined to have an indefinite life while the intangible asset relating to the proprietary recipes and processes was valued at
$14.6 million and will be amortized over a period of 10 years. The $58.7 million of goodwill is deductible for income tax
purposes and was allocated to our Americas operating segment.
On November 10, 2011, we acquired the outstanding shares of Evolution Fresh, Inc., a super-premium juice company, to
expand our portfolio of product offerings and enter into the super-premium juice market. We acquired Evolution Fresh for a
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 within All Other Segments.
Note 3: Derivative Financial Instruments
Interest Rates
Depending on market conditions, we enter into interest rate swap agreements to hedge the variability in cash flows due to
changes in the benchmark interest rate related to anticipated debt issuances. These agreements are cash settled at the time of the
pricing of the related debt. The effective portion of the derivative's gain or loss is recorded in accumulated other comprehensive
income ("AOCI") and is subsequently reclassified to interest expense over the life of the related debt.
Foreign Currency
To reduce cash flow volatility from foreign currency fluctuations, 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.
The effective portion of the derivative's gain or loss is recorded in AOCI and is subsequently reclassified to revenue or cost of
sales when the hedged exposure affects net earnings.
We also enter into forward contracts to hedge the foreign currency exposure of our net investment in certain foreign operations.
The effective portion of the derivative's gain or loss is recorded in AOCI and will be subsequently reclassified to net earnings
when the hedged net investment is either sold or substantially liquidated.
To mitigate the translation risk of certain balance sheet items, we enter into foreign currency swap contracts that are not
designated as hedging instruments. Gains and losses from these derivatives are largely offset by the financial impact of
translating foreign currency denominated payables and receivables; both are recorded in net interest income and other.
Commodities
Depending on market conditions, we enter into coffee futures contracts and collars (the combination of a purchased call option
and a sold put option) to hedge a portion of anticipated cash flows under our price-to-be-fixed green coffee contracts, which are
described further in Note 5, Inventories. The effective portion of the derivative's gain or loss is recorded in AOCI and is
subsequently reclassified to cost of sales when the hedged exposure affects net earnings.