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Starbucks Corporation 2014 Form 10-K 65
Trading Securities
Trading securities include equity mutual funds and exchange-traded funds. Our trading securities portfolio approximates a
portion of our liability under our Management Deferred Compensation Plan ("MDCP"), a defined contribution plan. Our
MDCP liability was $106.4 million and $101.6 million as of September 28, 2014 and September 29, 2013, respectively, which
is included in accrued compensation and related costs within accrued liabilities on the consolidated balance sheets. The changes
in net unrealized holding gains and losses in the trading securities portfolio included in earnings for fiscal years 2014, 2013 and
2012 were net gains of $1.2 million, $11.7 million, and $10.9 million, respectively. Gross unrealized holding gains and losses
on trading securities were not material as of September 28, 2014 and September 29, 2013.
Derivative Assets and Liabilities
Derivative assets and liabilities include foreign currency forward contracts, commodity futures contracts, collars (the
combination of a purchased call option and a sold put option) and swaps, which are described further in Note 3, Derivative
Financial Instruments. During fiscal 2014, we revised the classification of coffee and dairy futures from Level 2 to Level 1, as
we use quoted prices in active markets for identical assets to determine fair value.
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. Impairment of property, plant, and equipment is included at Note 1,
Summary of Significant Accounting Policies. During fiscal 2014 and 2013, there were no other material fair value adjustments.
Fair Value of Other Financial Instruments
The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 9, Debt.
Note 5: Inventories (in millions)
Sep 28, 2014 Sep 29, 2013
Coffee:
Unroasted $ 432.3 $ 493.0
Roasted 238.9 235.4
Other merchandise held for sale 265.7 243.3
Packaging and other supplies 154.0 139.5
Total $ 1,090.9 $ 1,111.2
Other merchandise held for sale includes, among other items, tea and serveware. Inventory levels vary due to seasonality,
commodity market supply and price fluctuations.
As of September 28, 2014, we had committed to purchasing green coffee totaling $417 million under fixed-price contracts and
an estimated $718 million under price-to-be-fixed contracts. As of September 28, 2014, approximately $29 million of our price-
to-be-fixed contracts were effectively fixed through the use of futures contracts and approximately $16 million were price-
protected through the use of collar instruments. 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.