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Other Income and Expenses
Fiscal Year Ended
Sep 28,
2014
Sep 29,
2013
Sep 28,
2014
Sep 29,
2013
% of Total
Net Revenues
Operating income/(loss) $ 3,081.1 $ (325.4) 18.7 % (2.2)%
Interest income and other, net 142.7 123.6 0.9 0.8
Interest expense (64.1)(28.1) (0.4) (0.2)
Earnings/(loss) before income taxes 3,159.7 (229.9) 19.2 (1.5)
Income taxes 1,092.0 (238.7) 6.6 (1.6)
Net earnings including noncontrolling interests 2,067.7 8.8 12.6 0.1
Net earnings/(loss) attributable to noncontrolling
interests (0.4) 0.5 — —
Net earnings attributable to Starbucks $ 2,068.1 $ 8.3 12.6% 0.1 %
Effective tax rate including noncontrolling interests 34.6 % 103.8 %
Net interest income and other increased $19 million over the prior year, primarily due to a net benefit from transactions in the
fourth quarter of fiscal 2014, driven by a gain on the sale of our equity interest in our Malaysia joint venture (approximately
$68 million), favorable fair value adjustments from derivatives used to manage our risk of commodity price and foreign
currency fluctuations (approximately $14 million), net favorable foreign exchange fluctuations (approximately $9 million), and
realized gains on sales of investments (approximately $6 million). These increases were partially offset by lapping gains on the
sales of our equity interests in our joint ventures in Chile and Argentina in the fourth quarter of fiscal 2013 (approximately $45
million) and in Mexico in the second quarter of fiscal 2013 (approximately $35 million).
Interest expense increased $36 million due to interest on the long-term debt we issued in the first quarter of fiscal 2014 and the
fourth quarter of fiscal 2013.
Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn
in those jurisdictions, as well as discrete items that may occur in any given year, but are not consistent from year to year.
The effective tax rate for fiscal 2014 was 34.6% compared to 103.8% for fiscal 2013. The change in our effective tax rate was
primarily due to lapping the 71.2% impact of the litigation charge associated with the Kraft arbitration in fiscal 2013. For
additional information on the impact to our fiscal 2013 effective tax rate from the litigation charge, see Note 13, Income Taxes,
to the consolidated financial statements included in Item 8 of Part II of this 10-K. The remaining change in the effective tax rate
over fiscal 2013 was an increase of 2.0%, which was primarily due to net higher discrete benefits in the prior year. In fiscal
2013, our effective tax rate benefited from releasing certain tax reserves that did not recur in fiscal 2014 and a net tax benefit
from state income tax expense adjustments for returns filed in prior years. Also contributing to the increase in fiscal 2014 was
additional tax resulting from the sale of our Australian company-operated retail store assets and operations and our 50% equity
interest in our Malaysia joint venture.
32 Starbucks Corporation 2015 Form 10-K