Starbucks 2015 Annual Report Download - page 42

Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our
credit facility discussed above. As of September 27, 2015, availability under our commercial paper program was approximately
$750 million (which represents the full committed credit facility amount, as the amount of outstanding letters of credit was not
material as of September 27, 2015). The proceeds from borrowings under our commercial paper program may be used for
working capital needs, capital expenditures and other corporate purposes, including share repurchases, business expansion,
payment of cash dividends on our common stock or the financing of possible acquisitions. In the fourth quarter of fiscal 2015,
we issued and subsequently repaid commercial paper borrowings of $93 million for general corporate purposes. We had no
other borrowings under our commercial paper program during fiscal 2015.
In June 2015, we issued additional long-term debt in an underwritten registered public offering, which consisted of $500
million of 7-year 2.700% Senior Notes (the "2022 notes") due June 2022, and $350 million of 30-year 4.300% Senior Notes
(the "2045 notes") due June 2045. Interest on the 2022 notes and the 2045 notes is payable semi-annually on June 15 and
December 15 of each year, commencing on December 15, 2015. 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.
As discussed in Note 3, Derivative Financial Instruments, to the consolidated financial statements included in Item 8 of Part II
of this 10-K, during the first quarter of fiscal 2015, we entered into forward-starting interest rate swap agreements to hedge the
variability in cash flows due to changes in the benchmark interest rate related to the 2022 notes. During the third quarter of
fiscal 2015, we entered into forward-starting interest rate swap agreements to hedge the variability in cash flows due to changes
in the benchmark interest rate related to the 2045 notes. The swap agreements were cash settled in the third quarter of fiscal
2015 at the time the 2022 notes and the 2045 notes were priced. The resulting net losses from these agreements are included in
accumulated other comprehensive income and will be amortized as an increase to interest expense on the consolidated
statements of net earnings over the lives of the 2022 notes and the 2045 notes.
In July 2015, we redeemed our $550 million of 6.250% Senior Notes (the "2017 notes") that were originally scheduled to
mature in August 2017. 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.
We continually evaluate liquidity and funding needs and anticipate issuing long-term debt in fiscal 2016 to provide us with
financial flexibility. As discussed further in Note 3, Derivative Financial Instruments, to the consolidated financial statements
included in Item 8 of Part II of this 10-K, during the fourth quarter of fiscal 2015, we entered into forward-starting interest rate
swap agreements to hedge the variability in cash flows due to changes in the benchmark interest rate related to this anticipated
debt issuance.
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 27, 2015,
we were in compliance with all applicable covenants. 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.
Use of Cash
We expect to use our available cash and investments, including additional potential future borrowings under the credit facility
and commercial paper program, to invest in our core businesses, including capital expenditures, new product innovations,
related marketing support and partner investments, return cash to shareholders through common stock cash dividend payments
and share repurchases, as well as other new business opportunities related to our core businesses. Further, we may use our
available cash resources to make proportionate capital contributions to our equity method and cost method investees. We may
also seek strategic acquisitions to leverage existing capabilities and further build our business in support of our growth agenda.
Acquisitions may include increasing our ownership interests in our equity method and cost method investees. Any decisions to
increase such ownership interests will be driven by valuation and fit with our ownership strategy.
We believe that future cash flows generated from operations and existing cash and investments both domestically and
internationally will be sufficient to finance capital requirements for our core businesses in those respective markets as well as
shareholder distributions for the foreseeable future. Significant new joint ventures, acquisitions and/or other new business
opportunities may require additional outside funding. We have borrowed funds domestically and continue to believe we have
the ability to do so at reasonable interest rates; however, additional borrowings would result in increased interest expense in the
future.
As described in Note 2, Acquisitions and Divestitures, to the consolidated financial statements included in Item 8 of Part II of
this 10-K, in September 2014, we entered into a tender offer bid agreement with Starbucks Japan and our former joint venture
partner, Sazaby League, Ltd., to acquire the remaining 60.5% ownership interest in Starbucks Japan for approximately $876
million, through a two-step tender offer. In the first quarter of fiscal 2015, we funded the first tender offer step with $509
million in offshore cash. We funded the second tender offer step in the second quarter of fiscal 2015 and the related cash-out
procedure during the remainder of fiscal 2015, which required a combined total of $362 million in offshore cash. The
remaining $6 million of the purchase price represents cash that was unclaimed by minority shareholders as of September 27,
38 Starbucks Corporation 2015 Form 10-K