Starbucks 2015 Annual Report Download - page 44

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Contractual Obligations
The following table summarizes our contractual obligations and borrowings as of September 27, 2015, and the timing and
effect that such commitments are expected to have on our liquidity and capital requirements in future periods (in millions):
Payments Due by Period
Contractual Obligations (1) Total
Less than 1
Year
1 - 3
Years
3 - 5
Years
More than
5 Years
Operating lease obligations(2) $ 5,669.5 $ 1,032.4 $ 1,632.3 $ 1,172.9 $ 1,831.9
Financing lease obligations(3) 47.1 3.2 6.4 6.4 31.1
Debt obligations
Principal payments 2,350.0 — 400.0 350.0 1,600.0
Interest payments(4) 821.2 67.9 130.6 118.4 504.3
Purchase obligations(5) 1,257.1 884.0 284.7 76.0 12.4
Other obligations(6) 122.7 19.2 28.3 13.0 62.2
Total $ 10,267.6 $ 2,006.7 $ 2,482.3 $ 1,736.7 $ 4,041.9
(1) Income tax liabilities for uncertain tax positions were excluded as we are not able to make a reasonably reliable estimate
of the amount and period of related future payments. As of September 27, 2015, we had $159.3 million of gross
unrecognized tax benefits for uncertain tax positions, which includes accrued interest and penalties.
(2) Amounts include direct lease obligations, excluding any taxes, insurance and other related expenses.
(3) Amounts consist of build-to-suit lease arrangements primarily related to the Starbucks Japan acquisition, which are
described further in Note 2, Acquisitions and Divestitures, to the consolidated financial statements included in Item 8 of
Part II of this 10-K.
(4) Amounts exclude any gain or loss upon settlement of related interest rate swap agreements, which are described further
in Note 3, Derivative Financial Instruments, to the consolidated financial statements included in Item 8 of Part II of this
10-K.
(5) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on
Starbucks and that specify all significant terms. Green coffee purchase commitments comprise 86% of total purchase
obligations.
(6) Other obligations include other long-term liabilities primarily consisting of asset retirement obligations and hedging
instruments.
Starbucks currently expects to fund these commitments primarily with operating cash flows generated in the normal course of
business.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements relate to operating lease and purchase commitments detailed in the footnotes to the
consolidated financial statements included in Item 8 of Part II of this 10-K.
COMMODITY PRICES, AVAILABILITY AND GENERAL RISK CONDITIONS
Commodity price risk represents Starbucks primary market risk, generated by our purchases of green coffee and dairy products,
among other items. We purchase, roast and sell high-quality arabica coffee and related products and risk arises from the price
volatility of green coffee. In addition to coffee, we also purchase significant amounts of dairy products to support the needs of
our company-operated stores. The price and availability of these commodities directly impacts our results of operations and we
expect commodity prices, particularly coffee, to impact future results of operations. For additional details see Product Supply in
Item 1, as well as Risk Factors in Item 1A of this 10-K.
FINANCIAL RISK MANAGEMENT
Market risk is defined as the risk of losses due to changes in commodity prices, foreign currency exchange rates, equity
security prices, and interest rates. We manage our exposure to various market-based risks according to a market price risk
management policy. Under this policy, market-based risks are quantified and evaluated for potential mitigation strategies, such
as entering into hedging transactions. The market price risk management policy governs how hedging instruments may be used
to mitigate risk. Risk limits are set annually and prohibit speculative trading activity. We also monitor and limit the amount of
associated counterparty credit risk. In general, hedging instruments do not have maturities in excess of three years. Refer to
40 Starbucks Corporation 2015 Form 10-K