Starbucks 2015 Annual Report Download - page 69

On December 31, 2012, we acquired 100% of the outstanding shares of Teavana Holdings, Inc. ("Teavana"), a specialty retailer
of premium loose-leaf teas, authentic artisanal teawares and other tea-related merchandise, to elevate our tea offerings as well
as expand our domestic and global tea footprint. We acquired Teavana for $615.8 million in cash. Of the total cash paid, $12.2
million was excluded from the purchase price allocation below as it represented contingent consideration receivable, all of
which has been settled. At closing, we also repaid $35.2 million for long-term debt outstanding on Teavana's balance sheet,
which was recognized separately from the business combination. 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
Dec 31, 2012
Cash and cash equivalents $ 47.0
Inventories 21.3
Property, plant and equipment 59.7
Other intangible assets 120.8
Goodwill 467.5
Other current and noncurrent assets 19.8
Current liabilities (36.0)
Deferred income taxes (noncurrent) (54.3)
Long-term debt (35.2)
Other long-term liabilities (7.0)
Total consideration $ 603.6
The assets acquired and liabilities assumed are reported within All Other Segments. Other current and noncurrent assets
acquired primarily include prepaid expenses, trade receivables, and deferred tax assets. In addition, we assumed various current
liabilities primarily consisting of accounts payable, accrued payroll-related liabilities and other accrued operating expenses. The
intangible assets acquired as part of the transaction include the Teavana trade name, tea blends and non-compete agreements.
The Teavana trade name was valued at $105.5 million and determined to have an indefinite life, based on our expectation that
the brand will be used indefinitely and has no contractual limitations. The intangible asset related to the tea blends was valued
at $13.0 million and will be amortized on a straight-line basis over a period of 10 years, and the intangible asset related to the
non-compete agreements was valued at $2.3 million and will be amortized on a straight-line basis over a period of 3 years. The
$467.5 million of goodwill represents the intangible assets that do not qualify for separate recognition, primarily including
Teavana's established global store presence in high traffic mall locations and other high-sales-volume retail venues, Teavana's
global customer base, and Teavana's "Heaven of tea" retail experience in which store employees engage and educate customers
about the ritual and enjoyment of tea. The goodwill was allocated to All Other Segments and is not deductible for income tax
purposes.
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.
During the first quarter of fiscal 2015, we entered into forward-starting interest rate swap agreements with an aggregate
notional amount of $250.0 million related to the $500 million of 7-year 2.700% Senior Notes (the "2022 notes") due in June
2022 issued in the third quarter of fiscal 2015. During the third quarter of fiscal 2015, we entered into forward-starting interest
rate swap agreements with an aggregate notional amount of $250.0 million related to the $350 million of 30-year 4.300%
Senior Notes (the "2045 notes") due in June 2045 issued in the third quarter of fiscal 2015. We cash settled these swap
agreements at the time of the pricing of the 2022 and the 2045 notes, effectively locking in the benchmark interest rate in effect
at the time the swap agreements were initiated. In July 2015, we redeemed our $550 million of 6.250% Senior Notes (the "2017
notes") originally scheduled to mature in August 2017. In connection with the redemption in the fourth quarter of fiscal 2015,
we reclassified $2.0 million from accumulated other comprehensive income to interest expense on our consolidated statements
of earnings related to remaining unrecognized losses from interest rate contracts entered into in conjunction with the 2017 notes
and designated as cash flow hedges. In the fourth quarter of fiscal 2015, we entered into forward-starting interest rate swap
agreements with an aggregate notional amount of $125 million related to an anticipated debt issuance in fiscal 2016. Refer to
Note 9, Debt, for details of the components of our long-term debt.
Starbucks Corporation 2015 Form 10-K 65