Starbucks 2010 Annual Report Download - page 39

used for issuances of letters of credit. The 2010 credit facility is available for working capital, capital expenditures
and other corporate purposes, including acquisitions and share repurchases. The new 2010 credit facility is currently
set to mature in November 2014. The interest rate for any borrowings under the credit facility, based on Starbucks
current ratings and fixed charge coverage ratio, is 1.50% over LIBOR. The specific spread over LIBOR will depend
upon our long-term credit ratings assigned by Moody’s and Standard & Poor’s rating agencies and our fixed charge
coverage ratio. The credit facility contains provisions requiring us to maintain compliance with certain covenants,
including a minimum fixed charge coverage ratio which measures our ability to cover financing expenses. Starbucks
has the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment
amount by an additional $500 million. Under Starbucks commercial paper program we may issue unsecured
commercial paper notes, up to a maximum aggregate amount outstanding at any time of $500 million, with
individual maturities that may vary, but not exceed 397 days from the date of issue. The program is backstopped by
the 2010 credit facility, and the combined borrowing limit is $500 million for the commercial paper program and the
credit facility. Starbucks may issue commercial paper from time to time, and the proceeds of the commercial paper
financing will be used for working capital needs, capital expenditures and other corporate purposes, including
acquisitions and share repurchases.
We expect to use our cash and short-term investments, including any potential future borrowings under the credit
facility and commercial paper program, to invest in our core businesses, including new product innovations and
related marketing support, as well as other new business opportunities related to our core businesses. We believe
that cash flow generated from operations and existing cash and short-term investments should be sufficient to
finance capital requirements for our core businesses as well as shareholder distributions for the foreseeable future.
We may use our available cash resources to make proportionate capital contributions to our equity method and cost
method investees. Any decisions to increase ownership interest in our equity method investees or licensed
operations will be driven by valuation and fit with our ownership strategy. Significant new joint ventures,
acquisitions and/or other new business opportunities may require additional outside funding.
Other than normal operating expenses, cash requirements for fiscal 2011 are expected to consist primarily of capital
expenditures for remodeling and refurbishment of, and equipment upgrades for, existing company-operated retail
stores; systems and technology investments in the stores and in the support infrastructure; and new company-
operated retail stores. Total capital expenditures for fiscal 2011 are expected to range from $550 million to
$600 million.
In March 2010, Starbucks declared its first ever cash dividend to shareholders at $0.10 per share. This quarterly
dividend was paid on April 23, 2010. The third quarter dividend was raised to $0.13 per share and was paid on
August 20, 2010, bringing the total cash dividend payout for fiscal 2010 to $171 million. On September 14, 2010,
we declared a cash dividend of $0.13 per share to be paid on December 3, 2010 with an expected payout of $97
million. Starbucks repurchased 11 million shares of common stock ($286 million) during fiscal 2010 under share
repurchase authorizations. The number of remaining shares authorized for repurchase at the end of the fiscal year
totaled 10 million. Subsequent to year end, on November 15, 2010 we announced an additional share repurchase
authorization made by the Board of Directors in the amount of up to 10 million shares in addition to the 10 million
remaining under the previous authorization.
Cash provided by operating activities was $1.7 billion for fiscal 2010 as compared to $1.4 billion for fiscal 2009.
The increase was primarily due to higher net earnings for the period.
Cash used by investing activities for fiscal 2010 totaled $790 million as compared to $421 million in fiscal 2009.
The increase results primarily from the use of a portion of our available cash balances to purchase US Agency and
investment grade bonds. Capital expenditures in fiscal 2010 totaled $441 million, primarily for remodeling and
renovating existing company-operated retail stores, opening new retail stores, and investment in information
technology systems.
Cash used by financing activities for fiscal 2010 totaled $346 million as compared to $642 million in fiscal 2009.
The change primarily reflects net repayments of commercial paper and short-term borrowings under the credit
facility totaling $713 million in fiscal 2009, offset by dividend payments of $171 million and common share
repurchases of $286 million in fiscal 2010.
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