ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
September 30, 2012
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| Washington | 91-1325671 | |
| (State of Incorporation) | (IRS Employer ID) | |
Seattle, Washington 98134
Title of Each Class | Name of Each Exchange on Which Registered | |
| Common Stock, $0.001 par value per share | Nasdaq Global Select Market | |
None
| Large accelerated filer | x | Accelerated filer | ||||||
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||||
Item 1 Item 1A Item 1B Item 2 Item 3 Item 4 Item 5 Item 6 Item 7 Item 7A Item 8 Item 9 Item 9A Item 9B Item 10 Item 11 Item 12 Item 13 Item 14 Item 15 “our.” operations. Company-operated stores Licensed stores Total September 30, 2012 US International: Canada United Kingdom China Germany Thailand Other(2) Total International Total company-operated Fiscal Year Ended Beverages Food Whole bean and soluble coffees Coffee-making equipment and other merchandise Total a 12-month period. Product sales to and royalty and license fee revenues from Asia Pacific Europe/Middle East/Africa Americas Japan Turkey US Greater China UK Canada South Korea United Arab Emirates Mexico Philippines Spain Other Malaysia Saudi Arabia Indonesia Kuwait New Zealand Greece Switzerland Russia Other Total Total Total In CAP, 8% of total net revenues in fiscal 2012. 2013. Starbucks also faces competition from both restaurants and other specialty retailers for prime retail locations and qualified personnel to operate both new and existing stores. Starbucks employed approximately Name Position Howard Schultz Cliff Burrows John Culver Jeff Hansberry Michelle Gass and Troy Alsteadjoined Starbucks in 1992 and has served as chief financial officer and chief administrative officer since November 2008. Mr. Alstead previously served as chief operating officer, Starbucks Greater China from April 2008 to October 2008, senior vice president, Global Finance and Business Operations from August 2007 to April 2008, and senior vice president, Corporate Finance from September 2004 to August 2007. Mr. Alstead served in a number of other senior positions with Starbucks prior to 2004. lower customer traffic or average value per transaction, which negatively impacts comparable store sales, net revenues, operating income, operating margins and earnings per share, due to: customers trading down to lower priced products within Starbucks, and/or shifting to competitors with lower priced products; lack of customer acceptance of new products or price increases necessary to cover costs of new products and/or higher input costs; unfavorable general economic conditions in the markets in which we operate that adversely affect consumer spending; declines in general consumer demand for specialty coffee products; or adverse impacts resulting from negative publicity regarding our business practices or the health effects of consuming our products; cost increases that are either wholly or partially beyond our control, such as: construction costs associated with new store any material interruption in our supply chain beyond our control, such as material interruption of roasted coffee supply due to the casualty loss of any of our roasting plants or the failures of third-party suppliers, or interruptions in service by common carriers that ship goods within our distribution channels, or trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions; delays in store openings for reasons beyond our control, or a lack of desirable real estate locations available for lease at reasonable rates, either of which could keep us from meeting annual store opening targets and, in turn, negatively impact net revenues, operating income and earnings per share; the degree to which we enter into, maintain, develop, and are able to negotiate appropriate terms and conditions, and enforce, commercial and other agreements; the impact on our business, especially in our larger or fast growing markets, due to labor discord, war, terrorism (including incidents targeting us), political instability, boycotts, social unrest, and natural successfully leveraging Starbucks brand portfolio outside the company-operated store base, including our increased focus on international licensed stores; balancing disciplined global store growth and existing store renovation while meeting target store-level unit economics in a given market; executing a multi-channel advertising and marketing campaign to effectively communicate our message directly to Starbucks consumers and Our financial performance is highly dependent on our affected, and because the Americas segment is relatively mature and produces the large majority of our operating cash flows, could result in reduced cash flows for funding the expansion of our international business and for returning cash to shareholders. international operations. more developed operations, such as in the US. Additionally, our international joint venture partners or licensees may face capital constraints or other factors that may limit the speed at which they are able to expand and develop in a certain market. foreign currency exchange rate changes or uncertainties in economic, legal, regulatory, social and political conditions in our markets; interpretation and application of laws and regulations; restrictive actions of foreign or US governmental authorities affecting trade and foreign investment, especially during periods of heightened tension between the US and such foreign governmental authorities, including protective measures such as export and customs duties and tariffs, government intervention favoring local competitors, and restrictions on the level of foreign ownership; import or other business licensing requirements; the enforceability of intellectual property and contract rights; in developing economies, the growth rate in the portion of the population achieving targeted levels of disposable income may not be as fast as we forecast; difficulty in staffing, developing and managing foreign operations and supply chain logistics, including ensuring the consistency of product quality and service, due to distance, language and cultural local laws that make it more expensive and complex to negotiate with, retain or terminate employees; delays in store openings for reasons beyond our control, competition with locally relevant competitors or a lack of desirable real estate locations available for lease at reasonable rates, We purchase, roast, and sell high-quality whole bean arabica coffee beans and related coffee products. The price of coffee is subject to significant volatility and, results. Additionally, inconsistent uses of our brand and other of our intellectual property assets, as well as failure to protect our intellectual property, including from unauthorized uses of our brand or other of our intellectual property assets, can erode consumer trust and our brand value and have a negative impact on our financial results. disruption of our ongoing business, including loss of management focus on existing businesses; problems retaining key personnel; operating losses and expenses of the businesses we acquire or in which we invest; the potential impairment of tangible assets, intangible assets and goodwill acquired in the acquisitions; the difficulty of incorporating an acquired business into our business and unanticipated expenses related to such integration; and potential unknown liabilities associated with a business we acquire or in which we invest Furthermore, security breaches of our employees' or customers' private data could result in a violation of applicable U.S. and international privacy and other laws, loss of revenues from the potential adverse impact to our reputation and our ability to retain or attract new customers, and could result in litigation, potential liability and the imposition of penalties. Location Kent, WA distribution locations. As of PART I 17PART II 18202238 3971727274PART III 7474747474PART IV 757678Item 1. Business more than 5060 countries. Starbucks Corporation was formedFormed in 1985, and itsStarbucks Corporation’s common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SBUX.” Starbucks purchasesWe purchase and roastsroast high-quality whole bean coffees and sells them,that we sell, along with handcrafted coffee, tea and teaother beverages and a variety of fresh food items, through company-operated retail stores. We also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed retail stores, grocery and through certain of our licensees and equity investees, we produce and sell a variety of ready-to-drink beverages. All channels outside the company-operated retail stores are collectively known as specialty operations.national foodservice accounts. In addition to our flagship Starbucks brand, our portfolio also includes brands such as Tazo® Tea, Seattle’s Best Coffee®, and Starbucks VIA® Ready Brew.Brew, Starbucks Refreshers™ beverages, Evolution Fresh™, La Boulange bakery brand and the Verismo™ System by Starbucks.plan to continueare continuing the disciplined expansion of our retail and licensedglobal store base, primarily focused on growth in countries outside of the US.base. In addition, by leveraging the experience gained through our traditional store model, we are offeringcontinue to offer consumers new coffee products in multiplea variety of forms, across new categories, and through diverse channels. Starbucks Global Responsibility strategy and commitments related to coffee and the communities we do business in, as well as our focus on being an employer of choice, are also key complements to our business strategies.October 3, 2010September 30, 2012 (“fiscal 2010”2012”), Starbucks Corporation (together with its subsidiaries) is referred to as “Starbucks,” the “Company,” “we,” “us” or “our”.Starbucks has threesegments: United Statessegments to align with the three-region leadership and organizational structure of our retail business that took effect at the beginning of fiscal 2012.US”CAP”),. Our chief executive officer, who is our chief operating decision maker, manages these businesses, evaluates financial results, and makes key operating decisions based on the new organizational structure. Accordingly, beginning with the first quarter of fiscal 2012, we revised our reportable operating segments from 1) US, 2) International, and 3) Global Consumer Products Group (“CPG”).to the following four reportable segments: 1) Americas, 2) EMEA, 3) CAP, and 4) Global Consumer Products Group. In the fourth fiscalsecond quarter of 2010,fiscal 2012, we changed the composition ofrenamed our reportable segments by creatingGlobal Consumer Products Group segment “Channel Development.” Segment revenues as a Seattle’s Best Coffee operating segment and reporting it with our unallocated corporate expenses and Digital Ventures in “Other”. Financial information for Seattle’s Best Coffee was previously reported within the US, International, and CPG segments. This change reflects the culmination of internal management and reporting realignments and the expected development of the Seattle’s Best Coffee business. Segment information for all prior periods presented has been revised to reflect this change. Each of the segments provided the following percentage of total net revenues for fiscal year fiscal 2010: US (71%2012 were as follows: Americas (75%), International (21%EMEA (9%), CPG (7%CAP (5%), and Other (1%Channel Development (10%).USAmericas, EMEA, and InternationalCAP segments include both include company-operated retail stores and certain componentslicensed stores. Our Americas segment is our most mature business and has achieved significant scale. Certain markets within EMEA and CAP operations are in the early stages of specialtydevelopment and require a more extensive support organization, relative to the current levels of revenue and operating income, than the Americas operations. Specialty operations within the USThe Americas and EMEA segments also include licensed retail stores. International specialty operations include retail store licensing operations in nearly 40 countries and foodservice accounts, primarily in Canada and the United Kingdom (“UK”).UK. Our International segment’s largest markets, based on numberAmericas segment also includes the retail and wholesale activities of company-operated and licensed retail stores, are Canada, Japan andBay Bread, LLC (doing business as La Boulange), which was acquired in the UK. The CPGfourth quarter of fiscal 2012.packagedwhole bean and ground coffees, premium Tazo® teas, Starbucks VIA® Ready Brew, Starbucks® coffee and tea, Starbucks VIATazo® Ready Brew tea K-Cup® portion packs, a variety of ready-to-drink beverages, such as Starbucks Refreshers™ beverages, and other branded products sold worldwide through channels such as grocery stores, warehouse clubs, and convenience stores, and US foodservice accounts. CPG operates a significant portionits business through licensing arrangements and a joint venture with a large consumer products business partner. Thisthe operating model leverages the business partners’ existing infrastructures and, as a result, our CPG segment reflects relatively lower revenues, a modest cost structure, and a resulting higher operating margin, compared to Starbucks US and International reporting segments, which consist primarilysegments. The Other category comprised approximately 1% of retail stores.total net revenues.aboutfor Starbucks reportable operating segments and Other is included in Note 1917 to the consolidated financial statements included in Item 8 of this 10-K.retail stores and our specialty operations. Specialty operations include retail stores, licensed by local business partners,stores, consumer packaged coffeegoods ("CPG") and tea sold through licensees in grocery and warehouse club stores, license arrangements with business partners to use our brands on various products, and arrangements with foodservice companies that service a variety of locations outside our retail store footprint. Retail Store Summary as of October 3, 2010 US As a % of Total
US Stores International As a % of Total
International
Stores Total As a % of
Total Stores 6,707 60 % 2,126 37 % 8,833 52 % 4,424 40 % 3,601 63 % 8,025 48 % 11,131 100 % 5,727 100 % 16,858 100 % Americas EMEA CAP Total Company-operated stores 7,857 61 % 882 47 % 666 20 % 9,405 52 % Licensed stores 5,046 39 % 987 53 % 2,628 80 % 8,661 48 % Total 12,903 100 % 1,869 100 % 3,294 100 % 18,066 100 % Retail Storesretail stores accounted for 84%79% of total net revenues during fiscal 2010.2012. Our retail objective is to be the leading retailer and brand of coffee in each of our target markets by selling the finest quality coffee and related products, and by providing each customer a uniqueStarbucks Experience. TheStarbucks Experienceis built upon superior customer service as well as clean and well-maintained company-operated retail stores that reflect the personalities of the communities in which they operate, thereby building a high degree of customer loyalty.opening stores in new markets, andas well as increasing sales in existing stores, to support our long termlong-term strategic objectives.objective to maintain Starbucks standing as one of the most recognized and respected brands in the world. Store growth in specific existing markets will vary due to many factors, including the maturity of the market.retail store data for the periods indicated: Net Stores Opened
(Closed) During the
Fiscal Year Ended(1) Stores Open as of Oct 3, 2010 Sep 27, 2009 Oct 3, 2010 Sep 27, 2009 (57 ) (474 ) 6,707 6,764 24 44 799 775 (65 ) 2 601 666 29 13 220 191 (2 ) 13 142 144 2 4 133 131 (3 ) 27 231 234 (15 ) 103 2,126 2,141 (72 ) (371 ) 8,833 8,905 Stores Open as of Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011Americas: US 161 (2 ) 6,866 6,705 Canada 42 37 878 836 Chile 6 5 41 35 Brazil 25 5 53 28 Puerto Rico — (2 ) 19 19 Total Americas 234 43 7,857 7,623 EMEA: UK (7 ) 5 593 600 Germany 7 8 157 150 France 5 8 67 62 Switzerland 4 — 50 46 Austria — 2 12 12 Netherlands 1 2 3 2 Total EMEA 10 25 882 872 CAP: China 130 58 408 278 Thailand 14 8 155 141 Singapore 8 8 80 72 Australia 2 (1 ) 23 21 Total CAP 154 73 666 512 Total company-operated 398 141 9,405 9,007 (1)(1) US, 13Americas, 279 and 121100 company-operated stores were opened during 20102012 and 2009,2011, respectively, and 7045 and 59557 stores were closed during 20102012 and 2009,2011, respectively. In EMEA, Internationally, 9727 and 16741 company-operated stores were opened during 20102012 and 2009,2011, respectively, and 11217 and 6416 stores were closed during 20102012 and 2009,2011, respectively. As described in more detail in Management’s DiscussionIn CAP, 161 and Analysis in this 10-K, we took a number of actions in fiscal 200887 company-operated stores were opened during 2012 and 2009 to rationalize the size of our global company-operated store portfolio. Nearly all of the2011, respectively, and 7 and 14 stores related to these actions have beenwere closed as of the end of fiscal 2010.(2)Store data has been adjusted for the fiscal 2010 acquisition of the France and Brazil operations by reclassifying historical information from licensed stores to stores.Starbucks retail stores are typically located in high-traffic, high-visibility locations. Our ability to vary the size and format of our stores allows us to locate them in or near a variety of settings, including downtown and suburban retail centers, office buildings, university campuses, and in select rural and off-highway locations. To provide a greater degree of access and convenience for non-pedestrian customers, we continue to selectively expand development of drive-thru retail stores. and a variety of Starbucks VIA® Ready Brew soluble coffees.coffees, Starbucks® coffee and Tazo® tea K-Cup® portion packs, Starbucks Refreshers™ beverages, juices and bottled water. Starbucks stores also offer a varietyan assortment of fresh food items, including selectionssalads, as well as juices, sodas, and bottled water. We continue to expand the food warming program in the US and Canada, with close to 90 % of the stores in these markets providing warm food items as of the end of fiscal 2010.salads. A focused selection of beverage-making equipment and accessories are also sold in theour stores. Each Starbucks store varies its product mix depending upon the size of the store and its location. InTo complement the in-store experience, our US company-operated Starbucks stores in the US, wealso provide customers free access to wireless internet. Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 75 % 76 % 76 % 19 % 18 % 17 % 4 % 3 % 3 % 2 % 3 % 4 % 100 % 100 % 100 % Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Oct 3,
2010Beverages 75 % 75 % 75 % Food 19 % 19 % 19 % Packaged and single serve coffees 4 % 4 % 4 % Coffee-making equipment and other merchandise 2 % 2 % 2 % Total 100 % 100 % 100 % Cardstored value card program is designed to increase customer loyalty and the frequency of store visits by cardholders. Since January 2010, Starbucks customers in the US have earned free beverages through the My Starbucks Rewards program. Gold Level members earn a free drink after fifteen purchases at participating Starbucks stores. Members also receive free select syrups, milk options and refills on tea or brewed coffee during a store visit. Starbucks Cards are accepted at all company-operated and most licensed stores in North America. The cards are also accepted at a number of international locations.Specialty OperationsDuring fiscal 2010, specialty revenues accounted for 16% of total net revenues. Our specialty operations strive to develop Customers who register their cards in the US, Canada, and certain other countries are enrolled in the My Starbucks brands outsideRewards™ program and can receive various benefits depending on the company-operated retail store environment through a number of channels. Starbucks strategy to reach customers where they work, travel, shop and dine includes establishing and maintaining relationships with prominent third parties that share our values and commitment to quality. These relationships take various forms, including licensing arrangements, foodservice accounts and other initiatives related to our core businesses. In certain situations, Starbucks has an equity ownership interestStars earned in licensee operations.Licensing — Retail storesUS and Internationalour licensed retail stores accounted for 50%9% of specialtytotal revenues in fiscal 2010.2012. In our licensed retail store operations, we leverage the expertise of our local partners and share our operating and store development experience. Licensee partnersLicensees provide improved, and at times the only, access to desirable retail space. Most licensees are prominent retailers with in-depth market knowledge and access. As part of these arrangements, we receive royalties and license fees and sell coffee, tea and related products for resale in licensed locations. Employees working in licensed retail locations are required to follow our detailed store operating procedures and attend training classes similar to those given to employees in company-operated stores. For our Seattle’s Best Coffee brand, we use various forms of licensing, including traditional franchising.retail stores by region and country at fiscal year end 2010as of September 30, 2012 are as follows: 892 137 4,424 525 102 274 315 95 283 168 75 63 117 69 85 66 39 60 47 37 152 2,141 840 5,044 Americas Europe/Middle East/Africa China / Asia Pacific US 4,262 Turkey 171 Japan 965 Mexico 356 UK 168 South Korea 467 Canada 303 United Arab Emirates 99 China 292 Other 125 Spain 78 Taiwan 271 Kuwait 65 Philippines 201 Saudi Arabia 64 Malaysia 134 Russia 60 Indonesia 133 Greece 42 Hong Kong 131 Other 240 New Zealand 34 Total 5,046 Total 987 Total 2,628 US, 166Americas, 351 and 286296 licensed stores were opened during 20102012 and 2009,2011, respectively, and 10681 and 251564 licensed stores were closed during 20102012 and 2009,2011, respectively. Internationally, 335The 564 licensed stores that were closed in the Americas during fiscal 2011 include 475 Seattle’s Best Coffee locations in Borders Bookstores. In EMEA, 139 and 375111 licensed stores were opened during 20102012 and 2009,2011, respectively, and 10038 and 8432 licensed stores were closed during 20102012 and 2009,2011, respectively.Licensing —354 and 264 licensed stores were opened during 2012 and 2011, respectively, and 60 and 71 licensed stores were closed during 2012 and 2011, respectively.coffeeGoodsteaRevenues from licensedinternational sales of packaged coffee and tea comprised 23%as well as a variety of specialty revenues in fiscal 2010. For over ten years through licensing relationships with Kraft Foods Global, Inc., we have sold a selection of Starbucksready-to-drink beverages and Seattle’s Best Coffee branded packaged coffees and Tazo® teas in grocery and warehouse club stores throughout the US and to grocery stores in Canada, the UK and other European countries. Kraft has managed the distribution, marketing, advertising and promotion of these products.We also sell packagedsingle-serve coffee and tea internationally directlyproducts to grocery, warehouse club stores, such as Costco Wholesale Corporation.In the first quarter of fiscal 2011, Starbucks notified Kraft that we are discontinuing our licensing relationships. We intend to work closely with Kraft to ensure an orderly transition.Licensing — Branded productsTheand specialty retail stores. It also includes revenues from licensed branded products accounted for 4% of specialtyproduct sales to and licensing revenues in fiscal 2010. We license the rights tofrom manufacturers that produce and market Starbucks and Seattle’s Best Coffee branded products through several partnerships both domestically and internationally. Significant licensing agreements include:•The North American Coffee Partnership, a joint venture with the Pepsi-Cola Company in which Starbucks is a 50% equity investor, manufactures and markets ready-to-drink beverages, including bottled Frappuccino®agreements. Revenues from sales of consumer packaged goods comprised beverages, Starbucks DoubleShot®, and Seattle’s Best Coffee® ready-to-drink espresso beverages in the US and Canada;•licensing agreements for the manufacturing, marketing and distribution of Starbucks Discoveries®, a ready-to-drink chilled cup coffee beverage, in Japan and South Korea;•a licensing agreement with a partnership formed by Unilever and Pepsi-Cola Company for the manufacturing, marketing and distribution of Starbucks super-premium Tazo® Tea ready-to-drink beverages in the US; and•a licensing agreement with Unilever for the manufacturing, marketing and distribution of Starbucks® super-premium ice cream products in the US.23%4% of total specialtynet revenues in fiscal 2010.2012. We sell Starbucks® and Seattle’s Best Coffee® whole bean and ground coffees, including the Starbucks and Seattle’s Best Coffee brands, as well as a selection of premium Tazo® teas, Starbucks VIA® Ready Brew, and other coffee and tea related products to institutional foodservice companies that service business and industry, education, healthcare, office coffee distributors, hotels, restaurants, airlines and other retailers. We also sell our Seattle’s Best Coffee® through arrangements with national accounts. The majority of the sales in this channel come through national broadline distribution networks with SYSCO Corporation, US FoodserviceTM™, and other distributors.substantial premiumcoffee prices.price. Both the premium and the “C” coffee commodity price depend upon the supply and demand at the time of purchase. Supply and price can be affected by multiple factors in the producing countries, including weather, natural disasters, crop disease, general increase in farm inputs and costs of production, inventory levels and political and economic conditions. Price is also impacted by trading activities in the arabica coffee futures market, including hedge funds and commodity index funds. In addition, green coffee prices have been affected in the past, and may be affected in the future, by the actions of certain organizations and associations that have historically attempted to influence prices of green coffee through agreements establishing export quotas or by restricting coffee supplies.To help ensure sustainability and future supply of high-quality green coffees and to reinforce our leadership role in the coffee industry, Starbucks operates Farmer Support Centers in Costa Rica and Rwanda. The Farmer Support Centers are staffed with agronomists and sustainability experts who work with coffee farming communities to promote best practices in coffee production designed to improve both coffee quality and yields.October 3, 2010, we had a totalSeptember 30, 2012, approximately $125 million of $557 million in purchase commitments,our price-to-be-fixed contracts were effectively fixed through the use of which $401 million represented the estimated cost of price-to-be-fixedfutures contracts. All price-to-be-fixed contracts as of October 3, 2010September 30, 2012 were at the Company’s option to fix the base “C” coffee commodity price component. Total purchase commitments, together with existing inventory, are expected to provide an adequate supply of green coffee through fiscal 2011.retail stores. Starbucks highest volumes of dairy purchases are inFor our largest markets, the US, Canada and the UK. For these markets,UK, we purchase substantially all of our fluid milk requirements from sixeight dairy suppliers. We believe, based on relationships established with these suppliers, that the risk of non-delivery of sufficient fluid milk to support these retail businessesour stores is remote.retail stores are obtained throughinclude Evolution Fresh™ juices and a number of different channels. Beverage ingredients other than coffee and milk, including leaf teas as well as our selection of ready-to-drink beverages that are purchased from several specialty suppliers, usually under long-term supply contracts. Food products, such as fresh pastries, breakfast sandwiches and lunch items, are purchased from national, regional and local sources. We also purchase a broad range of paper and plastic products, such as cups and cutlery, from several companies to support the needs of our retail stores as well as our manufacturing and distribution operations. We believe, based on relationships established with these suppliers and manufacturers, that the risk of non-delivery of these items is remote.marketsmarkets.in the US ready-to-drink coffee beverage market.Our whole bean coffees, ground packaged coffees, Tazo® teas, and Starbucks VIA® Ready Brewtea products sold through our Channel Development segment compete directly against specialty coffees and teas sold through supermarkets, club stores and specialty retailers. Our whole bean coffees, coffee beverages,retailers and Starbucks VIA® Ready Brew compete indirectly against all other coffees and teas on the market. Starbucks specialty operations face significant competition from established wholesale and mail order suppliers, some of whom have greater financial and marketing resources than we do.many additional countries throughout the world. Some of our trademarks, including Starbucks,®, the Starbucks® logo, Seattle’s Best Coffee,®, Frappuccino,®, Starbucks VIA® Ready Brew and Tazo® are of material importance. The duration of trademark registrations varies from country to country. However, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.Research and DevelopmentOur research and development teams are responsible for the technical development of food and beverage products and new equipment. We spent approximately $9 million, $7 million and $7 million during fiscal 2010, 2009 and 2008, respectively, on technical research and development activities, in addition to customary product testing and product and process improvements in all areas of its business.the Starbucks Cards are recognized upon redemption and not when purchased, seasonal fluctuations on the consolidated statements of earnings are much less pronounced. Quarterly results can also be affected by the timing of the opening of new stores and the closing of existing stores. For these reasons, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.Employees137,000160,000 people worldwide as of October 3, 2010.September 30, 2012. In the US, Starbucks employed approximately 107,000120,000 people, with 101,000113,000 in company-operated retail stores and the remainder in administrative and regional offices, andsupport facilities, store development, and roasting and warehousing operations. Approximately 30,00040,000 employees were employed outside of the US, with 29,00038,000 in company-operated retail stores and the remainder in regional support facilities and roasting and warehousing operations. The number of Starbucks employees represented by unions is not significant. We believe our current relations with our employees are good. Age 5759 chairman, president and chief executive officer 5153 president, Starbucks Coffee Americas and US 5052 president, Starbucks Coffee InternationalChina and Asia Pacific 4648 president, Global Consumer ProductsChannel Development and FoodserviceEmerging Brands 4244 president, Seattle’s BestStarbucks Coffee EMEAArthur Rubinfeld 57president, Global DevelopmentAnnie Young-Scrivner41chief marketing officerTroy Alstead4749 chief financial officer and chief administrative officer Paula E. Boggs 5155 executive vice president, general counsel and secretary Peter D. Gibbons49executive vice president, Global Supply Chain OperationsKalen Holmes44executive vice president, Partner ResourcesStephen Gillett34executive vice president, chief information officer and GM Digital VenturesVivek Varma44executive vice president, Public Affairs2008.2008 to October 2011, Mr. Burrows served as president, Starbucks Coffee US. He served as president, Europe, Middle East and Africa (EMEA) from April 2006 to March 2008. He served as vice president and managing director, UK prior to April 2006. Prior to joining Starbucks, Mr. Burrows served in various management positions with Habitat Designs Limited, a furniture and house wareshousewares retailer.InternationalChina and Asia Pacific since October 2011. From December 2009.2009 to October 2011, he served as president, Starbucks Coffee International. Mr. Culver served as executive vice president; president, Global Consumer Products, FoodserviceSeattle’sSeattle's Best Coffee from February 2009 to September 2009, and then as president, Global Consumer Products and Foodservice from October 2009 to November 2009. He previously served as senior vice president; president, Starbucks Coffee Asia Pacific from January 2007 to February 2009, and vice president; general manager, Foodservice from August 2002 to January 2007.the president, Seattle’sStarbucks Coffee EMEA since October 2011. From September 2009 to October 2011, she served as president, Seattle's Best Coffee since September 2009.Coffee. Ms. Gass served as senior vice president, Marketing and Category from July 2008 to November 2008, and then as executive vice president, Marketing and Category from December 2008 to September 2009. Ms. Gass previously served as senior vice president, Global Strategy, Office of the ceo from January 2008 to July 2008, senior vice president, Global Product and Brand from August 2007 to January 2008 and senior vice president, and U.S. Category Management from May 2004 to August 2007. Ms. Gass served in a number of other positions with Starbucks prior to 2004.Arthur Rubinfeldrejoined Starbucks in February 2008 as president, Global Development. Mr. Rubinfeld also serves as president of AIRVISION LLC, an advisory firm specializing in brand positioning that he founded in June 2002. From March 2006 to February 2008, Mr. Rubinfeld served as executive vice president, Corporate Strategy and chief development officer at Potbelly Sandwich Works. Prior to 2002, Mr. Rubinfeld held several positions in Store Development at Starbucks.Annie Young-Scrivnerjoined Starbucks in September 2009 as chief marketing officer. Prior to joining Starbucks, Ms. Young-Scrivner served as Chief Marketing Officer and Vice President of Sales for Quaker Foods and Snacks, a division of PepsiCo, Inc. From October 2006 to November 2008, she served as Region President of PepsiCo Foods for Greater China. From 2005 to 2006, Ms. Young-Scrivner served as Vice President of Sales for PepsiCo Beverages in Greater China. She also served in a number of other leadership roles at PepsiCo prior to 2005.Paula E. BoggsLucy Lee Helmjoined Starbucks in September 20021999 and has served as executive vice president, general counsel and secretary.secretary since May 2012. She served as senior vice president and deputy general counsel from October 2007 to April 2012 and served as interim general counsel and secretary from April 2012 to May 2012. Ms. Helm previously served as vice president, assistant general counsel from June 2002 to September 2007 and as director, corporate counsel from September 1999 to May 2002. During her tenure at Starbucks, Ms. Helm has led various teams of the Starbucks legal department, including the Litigation and Brand protection team, the Global Business (Commercial) team and the Litigation and Employment team. Prior to joining Starbucks, Ms. Boggs served as vice president, legal, for products, operations and information technology at Dell Computer Corporation from 1997 to 2002. From 1995 to 1997, Ms. BoggsHelm was a partner withprincipal at the Seattle law firm of Preston Gates & Ellis (now K&L Gates). Ms. Boggs servedRiddell Williams P.S. from 1990 to 1999, where she was a trial lawyer specializing in several roles at the Pentagon, White Housecommercial, insurance coverage and US Department of Justice between 1984 and 1995.environmental litigation.Peter D. Gibbonsjoined Starbucks in February 2007 and has served as executive vice president, Global Supply Chain Operations since July 2008. From February 2007 to July 2008, Mr. Gibbons served as senior vice president, Global Manufacturing Operations. From March 1999 to February 2007, Mr. Gibbons was executive vice president, Supply Chain, of The Glidden Company, a subsidiary of ICI Americas, Inc.Kalen Holmesjoined Starbucks in November 2009 as executive vice president, Partner Resources. Prior to joining Starbucks, Ms. Holmes served as HR General Manager for the Entertainment and Devices division at Microsoft Corporation, a worldwide provider of software, services and solutions, from December 2007 to November 2009. From December 2005 to December 2007, Ms. Holmes was HR General Manager for Microsoft’s Server and Tools Division. From September 2003 to December 2005, she served as HR General Manager for Microsoft’s Corporate Staff business unit.Stephen Gillett joined Starbucks in May 2008 and has served as executive vice president, chief information officer and GM Digital Ventures since May 2010. From May 2008 to May 2010, Mr. Gillett served as senior vice president, chief information officer and general manager, Digital Ventures. Prior to joining Starbucks, Mr. Gillett was CIO and SVP, Engineering for Corbis, a digital media company, from May 2006 to May 2008. From December 2004 to May 2006, Mr. Gillett was Senior Director Engineering with Yahoo!, an internet destination and online media company.Vivek Varma joined Starbucks in September of 2008, and has served as executive vice president, Public Affairs since May 2010. From September 2008 to May 2010, Mr. Varma served as senior vice president, Public Affairs. Prior to joining Starbucks, Mr. Varma was general manager of communications and public relations for the Platforms and Services Division of Microsoft Corporation, a worldwide provider of software, services and solutions, from April 2006 to September 2008. From January 2002 to April 2006, Mr. Varma served in a number of other positions with Microsoft, including as senior director of corporate communications and public relations in Microsoft’s Corporate Marketing Group.http://investor.starbucks.com or at www.sec.gov as soon as reasonably practicable after these materials are filed with or furnished to the SEC. Our corporate governance policies, code of ethics and Board committee charters and policies are also posted on the Investor Relations section of Starbucks website at http://investor.starbucks.com. The information on our website is not part of this or any other report Starbucks files with, or furnishes to, the SEC.Item 1A. The risks and factors listed below, however, are not exhaustive. Other sections of this 10-K include additional factors that could materially and adversely impact our business, financial condition and results of operations. Moreover, we operate in a very competitive and rapidly changing environment. New factors emerge from time to time and it is not possible to predict the impact of all these factors on our business, financial condition or results of operation.•Our financial condition and results of operations are sensitive to, and may be adversely affected by, a number of factors, many of which are largely outside our control.high quality high-quality arabica coffee;workers’workers' compensation insurance costs;litigation, particularly class actionadverse outcomes of current or future litigation; oropenings; anddisasters.•Economic conditions in the US and certain International markets could adversely affect our business and financial results.•We may not be successful in implementing important strategic initiatives, which may have an adverse impact on our business and financial results.•successfully leveraging Starbucks brand outside the company-operated store base, including an increased focus on international licensed stores, Starbucks VIA® Ready Brew, and the Seattle’s Best Coffee brand;acceleratingcontinuing to accelerate the growth of our global consumer products business as we transition from our licensing relationships with Kraft Foods Global, Inc.;and• partners.•We face intense competition in each of our channels and markets, which could lead to reduced profitability.CPGChannel Development segment. (See alsodiscussion under “Competition” in Item 1).financial performance of our Americas operating segment. •We are highly dependent on the financial performance of our US operating segment.USAmericas operating segment, whichas it comprised approximately three-quarters75% of consolidated total net revenues in fiscal 2010. Although the US segment’s operating results have improved significantly, primarily due to our restructuring efforts (substantially completed in 2009) and to improved revenue trends, if the operational improvements are not sustained going forward and/or the2012. If revenue trends slow or decline, our business and financial results could be adversely affected.•We are increasingly dependent on the success of our International operating segment in order to achieve our growth targets.the Internationalour EMEA and CAP operating segment.segments. Some or all of our Internationalinternational market business units (“MBUs”), which we generally define by the countries or regions in which they operate, may not be successful in their operations or in achieving expected growth, which ultimately requires achieving consistent, stable net revenues and earnings. The performance of our International operating segmentthese international operations may be adversely affected by economic downturns in one or more of our large MBUs. In particular, our Canada, Japan, UK, and UKChina MBUs account for a significant portion of the net revenue and earnings of our International operating segmentEMEA and CAP segments and a decline in the performance of any of these MBUs could have a material adverse impact on the results of operations of our International operating segment.International MBUsthe EMEA and CAP segments are different than those affecting our US stores and licensees. Tastes naturally vary by region, and consumers in new international markets into which we and our licensees expandsome MBUs may not embrace our products to the same extent as consumers in our existingthe US or other international markets. Occupancy costs and store operating expenses are also sometimescan be higher internationally than in the US due to higher rents for prime store locations or costs of compliance with country-specific regulatory requirements. Because many of our Internationalinternational operations are in an early phase of development, operating expenses as a percentage of related revenues are often higher compared to US operations.Internationalinternational operations are also subject to additional inherent risks of conducting business abroad, such as:fluctuations;restrictions;restrictions due to current or new US and international regulations;differences; andeitherany of which could keep us from meeting annual store opening targets and, in turn, negatively impact net revenues, operating income and earnings per share.•Increases in the cost of high-quality arabica coffee beans or other commodities or decreases in the availability of high quality arabica coffee beans or other commodities could have an adverse impact on our business and financial results.in fiscal 2010,although coffee prices have come down from their near-record highs of 2011, they are still above the base “C”historical average price of coffee commodity price increased markedly.and may again increase significantly due to factors described below. The high-quality arabica coffee of the quality we seek tends to trade on a negotiated basis at a substantial premium above the “C” price. This premium depends upon the supply and demand at the time of purchase and the amount of the premium can vary significantly. Increases in the “C” coffee commodity price do increase the price of high-quality arabica coffee and also impact our ability to enter into fixed-price purchase commitments. We frequently enter into supply contracts whereby the quality, quantity, delivery period, and other negotiated terms are agreed upon, but the date, and therefore price, at which the base “C” coffee commodity price component will be fixed has not yet been established. These are known as price-to-be-fixed contracts. The supply and price of coffee we purchase can also be affected by multiple factors in the producing countries, including weather, natural disasters, crop disease, general increase in farm inputs and costs of production, inventory levels and political and economic conditions, as well as the actions of certain organizations and associations that have historically attempted to influence prices of green coffee through agreements establishing export quotas or by restricting coffee supplies. Speculative trading in coffee commodities can also influence coffee prices. Because of the significance of coffee beans to our operations, combined with our ability to only partially mitigate future price risk through purchasing practices (see discussion of “Product Supply” in Item 1 above) and hedging activities, increases in the cost of high-quality arabica coffee beans could have an adverse impact on our profitability. In addition, if we are not able to purchase sufficient quantities of green coffee due to any of the above factors or to a worldwide or regional shortage, we may not be able to fulfill the demand for our coffee, which could have an adverse impact on our profitability.•Failure to meet market expectations for our financial performance will likely adversely affect the market price and volatility of our stock.Failure to meet market expectations going forward, particularly with respect to operating margins, earnings per share, comparable store sales, and net revenues, will likely result in a decline and/or increased volatility inmarket pricevalue of our stock. In addition, pricebrands and volume fluctuations in the stock market asfailure to preserve their value could have a whole may affect the market price of our stock in ways that may be unrelated tonegative impact on our financial performance.•A regional or global health pandemic could severely affect our business.A health pandemic is a disease outbreak that spreads rapidly and widely by infection and affects many individuals in an area or population at the same time. If a regional or global health pandemic were to occur, depending upon its duration and severity, our business could be severely affected. Customers might avoid public gathering places, such as our stores, in the event of a health pandemic, and governments might limit or ban public gatherings to halt or delay the spread of disease. A regional or global health pandemic might also adversely impact our business by disrupting or delaying production and delivery of materials and products in the supply chain and by causing staffing shortages in our stores. The impact of a health pandemic on us might be disproportionately greater than on other companies that depend less on the gathering of people together for the sale, use or license of their products and services.•Our success depends substantially on the value of our brands.value.value and have a negative impact on our financial results. Consumer demand for our products and our brand equity could diminish significantly if we or our licensees fail to preserve the quality of our products, are perceived to act in an unethical or socially irresponsible manner or fail to deliver a consistently positive consumer experience in each of our markets.•Our business depends in large part on the success of our business partners and suppliers, and our brand and reputation may be harmed by actions taken by third parties that are outside of our control.Internationalinternational markets. Licensees are often authorized to use our logos and provide branded beverages, food and other products directly to customers. We provide training and support to, and monitor the operations of, certain of these business partners, but the product quality and service they deliver may be diminished by any number of factors beyond our control, including financial pressures. We believe customers expect the same quality of products and service from our licensees as they do from us and we strive to ensure customers have the same experience whether they visit a company-operated or licensed store. Any shortcoming of a Starbucks business partner, particularly an issue affecting the quality of the service experience, or the safety of beverages or food or compliance with laws and regulations, may be attributed by customers to us, thus damaging our reputation and brand value and potentially affecting our results of operations.productsfood and in particular, our coffee and teabeverage products are sourced from a wide variety of domestic and international business partners in our supply chain operations.operations, and in certain cases are produced or sourced by our licensees directly. We rely on these suppliers and vendors to provide high quality products and to comply with applicable laws. Our ability to find qualified suppliers and vendors who meet our standards and supply products in a timely and efficient manner is a significant challenge, especially with respect to goods sourced from outside the US. A vendorvendor's or supplier’ssupplier's failure to meet our standards, provide products in a timely and efficient manner, and comply with applicable laws is beyond our control. These issues could negatively impact our business and profitability.•The loss of key personnel or difficulties recruiting and retaining qualified personnel could adversely impact our business and financial results.sufficientsufficiently, both to maintain our current business and to execute our strategic initiatives, some of which involve ongoing expansion in business channels outside of our traditional company-operated store model. Our success also depends substantially on the contributions and abilities of our retail store employees whowhom we rely on to give customers a superior in-store experience. Accordingly, our performance depends on our ability to recruit and retain high quality employees to work in and manage our stores.stores, both domestically and internationally. If we are unable to recruit, retain and motivate employees sufficientsufficiently to maintain our current business and support our projected growth, our business and financial performance may be adversely affected.•Adverse public or medical opinions about the health effects of consuming our products, as well as reports of incidents involving food-borne illnesses or food tampering, whether or not accurate, could harm our business.low in caffeinecoffee-free and have reduced calories, an unfavorable report on the health effects of caffeine or other compounds present in our products, or negative publicity or litigation arising from certain health risks could significantly reduce the demand for our beverages and food products.tamperingcontamination, either during manufacturing, packaging or preparation, have in the past severely injured the reputations of companies in the food processing, grocery and quick-service restaurant sectors and could in the future affect us as well. Any report linking us to the use of unclean water, food-borne illnesses, food tampering or food tamperingcontamination could damage our brand value and severely hurt sales of our beverages and food products, and possibly lead to product liability claims.claims, litigation (including class actions) or damages. Clean water is critical to the preparation of specialty coffee and tea beverages and our ability to ensure a clean water supply to our stores can be limited, particularly in some international locations. If customers become ill from food-borne illnesses, tampering or contamination, we could also be forced to temporarily close some stores. In addition, instances of food-borne illnesses, food tampering or food tampering,contamination, even those occurring solely at the restaurants or stores of competitors, could, by resulting in negative publicity about the foodservice industry, adversely affect our sales on a regional or global basis. A decrease in customer traffic as a result of these health concerns or negative publicity, or as a result of a temporary closure of any of our stores, as well adverse results of claims or litigation, could materially harm our business and results of operations.•Effectively managing growth is challenging and places significant strain on our management and employees and our operational, financial, and other resources.global consumer productsChannel Development business, and expand into new markets internationally where we must balance the need for flexibility and a degree of autonomy for local management against the need for consistency with our goals, philosophy and standards. Growth can make it increasingly difficult to ensure a consistent supply of high qualityhigh-quality raw materials, to locate and hire sufficient numbers of key employees, to meet our financial targets, to maintain an effective system of internal controls for a globally dispersed•If we may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses.From time to time we may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses.•We rely heavily on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our ability to effectively operate our business. point-of-sale processing in our stores, Starbucks Cards, online business and various other processes and transactions. Our ability to effectively manage our business and coordinate the production, distribution and sale of our products depends significantly on the reliability, integrity and capacity of these systems. We also rely on third party providers for some of these information technology systems and support. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, or a breach in security of these systems could cause delays inmaterial negative impacts to our product sales, and reducedthe efficiency of our operations and significantour financial results. Significant capital investments and other expenditures could be required to remediateremedy the problem.•Failure to comply with applicable laws and regulations could harm our business and financial results. tax requirements, including those imposed by the SEC, NASDAQ, and foreign countries, as well as applicable trade, labor, healthcare, privacy, food, anti-bribery and corruption and merchandise laws. The complexity of the regulatory environment in which we operate and the related cost of compliance are both increasing due to additional or changing legal and regulatory requirements, our ongoing expansion into new markets and new channels, together with the fact that foreign laws occasionally conflict with domestic laws. FailureIn addition to potential damage to our reputation and brand, failure to comply with the various laws and regulations as well as changes in laws and regulations or the manner in which they are interpreted or applied, may result in damage to our reputation, civil and criminal liability, damages, fines and penalties, increased cost of regulatory compliance and restatements of our financial statements.•Deterioration in operating performance could lead to increased leverage, which may harm our financial condition and results of operations.Any reduction in cash flow relative to the level of our financial obligations would result in an increase in leverage. Any increase in leverage could lead to deterioration in our credit ratings, which could limit the availability of additional financing and increase the cost of obtaining financing. In addition, an increase in leverage could raise the likelihood of a financial covenant breach which in turn could limit our access to existing funding under our credit facility.Our ability to satisfy our operating lease obligations and make payments of principal and interest on our indebtedness depends on our future performance. Should we experience deterioration in operating performance, we will have less cash flow available to meet these obligations. In addition, if such deterioration were to lead to theclosure of underperforming stores, we would need to fund the costs of terminating store leases. If we are unable to generate sufficient cash flow from operations in the future to satisfy these financial obligations, we may be required to, among other things:seek additional financing in the debt or equity markets;refinance or restructure all or a portion of our indebtedness;sell selected assets;discontinue our common stock dividend; orreduce or delay planned capital or operating expenditures.Such measures might not be sufficient to enable us to satisfy our financial obligations. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms.Item 1B. Unresolved Staff Comments Item 2. Properties distributioncorporate administrative operations, serving all segments, are as follows:Approximate Size
in Square Feet Purpose Rancho Cucamonga, CA Owned or265,000Leased PurposeAuburn, WA384,000 Roasting, distribution and warehouse York County, PA 491,000748,000 Roasting, distribution and warehouse Sandy Run, SC 117,000 LeasedRoasting and distributionAuburn, WA 351,000 Warehouse and distribution 332,000 Owned Roasting and distribution Kent,Seattle, WA1,000,000 215,000LeasedWarehouseCorporate administrativeRenton, WA97,000 125,000LeasedWarehouseYork County, PA450,000Owned Roasting and distribution York County, PA142,000 298,000OwnedWarehouseCarson Valley, NV360,000OwnedRoasting and distributionSandy Run, SC117,000OwnedRoasting and distributionPortland, OR68,000LeasedWarehouseAtlanta, GA32,000Leased Warehouse and distribution Basildon, United Kingdom142,000LeasedWarehouse and distributionAmsterdam, Netherlands97,000LeasedRoasting and distributionapproximately 1.0 million square feetthe majority of office space in Seattle, Washington for corporate administrative purposes. Also in Seattle, Washington, we own a 205,000 square foot office building (previously occupied by us, but now leased to other parties)our warehousing and an adjacent 285,000 square foot office building, which is currently being marketed for lease.October 3, 2010,more than 8,800approximately 9,400 company-operated retail stores, almost all of which are leased. We also lease space in various locations worldwide for regional, district and other administrative offices, training facilities and storage.Item 3. Legal Proceedings See discussionLegal Proceedingsfiscal 2011, Starbucks notified Kraft Foods Global, Inc. (“Kraft”) that we were discontinuing our distribution arrangement with Kraft on March 1, 2011 due to material breaches by Kraft of its obligations under the Supply and License Agreement between the Company and Kraft, dated March 29, 2004 (the “Agreement”), which defined the main distribution arrangement between the parties. Through our arrangement with Kraft, Starbucks sold a selection of Starbucks and Seattle's Best Coffee branded packaged coffees in Note grocery and warehouse club stores throughout the US, and to grocery stores in Canada, the UK andstatements included in Item 8position, results of this Report.operations or cash flows.Item 4. (Removed and Reserved)Mine Safety Disclosures
2010: Fourth Quarter Third Quarter Second Quarter First Quarter 2009: Fourth Quarter Third Quarter Second Quarter First Quarter Period(1) June 28, 2010 — July 25, 2010 July 26, 2010 — August 22, 2010 August 23, 2010 — October 3, 2010 Total Starbucks Corporation S&P 500 NASDAQ Composite S&P Consumer Discretionary As of and for the Fiscal Year Ended(1) RESULTS OF OPERATIONS Net revenues: Company-operated retail Specialty: Licensing Foodservice and other Total specialty Total net revenues Operating income(2) Earnings before cumulative effect of change in accounting principle Cumulative effect of accounting change for asset retirement obligations, net of taxes Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per common share before cumulative effect of change in accounting principle — diluted (“EPS”) Cumulative effect of accounting change for asset retirement obligations, net of taxes — per common share EPS — diluted Cash dividends declared per share Net cash provided by operating activities Capital expenditures (additions to property, plant and equipment) BALANCE SHEET Total assets Short-term borrowings Long-term debt (including current portion) Shareholders’ equity STORE INFORMATION Percentage change in comparable store sales(3) United States International Consolidated Net stores opened (closed) during the year: United States Company — operated stores Licensed stores International Company — operated stores Licensed stores Total As of and for the Fiscal Year Ended(1) Stores open at year end: United States Company-operated stores Licensed stores International Company-operated stores Licensed stores TotalItem 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities closing sale prices per share of Starbucks common stock as reported by NASDAQ for each quarter during the last two fiscal years and the quarterly cash dividend declared per share of our common stock during the periods indicated: High Low Cash Dividends
Declared $ 26.39 $ 22.82 $ 0.13 28.09 24.24 0.13 25.56 21.70 0.10 23.74 18.74 0.00 $ 20.76 $ 12.97 $ 0.00 15.30 11.11 0.00 12.39 8.27 0.00 14.87 7.17 0.00 High Low Cash Dividends
Declared2012: Fourth Quarter $ 54.28 $ 43.04 $ 0.21 Third Quarter 62.00 51.03 0.17 Second Quarter 56.55 45.28 0.17 First Quarter 46.50 35.12 0.17 2011: Fourth Quarter $ 42.00 $ 33.72 $ 0.17 Third Quarter 40.26 34.61 0.13 Second Quarter 38.21 30.75 0.13 First Quarter 33.15 25.37 0.13 12, 2010,9, 2012, we had approximately 21,70018,500 shareholders of record. This does not include persons whose stock is in nominee or “street name” accounts through brokers.14-week periodquarter ended October 3, 2010: Total
Number of
Shares
Purchased Average
Price
Paid per
Share Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs Maximum
Number of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs(2) 4,487,620 $ 24.97 4,487,620 10,095,392 0 0 0 10,095,392 0 0 0 10,095,392 4,487,620 $ 24.97 4,487,620 Total
Number of
Shares
Purchased Average
Price
Paid per
Share Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs Maximum
Number of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs (2)Period(1) July 2, 2012 — July 29, 2012 — $ — — 24,015,356 July 30, 2012 — August 26, 2012 5,265,260 46.44 5,265,260 18,750,096 August 27, 2012 — September 30, 2012 6,622,320 50.27 6,622,320 12,127,776 Total 11,887,580 $ 48.58 11,887,580 (1)(1) 2010.2012.(2)(2) theour Board of Directors. The Board of Directors initially authorizedOn March 24, 2010 we publicly announced the repurchase of 25 million shares of common stock (publicly announced on May 3, 2007) and later authorized additional repurchasesauthorization of up to 5 millionan additional shares (publicly announced on January 30, 2008) and 15 million shares, (publiclyon November 15, 2010 we publicly announced March 24, 2010).the authorization of up to an additional 10 million shares, and on November 3, 2011 we publicly announced the authorization of up to an additional 20 million shares. These authorizations have no expiration date. 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 programs.October 2, 2005September 30, 2007 through October 3, 2010,September 30, 2012, relative to the performance of the Standard & Poor’s 500 Index, the NASDAQ Composite Index, and the Standard & Poor’s 500 Consumer Discretionary Sector, a peer group that includes Starbucks. All indices shown in the graph have been reset to a base of 100 as of October 2, 2005,September 30, 2007, and assume an investment of $100 on that date and the reinvestment of dividends paid since that date. The stock price performance shown in the graph is not necessarily indicative of future price performance.
10/2/05 10/1/06 9/30/07 9/28/08 9/27/09 10/3/10 $100.00 $135.93 $104.59 $59.72 $79.16 $104.52 $100.00 $110.79 $129.01 $100.66 $93.70 $103.22 $100.00 $106.39 $127.37 $96.70 $100.00 $112.86 $100.00 $108.85 $115.75 $89.81 $89.76 $110.97 
9/30/2007 9/28/2008 9/27/2009 10/3/2010 10/2/2011 9/30/2012 Starbucks Corporation 100.00 57.10 75.69 99.93 145.94 201.33 S&P 500 100.00 78.02 72.63 80.01 80.93 105.37 NASDAQ Composite 100.00 69.59 74.90 84.99 86.87 110.79 S&P Consumer Discretionary 100.00 77.59 77.55 95.87 101.79 139.08 Item 6. Selected Financial Data In millions, except earnings per share and store information Oct 3,
2010
(53 Wks) Sep 27,
2009
(52 Wks) Sep 28,
2008
(52 Wks) Sep 30,
2007
(52 Wks) Oct 1,
2006
(52 Wks) $ 8,963.5 $ 8,180.1 $ 8,771.9 $ 7,998.3 $ 6,583.1 1,340.9 1,222.3 1,171.6 1,026.3 860.6 403.0 372.2 439.5 386.9 343.2 1,743.9 1,594.5 1,611.1 1,413.2 1,203.8 $ 10,707.4 $ 9,774.6 $ 10,383.0 $ 9,411.5 $ 7,786.9 $ 1,419.4 $ 562.0 $ 503.9 $ 1,053.9 $ 894.0 948.3 391.5 311.7 673.7 582.5 0.0 0.0 0.0 0.0 17.2 $ 948.3 $ 391.5 $ 311.7 $ 673.7 $ 565.3 2.7 0.7 (3.8 ) 1.1 1.0 $ 945.6 $ 390.8 $ 315.5 $ 672.6 $ 564.3 $ 1.24 $ 0.52 $ 0.43 $ 0.87 $ 0.73 0.00 0.00 0.00 0.00 0.02 $ 1.24 $ 0.52 $ 0.43 $ 0.87 $ 0.71 $ 0.36 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 1,704.9 $ 1,389.0 $ 1,258.7 $ 1,331.2 $ 1,131.6 $ 440.7 $ 445.6 $ 984.5 $ 1,080.3 $ 771.2 $ 6,385.9 $ 5,576.8 $ 5,672.6 $ 5,343.9 $ 4,428.9 0.0 0.0 713.0 710.3 700.0 549.4 549.5 550.3 550.9 2.7 $ 3,674.7 $ 3,045.7 $ 2,490.9 $ 2,284.1 $ 2,228.5 7 % (6 )% (5 )% 4 % 7 % 6 % (2 )% 2 % 7 % 8 % 7 % (6 )% (3 )% 5 % 7 % �� (57 ) (474 ) 445 1,065 810 60 35 438 723 733 (15 ) 103 253 302 250 235 291 533 481 406 223 (45 ) 1,669 2,571 2,199 Oct 3,
2010
(53 Wks) Sep 27,
2009
(52 Wks) Sep 28,
2008
(52 Wks) Sep 30,
2007
(52 Wks) Oct 1,
2006
(52 Wks) 6,707 6,764 7,238 6,793 5,728 4,424 4,364 4,329 3,891 3,168 2,126 2,141 2,038 1,785 1,483 3,601 3,366 3,075 2,542 2,061 16,858 16,635 16,680 15,011 12,440 Results of Operations Net revenues: Company-operated stores $ 10,534.5 $ 9,632.4 $ 8,963.5 $ 8,180.1 $ 8,771.9 1,210.3 1,007.5 875.2 795.0 779.0 1,554.7 1,060.5 868.7 799.5 832.1 Total net revenues $ 13,299.5 $ 11,700.4 $ 10,707.4 $ 9,774.6 $ 10,383.0 $ 1,997.4 $ 1,728.5 $ 1,419.4 $ 562.0 $ 503.9 Net earnings including noncontrolling interests 1,384.7 1,248.0 948.3 391.5 311.7 Net earnings (loss) attributable to noncontrolling interests 0.9 2.3 2.7 0.7 (3.8 ) Net earnings attributable to Starbucks 1,383.8 1,245.7 945.6 390.8 315.5 EPS — diluted 1.79 1.62 1.24 0.52 0.43 Cash dividends declared per share 0.72 0.56 0.36 — — Net cash provided by operating activities 1,750.3 1,612.4 1,704.9 1,389.0 1,258.7 Capital expenditures (additions to property, plant and equipment) 856.2 531.9 440.7 445.6 984.5 Balance Sheet Total assets $ 8,219.2 $ 7,360.4 $ 6,385.9 $ 5,576.8 $ 5,672.6 Short-term borrowings — — — — 713.0 Long-term debt (including current portion) 549.6 549.5 549.4 549.5 550.3 Shareholders’ equity 5,109.0 4,384.9 3,674.7 3,045.7 2,490.9 (1)(1) (2)(2) Includes the revenue reclassification described in Note 1. For fiscal years 2010, 2009, and 2008, we reclassified $465.7 million, $427.3 million, and $392.6 million, respectively, from the previously named “Licensing” revenue to “CPG, foodservice and other” revenue. (3) Fiscal 2010, 2009, and 2008 results include pretax restructuring charges of $53.0 million, $332.4 million, and $266.9 million, respectively. Fiscal Year Ended Americas Sales growth 8 % 8 % 7 % (6 )% (4 )% Change in transactions 6 % 5 % 3 % (4 )% (4 )% Change in ticket 2 % 2 % 3 % (2 )% — % EMEA Sales growth — % 3 % 5 % (3 )% 1 % Change in transactions — % 3 % 6 % — % (3 )% Change in ticket — % — % (1 )% (3 )% 4 % China / Asia Pacific Sales growth 15 % 22 % 11 % 2 % 8 % Change in transactions 11 % 20 % 9 % — % 4 % Change in ticket 3 % 2 % 2 % 2 % 3 % Consolidated Sales growth 7 % 8 % 7 % (6 )% (3 )% Change in transactions 6 % 6 % 4 % (4 )% (4 )% Change in ticket 1 % 2 % 3 % (2 )% — % (3)(4) retail stores open 13 months or longer. For fiscal year 2010, comparable store sales percentages were calculated excluding the 53rd week. Comparable store sales exclude the effect of fluctuations in foreign currency exchange rates.
| As of and for the Fiscal Year Ended | Sep 30, 2012 (52 Wks) | Oct 2, 2011 (52 Wks) | Oct 3, 2010 (53 Wks) | Sep 27, 2009 (52 Wks) | Sep 28, 2008 (52 Wks) | ||||||||||
| Net stores opened (closed) during the year: | |||||||||||||||
| Americas | |||||||||||||||
| Company-operated stores | 234 | 43 | (33 | ) | (417 | ) | 561 | ||||||||
Licensed stores(5) | 270 | (268 | ) | 111 | 101 | 558 | |||||||||
EMEA(6) | |||||||||||||||
| Company-operated stores | 10 | 25 | (64 | ) | 20 | 127 | |||||||||
| Licensed stores | 101 | 79 | 100 | 98 | 153 | ||||||||||
| China / Asia Pacific | |||||||||||||||
| Company-operated stores | 154 | 73 | 30 | 24 | 9 | ||||||||||
| Licensed stores | 294 | 193 | 79 | 129 | 261 | ||||||||||
| Total | 1,063 | 145 | 223 | (45 | ) | 1,669 | |||||||||
| Stores open at year end: | |||||||||||||||
| Americas | |||||||||||||||
| Company-operated stores | 7,857 | 7,623 | 7,580 | 7,613 | 8,030 | ||||||||||
| Licensed stores | 5,046 | 4,776 | 5,044 | 4,933 | 4,832 | ||||||||||
EMEA(6) | |||||||||||||||
| Company-operated stores | 882 | 872 | 847 | 911 | 891 | ||||||||||
| Licensed stores | 987 | 886 | 807 | 707 | 609 | ||||||||||
| China / Asia Pacific | |||||||||||||||
| Company-operated stores | 666 | 512 | 439 | 409 | 385 | ||||||||||
| Licensed stores | 2,628 | 2,334 | 2,141 | 2,062 | 1,933 | ||||||||||
| Total | 18,066 | 17,003 | 16,858 | 16,635 | 16,680 | ||||||||||
| (5) | Includes the closure of 475 licensed Seattle’s Best Coffee locations in Borders Bookstores during fiscal 2011. |
| (6) | EMEA store data has been adjusted for the acquisition of store locations in Austria and Switzerland in the fourth quarter of fiscal 2011 by reclassifying historical information from licensed stores to company-operated stores, and the transfer of certain company-operated stores to licensees in the fourth quarter of fiscal 2012. |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Starbucks Corporation’sOur fiscal year ends on the Sunday closest to September 30. The fiscal year ended on October 3, 2010 included 53 weeks with the 53rd week falling in ourthe fourth fiscal quarter. FiscalThe fiscal years ended on September 27, 2009October 2, 2011 and September 28, 200830, 2012 both included 52 weeks. Comparable store sales percentages belowfor fiscal 2010 are calculated excluding the 53rd week. All references to store counts, including data for new store openings, are reported net of related store closures, unless otherwise noted.
While the reinvigorated US business has been the primary driver of Starbucks improved consolidated financial results,region, improving the profitability of the existing store base through a focus on revenue growth and operating costs, and identifying opportunities for new store growth through licensing arrangements. We expect the investments we are making as part of this transformation effort will result in improved operating performance as we progress on our international businessplan towards mid-teens operating margin; however, this turnaround will take time to gain traction.
region.
Starbucks continues to generate strong operating cash flows, which provide us the financial flexibility to continue disciplined investment and spending in both our core business and new growth platforms, while also returning cash
to shareholders. We generated $1.7 billion of operating cash flow in fiscal 2010 and finished the year with $1.4 billion in cash and short-term investments and no short-term debt. In fiscal 2010 we returned approximately $460 million of cash to our shareholders via share repurchases and dividends.
For fiscal 2011,year 2013, we expect revenues to grow in the mid-to-high single digits based on a 52-week comparable year,moderate revenue growth driven by low to mid single-digit increased comparable store sales, growth. new store openings and strong growth in the Channel Development business. Licensed stores will comprise between one-half and two-thirds of new store openings.
|
We expect capital expenditures to be approximately $550 million to $600 million for the full year.
income, than the Americas. stores. Our income from equity investees on the consolidated statements of earnings. The US foodservice business sells coffee and other related products to institutional foodservice companies with the majority of its sales through national 2011 Fiscal Year Ended Net revenues: Company-operated retail Specialty: Licensing Foodservice and other Total specialty Total net revenues Fiscal Year Ended Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Supplemental ratios as a % of related revenues: Store operating expenses Other operating expenses also contributed. Fiscal Year Ended Operating income Interest income and other, net Interest expense Earnings before income taxes Income taxes Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Effective tax rate including noncontrolling interests 20 basis points over fiscal 2011. state unclaimed property laws. same basis that our management reviews financial information for operational decision-making purposes. The following tables summarize the Fiscal Year Ended Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Supplemental ratios as a % of related revenues: Store operating expenses Other operating expenses over the past 12 months. points. Increased licensed store revenues contributed approximately 30 basis points of the decrease. Store operating expenses as a Fiscal Year Ended Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Supplemental ratios as a % of related revenues: Store operating expenses Other operating expenses royalty revenues from our licensees, resulting from the opening of 101 net new licensed stores over the past 12 months. Fiscal Year Ended Total specialty revenues Cost of sales Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Fiscal Year Ended Total specialty revenues Cost of sales Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Loss from equity investee Operating loss Fiscal Year Ended Net revenues: Company-operated retail Specialty: Licensing Foodservice and other Total specialty Total net revenues Fiscal Year Ended Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Supplemental ratios as a % of related revenues: Store operating expenses Other operating expenses 2010 (approximately $207 million). partially offset by increased sales leverage on occupancy costs (approximately 60 basis points). Fiscal Year Ended Operating income Interest income and other, net Interest expense Earnings before income taxes Income taxes Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Effective tax rate including noncontrolling interests 2011. Fiscal Year Ended Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Supplemental ratios as a % of related revenues: Store operating expenses Other operating expenses Fiscal Year Ended Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Supplemental ratios as a % of related revenues: Store operating expenses Other operating expenses fiscal 2011. Fiscal Year Ended Total specialty Cost of sales Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Total Channel Development net revenues for fiscal 2011 increased expenses for Starbucks VIA Fiscal Year Ended Total specialty revenues Cost of sales Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Operating loss growth initiatives and higher donations to the Starbucks Foundation. These increases in operating expenses were partially offset by a gain on the sale of corporate real estate in fiscal 2011 (approximately $30 million). 2010: Net revenues Operating income(1) Net earnings attributable to Starbucks(1) EPS — diluted 2009: Net revenues Operating income(2) Net earnings attributable to Starbucks(2) EPS — diluted Also included in our short-term investment portfolio are certificates of deposit placed through an account registry service, with maturities ranging from 91 days to one year. The principal amounts of the individual certificates of deposit do not exceed the Federal Deposit Insurance Corporation limits. Our portfolio of long-term available for sale securities consists predominantly of high investment-grade corporate bonds, diversified among industries and individual used for issuances of letters of credit. The During fiscal our share repurchase program. in fiscal 2012. This was partially offset by a net increase in our working capital accounts, due primarily to increased payments on accounts payable. the first and fourth quarters of fiscal 2012, respectively. Contractual Obligations(1) Operating lease obligations(2) Debt obligations(3) Purchase obligations(4) Other obligations(5) Total Arrangements hedged items Foreign currency hedges Debt following policies involve a higher degree of judgment and/or complexity: circumstances, which may include discounted cash flows, comparable transactions, or comparable company analyses. this calculation include revenue growth, operating expenses and a discount rate that we believe a buyer would assume when determining a purchase price for the reporting unit. Estimates of revenue growth and operating expenses are based on internal projections considering a reporting unit’s past performance and forecasted growth, local market economics and the local business environment impacting the reporting unit’s performance. The discount rate is calculated using an estimated cost of capital for a retail operator to operate the reporting unit in the region. These estimates are highly subjective judgments and can be significantly impacted by changes in the business or economic conditions. future. assumptions could have a material impact on our future results of operations. Fiscal Year Ended Net revenues: Company-operated retail Specialty: Licensing Foodservice and other Total specialty Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring charges Total operating expenses Income from equity investees Operating income Interest income and other, net Interest expense Earnings before income taxes Income taxes Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share — basic Earnings per share — diluted Weighted average shares outstanding: Basic Diluted Cash dividends declared per share Current assets: Cash and cash equivalents Short-term investments — available-for-sale securities Short-term investments — trading securities Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments — available-for-sale securities Equity and cost investments Property, plant and equipment, net Other assets Other intangible assets Goodwill TOTAL ASSETS Current liabilities: Accounts payable Accrued compensation and related costs Accrued occupancy costs Accrued taxes Insurance reserves Other accrued liabilities Deferred revenue Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders’ equity: Common stock ($0.001 par value) — authorized, 1,200.0 shares; issued and outstanding, 742.6 and 742.9 shares, respectively (includes 3.4 common stock units in both periods) Additional paid-in capital Other additional paid-in-capital Retained earnings Accumulated other comprehensive income Total shareholders’ equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY Fiscal Year Ended OPERATING ACTIVITIES: Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Provision for impairments and asset disposals Deferred income taxes, net Equity in income of investees Distributions of income from equity investees Stock-based compensation Tax benefit from exercise of stock options Excess tax benefit from exercise of stock options Other Cash provided/(used) by changes in operating assets and liabilities: Inventories Accounts payable Accrued taxes Deferred revenue Other operating assets Other operating liabilities Net cash provided by operating activities INVESTING ACTIVITIES: Purchase of available-for-sale securities Maturities and calls of available-for-sale securities Sales of available-for-sale securities Acquisitions, net of cash acquired Net purchases of equity, other investments and other assets Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Net cash used by investing activities FINANCING ACTIVITIES: Proceeds from issuance of commercial paper Repayments of commercial paper Proceeds from short-term borrowings Repayments of short-term borrowings Purchase of noncontrolling interest Proceeds from issuance of common stock Excess tax benefit from exercise of stock options Principal payments on long-term debt Cash dividends paid Repurchase of common stock Other Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of period End of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of capitalized interest Income taxes Balance, September 30, 2007 Cumulative impact of adoption of accounting requirements for uncertain tax positions Net earnings Unrealized holding gain, net Translation adjustment, net of tax Comprehensive income Stock-based compensation expense Exercise of stock options, including tax benefit of $8.4 Sale of common stock, including tax benefit of $0.1 Repurchase of common stock Net contributions from noncontrolling interests Balance, September 28, 2008 Net earnings Unrealized holding gain, net Translation adjustment, net of tax Comprehensive income Stock-based compensation expense Exercise of stock options, including tax benefit of $5.3 Sale of common stock, including tax benefit of $0.1 Net distributions to noncontrolling interests Balance, September 27, 2009 Net earnings Unrealized holding loss, net Translation adjustment, net of tax Comprehensive income Stock-based compensation expense Exercise of stock options, including tax benefit of $27.7 Sale of common stock, including tax benefit of $0.1 Repurchase of common stock Net distributions to noncontrolling interests Cash dividend Purchase of noncontrolling interests Balance, October 3, 2010 national foodservice accounts. “our.” Channel Development. Our Seattle’s Best Coffee operating segment is reported in “Other” with Evolution Fresh, our Digital Ventures business and unallocated corporate expenses. effective maturity. flows. We generally do not enter into derivative instruments with maturities longer than Inventories are stated at the lower of cost (primarily moving average cost) or market. We record inventory reserves for obsolete and slow-moving of whether the portion of a reporting unit being disposed of constitutes a business occurs on the date of abandonment. Although an operating store meets the accounting definition of a business prior to abandonment, it does not constitute a business on the closure date because the remaining assets on that date do not constitute an integrated set of assets that are capable of being conducted and managed for the purpose of providing a return to investors. As a result, when closing individual stores, we do not include goodwill in the calculation of any loss on disposal of the related assets. As noted above, if store closures are indicative of potential impairment of goodwill at the reporting unit level, we perform an evaluation of our reporting unit goodwill when such closures occur. expenses. which is advertising costs. We expense most advertising costs as they are incurred, except for certain production costs that are expensed the first time the advertising campaign takes place. advertising expenses, which totaled We record stock-based compensation expenses based on the fair value of stock awards at the grant date and recognize the expense over the related service period following a graded vesting expense schedule. For stock option awards we use the Black-Scholes-Merton option pricing model to measure fair value. For restricted stock units, fair value is calculated using the stock price at the date of grant. statements of earnings. The Costs incurred and charged to expense in fiscal 2010 Costs incurred and charged to expense in fiscal 2009 Costs incurred and charged to expense in fiscal 2008 Cumulative costs incurred to date Accrued liability as of September 28, 2008 Costs incurred in fiscal 2009, excluding non-cash charges(1) Cash payments Accrued liability as of September 27, 2009 Costs incurred in fiscal 2010, excluding non-cash charges(1) Cash payments Accrued liability as of October 3, 2010(2) October 3, 2010 Short-term investments: Available-for-sale securities — Agency obligations Available-for-sale securities — Corporate debt securities Available-for-sale securities — State and local government obligations Available-for-sale securities — Government treasury securities Trading securities Total short-term investments Long-term investments: Available-for-sale securities — Agency obligations Available-for-sale securities — Corporate debt securities Available-for-sale securities — State and local government obligations Total long-term investments September 27, 2009 Short-term investments: Available-for-sale securities — Corporate debt securities Available-for-sale securities — Government treasury securities Trading securities Total short-term investments Long-term investments: Available-for-sale securities — State and local government obligations Available-for-sale securities — Corporate debt securities Total long-term investments will also continue to experience fair value changes before affecting earnings. Outstanding contracts will expire within Net derivative losses from net investment hedges of Financial Statement Location Prepaid expenses and other current assets Other assets Other accrued expenses Other long-term liabilities Total losses in accumulated OCI(1) operating expenses. Gain/(Loss) recognized in earnings Gain/(Loss) recognized in OCI Foreign exchange Dairy Diesel Value Measurements Assets: Trading securities Available-for-sale securities Derivatives Total Liabilities: Derivatives Assets: Trading securities Available-for-sale securities Derivatives Total Liabilities: Derivatives September 30, 2012 and October 2, 2011. Liabilities Beginning balance of ARS Total (increase)/decrease in unrealized losses included in other comprehensive income Realized losses recognized in net earnings Calls Transfers in (out ) of Level 3 Ending balance of ARS $10.7 million and $15.8 million, respectively, of our ARS were called at par. Property, plant and equipment(1) Coffee: Unroasted Roasted Other merchandise held for sale Packaging and other supplies Total fluctuations. Equity method investments Cost method investments Total President Starbucks Coffee Taiwan Ltd.; Shanghai President Coffee Co.; royalty revenues. Financial Position as of Current assets Noncurrent assets Current liabilities Noncurrent liabilities Results of Operations for Fiscal Year Ended Net revenues Operating income Net earnings We have the ability to acquire additional interests in some of these cost method investees at certain intervals. Depending on our total percentage of ownership interest and our ability to exercise significant influence over financial and operating policies, additional investments may require Land Buildings Leasehold improvements Store equipment Roasting equipment Furniture, fixtures and other Work in progress Less accumulated depreciation Property, plant and equipment, net Indefinite-lived intangibles Definite-lived intangibles Accumulated amortization Definite-lived intangibles, net Total other intangible assets Definite-lived intangibles approximate remaining weighted average useful life in years Balance at September 28, 2008 Goodwill prior to impairment Accumulated impairment charges Goodwill Acquisitions Purchase price adjustment of previous acquisitions Impairment Foreign currency fluctuations Balance at September 27, 2009 Goodwill prior to impairment Accumulated impairment charges Goodwill Acquisitions Purchase price adjustment of previous acquisitions Impairment Foreign currency fluctuations Balance at October 3, 2010 Goodwill prior to impairment Accumulated impairment charges Goodwill Current portion of long-term debt (included in other accrued liabilities) 6.25% Senior Notes (10-year, due Aug 2017) Other long-term debt Long-term debt Total debt vary, but not exceed As of Accrued dividend payable Other Total other accrued liabilities Deferred rent Unrecognized tax benefits Asset retirement obligations Other Total other long term liabilities projects. Fiscal Year Ended Minimum rentals Contingent rentals Total Fiscal Year Ending 2011 2012 2013 2014 2015 Thereafter Total minimum lease payments In addition to 2, 2011 Number of shares acquired Average price per share of acquired shares Total cost of acquired shares our share repurchase program. amounts) Fiscal Year Ended Net earnings attributable to Starbucks Unrealized holding gains/(losses) on available-for-sale securities, net of tax (provision)/benefit of $0.1, $(1.9) and $2.4, respectively Unrealized holding gains/(losses) on cash flow hedging instruments, net of tax (provision)/benefit of $6.6, $(2.4) and $(0.4), respectively Unrealized holding losses on net investment hedging instruments, net of tax benefit of $4.0, $4.0 and $0.6, respectively Reclassification adjustment for net losses realized in net earnings for cash flow hedges, net of tax benefit of $0.8, $0.8 and $3.0, respectively Net unrealized gain/(loss) Translation adjustment, net of tax (provision)/benefit of $(3.2), $6.0 and $0.3, respectively Total comprehensive income Fiscal Year Ended Net unrealized gains/(losses) on available-for-sale securities Net unrealized gains/(losses) on hedging instruments Translation adjustment Accumulated other comprehensive income Fiscal Year Ended Options RSUs ESPP Total stock-based compensation expense on the consolidated statements of earnings Total related tax benefit Stock-based compensation capitalized in the respective fiscal year — included in net property, plant and equipment and inventories on the consolidated balance sheets Fiscal Year Ended Expected term (in years) Expected stock price volatility Risk-free interest rate Expected dividend yield Weighted average grant price Estimated fair value per option granted Outstanding, September 30, 2007 Granted Exercised Expired/forfeited Outstanding, September 28, 2008 Granted Granted under option exchange program Exercised Expired/forfeited Cancelled under option exchange program Outstanding, September 27, 2009 Granted Exercised Expired/forfeited Outstanding, October 3, 2010 Exercisable, October 3, 2010 Vested and expected to vest, October 3, 2010 Nonvested, September 30, 2007 Granted Vested Forfeited/Cancelled Nonvested, September 28, 2008 Granted Vested Forfeited/Cancelled Nonvested, September 27, 2009 Granted Vested Forfeited/Cancelled Nonvested, October 3, 2010 years Fiscal Year Ended Current taxes: Federal State Foreign Deferred taxes, net Total Fiscal Year Ended Statutory rate State income taxes, net of federal income tax benefit Foreign earnings taxed at lower rates Domestic production activity deduction Credit resulting from employment audit Other, net Effective tax rate Deferred tax assets: Property, plant and equipment Accrued occupancy costs Accrued compensation and related costs Other accrued expenses Asset retirement obligation asset Deferred revenue Asset impairments Tax credits Stock based compensation Net operating losses Other Total Valuation allowance Total deferred tax asset, net of valuation allowance Deferred tax liabilities: Property, plant and equipment Other Total Net deferred tax asset Reported as: Current deferred income tax asset Long-term deferred income tax asset (included in Other assets) Net deferred tax asset expiration date. Beginning balance Increase related to prior year tax positions Decrease related to prior year tax positions Increase related to current year tax positions Decrease related to current year tax positions Decreases related to settlements with taxing authorities Decreases related to lapsing of statute of limitations Ending balance 2006. Fiscal Year Ended Net earnings attributable to Starbucks Weighted average common shares and common stock units outstanding (for basic calculation) Dilutive effect of outstanding common stock options and RSUs Weighted average common and common equivalent shares outstanding (for diluted calculation) EPS — basic EPS — diluted for this matter. Fiscal Year Ended Net earnings attributable to Starbucks Transfers (to) from the noncontrolling interest: Decrease in additional paid-in capital for purchase of 50% interest in subsidiary Change from net earnings attributable to Starbucks and transfers to noncontrolling interest Segment information is prepared on the same basis that our management reviews financial information for operational early stages of development and require a more extensive support organization, relative to the current levels of revenue and operating income, than Americas. Fiscal Year Ended Beverage Food Whole bean and soluble coffees Other(1) Total Fiscal Year Ended Net revenues from external customers: United States Other countries Total Long-lived assets: United States Other countries Total 2012. Fiscal 2010: Total net revenues Depreciation and amortization Income (loss) from equity investees Operating income/(loss) Total assets Fiscal 2009: Total net revenues Depreciation and amortization Income from equity investees Operating income/(loss) Total assets Fiscal 2008: Total net revenues Depreciation and amortization Income (loss) from equity investees Operating income/(loss) Total assets Fiscal Year Ended Operating income Interest income and other, net Interest expense Earnings before income taxes 16, 2012 September 30, 2012. 16, 2012 Notes to Consolidated Financial Statements; and Reports of Independent Registered Public Accounting Firm 16, 2012 Signature Title /s/ Howard Schultz chairman, president and chief executive officer /s/ Troy Alstead chief financial officer and chief administrative officer (principal financial officer and principal accounting officer) /s/ director /s/ director /s/ director /s/ Kevin R. Johnson director Signature Title /s/ director /s/ James G. Shennan, Jr. /s/ director /s/ Javier G. Teruel /s/ Craig E. Weatherup Exhibit Number Exhibit Description Form File No. Date of First Filing Exhibit Number Filed Herewith Exhibit Number Exhibit Description Form File No. Date of First Filing Exhibit Number Filed Herewith Exhibit Description Form File No.threefour reportable operating segments: US, International,Americas, Europe, Middle East, and CPG. In the fourth fiscal quarter of 2010, we changed the composition of our reportable segments by creating aAfrica ("EMEA"), China and Asia Pacific ("CAP") and Channel Development. Seattle’s Best Coffee operating segmentis reported in “Other,” along with Evolution Fresh, Digital Ventures and reporting it with our unallocated corporate expenses that pertain to corporate administrative functions that support our operating segments but are not specifically attributable to or managed by any segment and Digital Venturesare not included in Other. Financial information for Seattle’s Best Coffee was previouslythe reported withinfinancial results of the US, International,operating segments.CPG segments.The US and InternationalCAP segments both include company-operated retail stores and licensed retail stores. Licensed stores generally have a higher operating margin than company-operated stores. Under the licensed model, Starbucks receives a reduced share of the total store revenues, but this is more than offset by the reduction in its share of costs as these are primarily borneincurred by the licensee. The International segment hasEMEA and CAP segments have a higher relative share of licensed stores versus company-operated stores compared to the USAmericas segment; however, the USAmericas segment has been operating significantly longer than the International segmentother segments and has developed deeper awareness of, and attachment to, the Starbucks brand and stores among its customer base. As a result, the more mature USAmericas segment has significantly more stores and higher total revenues than the International segment.other segments. Average sales per store are also higher in the USAmericas due to various factors including length of time in market and local income levels. Further, certain market costs, particularly occupancy costs, are lowerthe US segment compared to the average for the International segment, which comprises a more diverse group of operations. As a result of the relative strength of the brand in the US segment, the number of stores, the higher unit volumes,EMEA and the lower market costs, the US segment, despite its higher relative percentage of company-operated stores, has a higher operating margin, excluding restructuring costs, than the less-developed International segment.Starbucks International store baseCAP continues to expand and as we continue to focus on achieving sustainable growth from established international markets while at the same time investing in emerging markets, such as ChinaChina. Occupancy costs and Brazil. Newerstore operating expenses can be higher in certain international markets than in the Americas segment due to higher rents for prime store locations or costs of compliance with country-specific regulatory requirements. Because many of our international operations are in an early phase of development, operating expenses as a percentage of related revenues are often higher compared to the Americas segment. International markets in the early stages of development require a more extensive support organization, relative to the current levels of revenue and operating income.CPGChannel Development segment includes packaged coffee and tea, a variety of ready-to-drink beverages, single-serve coffee and tea products and other branded productsproduct operations worldwide, andas well as the US foodservice business. For over tenIn prior years through licensing relationships with Kraft Foods Global, Inc.,the first several months of fiscal 2011, we have sold a selection of Starbucks and Seattle’s Best Coffee branded packaged coffees and Tazo® teas in grocery and warehouse club stores throughout the US and to grocery stores in Canada, the UK and other European countries.countries through a distribution arrangement with Kraft hasFoods Global, Inc. Kraft managed the distribution, marketing, advertising and promotion of these products. In the first quarterproducts as a part of that arrangement. During fiscal 2011, Starbucks notified Kraft that we are discontinuingsuccessfully transitioned these businesses including the marketing, advertising, and promotion of these products, from our licensing relationships. We intend to work closelyprevious distribution arrangement with Kraft to ensure an orderly transition. We also sell packaged coffee and tea internationallybegan selling these products directly to the grocery and warehouse club stores, such as Costco Wholesale Corporation.CPGChannel Development segment also includes ready-to-drink beverages, which are primarily manufactured and distributed through The North American Coffee Partnership, a joint venture with the Pepsi-Cola Company. In the CPG segment, most of the customer revenues from the packaged coffee and ready-to-drink products are recognized as revenues by the licensed or joint venture business partner. Royalties and payments from our licensing agreements are recorded under licensing revenue, and theThe proportionate share of the results of the joint venture areis included, on a net basis, inbroadlinebroad-line distribution networks. The CPGChannel Development segment reflects relatively lower revenues, a modest cost structure and a resulting higher operating margin, compared to the other two reporting segments, which consist primarily of retail stores.182 to the consolidated financial statements in this 10-K.20102012 COMPARED TO FISCAL 2009 Oct 3,
2010 Sep 27,
2009 %
Change Oct 3,
2010 Sep 27,
2009 % of Total Net
Revenues $ 8,963.5 $ 8,180.1 9.6 % 83.7 % 83.7 % 1,340.9 1,222.3 9.7 % 12.5 % 12.5 % 403.0 372.2 8.3 % 3.8 % 3.8 % 1,743.9 1,594.5 9.4 % 16.3 % 16.3 % $ 10,707.4 $ 9,774.6 9.5 % 100.0 % 100.0 % Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011 Net revenues: Company-operated stores $ 10,534.5 $ 9,632.4 9.4 % 79.2 % 82.3 % Licensed stores 1,210.3 1,007.5 20.1 % 9.1 % 8.6 % CPG, foodservice and other 1,554.7 1,060.5 46.6 % 11.7 % 9.1 % Total net revenues $ 13,299.5 $ 11,700.4 13.7 % 100.0 % 100.0 % $10.7$13.3 billion for fiscal 2010,2012, an increase of 9.5%13.7%, or $1.6 billion over fiscal 2009. The increase was2011, primarily due to an increase inincreased revenues from company-operated retail revenuesstores (contributing $902 million), driven by a 7% increase in global comparable stores sales (contributing approximately $551 million). Thean increase in comparable store sales was due to a 4% increase in number of transactions (contributing approximately $298 million) and a 3% increase in average value per transaction (contributing approximately $253(approximately 7%, or $680 million). Also contributing to the increase were was the extra week in fiscal 2010 (approximately $207 million), foreign currency translation2012, primarily due to higher product sales to and royalty revenues from our licensees, resulting from the weakening of the US dollar primarily in relation to the Canadian dollar (approximately $101 million),improved comparable store sales and the effectopening of consolidating our previous joint venture665 net new licensed stores over the past 12 months.Francethe CPG channel on November 1, 2011 (approximately $87$232 million). ThisThe benefit of recognizing full revenue from packaged coffee and tea under the direct distribution model (approximately $78 million) and an increase was partially offset by a net decrease of 72 company-operated stores from fiscal 2009in foodservice revenues (approximately $119$50 million). Oct 3,
2010 Sep 27,
2009 Oct 3,
2010 Sep 27,
2009 % of Total Net
Revenues $ 4,458.6 $ 4,324.9 41.6 % 44.2 % 3,551.4 3,425.1 33.2 % 35.0 % 293.2 264.4 2.7 % 2.7 % 510.4 534.7 4.8 % 5.5 % 569.5 453.0 5.3 % 4.6 % 53.0 332.4 0.5 % 3.4 % 9,436.1 9,334.5 88.1 % 95.5 % 148.1 121.9 1.4 % 1.2 % $ 1,419.4 $ 562.0 13.3 % 5.7 % 39.6 % 41.9 % 16.8 % 16.6 % Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011 Cost of sales including occupancy costs $ 5,813.3 $ 4,915.5 43.7 % 42.0 % Store operating expenses 3,918.1 3,594.9 29.5 % 30.7 % Other operating expenses 429.9 392.8 3.2 % 3.4 % Depreciation and amortization expenses 550.3 523.3 4.1 % 4.5 % General and administrative expenses 801.2 749.3 6.0 % 6.4 % Total operating expenses 11,512.8 10,175.8 86.6 % 87.0 % Gain on sale of properties — 30.2 — % 0.3 % Income from equity investees 210.7 173.7 1.6 % 1.5 % Operating income $ 1,997.4 $ 1,728.5 15.0 % 14.8 % Supplemental ratios as a % of related revenues: Store operating expenses 37.2 % 37.3 % decreased 260increased 170 basis points. The decrease was primarilypoints, driven by supply chain efficiencies which contributed to lower foodincreased commodity costs (approximately 70160 basis points) and lower beverage and paper packaging product costs (approximately 50 basis points). Also contributing, primarily due to the decrease were lower occupancy costshigher coffee costs.(approximately 80decreased 120 basis points) primarilypoints, due to increased Channel Development and licensed store revenues. Store operating expenses as a percent of company-operated store revenues decreased 10 basis points due to increased sales leverage.Storecompany-operated retailtotal net revenues decreased 23020 basis pointspoints. As a percentage of net revenues excluding company-operated store revenues, other operating expenses decreased 350 basis points. This decrease was primarily driven by increased sales leverage (approximately 150 basis points), the absence of charges in fiscal 2012 related to the Seattle’s Best Coffee store closures in Borders bookstores (approximately 80 basis points) and a shift in the timing of marketing spend (approximately 60 basis points).from increased revenues.Restructuring charges include lease exiton depreciation and related costs associated with the actions to rationalize our global store portfolioamortization (approximately 40 basis points) and reduce the global cost structure in fiscal 2009 and 2008. The restructuring charges incurred in fiscal 2010 reflect charges incurred on the previously announced store closures. With the previously-announced store closures essentially complete, we do not expect to report any further restructuring costs related to these activities.Partially offsetting these favorable fluctuations were increased advertising costs included primarily in other operating expenses and higher performance based compensation expenses, which drove the 70 basis point increase in general and administrative expenses as a percentage(approximately 40 basis points), resulted in an increase in operating margin of revenues. Oct 3,
2010 Sep 27,
2009 Oct 3,
2010 Sep 27,
2009 % of Total Net
Revenues $ 1,419.4 $ 562.0 13.3 % 5.7 % 50.3 37.0 0.5 % 0.4 % (32.7 ) (39.1 ) (0.3 )% (0.4 )% 1,437.0 559.9 13.4 % 5.7 % 488.7 168.4 4.6 % 1.7 % 948.3 391.5 8.9 % 4.0 % 2.7 0.7 0 0 $ 945.6 $ 390.8 8.8 % 4.0 % 34.0 % 30.1 % Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011 Operating income $ 1,997.4 $ 1,728.5 15.0 % 14.8 % Interest income and other, net 94.4 115.9 0.7 % 1.0 % Interest expense (32.7 ) (33.3 ) (0.2 )% (0.3 )% Earnings before income taxes 2,059.1 1,811.1 15.5 % 15.5 % Income taxes 674.4 563.1 5.1 % 4.8 % Net earnings including noncontrolling interests 1,384.7 1,248.0 10.4 % 10.7 % Net earnings (loss) attributable to noncontrolling interests 0.9 2.3 — % — % Net earnings attributable to Starbucks $ 1,383.8 $ 1,245.7 10.4 % 10.6 % Effective tax rate including noncontrolling interests 32.8 % 31.1 % increased $13decreased $21 million over the prior period. The increase was driven byyear, primarily due to the impactabsence of an accountingthe gain recordedrecognized in the firstfourth quarter of fiscal 2010 related to our2011 resulting from the acquisition of a controllingthe remaining interest in our previous joint venture operations in France. In accordance with accounting principles generally accepted in the United States of America (“GAAP”), the carrying value of the previously held joint venture interest was adjusted to fair value upon the acquisition of the controlling interest. Also contributing to the increase were favorable fluctuations in unrealized holding gains on our trading securities portfolio of approximately $10 million. The trading securities approximate a portion of the Company’s liability under the Management Deferred Compensation Plan (“MDCP”). The MDCP liability also increasesSwitzerland and decreases with changes in investment performance, with this offsetting impact recorded in general and administrative expenses on the consolidated statements of earnings. This favorability wasAustria (approximately $55 million), partially offset by unfavorable foreign currency fluctuationsthe recognition of additional income associated with unredeemed gifts cards in the second quarter of fiscal 2012 (approximately $11$29 million), which relate primarilyfollowing a court ruling related to the revaluation of certain trade payables and receivables.20102012 resulted in an effective tax rate of 34.0%32.8% compared to 30.1%31.1% for fiscal 2009.year 2011. The lower rate increased in fiscal 2009 wasyear 2012 primarily due to thetax benefits recognized for retroactive tax creditsin fiscal 2011 from the Switzerland and an audit settlement.Austria transaction and the release of foreign valuation allowances. The effective tax rate for fiscal 20112013 is expected to be inapproximately 33%.range of 34% to 35%.Operating SegmentsCompany’s results of operations by segment (in millions): Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011 Total net revenues $ 9,936.0 $ 9,065.0 100.0 % 100.0 % Cost of sales including occupancy costs 3,885.5 3,512.7 39.1 % 38.8 % Store operating expenses 3,427.8 3,184.2 34.5 % 35.1 % Other operating expenses 83.8 75.8 0.8 % 0.8 % Depreciation and amortization expenses 392.3 390.8 3.9 % 4.3 % General and administrative expenses 74.3 60.8 0.7 % 0.7 % Total operating expenses 7,863.7 7,224.3 79.1 % 79.7 % Income from equity investees 2.1 1.6 — % — % Operating income $ 2,074.4 $ 1,842.3 20.9 % 20.3 % Supplemental ratios as a % of related revenues: Store operating expenses 37.8 % 38.1 % 2010 and 2009 (in millions).United States Oct 3,
2010 Sep 27,
2009 Oct 3,
2010 Sep 27,
2009 As a % of US Total
Net Revenues $ 7,560.4 $ 7,061.7 100.0 % 100.0 % $ 2,906.1 $ 2,941.4 38.4 % 41.7 % 2,831.9 2,815.1 37.5 % 39.9 % 55.6 66.6 0.7 % 0.9 % 350.7 377.9 4.6 % 5.4 % 97.8 84.8 1.3 % 1.2 % 27.2 246.3 0.4 % 3.5 % 6,269.3 6,532.1 82.9 % 92.5 % 0.0 0.5 0.0 % 0.0 % $ 1,291.1 $ 530.1 17.1 % 7.5 % 40.3 % 42.8 % 10.5 % 13.6 % US net revenues2012 increased 10%, or $871 million, primarily due to an increase inincreased revenues from company-operated retail revenues of 7%. This increase is primarily due to a 7%stores (contributing $712 million), driven by an increase in comparable store sales (contributing approximately $452 million)(approximately 8%, comprised of a 3% increase in transactions (contributing approximately $222 million), and a 4% increase in average value per transaction (contributing approximately $230or $626 million). Also contributing to the increase were incremental revenues from net new company-operated store openings over the past 12 months (approximately $100 million).was the extra weekwith an increase of $149 million in fiscal 2010 (approximately $143 million), partially offset by a2012 over the prior year period, primarily due to higher product sales to and royalty revenues from our licensees, resulting from improved comparable store sales and the opening of 270 net decrease of 57 company-operatednew licensed stores from fiscal 2009 (approximately $125 million).decreased by 330increased 30 basis points, over the prior year. The decrease was primarily driven by supply chain efficiencies which contributed to lower foodhigher commodity costs (approximately 90110 basis points) and lower beverage and paper packaging product, mainly coffee, partially offset by increased sales leverage on occupancy costs (approximately 6070 basis points). Also contributing to the decrease were lower occupancy costs(approximately 100decreased 60 basis points) primarily due to sales leverage.percentpercentage of related retailcompany-operated store revenues decreased 25030 basis points, primarily due to increased sales leverage (approximately 70 basis points), partially offset by higher debit card transaction fees (approximately 20 basis points).Restructuring charges include lease exitrelated costs associated with the actions to rationalize our global store portfolio. Restructuring chargesamortization expense (approximately 40 basis points), resulted in an increase in operating margin of 60 basis points over fiscal 2010 decreased $2192011. Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011 Total net revenues $ 1,141.3 $ 1,046.8 100.0 % 100.0 % Cost of sales including occupancy costs 597.3 530.3 52.3 % 50.7 % Store operating expenses 371.1 327.3 32.5 % 31.3 % Other operating expenses 33.6 36.5 2.9 % 3.5 % Depreciation and amortization expenses 57.1 53.4 5.0 % 5.1 % General and administrative expenses 72.1 65.0 6.3 % 6.2 % Total operating expenses 1,131.2 1,012.5 99.1 % 96.7 % Income from equity investees 0.3 6.0 — % 0.6 % Operating income $ 10.4 $ 40.3 0.9 % 3.8 % Supplemental ratios as a % of related revenues: Store operating expenses 38.3 % 36.1 % 2009company-operated stores (contributing $63 million), due to the completion of our restructuring efforts in the US during the current year.International Oct 3,
2010 Sep 27,
2009 Oct 3,
2010 Sep 27,
2009 As a % of
International Total
Net Revenues $ 2,288.8 $ 1,914.3 100.0 % 100.0 % $ 1,078.2 $ 961.3 47.1 % 50.2 % 719.5 610.0 31.4 % 31.9 % 85.7 71.2 3.7 % 3.7 % 108.6 102.2 4.7 % 5.3 % 126.6 105.0 5.5 % 5.5 % 25.8 27.0 1.1 % 1.4 % 2,144.4 1,876.7 93.7 % 98.0 % 80.8 53.6 3.5 % 2.8 % $ 225.2 $ 91.2 9.8 % 4.8 % 37.2 % 37.9 % 24.0 % 23.2 % International net revenues increased due to foreign currency translation resulting from the weakeningacquisition of the US dollar primarilyremaining interest in relation to the Canadian dollar (approximately $101 million), comparable store sales of 6% (contributing approximately $99 million), the effect of consolidating our previous joint venture operations in FranceSwitzerland and Austria in the fourth quarter of fiscal 2011 (approximately $87$80 million), and the extra week in fiscal 2010partially offset by unfavorable foreign currency fluctuations (approximately $45$33 million). Thecomparablelicensed store sales wasrevenues of $27 million also contributed to the increase in total net revenues, primarily due to a 5% increase in transactions (contributing approximately $78 million),higher product sales to and a 1% increase in average value per transaction (contributing approximately $21 million).decreased by 310increased 160 basis points, compared to the prior year. The decrease was primarily driven by lowerhigher costs forrelated to the transition to a consolidated food and beverage components resulting from supply chain efficienciesdairy distribution model in the UK that began in the first quarter of fiscal 2012 (approximately 180 basis points). These costs are expected to decline over time as the full benefits of the transition are realized. Also contributing to the decrease were costs related to store portfolio optimization initiatives occurring in the fourth quarter of fiscal 2012 (approximately 60 basis points), partially offset by increased sales leverage on occupancy costs.lowercosts related to store portfolio optimization initiatives occurring in the fourth quarter of fiscal 2012 (approximately 40 basis points). Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011 Total net revenues $ 721.4 $ 552.3 100.0 % 100.0 % Cost of sales including occupancy costs 362.8 282.0 50.3 % 51.1 % Store operating expenses 119.2 83.4 16.5 % 15.1 % Other operating expenses 47.0 35.7 6.5 % 6.5 % Depreciation and amortization expenses 23.2 18.1 3.2 % 3.3 % General and administrative expenses 38.1 32.9 5.3 % 6.0 % Restructuring charges — — — % — % Total operating expenses 590.3 452.1 81.8 % 81.9 % Income from equity investees 122.4 92.9 17.0 % 16.8 % Operating income $ 253.5 $ 193.1 35.1 % 35.0 % Supplemental ratios as a % of related revenues: Store operating expenses 24.4 % 23.1 % Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Sep 30,
2012 Oct 2,
2011 Total net revenues $ 1,292.2 $ 860.5 100.0 % 100.0 % Cost of sales 827.6 487.5 64.0 % 56.7 % Other operating expenses 191.1 151.8 14.8 % 17.6 % Depreciation and amortization expenses 1.3 2.4 0.1 % 0.3 % General and administrative expenses 8.9 6.6 0.7 % 0.8 % Total operating expenses 1,028.9 648.3 79.6 % 75.3 % Income from equity investees 85.2 75.6 6.6 % 8.8 % Operating income $ 348.5 $ 287.8 27.0 % 33.4 % sales leverage.Storethe growth in segment revenues.expenses as a percentmargin of related retail revenues decreased 70 basis points primarily due to reduced impairments in fiscal 2010 compared to fiscal 2009.Restructuring charges include lease exit and related costs associated with the actions to rationalize our global store portfolio. Restructuring charges in fiscal 2010 decreased slightly from 2009 due to the completion of our restructuring efforts internationally by the end of the current year.Global Consumer Products Group Oct 3,
2010 Sep 27,
2009 Oct 3,
2010 Sep 27,
2009 As a % of CPG
Total Net Revenues $ 707.4 $ 674.4 100.0 % 100.0 % $ 384.9 $ 350.5 54.4 % 52.0 % 117.0 95.3 16.5 % 14.1 % 3.7 4.8 0.5 % 0.7 % 11.0 8.8 1.6 % 1.3 % 0.0 1.0 0.0 % 0.1 % 516.6 460.4 73.0 % 68.3 % 70.6 67.8 10.0 % 10.1 % $ 261.4 $ 281.8 37.0 % 41.8 % CPG net revenues increased primarily due to the launch of Starbucks VIA® Ready Brew (approximately $22 million) and the extra week in fiscal 2010 (approximately $16 million).Operating margin decreased 480640 basis points over the prior year due primarily to increased Starbucks VIA® Ready Brew launch expenses.Other Oct 3,
2010 Sep 27,
2009 %
Change $ 150.8 $ 124.2 21.4 % $ 89.4 $ 71.7 24.7 % 34.9 31.3 11.5 % 47.4 49.8 (4.8 )% 334.1 254.4 31.3 % 0.0 58.1 (100.0 )% 505.8 465.3 8.7 % (3.3 ) 0.0 nm $ (358.3 ) $ (341.1 ) 5.0 % Substantially allfiscal 2011. Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 % Change Total net revenues $ 208.6 $ 175.8 18.7 % Cost of sales 140.1 103.0 36.0 % Other operating expenses 74.4 93.0 (20.0 )% Depreciation and amortization expenses 76.4 58.6 30.4 % General and administrative expenses 607.8 584.0 4.1 % Total operating expenses 898.7 838.6 7.2 % Gain on sale of properties — 30.2 (100.0 )% Income from equity investees 0.7 (2.4 ) nm Operating loss $ (689.4 ) $ (635.0 ) 8.6 % are generatedincludes operating results from the Seattle’s Best Coffee, operating segment. The increase in revenues for Seattle’s Best Coffee was primarily due to sales to new national accounts (contributing approximately $13 million).Operating expenses included in Other relate to Seattle’s Best CoffeeEvolution Fresh, and Digital Ventures, as well as expenses pertaining to corporate administrative functions that support our operating segments but are not specifically attributable to, or managed by, any segment and are not included in the reported financial results of the operating segments.$40.5$60 million, primarily as a resultdue to increased cost of increasedsales resulting from higher commodity costs, primarily coffee, and higher general and administrative expenses ($80 million)to support the growth of the business. Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Oct 2,
2011 Oct 3,
2010 Net revenues: Company-operated stores $ 9,632.4 $ 8,963.5 7.5 % 82.3 % 83.7 % Licensed stores 1,007.5 875.2 15.1 % 8.6 % 8.2 % CPG, foodservice and other 1,060.5 868.7 22.1 % 9.1 % 8.1 % Total net revenues $ 11,700.4 $ 10,707.4 9.3 % 100.0 % 100.0 % higher performance-based compensationan increase in 2010.company-operated store revenues driven by an 8% increase in global comparable stores sales (contributing approximately $672 million). The increase in comparable store sales was due to a 6% increase in number of transactions (contributing approximately $499 million) and a 2% increase in average value per transaction (contributing approximately $173 million). Also contributing to the increase ina decreasethe impact of $58 millionthe extra week in restructuring charges due to the completion of our restructuring activities within the non-store support organization.RESULTS OF OPERATIONS — FISCAL 2009 COMPARED TO FISCAL 2008Consolidated results of operations (in millions): Sep 27,
2009 Sep 28,
2008 %
Change Sep 27,
2009 Sep 28,
2008 % of Total Net
Revenues $ 8,180.1 $ 8,771.9 (6.7 )% 83.7 % 84.5 % 1,222.3 1,171.6 4.3 % 12.5 % 11.3 % 372.2 439.5 (15.3 )% 3.8 % 4.2 % 1,594.5 1,611.1 (1.0 )% 16.3 % 15.5 % $ 9,774.6 $ 10,383.0 (5.9 )% 100.0 % 100.0 % Company-operated retail revenues decreased from fiscal 2008, primarily attributable to a 6% decline in comparable store sales, comprised of a 4% decline in transactions and a 2% decline in the average value per transaction. Foreign currency translation also contributed to the decline with the effects of a stronger US dollar relative to the British pound and Canadian dollar. The weakness in consolidated comparable store sales was driven by the US segment, with a comparable store sales decline of 6% for the year. The International segment experienced a 2% decline in comparable store sales. Sep 27,
2009 Sep 28,
2008 Sep 27,
2009 Sep 28,
2008 % of Total Net
Revenues $ 4,324.9 $ 4,645.3 44.2 % 44.7 % 3,425.1 3,745.1 35.0 % 36.1 % 264.4 330.1 2.7 % 3.2 % 534.7 549.3 5.5 % 5.3 % 453.0 456.0 4.6 % 4.4 % 332.4 266.9 3.4 % 2.6 % 9,334.5 9,992.7 95.5 % 96.2 % 121.9 113.6 1.2 % 1.1 % $ 562.0 $ 503.9 5.7 % 4.9 % 41.9 % 42.7 % 16.6 % 20.5 % Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Oct 2,
2011 Oct 3,
2010 Cost of sales including occupancy costs $ 4,915.5 $ 4,416.5 42.0 % 41.2 % Store operating expenses 3,594.9 3,471.9 30.7 % 32.4 % Other operating expenses 392.8 279.7 3.4 % 2.6 % Depreciation and amortization expenses 523.3 510.4 4.5 % 4.8 % General and administrative expenses 749.3 704.6 6.4 % 6.6 % Restructuring charges — 53.0 — % 0.5 % Total operating expenses 10,175.8 9,436.1 87.0 % 88.1 % Gain on sale of properties 30.2 — 0.3 % — % Income from equity investees 173.7 148.1 1.5 % 1.4 % Operating income $ 1,728.5 $ 1,419.4 14.8 % 13.3 % Supplemental ratios as a % of related revenues: Store operating expenses 37.3 % 38.7 % decreased as a percentage of total net revenues increased 80 basis points. The increase was primarily due to the implementationhigher commodity costs (approximately 220 basis points), mainly driven by increased coffee costs. Partially offsetting this increase was lower occupancy costs as a percentage of in-store operational efficiencies designed to reduce product waste, andtotal net revenues (approximately 70 basis points), driven by increased sales leverage.lower dairy costsincreased sales leverage.US,current year (approximately 50 basis points) and the gain on the sale of corporate real estate in fiscal 2011 (approximately 30 basis points). These increases were partially offset by higher commodity costs (approximately 220 basis points). Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Oct 2,
2011 Oct 3,
2010 Operating income $ 1,728.5 $ 1,419.4 14.8 % 13.3 % Interest income and other, net 115.9 50.3 1.0 % 0.5 % Interest expense (33.3 ) (32.7 ) (0.3 )% (0.3 )% Earnings before income taxes 1,811.1 1,437.0 15.5 % 13.4 % Income taxes 563.1 488.7 4.8 % 4.6 % Net earnings including noncontrolling interests 1,248.0 948.3 10.7 % 8.9 % Net earnings (loss) attributable to noncontrolling interests 2.3 2.7 — % — % Net earnings attributable to Starbucks $ 1,245.7 $ 945.6 10.6 % 8.8 % Effective tax rate including noncontrolling interests 31.1 % 34.0 % Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Oct 2,
2011 Oct 3,
2010 Total net revenues $ 9,065.0 $ 8,488.5 100.0 % 100.0 % Cost of sales including occupancy costs 3,512.7 3,258.5 38.8 % 38.4 % Store operating expenses 3,184.2 3,083.3 35.1 % 36.3 % Other operating expenses 75.8 63.1 0.8 % 0.7 % Depreciation and amortization expenses 390.8 392.9 4.3 % 4.6 % General and administrative expenses 60.8 56.4 0.7 % 0.7 % Restructuring charges — 28.4 — % 0.3 % Total operating expenses 7,224.3 6,882.6 79.7 % 81.1 % Income from equity investees 1.6 0.9 — % — Operating income $ 1,842.3 $ 1,606.8 20.3 % 18.9 % Supplemental ratios as a % of related revenues: Store operating expenses 38.1 % 39.2 % costs. Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Oct 2,
2011 Oct 3,
2010 Total net revenues $ 1,046.8 $ 953.4 100.0 % 100.0 % Cost of sales including occupancy costs 530.3 471.8 50.7 % 49.5 % Store operating expenses 327.3 324.5 31.3 % 34.0 % Other operating expenses 36.5 36.1 3.5 % 3.8 % Depreciation and amortization expenses 53.4 50.6 5.1 % 5.3 % General and administrative expenses 65.0 58.2 6.2 % 6.1 % Restructuring charges — 24.5 — % 2.6 % Total operating expenses 1,012.5 965.7 96.7 % 101.3 % Income from equity investees 6.0 6.8 0.6 % 0.7 % Operating income $ 40.3 $ (5.5 ) 3.8 % (0.6 )% Supplemental ratios as a % of related revenues: Store operating expenses 36.1 % 38.4 % retailstore revenues decreased 230 basis points primarily due to reduced headcountfewer impairment charges in fiscal 2011 compared to fiscal 2010 (approximately 110 basis points), lower equipment maintenance costs (approximately 60 basis points) and spending in the regional support organization as a result of our restructuring efforts,increased sales leverage on salaries and the effect of initiatives to improve store labor efficiencies.Restructuring charges include lease exit and related costs associated with the actions to rationalize our global store portfolio and reduce the global cost structure.Operating margin expansion was primarily due to the improved labor efficiency and reduced product waste in company-operated stores, partially offset by increased restructuring charges. Sep 27,
2009 Sep 28,
2008 Sep 27,
2009 Sep 28,
2008 % of Total Net
Revenues $ 562.0 $ 503.9 5.7 % 4.9 % 37.0 5.2 0.4 % 0.1 % (39.1 ) (53.4 ) (0.4 )% (0.5 )% 559.9 455.7 5.7 % 4.4 % 168.4 144.0 1.7 % 1.4 % 391.5 311.7 4.0 3.0 0.7 (3.8 ) 0 0 $ 390.8 $ 315.5 4.0 % 3.0 % 30.1 % 31.6 % Net interest income and other increased due primarily to the impact of foreign currency fluctuations on certain balance sheet amounts. benefits (approximately 40 basis).were lower unrealized market value losses on our trading securities portfolio compared to fiscal 2008. Interest expense decreased due to a lower average balancein operating margin was the absence of short term borrowings and lower average short term borrowing ratesrestructuring charges in fiscal 2009 compared to the prior year. At the end2011 (approximately 260 basis points). The combination of these changes resulted in an overall increase in operating margin of 440 basis points for fiscal 2009, we had no short term debt. Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Oct 2,
2011 Oct 3,
2010 Total net revenues $ 552.3 $ 407.3 100.0 % 100.0 % Cost of sales including occupancy costs 282.0 213.4 51.1 % 52.4 % Store operating expenses 83.4 64.1 15.1 % 15.7 % Other operating expenses 35.7 30.0 6.5 % 7.4 % Depreciation and amortization expenses 18.1 15.8 3.3 % 3.9 % General and administrative expenses 32.9 27.4 6.0 % 6.7 % Restructuring charges — 0.1 — % — % Total operating expenses 452.1 350.8 81.9 % 86.1 % Income from equity investees 92.9 73.1 16.8 % 17.9 % Operating income $ 193.1 $ 129.6 35.0 % 31.8 % Supplemental ratios as a % of related revenues: Store operating expenses 23.1 % 25.4 % relatively low 2009 effective tax rateincrease was primarily due to a tax benefit recognized for retroactive tax credits anddriven by an income tax credit related to the settlement of an employment tax audit in fiscal 2009. As a result of the audit settlement, approximately $17 million of expense was recorded in store operating expenses, with an offsetting income tax credit and no impact to net earnings.United States Sep 27,
2009 Sep 28,
2008 Sep 27,
2009 Sep 28,
2008 As a % of US Total
Net Revenues $ 7,061.7 $ 7,491.2 100.0 % 100.0 % $ 2,941.4 $ 3,184.1 41.7 % 42.5 % 2,815.1 3,080.9 39.9 % 41.1 % 66.6 95.6 0.9 % 1.3 % 377.9 395.1 5.4 % 5.3 % 84.8 69.3 1.2 % 0.9 % 246.3 210.9 3.5 % 2.8 % 6,532.1 7,035.9 92.5 % 93.9 % 0.5 (1.3 ) 0.0 % 0.0 % $ 530.1 $ 454.0 7.5 % 6.1 % 42.8 % 44.0 % 13.6 % 19.4 % Company-operated retail revenues decreased year over year primarily due to a 6% decreaseincrease in comparable store sales comprisedin our company-operated stores of 22% (contributing approximately $58 million), driven by a 4% decrease20% increase in number of transactions and a 2% decreaseincrease in average value per transaction.Operating margin expanded primarily Also contributing to the increase in total net revenues was favorable foreign currency translation resulting from the weakening of the US dollar (approximately $40 million), the opening of 73 net new company-operated stores in the past 12 months (approximately $40 million), and an increase in royalty revenueslowerimproved comparable store operating expenses, lower costsales and net new store openings. These increases were partially offset by the absence of the extra week in fiscal 2010 (approximately $9 million).and lower otheras a percentage of total net revenues decreased by 130 basis points compared to the prior year, primarily due to increased sales leverage on occupancy costs.revenues. This improvement was primarily due to operational changes designed to improve labor efficiency and reduce product wastenet revenues decreased 60 basis points. Excluding the impact of licensed store revenues, store operating expenses decreased 230 basis points as a percent of company-operated store revenues in company-operated stores, and to lower non-store support costs. Partially offsetting the favorability were higher restructuring charges during the year. We incurred higher lease exit and related costs due to the higher number of actual store closuresfiscal 2011 compared to the prior year period.International Sep 27,
2009 Sep 28,
2008 Sep 27,
2009 Sep 28,
2008 As a % of
International Total
Net Revenues $ 1,914.3 $ 2,099.6 100.0 % 100.0 % $ 961.3 $ 1,052.8 50.2 % 50.1 % 610.0 664.2 31.9 % 31.6 % 71.2 87.3 3.7 % 4.2 % 102.2 108.6 5.3 % 5.2 % 105.0 113.0 5.5 % 5.4 % 27.0 19.3 1.4 % 0.9 % 1,876.7 2,045.0 98.0 % 97.4 % 53.6 54.2 2.8 % 2.6 % $ 91.2 $ 108.8 4.8 % 5.2 % 37.9 % 37.4 % 23.2 % 26.8 % Company-operated retail revenues decreasedfiscal 2010, primarily due to unfavorable foreign currency exchange rates, particularly for the British pound and Canadian dollar. Partially offsetting the decrease were thedriven by lower compensation costs (approximately 210 basis points) as a percentage of total net new store openings during the fiscal year.Specialty revenues decreased primarily due to continued softness in the hospitality industry and unfavorable foreign currency exchange rates.Operating margin decreased primarily due to higher restructuring charges and higher storerevenues.revenues. Restructuring charges of $27.0 million recognized during the year had a 50net revenues decreased 90 basis point impact on operating margin comparedpoints. Increased company-operated store revenues contributed approximately 30 basis points to the prior year, due to the previously announced store closures. Higher storedecrease. Other operating expenses as ofa percentage of company-operated retaillicensed store revenues weredecreased 60 basis points, primarily driven by an increaselower compensation related costs (approximately 140 basis points), partially offset by increasing costs related to our expansion efforts into key emerging markets, primarily China.store impairment chargesfiscal 2011, driven by improved performance in our joint venture operations, primarily in Japan, Shanghai and a declineTaiwan.impacting salarieson general and benefits. Partially offsetting the decreaseadministrative expenses (approximately 70 basis points) and depreciation and amortization (approximately 60 basis points) contributed to an overall increase in operating margin were lower other operating expenses due to headcount reductionsof 320 basis points in the non-store support functions.Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Oct 2,
2011 Oct 3,
2010 Total net revenues $ 860.5 $ 707.4 100.0 % 100.0 % Cost of sales including occupancy costs 487.5 383.2 56.7 % 54.2 % Other operating expenses 151.8 115.6 17.6 % 16.3 % Depreciation and amortization expenses 2.4 3.7 0.3 % 0.5 % General and administrative expenses 6.6 4.5 0.8 % 0.6 % Total operating expenses 648.3 507.0 75.3 % 71.7 % Income from equity investees 75.6 70.6 8.8 % 10.0 % Operating income $ 287.8 $ 271.0 33.4 % 38.3 % Global Consumer Products Group Sep 27,
2009 Sep 28,
2008 Sep 27,
2009 Sep 28,
2008 As a % of CPG
Total Net Revenues $ 674.4 $ 680.9 100.0 % 100.0 % $ 350.5 $ 344.5 52.0 % 50.6 % 95.3 113.8 14.1 % 16.7 % 4.8 5.4 0.7 % 0.8 % 8.8 7.9 1.3 % 1.2 % 1.0 0.0 0.1 % 0.0 % 460.4 471.7 68.3 % 69.3 % 67.8 60.7 10.1 % 8.9 % $ 281.8 $ 269.9 41.8 % 39.6 % primarily due to higher revenues from packaged coffees, partially offset by lower foodservice revenues caused by continued softness in the hospitality industry.Growth of operating margin22%, or $153 million. The increase was primarily due to lowerthe benefit of recognizing full revenue from packaged coffee and tea sales under the direct distribution model for the majority of the year (approximately $70 million). On March 1, 2011, we successfully transitioned to a direct distribution model from our previous distribution arrangement with Kraft for the sale of packaged Starbucks® and Seattle’s Best Coffee® coffee products in grocery and warehouse club stores throughout the US, and to grocery stores in Canada, the UK and other operating expensesEuropean countries. We successfully transitioned the Tazo® tea business to a direct distribution model in January 2011. Also contributing to the increase were improved revenues from US foodservice business(approximately $26 million) and the expanded distribution of Starbucks VIA®lower compensationincreased commodity costs (approximately 830 basis points), driven by higher coffee costs. Partially offsetting the increase in commodity costs was the benefit of price increases (approximately 200 basis points) and lower marketing expenses. Sep 27,
2009 Sep 28,
2008 %
Change $ 124.2 $ 111.3 11.6 % $ 71.7 $ 64.0 12.1 % 31.3 33.4 (6.2 )% 49.8 40.2 23.8 % 254.4 265.8 (4.3 )% 58.1 36.7 58.5 % 465.3 440.1 5.7 % $ (341.1 ) $ (328.8 ) 3.7 % Fiscal Year Ended Oct 2,
2011 Oct 3,
2010 Total net revenues $ 175.8 $ 150.8 16.6 % Cost of sales 103.0 89.6 15.0 % Other operating expenses 93.0 34.9 166.5 % Depreciation and amortization expenses 58.6 47.4 23.6 % General and administrative expenses 584.0 558.1 4.6 % Total operating expenses 838.6 730.0 14.9 % Gain on sale of properties 30.2 — nm Loss from equity investee (2.4 ) (3.3 ) (27.3 )% Operating loss $ (635.0 ) $ (582.5 ) 9.0 % of net revenues in Other are generated from the Seattle’s Best Coffee operating segment. The increase in revenues for Seattle’s Best Coffee was primarily due to the increaserecognition of a full year of sales to national accounts added in pointsthe latter part of distribution forfiscal 2010 as well as new accounts added during fiscal 2011(approximately $20 million). This was partially offset by the impact of the closure of the Seattle’s Best Coffee including sales to new national accounts. locations in Borders Bookstores.$25.215%, or $109 million primarily as a. This increase is the result of increased restructuring activities withinan increase of $59 million in other operating expenses primarily due to the non-storeimpairment of certain assets in our Seattle’s Best Coffee business associated with the Borders bankruptcy in April 2011 and an increase in marketing expenses. Also contributing was a $26 million increase in general and administrative expenses due to higher corporate expenses to support organization.(unaudited,(unaudited; in millions, except EPS) First Second Third Fourth Total $ 2,722.7 $ 2,534.7 $ 2,612.0 $ 2,838.0 $ 10,707.4 352.6 339.8 327.7 399.3 1,419.4 241.5 217.3 207.9 278.9 945.6 0.32 0.28 0.27 0.37 1.24 $ 2,615.2 $ 2,333.3 $ 2,403.9 $ 2,422.2 $ 9,774.6 117.7 40.9 204.0 199.4 562.0 64.3 25.0 151.5 150.0 390.8 0.09 0.03 0.20 0.20 0.52 (1)Includes pretax restructuring charges of $18.3 million, $7.9 million, $20.4 million and $6.4 million for the first, second, third and fourth fiscal quarters respectively.(2)Includes pretax restructuring charges of $75.5 million, $152.1 million, $51.6 million and $53.2 million for the first, second, third and fourth fiscal quarters respectively. First Second Third Fourth Total 2012: Net revenues $ 3,435.9 $ 3,195.9 $ 3,303.6 $ 3,364.2 $ 13,299.5 Operating income 556.0 430.4 491.6 519.6 1,997.4 Net earnings attributable to Starbucks 382.1 309.9 333.1 359.0 1,383.8 EPS — diluted $ 0.50 $ 0.40 $ 0.43 $ 0.46 $ 1.79 2011: Net revenues $ 2,950.8 $ 2,785.7 $ 2,932.2 $ 3,031.9 $ 11,700.4 Operating income 501.9 376.1 402.2 448.3 1,728.5 Net earnings attributable to Starbucks 346.6 261.6 279.1 358.5 1,245.7 EPS — diluted $ 0.45 $ 0.34 $ 0.36 $ 0.47 $ 1.62 $1.4$2.0 billion and $666 million$2.1 billion as of September 30, 2012 and October 3, 2010 and 2, 2011, respectively. As of September 27, 2009, respectively.30, 2012, approximately $703 million of cash was held in foreign subsidiaries. Of our cash held in foreign subsidiaries, $343 million is denominated in the US dollar. We actively manage our cash and short-term investments in order to internally fund operating needs domestically and internationally, make scheduled interest and principal payments on our borrowings, and return cash to shareholders through common stock cash dividend payments and share repurchases. Our short-term investments consisted predominantly of US Treasury securities, commercial paper, corporate bonds, and US Agency securities.issuers. We also have investments in auction rate securities (“ARS”), nearly allissuers, as well as certificates of which are classified as long-term. ARS totaling $41 million and $56 million were outstanding as of October 3, 2010 and September 27, 2009, respectively. The reduction in ARS was due to $12 million in redemptions during the fiscal yeardeposits with all redemptions done at par. While the ongoing auction failures will limit the liquidity of these ARS investments for some period of time, we do not believe the auction failures will materially impact our ability to fund our working capital needs, capital expenditures, shareholder dividends or other business requirements.Starbucks $1 billion unsecured credit facility (the “2005 credit facility”) was available for working capital, capital expenditures, and other corporate purposes. maturities greater than 1 year.of 2010, subsequent to the end of the 2010 fiscal year, we replaced the 2005 credit facility, which was scheduled to mature in August 2011. The new credit facility is described in more detail below. The 2005 credit facility was paired with a commercial paper program whereby we could issue unsecured commercial paper notes, up to a maximum amount outstanding at any time of $1 billion. The commercial paper program was secured by the credit facility, and the combined borrowing limit was $1 billion for the commercial paper program and the credit facility. During fiscal 2010 and 2009, there were no borrowings under the 2005 credit facility or commercial paper program. As of October 3, 2010, a total of $15 million in letters of credit were outstanding under our revolving credit facility.The 2005 credit facility contained provisions requiring us to maintain compliance with certain covenants, including a minimum fixed charge coverage ratio. As of October 3, 2010 and September 27, 2009, we were in compliance with each of these covenants. The $550 million of 10-year 6.25% Senior Notes also require us to maintain compliance with certain covenants, including limits on future liens and sale and leaseback transactions on certain material properties. As of October 3, 2010 and September 27, 2009, we were in compliance with each of these covenants.In November of 2010, subsequent to the end of the 2010 fiscal year, we replaced the 2005previous credit facility with a new $500 million unsecured credit facility (the “2010("the credit facility”) with various banks, of which $100 million may be 2010 credit facility is available for working capital, capital expenditures and other corporate purposes, including acquisitions and share repurchases. The new 2010 credit facilityrepurchases and is currently set to mature in November 2014. Starbucks has the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $500 million. The interest rate for any borrowings under the credit facility, based on Starbucks current ratings and fixed charge coverage ratio, is 1.50%Starbucks has the option, subject to negotiationAs of September 30, 2012 and agreementOctober 2, 2011, we were in compliance with the related banks, to increase the maximum commitment amount by an additional $500 million. each of these covenants.Starbucksour 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 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 willmay be used for working capital needs, capital expenditures and other corporate purposes, including acquisitions and share repurchases.flowflows generated from operations and existing cash and short-term investments shouldboth 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.interest in our equity method investees or licensed operationsinterests 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.20112013 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.stores; and additional investments in manufacturing capacity. Total capital expenditures for fiscal 20112013 are expected to range from $550 million to $600 million.In March 2010, Starbucksbe approximately $1.2 billion.its first everand paid a cash dividend to shareholders at $0.10of $0.13 per share. This quarterly dividend wasIn the fourth quarter of fiscal 2011 and the first three quarters of fiscal 2012 we declared and 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 totala cash dividend payout forof $0.17 per share. Cash dividends paid in fiscal 2010 to $171 million. On September 14, 2010,2012 and 2011 totaled $513 million and $390 million, respectively. In the fourth quarter, we declared a cash dividend of $0.13$0.21 per share to be paid on December 3, 2010November 30, 2012 with an expected payout of $97 million. Starbucks$157 million.1112 million and 16 million shares of common stock ($286 million) during fiscal 2010($593 million and $556 million, respectively) under share repurchase authorizations. The number of remaining shares authorized for repurchase at the end of the fiscal yearSeptember 30, 2012 totaled 10 million. Subsequent to year end, on 12.1 million. On November 15, 2010 we announced an additional share repurchase authorization made by the14, 2012, our Board of Directors inauthorized the amountrepurchase of up to 10an additional 25 million shares in addition to the 10 million remaining under the previous authorization.$1.7$1.8 billion for fiscal 2010 asyear 2012, compared to $1.4$1.6 billion for fiscal 2009.year 2011. The slight increase was primarily dueattributable to higheran increase in net earnings for the period.2010 totaled $790 million as compared to $421 millionyears 2012 and 2011. Net cash proceeds on investment maturities were offset by an increase 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. Capitalcapital expenditures, in fiscal 2010 totaled $441 million, primarily for remodeling and renovating existing company-operated retail stores and opening new retail stores, the absence of cash proceeds from the sale of corporate real estate in the prior year and investmentcash paid to acquire Evolution Fresh and Bay Bread, LLC (doing business as La Boulange) in information technology systems.2010year 2012 totaled $346$746 million as, compared to $642$608 million for fiscal year 2011. The increase was primarily due to an increase in cash returned to shareholders through higher dividend payments 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 2010.2012.October 3, 2010,September 30, 2012, 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 Total Less than
1 Year 1 - 3
Years 3 - 5
Years More than
5 Years $ 4,084.2 $ 718.4 $ 1,279.4 $ 1,006.6 $ 1,079.8 790.8 34.4 68.8 68.8 618.8 613.2 556.7 52.3 4.2 0.0 107.7 1.8 22.3 9.5 74.1 $ 5,595.9 $ 1,311.3 $ 1,422.8 $ 1,089.1 $ 1,772.7 Payments Due by Period Total $ 4,060.2 $ 787.9 $ 1,368.9 $ 934.9 $ 968.5 911.0 727.9 170.0 13.1 — 722.0 34.4 68.8 618.8 — 94.9 19.4 9.6 8.3 57.6 Total $ 5,788.1 $ 1,569.6 $ 1,617.3 $ 1,575.1 $ 1,026.1 (1)(1) October 3, 2010,September 30, 2012, we had $68.4$78.4 million of gross unrecognized tax benefits for uncertain tax positions.(2)(2) Amounts include the direct lease obligations, excluding any taxes, insurance and other related expenses. (3)Debt amounts include principal maturities and scheduled interest payments on our long-term debt.(4)(3)Purchase obligations relate primarily to greenGreen coffee with thesepurchase commitments comprise 94% of total purchase obligations.(4) Debt amounts comprising approximately 90% of the total of this item.include principal maturities and scheduled interest payments on our long-term debt.(5)(5) Other obligations include other long-term liabilities primarily consisting of asset retirement obligations, capital lease obligations and hedging instruments. Arrangementcertain guaranteesoperating lease and arepurchase commitments detailed in Note 17the footnotes to the consolidated financial statements in this 10-K.purchasespurchase significant amounts of dairy products to support the needs of our company-operated retail stores. The price and availability of these commodities directly impacts our results of operations and can be expected to impact our 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.an umbrellaa 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 umbrellamarket price risk management policy governs thehow hedging instruments the business may usebe used to mitigate risk. Risk limits are set annually and limits the risk to net earnings.prohibit speculative trading activity. We also monitor and limit the amount of associated counterparty credit risk. Additionally, this policy restricts, among other things, the amount of market-based risk we will tolerate before implementing approved hedging strategies and prohibits speculative trading activity. In general, hedging instruments do not have maturities in excess of five years. We performed a sensitivity analysis based on a 10% changecommodity prices of our commodity hedges, as of the end of fiscal 2010, and determined that such a change would not have a significant effect on the fair value of these instruments. Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI Commodity hedges $ 10 $ (10 ) $ 13 $ (13 ) October 3, 2010, StarbucksSeptember 30, 2012, we had forward foreign exchange contracts that hedge portions of anticipated international revenue streams and inventory purchases. In addition, we had forward foreign exchange contracts that qualify as accounting hedges of our net investment in Starbucks Japan to minimize foreign currency exposure.hedgesderivatives are generally offset by corresponding decreases or increases in the US dollar value of our foreign currency denominated payables and receivables (i.e.(i.e. “hedged items”) that would occur within the hedging period.October 3, 2010 Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI 10% Increase in
Underlying Rate 10% Decrease in
Underlying Rate 10% Increase in
Underlying Rate 10% Decrease in
Underlying Rate $ 46 $ (46 ) $ 13 $ (13 ) Increase/(Decrease) to Net Earnings Increase/(Decrease) to OCI Foreign currency hedges $ 8 $ (8 ) $ 30 $ (30 ) MDCP.Management Deferred Compensation Plan (“MDCP”). A corresponding liability is included in accrued compensation and related costs on the consolidated balance sheets. These investments are recorded at fair value with unrealized gains and losses recognized in net interest income and other in the consolidated statements of earnings. The offsetting changes in the MDCP liability are recorded in general and administrative expenses. We performed a sensitivity analysis based on a 10% change in the underlying equity prices of our investments as of the end of fiscal 2010September 30, 2012 and determined that such a change would not have a significant effectimpact on the fair value of these instruments.At the endAs of fiscal years 2010September 30, 2012 and 2009,October 2, 2011, we did not have any interest rate hedge agreements outstanding.October 3, 2010 Change in Fair Value Fair Value 100 Basis Point Increase in
Underlying Rate 100 Basis Point Decrease in
Underlying Rate $ 637 $ (36 ) $ 36 Change in Fair Value Fair Value Debt $ 674 $ 29 $ (29 ) As of October 3, 2010, our long-term available-for-sale securities included ARS. Please see Note 3 for further information. Available-for-sale securities are recorded on the consolidated balance sheets at fair value with unrealized gains and losses reported as a componentthe end of fiscal 2010,September 30, 2012, and determined that such a change would not have a significant effectimpact on the fair value of these instruments.on asset impairment, goodwill, stock-based compensation, operating leases, self insurance reserves and income taxes to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.flows (undiscounted).flows. If the estimated future cash flows are less than the carrying value of the asset, we calculatemeasure an impairment loss based on the asset’s estimated fair value. For storeretail assets, the impairment test is performed at the individual store asset group level. The fair value of thea store’s assets is estimated using a discounted cash flow model based on future store revenuesinternal projections. Key assumptions used in this calculation include revenue growth, operating expenses and a discount rate that we believe a buyer would assume when determining a purchase price for the store. Estimates of revenue growth and operating costs,expenses are based on internal projections and consider a store’s historical performance, local market economics and the business environment impacting the store’s performance. These estimates are subjective and can be significantly impacted by changes in the business or economic conditions. For non-retail assets, fair value is determined using internal projections. For other assets, we use the valuationan approach that is appropriate givenbased on the relevant facts and circumstances.AsDuring the past three fiscal years, we have not made any material changes in the accounting methodology that we use to assess long-lived asset impairment loss. For the foreseeable future, we do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions that we use to calculate long-lived asset impairment losses. However, as we periodically reassess estimated future cash flows and asset fair values, changes in our estimates and assumptions may cause us to realize material impairment charges in the future.values.values.When evaluating goodwill for impairment, we first perform a qualitative assessment to determine if the fair value of the reporting unit is more likely than not greater than the carrying amount. If not, we calculate the implied estimated fair value of the reporting unit. If the carrying amount of goodwill exceeds the implied estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to the implied estimated fair value. We conductThe fair value of each of our annual goodwill impairment testreporting units is the price aconsolidated entitiesthe reporting unit and is typically calculated using a discounted cash flow model. Key assumptions used in our third fiscal quarter. As we periodically reassess our fair value calculations, including estimated future cash flows, changes in our estimates and assumptions may cause us to realize material impairment charges in the future.Starbucksour ongoing operations, we may close certain stores within a reporting unit containing goodwill due to underperformance of the store or inability to renew our lease, among other reasons. We abandon certain assets associated with a closed store including leasehold improvements and other non-transferrablenon-transferable assets. Under GAAP, when a portion of a reporting unit that constitutes a business is to be disposed of, goodwill associated with the business is included in the carrying amount of the business in determining any loss on disposal. Our evaluation of whether the portion of a reporting unit being disposed of constitutes a business occurs on the date of abandonment. Although an operating store meets the accounting definition of a business prior to abandonment, it does not constitute a business on the closure date because the remaining assets on that date do not constitute an integrated set of assets that are capable of being conducted and managed for the purpose of providing a return to investors. As a result, when closing individual stores, we do not include goodwill in the calculation of any loss on disposal of the related assets. As noted above, if store closures are indicative of potential impairment of goodwill at the reporting unit level, we perform an evaluation of our reporting unit goodwill when such closures occur.Stock-based CompensationDuring the past three fiscal years, we have not made any material changes in the accounting methodology that we use to assess goodwill impairment loss. For fiscal We measure2012, we determined the fair value of stock awards atour reporting units was substantially in excess of their carrying values. Accordingly, we did not recognize any goodwill impairments during the grant date basedcurrent fiscal year. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions that we use to test for impairment losses on goodwill in the foreseeable future. However, as we periodically reassess our fair value of the award and recognize the expense over the related service period. For stock option awards we use the Black-Scholes-Merton option pricing model which requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their stock options before exercising them (“expected term”), thecalculations, including estimated volatility of our common stock price over the expected term and the expected dividend yield. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those stock awards expected to vest. We estimate the forfeiture rate based on historical experience. Changesfuture cash flows, changes in our estimates and assumptions could materially affect the estimate of fair value of stock-based compensation; however, a 10% change in our critical assumptions including volatility and expected term would not have amay cause us to realize material impact for fiscal year 2010.Operating LeasesWe lease retail stores, roasting and distribution facilities and office space under operating leases. We provide for an estimate of asset retirement obligation (“ARO”) expense at the lease inception date for operating leases with requirements to remove leasehold improvements at the end of the lease term. Estimating AROs involves subjective assumptions regarding both the amount and timing of actual future retirement costs. Future actual costs could differ significantly from amounts initially estimated. In addition, the large number of operating leases and the significant number of international markets in which we have operating leases adds administrative complexity to the calculation of ARO expense, as well as to the other technical accounting requirements of operating leases such as contingent rent. Estimating the cost of certain lease exit costs involves subjective assumptions, including the time it would take to sublease the leased location and the related potential sublease income. The estimated accruals for these costs could be significantly affected if future experience differs from that usedimpairment charges in the initial estimate.LiabilitiesKey assumptions used in the estimate of our self insurance reserves include the amount of claims incurred but not reported at the balance sheet date. These liabilities, which are associated with the risks that are retained by Starbucks are not discounted and are estimated, in part, by considering historical claims experience, demographic, factors,exposure and severity factors, and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.andthat do not meet this threshold, we record a related liability. We adjust our liability for unrecognized tax benefits liability and income tax provisionexpense in the period in which anthe uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position, or when morenew information becomes available.WeAlthough we believe that ourthe judgments and estimates discussed herein are reasonable; however,reasonable, actual results could differ, fromand we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which a liability has been established, or are required to pay amounts in excess of our established liability, our effective income tax rate in a given financial statement period could be materially affected.estimates.10-K.10-K for a detailed description of recent accounting pronouncements. We do not expect these recently issued accounting pronouncements to have a material impact on our results of operations, financial condition, or liquidity in future periods.Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Inin millions, except per share data) Oct 3,
2010 Sep 27,
2009 Sep 28,
2008 $ 8,963.5 $ 8,180.1 $ 8,771.9 1,340.9 1,222.3 1,171.6 403.0 372.2 439.5 1,743.9 1,594.5 1,611.1 10,707.4 9,774.6 10,383.0 4,458.6 4,324.9 4,645.3 3,551.4 3,425.1 3,745.1 293.2 264.4 330.1 510.4 534.7 549.3 569.5 453.0 456.0 53.0 332.4 266.9 9,436.1 9,334.5 9,992.7 148.1 121.9 113.6 1,419.4 562.0 503.9 50.3 37.0 5.2 (32.7 ) (39.1 ) (53.4 ) 1,437.0 559.9 455.7 488.7 168.4 144.0 948.3 391.5 311.7 2.7 0.7 (3.8 ) $ 945.6 $ 390.8 $ 315.5 $ 1.27 $ 0.53 $ 0.43 $ 1.24 $ 0.52 $ 0.43 744.4 738.7 731.5 764.2 745.9 741.7 $ 0.36 $ 0.00 $ 0.00 Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Oct 3,
2010Net revenues: Company-operated stores $ 10,534.5 $ 9,632.4 $ 8,963.5 Licensed stores 1,210.3 1,007.5 875.2 CPG, foodservice and other 1,554.7 1,060.5 868.7 Total net revenues 13,299.5 11,700.4 10,707.4 Cost of sales including occupancy costs 5,813.3 4,915.5 4,416.5 Store operating expenses 3,918.1 3,594.9 3,471.9 Other operating expenses 429.9 392.8 279.7 Depreciation and amortization expenses 550.3 523.3 510.4 General and administrative expenses 801.2 749.3 704.6 Restructuring charges — — 53.0 Total operating expenses 11,512.8 10,175.8 9,436.1 Gain on sale of properties — 30.2 — Income from equity investees 210.7 173.7 148.1 Operating income 1,997.4 1,728.5 1,419.4 Interest income and other, net 94.4 115.9 50.3 Interest expense (32.7 ) (33.3 ) (32.7 ) Earnings before income taxes 2,059.1 1,811.1 1,437.0 Income taxes 674.4 563.1 488.7 Net earnings including noncontrolling interests 1,384.7 1,248.0 948.3 Net earnings (loss) attributable to noncontrolling interests 0.9 2.3 2.7 Net earnings attributable to Starbucks $ 1,383.8 $ 1,245.7 $ 945.6 Earnings per share — basic $ 1.83 $ 1.66 $ 1.27 Earnings per share — diluted $ 1.79 $ 1.62 $ 1.24 Weighted average shares outstanding: Basic 754.4 748.3 744.4 Diluted 773.0 769.7 764.2 Cash dividends declared per share $ 0.72 $ 0.56 $ 0.36 Inin millions, except per share data) Oct 3,
2010 Sep 27,
2009 ASSETS $ 1,164.0 $ 599.8 236.5 21.5 49.2 44.8 302.7 271.0 543.3 664.9 156.5 147.2 304.2 286.6 2,756.4 2,035.8 191.8 71.2 341.5 352.3 2,416.5 2,536.4 346.5 253.8 70.8 68.2 262.4 259.1 $ 6,385.9 $ 5,576.8 LIABILITIES AND EQUITY 282.6 267.1 400.0 307.5 173.2 188.1 100.2 127.8 146.2 154.3 262.8 147.5 414.1 388.7 1,779.1 1,581.0 549.4 549.3 375.1 389.6 2,703.6 2,519.9 0.7 0.7 106.2 147.0 39.4 39.4 3,471.2 2,793.2 57.2 65.4 3,674.7 3,045.7 7.6 11.2 3,682.3 3,056.9 $ 6,385.9 $ 5,576.8 Sep 30,
2012 Oct 2,
2011ASSETS Current assets: Cash and cash equivalents $ 1,188.6 $ 1,148.1 Short-term investments 848.4 902.6 Accounts receivable, net 485.9 386.5 Inventories 1,241.5 965.8 Prepaid expenses and other current assets 196.5 161.5 Deferred income taxes, net 238.7 230.4 Total current assets 4,199.6 3,794.9 Long-term investments — available-for-sale securities 116.0 107.0 Equity and cost investments 459.9 372.3 Property, plant and equipment, net 2,658.9 2,355.0 Other assets 385.7 409.6 Goodwill 399.1 321.6 TOTAL ASSETS $ 8,219.2 $ 7,360.4 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 398.1 $ 540.0 Accrued liabilities 1,133.8 940.9 Insurance reserves 167.7 145.6 Deferred revenue 510.2 449.3 Total current liabilities 2,209.8 2,075.8 Long-term debt 549.6 549.5 Other long-term liabilities 345.3 347.8 Total liabilities 3,104.7 2,973.1 Shareholders’ equity: Common stock ($0.001 par value) — authorized, 1,200.0 shares; issued and outstanding, 749.3 and 744.8 shares, respectively (includes 3.4 common stock units in both periods) 0.7 0.7 Additional paid-in capital 39.4 40.5 Retained earnings 5,046.2 4,297.4 Accumulated other comprehensive income 22.7 46.3 Total shareholders’ equity 5,109.0 4,384.9 Noncontrolling interests 5.5 2.4 Total equity 5,114.5 4,387.3 TOTAL LIABILITIES AND EQUITY $ 8,219.2 $ 7,360.4 Inin millions) Oct 3,
2010 Sep 27,
2009 Sep 28,
2008 $ 948.3 $ 391.5 $ 311.7 540.8 563.3 604.5 67.7 224.4 325.0 (42.0 ) (69.6 ) (117.1 ) (108.6 ) (78.4 ) (61.3 ) 91.4 53.0 52.6 113.6 83.2 75.0 13.5 2.0 3.8 (36.9 ) (15.9 ) (14.7 ) (15.3 ) 5.4 (0.1 ) 123.2 28.5 (0.6 ) (3.6 ) (53.0 ) (63.9 ) (12.9 ) 57.2 7.3 24.2 16.3 72.4 (16.1 ) 120.5 (11.2 ) 17.6 60.6 75.3 1,704.9 1,389.0 1,258.7 (549.0 ) (129.2 ) (71.8 ) 209.9 111.0 20.0 1.1 5.0 75.9 (12.0 ) 0.0 (74.2 ) 1.2 (4.8 ) (52.0 ) (440.7 ) (445.6 ) (984.5 ) 0.0 42.5 0.0 (789.5 ) (421.1 ) (1,086.6 ) 0.0 20,965.4 65,770.8 0.0 (21,378.5 ) (66,068.0 ) 0.0 1,338.0 528.2 0.0 (1,638.0 ) (228.8 ) (45.8 ) 0.0 0.0 127.9 57.3 112.3 36.9 15.9 14.7 (6.6 ) (0.7 ) (0.6 ) (171.0 ) 0.0 0.0 (285.6 ) 0.0 (311.4 ) (1.8 ) (1.6 ) (1.7 ) (346.0 ) (642.2 ) (184.5 ) (5.2 ) 4.3 0.9 564.2 330.0 (11.5 ) 599.8 269.8 281.3 $ 1,164.0 $ 599.8 $ 269.8 $ 32.0 $ 39.8 $ 52.7 $ 527.0 $ 162.0 $ 259.5 Fiscal Year Ended Sep 30,
2012 Oct 2,
2011 Oct 3,
2010OPERATING ACTIVITIES: Net earnings including noncontrolling interests $ 1,384.7 $ 1,248.0 $ 948.3 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 580.6 550.0 540.8 Gain on sale of properties — (30.2 ) — Deferred income taxes, net 61.1 106.2 (42.0 ) Income earned from equity method investees, net of distributions (49.3 ) (32.9 ) (17.2 ) Gain resulting from acquisition of joint ventures — (55.2 ) (23.1 ) Stock-based compensation 153.6 145.2 113.6 Other 23.6 33.3 75.5 Cash provided/(used) by changes in operating assets and liabilities: Accounts receivable (90.3 ) (88.7 ) (33.4 ) Inventories (273.3 ) (422.3 ) 123.2 Accounts payable (105.2 ) 227.5 (3.6 ) Accrued liabilities and insurance reserves 23.7 (81.8 ) (18.7 ) Deferred revenue 60.8 35.8 24.2 Prepaid expenses, other current assets and other assets (19.7 ) (22.5 ) 17.3 Net cash provided by operating activities 1,750.3 1,612.4 1,704.9 INVESTING ACTIVITIES: Purchase of investments (1,748.6 ) (966.0 ) (549.0 ) Maturities and calls of investments 1,796.4 430.0 209.9 Acquisitions, net of cash acquired (129.1 ) (55.8 ) (12.0 ) Additions to property, plant and equipment (856.2 ) (531.9 ) (445.8 ) Cash proceeds from sale of property, plant, and equipment 5.3 117.4 5.1 Other (41.8 ) (13.2 ) 2.3 Net cash used by investing activities (974.0 ) (1,019.5 ) (789.5 ) FINANCING ACTIVITIES: (Payments)/proceeds from short-term borrowings (30.8 ) 30.8 — Purchase of noncontrolling interest — (27.5 ) (45.8 ) Proceeds from issuance of common stock 236.6 250.4 132.8 Excess tax benefit from exercise of stock options 169.8 103.9 36.9 Cash dividends paid (513.0 ) (389.5 ) (171.0 ) Repurchase of common stock (549.1 ) (555.9 ) (285.6 ) Minimum tax withholdings on share-based awards (58.5 ) (15.0 ) (4.9 ) Other (0.5 ) (5.2 ) (8.4 ) Net cash used by financing activities (745.5 ) (608.0 ) (346.0 ) Effect of exchange rate changes on cash and cash equivalents 9.7 (0.8 ) (5.2 ) Net increase (decrease) in cash and cash equivalents 40.5 (15.9 ) 564.2 CASH AND CASH EQUIVALENTS: Beginning of period 1,148.1 1,164.0 599.8 End of period $ 1,188.6 $ 1,148.1 $ 1,164.0 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest, net of capitalized interest $ 34.4 $ 34.4 $ 32.0 Income taxes $ 416.9 $ 350.1 $ 527.0 Inin millions) Common Stock Additional
Paid-in
Capital Other
Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income/(Loss) Shareholders’
Equity Noncontrolling
Interest Total Shares Amount 738.3 $ 0.7 $ 0.0 $ 39.4 $ 2,189.4 $ 54.6 $ 2,284.1 $ 17.3 $ 2,301.4 0.0 0.0 (1.6 ) 0.0 (1.7 ) 0.0 (3.3 ) 0.0 (3.3 ) 0.0 0.0 0.0 0.0 315.5 0.0 315.5 (3.8 ) 311.7 0.0 0.0 0.0 0.0 0.0 0.8 0.8 0.0 0.8 0.0 0.0 0.0 0.0 0.0 (7.0 ) (7.0 ) 0.0 (7.0 ) 309.3 (3.8 ) 305.5 0.0 0.0 76.8 0.0 0.0 0.0 76.8 0.0 76.8 6.6 0.0 77.4 0.0 0.0 0.0 77.4 0.0 77.4 2.8 0.0 41.9 0.0 0.0 0.0 41.9 0.0 41.9 (12.2 ) 0.0 (194.5 ) 0.0 (100.8 ) 0.0 (295.3 ) 0.0 (295.3 ) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.8 4.8 735.5 $ 0.7 $ 0.0 $ 39.4 $ 2,402.4 $ 48.4 $ 2,490.9 $ 18.3 $ 2,509.2 0.0 0.0 0.0 0.0 390.8 0.0 390.8 0.7 391.5 0.0 0.0 0.0 0.0 0.0 1.8 1.8 0.0 1.8 0.0 0.0 0.0 0.0 0.0 15.2 15.2 0.0 15.2 407.8 0.7 408.5 0.0 0.0 84.3 0.0 0.0 0.0 84.3 0.0 84.3 4.9 0.0 35.9 0.0 0.0 0.0 35.9 0.0 35.9 2.5 0.0 26.8 0.0 0.0 0.0 26.8 0.0 26.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (7.8 ) (7.8 ) 742.9 $ 0.7 $ 147.0 $ 39.4 $ 2,793.2 $ 65.4 $ 3,045.7 $ 11.2 $ 3,056.9 0.0 0.0 0.0 0.0 945.6 0.0 945.6 2.7 948.3 0.0 0.0 0.0 0.0 0.0 (17.0 ) (17.0 ) 0.0 (17.0 ) 0.0 0.0 0.0 0.0 0.0 8.8 8.8 0.0 8.8 937.4 2.7 940.1 0.0 0.0 115.6 0.0 0.0 0.0 115.6 0.0 115.6 10.1 0.0 137.5 0.0 0.0 0.0 137.5 0.0 137.5 0.8 0.0 18.5 0.0 0.0 0.0 18.5 0.0 18.5 (11.2 ) 0.0 (285.6 ) 0.0 0.0 0.0 (285.6 ) 0.0 (285.6 ) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.8 ) (0.8 ) 0.0 0.0 0.0 0.0 (267.6 ) 0.0 (267.6 ) 0.0 (267.6 ) 0.0 0.0 (26.8 ) 0.0 0.0 0.0 (26.8 ) (5.5 ) (32.3 ) 742.6 $ 0.7 $ 106.2 $ 39.4 $ 3,471.2 $ 57.2 $ 3,674.7 $ 7.6 $ 3,682.3 Common Stock Additional Paid-in Capital Retained
Earnings Accumulated
Other
Comprehensive
Income/(Loss) Shareholders’
Equity Noncontrolling
Interest Total Shares Amount Balance, September 27, 2009 742.9 $ 0.7 $ 186.4 $ 2,793.2 $ 65.4 $ 3,045.7 $ 11.2 $ 3,056.9 Net earnings — — — 945.6 — 945.6 2.7 948.3 Unrealized holding loss, net — — — — (17.0 ) (17.0 ) — (17.0 ) Translation adjustment, net of tax — — — — 8.8 8.8 — 8.8 Comprehensive income 937.4 2.7 940.1 Stock-based compensation expense — — 115.6 — — 115.6 — 115.6 Exercise of stock options, including tax benefit of $27.7 10.1 — 137.5 — — 137.5 — 137.5 Sale of common stock, including tax benefit of $0.1 0.8 — 18.5 — — 18.5 — 18.5 Repurchase of common stock (11.2 ) — (285.6 ) — — (285.6 ) — (285.6 ) Net distributions to noncontrolling interests — — — — — — (0.8 ) (0.8 ) Cash dividend — — — (267.6 ) — (267.6 ) — (267.6 ) Purchase of noncontrolling interests — — (26.8 ) — — (26.8 ) (5.5 ) (32.3 ) Balance, October 3, 2010 742.6 $ 0.7 $ 145.6 $ 3,471.2 $ 57.2 $ 3,674.7 $ 7.6 $ 3,682.3 Net earnings — — — 1,245.7 — 1,245.7 2.3 1,248.0 Unrealized holding loss, net — — — — (4.4 ) (4.4 ) — (4.4 ) Translation adjustment, net of tax — — — — (6.5 ) (6.5 ) — (6.5 ) Comprehensive income 1,234.8 2.3 1,237.1 Stock-based compensation expense — — 147.2 — — 147.2 — 147.2 Exercise of stock options, including tax benefit of $96.1 17.3 — 312.5 — — 312.5 — 312.5 Sale of common stock, including tax benefit of $0.1 0.5 — 19.1 — — 19.1 — 19.1 Repurchase of common stock (15.6 ) — (555.9 ) — — (555.9 ) — (555.9 ) Cash dividend — — — (419.5 ) — (419.5 ) — (419.5 ) Purchase of noncontrolling interests — — (28.0 ) — — (28.0 ) (7.5 ) (35.5 ) Balance, October 2, 2011 744.8 $ 0.7 $ 40.5 $ 4,297.4 $ 46.3 $ 4,384.9 $ 2.4 $ 4,387.3 Net earnings — — — 1,383.8 — 1,383.8 0.9 1,384.7 Unrealized holding loss, net — — — — (26.4 ) (26.4 ) — (26.4 ) Translation adjustment, net of tax — — — — 2.8 2.8 — 2.8 Comprehensive income 1,360.2 0.9 1,361.1 Stock-based compensation expense — — 155.2 — — 155.2 — 155.2 Exercise of stock options, including tax benefit of $167.3 16.5 — 326.1 — — 326.1 — 326.1 Sale of common stock, including tax benefit of $0.2 0.3 — 19.5 — — 19.5 — 19.5 Repurchase of common stock (12.3 ) — (501.9 ) (91.3 ) — (593.2 ) — (593.2 ) Cash dividend — — — (543.7 ) — (543.7 ) — (543.7 ) Non-controlling interest resulting from acquisition — — — — — — 2.2 2.2 Balance, September 30, 2012 749.3 $ 0.7 $ 39.4 $ 5,046.2 $ 22.7 $ 5,109.0 $ 5.5 $ 5,114.5 September 27, 2009 and September 28, 2008Note 1:Summary of Significant Accounting PoliciesStarbucks purchasesroastsroast high-quality whole bean coffees and sells them,that we sell, along with handcrafted coffee and tea beverages and a variety of fresh food items, through itsour company-operated retail stores. We also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed stores, grocery and through certain of our licensees and equity investees, we produce and sell a variety of ready-to-drink beverages. All channels outside the company-operated retail stores are collectively known as specialty operations. Additional details on the nature of our business are in Item 1 of this 10-K.“our”.threefour reportable operating segments: United StatesAmericas; Europe, Middle East, and Africa, collectively referred to as “EMEA;” China / Asia Pacific (“US”CAP”), International, and Global Consumer Products Group (“CPG”).controlled by us.that we control. Investments in entities that we do not control, but have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method. Investments in entities in which we do not have the ability to exercise significant influence are accounted for under the cost method. Intercompany transactions and balances have been eliminated. Fiscal years 2009 and 2008 included 52 weeks.and future asset retirement obligations;obligations, and inventory reserves; assumptions underlying self-insurance reserves;reserves and income from unredeemed stored value cards; and the potential outcome of future tax consequences of events that have been recognized in the financial statements. Actual results and outcomes may differ from these estimates and assumptions.management believes itswe believe credit risk to be minimal.Cash ManagementWe have investments in auction rate securities within the long-term investment portfolio. Our trading portfolio is primarily comprised of equity mutual funds and equity exchange-traded funds. Trading securities are recorded at fair value with unrealized holding gains and lossesAlso included in net earnings.our available-for-sale investment portfolio are certificates of deposit placed through an account registry service. Available-for-sale securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income. Available-for-sale securities with remaining maturities of less than one year and those identified by management at the time of purchase for fundingto be used to fund operations in less thanwithin one year are classified as short term, andterm. All other available-for-sale securities, including all other available-for-saleof our auction rate securities, are classified as long term. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary. Management reviewsWe review several factors to determine whether a loss is other than temporary, such as the length and extent of the fair value decline, the financial condition and near term prospects of the issuer, and for equity investments, our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. For debt securities, management also evaluates whether we have the intent to sell or will likely be required to sell before theirthe securities anticipated recovery, which may be at maturity. Realized gains and losses are accounted for using the specific identification method. Purchases and sales are recorded on a trade date basis.Financial Instrumentsthe last day of the fiscal period, if available. If a quoted market price is not available for identical assets, we determine fair value based upon the quoted market price of similar assets or using a variety of other valuation methodologies. We determine fair value of our auction rate securities using an internally developed valuation model, using inputs that include interest rate curves, credit and Equityliquidity spreads, and Cost Investmentsmaturitynature of thosethese instruments. The fair value of our investments in marketable debt and equity securities, equity mutual funds and equity exchange-traded funds is based upon the quoted market price on the last business day of the fiscal year. Where an observable quoted market price for a security does not exist, we estimate fair value using a variety of valuation methodologies, which include observable inputs for comparable instruments and unobservable inputs. The specific methodologies include comparing the security with securities of publicly traded companies in similar lines of business, applying revenue multiples to estimated future operating results and estimating discounted cash flows. The fair value of our long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities.standard valuation techniques, including discounted cash flows, comparable transactions, and comparable company analyses.an umbrellaa market price risk management policy. Under this policy, Starbuckswe may engage in transactions involving various derivative instruments with maturities generally not longer than five years, to hedge interest rates, commodity prices and foreign currency denominated revenues, purchases, assets and liabilities.derivative’sderivative's gain or loss is initially reported as a component of other comprehensive income (“OCI”) and subsequently reclassified into net earnings when the hedged exposure affects net earnings. For a net investment hedge, the effective portion of the derivative’sderivative's gain or loss is reported as a component of OCI.We also enter into certain that are not designated as hedging instruments for accounting purposes. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and other on the consolidated statements of earnings. September 27, 2009, and September 28, 2008,, the allowance for doubtful accounts was $3.3$5.6 million $5.0, $3.3 million, and $4.5$3.3 million respectively.Inventoriesitemsinventory and for estimated shrinkage between physical inventory counts. Inventory reserves are based on inventory turnoverobsolescence trends, historical experience and application of the specific identification method. As of September 30, 2012, October 2, 2011, and October 3, 2010 September 27, 2009, and September 28, 2008,, inventory reserves were $18.1$22.6 million $21.1, $19.5 million, and $25.5$18.1 million, respectively.two2 to seven15 years for equipment and 30 to 40 years for buildings. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease life, generally 10 years.years . For leases with renewal periods at our option, we generally use the original lease term, excluding renewal option periods, to determine estimated useful lives. If failure to exercise a renewal option imposes an economic penalty to us, we may determine at the inception of the lease that renewal is reasonably assured and include the renewal option period in the determination of the appropriate estimated useful lives. The portion of depreciation expense related to production and distribution facilities is included in cost of sales including occupancy costs on the consolidated statements of earnings. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. When assets are retired or sold, the asset cost and related accumulated depreciation are eliminated with any remaining gain or loss reflectedrecognized in net earnings.Starbucksour ongoing operations, we may close certain stores within a reporting unit containing goodwill due to underperformance of the store or inability to renew our lease, among other reasons. We abandon certain assets associated with a closed store including leasehold improvements and other non-transferrablenon-transferable assets. Under GAAP, when a portion of a reporting unit that constitutes a business is to be disposed of, goodwill associated with the business is included in the carrying amount of the business in determining any loss on disposal. Our evaluationWe conduct our annual goodwill During Fiscal test for consolidated entitiescharges and recorded $1.6 million in our third fiscal quarter.2010.2010, 20092012, 2011, and 2008.2010. store revenues and operating costs, using internal projections. Property, plant and equipment assets are grouped at the lowest level for which there are identifiable cash flows when assessing impairment. Cash flows for retailcompany-operated store assets are identified at the individual store level. Long-lived assets to be disposed of are reported at the lower of their carrying amount, or fair value less estimated costs to sell.$67.7$31.7 million $224.4, $36.2 million, and $325.0$67.7 million in fiscal 2010, 20092012, 2011, and 2008,2010, respectively, primarily due to underperforming company-operated retail stores. The net losses in fiscal 2009 and 2008 include $129.2 million and $201.6 million, respectively, of asset impairments related primarily to the US and International store closures as part of Starbucks store portfolio rationalization which began in fiscal 2008. Depending on the underlying asset that is impaired, these losses may be recorded in any one of the operating expense lines on the consolidated statements of earnings: for retail operations, the net impairment and disposition losses are recorded in restructuring charges and store operating expenses; for specialty operations, these losses are recorded in restructuring charges and other operating expenses;expenses and for all other operations, these losses are recorded in cost of sales including occupancy costs, other operating expenses, or general and administrative expenses, or restructuring charges.factors,exposure and severity factors, and other actuarial assumptions.Stored Value CardsRevenues from our stored value cards, such as Starbucks Cards, are recognized when tendered for payment, or upon redemption. Outstanding customer balances are included in deferred revenue on the consolidated balance sheets. There are no expiration dates on our stored value cards, and we do not charge any service fees that cause a decrement to customer balances.While we will continue to honor all stored value cards presented for payment, management may determine the likelihood of redemption to be remote for certain cards due to, among other things, long periods of inactivity. In these circumstances, if management also determines there is no requirement for remitting balances to government agencies under unclaimed property laws, card balances may then be recognized in the consolidated statements of earnings, in net interest income and other. For the fiscal years ended October 3, 2010, September 27, 2009 and September 28, 2008, income recognized on unredeemed stored value card balances was $31.2 million, $26.0 million and $13.6 million, respectively.Customers in the US who register their Starbucks Card are automatically enrolled in the My Starbucks Reward program and earn points (“stars”) with each purchase. A free beverage coupon is issued to the customer once 15 points have been accumulated. The value of points earned by our program members is included in deferred revenue and recorded as a reduction in revenue at the time the points are earned, based on the value of points that are projected to be redeemed.Retail RevenuesretailStores Revenues We maintain a sales return allowance to reduce retail revenues for estimated future product returns based on historical patterns. Retail store revenues are reported net of sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities.SpecialtySpecialty primarily of product sales to customers other than through company-operated retaillicensed stores, as well as royalties and other fees generated from licensing operations.paid by licensees to use the Starbucks brand. Sales of coffee, tea and related products are generally recognized upon shipment to customers,licensees, depending on contract terms. Shipping charges billed to customerslicensees are also recognized as revenue, and the related shipping costs are included in cost of sales including occupancy costs on the consolidated statements of earnings.Specific to retail store licensing arrangements, initial For certainarrangements, where we intendagreements. Sales of coffee, tea, ready-to-drink beverages and related products to acquire an ownership interest,grocery and warehouse club stores are generally recognized when received by the initial nonrefundable development feescustomer or distributor, depending on contract terms. We maintain a sales return allowance to reduce packaged goods revenues for estimated future product returns based on historical patterns. Revenues are recorded net of sales discounts given to customers for trade promotions and payments to customers for product placement in our customers’ stores.to other long-term liabilitiesrevenue on the consolidated balance sheets until acquisition, at which pointsheets. There are no expiration dates on our stored value cards, and we do not charge any service fees that cause a decrement to customer balances. While we will continue to honor all stored value cards presented for payment, management may determine the feeslikelihood of redemption to be remote for certain cards due to long periods of inactivity. In these circumstances, if management also determines there is no requirement for remitting balances to government agencies under unclaimed property laws, card balances may then be recognized in the consolidated statements of earnings, in net interest income and other. For the fiscal years ended September 30, 2012, October 2, 2011, and October 3, 2010, income recognized on unredeemed stored value card balances was $65.8 million, $46.9 million, and $31.2 million, respectively. In fiscal 2012, we recognized additional income associated with unredeemed gift cards due to a recent court ruling relating to state unclaimed property laws.reflectedautomatically enrolled in the My Starbucks Reward program and earn points (“Stars”) with each purchase. Reward program members receive various benefits depending on the number of Stars earned in a 12-month period. The value of Stars earned by our program members towards free product is included in deferred revenue and recorded as a reduction in revenue at the time the Stars are earned, based on the value of our investment.Other arrangements involving multiple elements and deliverables as well as upfront feesStars that are individually evaluated for revenue recognition. Cash payments received in advanceprojected to be redeemed.product or service delivery are recorded in deferred revenue until earned.AdvertisingAdvertisingrecorded in store operating expenses, other operating expensestotaled $277.9 million, $244.0 million, and general and administrative expenses on the consolidated statements of earnings, totaled $176.2$198.7 million $126.3 million and $129.0 million in fiscal 2010, 20092012, 2011, and 2008,2010, respectively. As of October 3, 2010 and September 27, 2009, $5.6 million and $7.2 million, respectively, of capitalized advertisingIncluded in these costs were recorded on the consolidated balance sheets. in accrued occupancy costs and other long-term liabilities on the consolidated balance sheets and amortize the deferred rent over the terms of the leases as reductions to rent expense on the consolidated statements of earnings. in prepaid expenses and other current assets and other assets on the consolidated balance sheets and then amortize the deferred rent over the terms of the leases as additional rent expense on the consolidated statements of earnings. in accrued occupancy costs on the consolidated balance sheets and the corresponding rent expense when specified levels have been achieved or when we determine that achieving the specified levels during the fiscal year is probable.for depreciation ofas leasehold improvement assets. Upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statements of earnings. As of September 30, 2012 and October 3, 2010 and September 27, 2009,2, 2011, our net ARO asset included in property, plant and equipment was $13.7$8.8 million and $15.1$11.8 million, respectively, whileand our net ARO liability included in other long-term liabilities was $47.7$42.6 million and $43.4$50.1 million as of the same respective dates., respectively.Starbucks maintainswill establishroutinely evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance for deferred tax assets if, it is more likely than not that these items will either expire before Starbucks is able to realize their benefits, or that future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on management’s assessmentsall available evidence, we determine that some portion of realizable deferredthe tax assets.benefit will not be realized. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that thetheour position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Starbucks recognizes interest and penalties related to income tax matters in income tax expense. the basis of the weighted average number of shares andof common stock units that were outstanding during the period. Diluted earnings per share includesis computed based on the dilutive effectweighted average number of shares of common stock equivalents consistingand the effect of certaindilutive potential common shares subject to stock options and RSUs,outstanding during the period, calculated using the treasury stock method. Dilutive potential common shares include outstanding stock options and RSUs. Performance-based RSUs are considered dilutive when the related performance criterion has been met.2007, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on accounting and reporting for noncontrolling interests in subsidiaries. The guidance clarifies that a noncontrolling interest in a subsidiary should be accounted for as a component of equity separate from the parent company’s equity. It also requires the presentation of both net earnings attributable to non-controlling interests and net earnings attributable to Starbucks on the face of the consolidated statement of earnings. We adopted the new guidance relating to noncontrolling interests beginning September 28, 2009 on a prospective basis, except for the presentation and disclosure requirements, which were applied retrospectively as follows:we reclassified minority interests previously reported on our consolidated statements of earnings as a component of net interest income and other to a separate line below net earnings including noncontrolling interestswe reclassified minority interests previously reported on our consolidated balance sheets as a component of other long-term liabilities to noncontrolling interests and included it as a component of equityIn June 2009,July 2012, the FASB issued authoritative guidance that revises the requirements around how entities test indefinite-lived intangible assets, other than goodwill, for impairment. The guidance allows companies to perform a qualitative assessment before calculating the fair value of the reporting unit. If entities determine, on the consolidationbasis of variable interestqualitative factors, that the fair value of the indefinite-lived intangible asset is more likely than not greater than the carrying amount, a quantitative calculation would not be needed. The guidance will become effective for us at the beginning of our first quarter of fiscal 2013. The adoption of this guidance will not have a material impact on our financial statements.(“VIE”), which willtest goodwill for impairment. The guidance allows companies to perform a qualitative assessment before calculating the fair value of the reporting unit. If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not greater than the carrying amount, a quantitative calculation would not be needed. We early-adopted this guidance effective for our fiscal 2012 annual goodwill impairment test, which we performed during the third fiscal quarter. The adoption of this guidance will result in a change in how we perform our goodwill impairment assessment; however, it will not have a material impact on our financial statements. fiscal quarter of 2011.fiscal 2013. The new guidance requires a qualitative approach to identify a controlling financial interest in a VIE, and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. We believe the adoption of this new guidance will result in a change in how we present the components of comprehensive income, which is currently presented within our consolidated statements of equity.effectimpact on our financial statements. Year Ended October 2, 2011 As Filed Reclass As Adjusted Total net revenues $ 11,700.4 $ — $ 11,700.4 Cost of sales including occupancy costs 4,949.3 (33.8 ) 4,915.5 Store operating expenses 3,665.1 (70.2 ) 3,594.9 Other operating expenses 402.0 (9.2 ) 392.8 Depreciation and amortization expenses 523.3 — 523.3 General and administrative expenses 636.1 113.2 749.3 Total operating expenses 10,175.8 — 10,175.8 Gain on sale of properties 30.2 — 30.2 Income from equity investees 173.7 — 173.7 Operating income $ 1,728.5 $ — $ 1,728.5 Year Ended October 3, 2010 As Filed Reclass As Adjusted Total net revenues $ 10,707.4 $ — $ 10,707.4 Cost of sales including occupancy costs 4,458.6 (42.1 ) 4,416.5 Store operating expenses 3,551.4 (79.5 ) 3,471.9 Other operating expenses 293.2 (13.5 ) 279.7 Depreciation and amortization expenses 510.4 — 510.4 General and administrative expenses 569.5 135.1 704.6 Restructuring charges 53.0 — 53.0 Total operating expenses 9,436.1 — 9,436.1 Income from equity investees 148.1 — 148.1 Operating income $ 1,419.4 $ — $ 1,419.4 Property, plant and equipment $ 18.1 Intangible assets 24.3 Goodwill 58.7 Other current and noncurrent assets 5.1 Current liabilities (6.4 ) Total cash paid $ 99.8 financial statements.Note 2:Restructuring Chargesrestructuring efforts we began in fiscal 2008 to rationalize our store portfolio and the non-retail support organization were essentially completed in fiscal 2010. No material future costs related to these efforts are expected. On a cumulative basis we closed 918 stores on a global basis as partfair value of this effort.Restructuring charges by type of cost, by reportable segment and reconciliation100% of the associated accrued liability (net assets of these markets on the acquisition date was $131.0 million and was recorded on our consolidatedmillions):these net assets were By Type of Cost By Segment Total Lease Exit
and Other
Related Costs Asset
Impairments Employee
Termination
Costs US International Other $ 53.0 $ 53.0 $ 0.2 $ (0.2 ) $ 27.2 $ 25.8 $ 0.0 332.4 184.2 129.2 19.0 246.3 27.0 59.1 266.9 47.8 201.6 17.5 210.9 19.2 36.8 652.3 285.0 331.0 36.3 484.4 72.0 95.9 $ 53.4 $ 48.0 $ 5.4 211.6 192.6 19.0 (161.0 ) (137.8 ) (23.2 ) $ 104.0 $ 102.8 $ 1.2 53.4 53.7 (0.3 ) (68.2 ) (67.3 ) (0.9 ) $ 89.2 $ 89.2 $ 0.0 (1)Non-cash charges and credits for lease exit and other related costs primarily represent deferred rent balances recognized as expense credits at the cease-use date.(2)The remaining liability relates to lease obligations for stores that were previously closed where Starbucks has been unable to terminate the lease or find subtenants for the unused space.Note 3:Investments(in millions): Amortized
Cost Gross
Unrealized
Holding
Gains Gross
Unrealized
Holding
Losses Fair
Value $ 30.0 $ 0.0 $ 0.0 $ 30.0 15.0 0.0 0.0 15.0 0.7 0.0 0.0 0.7 190.7 0.1 0.0 190.8 58.8 49.2 $ 295.2 $ 0.1 $ 285.7 $ 27.0 $ 0.0 $ 0.0 $ 27.0 121.4 2.1 0.0 123.5 44.8 0.0 (3.5 ) 41.3 $ 193.2 $ 2.1 $ (3.5 ) $ 191.8 $ 2.5 $ 0.0 $ 0.0 $ 2.5 19.0 0.0 0.0 19.0 58.5 44.8 $ 80.0 $ 66.3 $ 57.8 $ 0.0 $ (2.1 ) $ 55.7 14.7 0.8 0.0 15.5 $ 72.5 $ 0.8 $ (2.1 ) $ 71.2 Available-for-sale securities$63.8 millionProceeds of goodwill and $35.1 million in definite-lived intangible assets.salesour noncontrolling partner, Maxim’s Caterers Limited (Maxim’s). We simultaneously sold our 5% ownership interest in the Hong Kong market to Maxim’s.available-for-sale securities were $1.1 million, $5.0 millionfiscal 2010, we acquired 100% ownership of our business in France, converting it from a 50% joint venture with Sigla S.A. (Grupo Vips) of Spain to a company-operated market. We simultaneously sold our 50% ownership interests in the Spain and $75.9 millionPortugal markets to Grupo Vips, converting them to licensed markets.years 2010, 2009 and 2008, respectively. For fiscal years 2010, 2009 and 2008, realized gains and losses on sales and maturities were immaterial.Aswe acquired October 3, 2010, long-term available-for-sale securities of $191.8 million included $41.3 million investeda previously consolidated 50% joint venture in auction rate securitiesthe US with Johnson Coffee Corporation, Urban Coffee Opportunities (“ARS”UCO”). As of September 27, 2009, long-term available-for-sale securities of $71.2 million included $55.7 million invested in ARS. ARS have long-dated maturities but provide liquidity through a Dutch auction process that resetsapplicable interest rate at pre-determined calendar intervals. Due to the auction failures that began in 2008, these securities became illiquid and were classified as long-term investments. The investment principal associated with the failed auctions will not be accessible until:successful auctions resume;an active secondary market for these securities develops;the issuers replace these securities with another form of financing; orfinal payments are made according to the contractual maturitieseffects of the debt issues which range from 20 to 35 years.We do not intend to sell the ARS, nor is it likely we will be required to sell the ARS before their anticipated recovery, which may be at maturity. In fiscal 2010, two ARS were fully called at par value of $6.1 millionchange in Starbucks ownership interest in UCO and three ARS were partially called at par value of $6.0 million.The gross unrealized holding lossesour business in South China on our state and local government obligations as of October 3, 2010 and September 27, 2009 are all related to our ARS investments. Our ARS are collateralized by portfolios of student loans, substantially all of which are guaranteed by the United States Department of Education.Long-term investments (except for ARS) generally mature within three years.Trading securitiesTrading securities are comprised of marketable equity mutual funds and equity exchange-traded funds that approximate a portion of the liability under the Management Deferred Compensation Plan (“MDCP”), a defined contribution plan. The corresponding deferred compensation liability of $82.7 million and $68.3 million as of October 3, 2010 and September 27, 2009, respectively, is included in accrued compensation and related costs on the consolidated balance sheets. The changes in net unrealized holding gains/losses in the trading portfolio included in earnings for fiscal years 2010 and 2009 were a net gain of $4.1 million and a net loss of $4.9 million, respectively.Fiscal Year Ended September 30, 2012 October 2, 2011 October 3, 2010 Net earnings attributable to Starbucks $ 1,383.8 $ 1,245.7 $ 945.6 Transfers (to) from the noncontrolling interest: Decrease in additional paid-in capital for purchase of interest in subsidiary — (28.0 ) (26.8 ) Change from net earnings attributable to Starbucks and transfers to noncontrolling interest $ 1,383.8 $ 1,217.7 $ 918.8 Note 4:Derivative Financial InstrumentsCash Flow HedgesStarbucks and certain subsidiariesWe enter into cash flow derivative instrumentsforward and swap contracts to hedge portions of cash flows of anticipated revenue streams and inventory purchases in currencies other than the entity’sentity's functional currency. Outstanding forward contracts, which compriseNet derivative losses from cash flow hedges of $2.9 million and $11.1 million, net of taxes, were included in accumulated other comprehensive income as of September 30, 2012 and October 2, 2011, respectively. Of the majoritynet derivative losses accumulated as of ourSeptember 30, 2012, $2.9 million pertains to derivative instruments hedge monthly forecasted revenue transactions denominated in Japanese yenthat will be dedesignated as cash flow hedges within 12 months and Canadian dollars, as well as forecasted inventory purchases denominated in US dollars for foreign operations.Net Investment Hedges12 monthsNet. are used to hedge our equity method investment in Starbucks Coffee Japan, Ltd. (“Starbucks Japan”) as well as our net investments in our Canada, UK and China subsidiaries,, to minimize foreign currency exposure.Other Derivatives$33.6 millionTo and $34.2 million, net of taxes, were included in accumulated other comprehensive income as of September 30, 2012 and October 2, 2011, respectively. Outstanding contracts will expire within 29 months.forwardswap contracts that are not designated as hedging instruments. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and other on the consolidated statements of earnings. Gains and losses from these instruments are largely offset by the financial impact of translating foreign currency denominated payables and receivables, which areis also recognized in net interest income and other.Wecertain swap and futures contracts to hedge a portion of anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in Note 1. Net derivative losses of $32.9 million, net of taxes, were included in accumulated other comprehensive income as of September 30, 2012 related to coffee hedges. Of the net derivative losses accumulated as of September 30, 2012, $26.9 million pertains to derivative instruments that are not designatedwill be dedesignated as hedging instrumentscash flow hedges within 12 months and will also continue to experience fair value changes before affecting earnings. Outstanding contracts will expire within 15 months. There was insignificant coffee hedge activity in fiscal 2011.and diesel fuel.we enter into certain futures contracts that are not designated as hedging instruments. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and otherother. Gains and losses from these instruments are largely offset by price fluctuations on our dairy purchases which are included in cost of sales.consolidated statementprice uncertainty of earnings.Fair valuesa portion of derivativeour future purchases of diesel fuel, we enter into certain swap contracts that are not designated as hedging instruments. These contracts are recorded at fair value, with the changes in fair value recognized in net interest income and other. Gains and losses from these instruments are largely offset by the financial impact of diesel fuel fluctuations on the consolidated balance sheet(our shipping costs which are included in millions): Cash Flow Hedges Net Investment Hedges Other Derivatives Oct 3, 2010 Sep 27, 2009 Oct 3, 2010 Sep 27, 2009 Oct 3, 2010 Sep 27, 2009 $ 0.1 $ 6.3 $ 0.0 $ 0.4 $ 0.0 $ 1.0 0.0 5.5 0.0 0.0 0.0 0.0 10.6 6.6 5.6 4.7 4.0 9.9 6.4 5.6 8.1 6.4 0.0 0.0 13.9 3.9 26.7 19.8 (1)Amount that will be dedesignated within 12 months for cash flow hedges is $6.4 million as of October 3, 2010.Ineffectiveness from hedges in fiscal years 2010 and 2009 was insignificant. Outstanding cash flow hedge and net investment hedge contracts will expire within 36 months and 30 months, respectively. Foreign Currency Coffee Sep 30, 2012 Oct 2, 2011 Sep 30, 2012 Oct 2, 2011 Cash Flow Hedges: Gain/(Loss) recognized in earnings $ (11.5 ) $ (15.9 ) $ (3.4 ) $ — Gain/(Loss) recognized in OCI $ (2.5 ) $ (12.1 ) $ (39.8 ) $ — Net Investment Hedges: Gain/(Loss) recognized in earnings $ — $ — Gain/(Loss) recognized in OCI $ 1.1 $ (12.0 ) Cash Flow Hedges Net Investment Hedges Other Derivatives Oct 3, 2010 Sep 27, 2009 Oct 3, 2010 Sep 27, 2009 Oct 3, 2010 Sep 27, 2009 $ (5.9 ) $ (0.2 ) $ 0.0 $ 0.0 $ 1.0 $ 22.2 $ (20.9 ) $ 7.8 $ (10.8 ) $ (10.8 ) Notional amounts of outstanding derivative contracts (in millions): Oct 3, 2010 Sep 27, 2009 $ 593 $ 708 $ 20 $ 25 $ 0 $ 7 Foreign Currency Coffee Dairy Diesel Fuel Sep 30, 2012 Oct 2, 2011 Sep 30, 2012 Oct 2, 2011 Sep 30, 2012 Oct 2, 2011 Sep 30, 2012 Oct 2, 2011 Gain/(Loss) recognized in earnings $ (2.2 ) $ 0.7 $ — $ (0.9 ) $ 7.8 $ 5.7 $ 3.1 $ 1.1 Sep 30, 2012 Oct 2, 2011 Foreign currency $ 383 $ 499 Coffee 125 66 Dairy 72 10 Diesel fuel $ 24 $ — Note 5:Fair Value Measurementsvalue accounting guidance defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements, for both financial and non-financial assets. It also establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. Fair Value Measurements at Reporting Date Using Balance at
September 30, 2012 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other Observable
Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3)Assets: Cash and cash equivalents $ 1,188.6 $ 1,188.6 $ — $ — Short-term investments: Available-for-sale securities Agency obligations 80.0 — 80.0 — Commercial paper 103.9 — 103.9 — Corporate debt securities 84.3 — 84.3 — Government treasury securities 459.7 459.7 — — Certificates of deposit 62.9 — 62.9 — Total available-for-sale securities 790.8 459.7 331.1 — Trading securities 57.6 57.6 — — Total short-term investments 848.4 517.3 331.1 — Long-term investments: Available-for-sale securities Agency obligations 14.0 — 14.0 — Corporate debt securities 61.3 — 61.3 — Auction rate securities 18.6 — — 18.6 Certificates of deposit 22.1 — 22.1 — Total long-term investments 116.0 — 97.4 18.6 Total $ 2,153.0 $ 1,705.9 $ 428.5 $ 18.6 Liabilities: Short-term derivatives: Foreign Currency $ 10.1 $ — $ 10.1 $ — Coffee 8.8 — 8.8 — Total short-term derivatives 18.9 — 18.9 — Long-term derivatives: Foreign Currency 3.0 — 3.0 — Total long-term derivatives 3.0 — 3.0 — Total $ 21.9 $ — $ 21.9 $ — Fair Value Measurements at Reporting Date Using Balance at
October 2, 2011 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other Observable
Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3)Assets: Cash and cash equivalents $ 1,148.1 $ 1,148.1 $ — $ — Short-term investments: Available-for-sale securities Agency obligations 20.0 — 20.0 — Commercial paper 87.0 — 87.0 — Corporate debt securities 78.0 — 78.0 — Government treasury securities 606.0 606.0 — — Certificates of deposit 64.0 — 64.0 — Total available-for-sale securities 855.0 606.0 249.0 — Trading securities 47.6 47.6 — — Total short-term investments 902.6 653.6 249.0 — Long-term investments: Available-for-sale securities Corporate debt securities 67.0 — 67.0 — Auction rate securities 28.0 — — 28.0 Certificates of deposit 12.0 — 12.0 — Total long-term investments 107.0 — 79.0 28.0 Total $ 2,157.7 $ 1,801.7 $ 328.0 $ 28.0 Liabilities: Short-term derivatives: Foreign Currency $ 20.1 $ — $ 20.1 $ — Coffee 1.2 — 1.2 — Total short-term derivatives 21.3 — 21.3 — Long-term derivatives: Foreign Currency 9.9 — 9.9 — Total long-term derivatives 9.9 — 9.9 — Total $ 31.2 $ — $ 31.2 $ — Fair Value Measurements at Reporting Date Using Balance at
Oct 3, 2010 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 49.2 $ 49.2 $ 0.0 $ 0.0 428.3 190.8 196.2 41.3 0.1 0.0 0.1 0.0 $ 477.6 $ 240.0 $ 196.3 $ 41.3 $ 34.7 $ 0.0 $ 34.7 $ 0.0 Fair Value Measurements at Reporting Date Using Balance at
Sept 27, 2009 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ 44.8 $ 44.8 $ 0.0 $ 0.0 92.7 19.0 18.0 55.7 13.2 0.0 13.2 0.0 $ 150.7 $ 63.8 $ 31.2 $ 55.7 $ 33.2 $ 0.0 $ 33.2 $ 0.0 their fair value, thus theythese securities are considered to be Level 1 instruments.Available-for-sale securities include government treasury securities, corporate and agency bonds and ARS. For government treasury securities, we use quoted prices in active markets for identical assets to determine their fair value, thus they are considered to be Level 1 instruments. We use observable directOur trading securities portfolio approximates a portion of the liability under the Management Deferred Compensation Plan (“MDCP”), a defined contribution plan. The corresponding deferred compensation liability of indirect inputs$84.7 million as of September 30, 2012 and October 2, 2011, respectively, is included in accrued compensation and related costs on the consolidated balance sheets. The changes in net unrealized holding gains/losses in the trading portfolio included in earnings for corporatefiscal years 2012 , 2011 and agency bonds, which are considered Level 2 instruments. Level 3 instruments are comprised solely2010 were a net gain of ARS, all$10.9 million, a net loss of which are considered to be illiquid due to the auction failures that began in 2008. We value ARS using an internally developed valuation model, using inputs that include interest rate curves, credit$2.1 million, and liquidity spreads,a net gain of $4.1 million, respectively.effective maturity.an active marketmarkets for identical derivative assets and liabilities that are traded on exchanges. Derivative assets and liabilities included in Level 2 are over-the-counter currency forward contracts and commodity swaps whose fair values are estimated using industry-standard valuation models. Such models project future cash flows and discount the future amounts to a present value using market-basedmarket- (in millions): Oct 3, 2010 Sep 27, 2009 $ 55.7 $ 59.8 (1.5 ) 3.9 (0.2 ) 0.0 (12.0 ) (8.0 ) (0.7 ) 0.0 $ 41.3 $ 55.7 Effective September 28, 2009, we adopted new fair value measurement guidance for all nonfinancial assetsin the financial statements on a nonrecurring basis. These assets and liabilitiesbasis include items such as property, plant and equipment, goodwill and other intangible assets, thatequity and cost method investments, and other assets. These assets are measured at fair value resulting from impairment, if determined to be necessary.We measure certain financial assets, including equity and cost method investments, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are determined to be other-than-temporarily impaired.2010,2012 and 2011, we recognized fair market value adjustments with a charge to earnings tofor these assets measured at fair value (Level 3) on a non-recurring basis, as follows: Carrying
Value before
adjustment Fair value
adjustment Carrying
value after
adjustment $ 26.8 $ (22.3 ) $ 4.5 Year Ended September 30, 2012 Carrying
Value before
adjustment Fair value
adjustment Carrying
value after
adjustment$ 21.5 $ (14.4 ) $ 7.1 Year Ended October 2, 2011 $ 8.8 $ (5.9 ) $ 2.9 $ 22.1 $ (22.1 ) $ — (1)(1) These assets primarily consist of leasehold improvements in underperforming stores. The fair value was determined using a discounted cash flow model based on expected future store revenues and operating costs, using internal projections. The resulting impairment charge was included in store operating expenses. (2) The fair value was determined using valuation techniques, including discounted cash flows, comparable transactions, and/or comparable company analyses. The resulting impairment charge was included in other operating expenses. The carrying value of cash and cash equivalents approximates fair value because of the short-term nature of those instruments. $550$550 million of 6.25% Senior Notes based on the quoted market price (Level 2) was approximately $637$674 million and $591$648 million as of September 30, 2012 and October 3, 2010 and September 27, 2009,2, 2011, respectively.Note 6:Inventories(in millions) Oct 3, 2010 Sep 27, 2009 $ 238.3 $ 381.6 95.1 76.7 115.6 116.0 94.3 90.6 $ 543.3 $ 664.9 September 30, 2012 October 2, 2011 Coffee: Unroasted $ 711.3 $ 431.3 Roasted 222.2 246.5 Other merchandise held for sale 181.6 150.8 Packaging and other supplies 126.4 137.2 Total $ 1,241.5 $ 965.8 Levels of inventory Inventory levels vary due to seasonality, driven primarily by the holiday season, commodity market supply and price variations, and changes in our use of fixed-price and price-to-be-fixed coffee contracts.October 3, 2010,September 30, 2012, we had committed to purchasing green coffee totaling $156$557 million under fixed-price contracts and an estimated $401$297 million under price-to-be-fixed contracts. Price-to-be-fixedAs of September 30, 2012, approximately $125 million of our price-to-be-fixed contracts are purchase commitments wherebywere effectively fixed through the quality, quantity, delivery period, and other negotiated terms are agreed upon, but the date at which the base “C” coffee commodity price component will be fixed has not yet been established. For these typesuse of contracts, either Starbucks or the seller has the option to “fix” the base “C” coffee commodity price prior to the delivery date.futures contracts. Until prices are fixed, we estimate the total cost of these purchase commitments. We believe, based on relationships established with our suppliers in the past, the risk of non-delivery on such purchase commitments is remote.Note 7:Equity and Cost Investments(in millions) Oct 3, 2010 Sep 27, 2009 $ 308.1 $ 313.2 33.4 39.1 $ 341.5 $ 352.3 September 30, 2012 October 2, 2011 Equity method investments $ 393.9 $ 334.4 Cost method investments 66.0 37.9 Total $ 459.9 $ 372.3 October 3, 2010,September 30, 2012, we had a 50 percent ownership interest in each of the following international equity investees: Starbucks Coffee Korea Co., Ltd.; Starbucks Coffee Austria GmbH; Starbucks Coffee Switzerland AG;and Berjaya Starbucks Coffee Company Sdn. Bhd. (Malaysia); and Tata Starbucks Limited (India). In addition, we had a 39.939.6 percent ownership interest in Starbucks Coffee Japan, Ltd. These international entities operate licensed Starbucks retail stores. We also have licensed the rights to produce and distribute Starbucks branded products to The North American Coffee Partnership with the Pepsi-Cola Company. We have a 50 percent ownership interest in The North AmericaAmerican Coffee Partnership, which develops and distributes bottled Frappuccino® beverages, Starbucks DoubleShot® espresso drinks, and Seattle’s Best Coffee® ready-to-drink espresso beverages and Starbucks Refreshers™ beverages.$125.7$190.3 million $125.3, $151.6 million, and $128.1$125.7 million in fiscal years 2010, 20092012, 2011, and 2008,2010, respectively. Related costs of sales, net of eliminations, were $65.3$111.0 million $64.9, $83.2 million, and $66.2$65.3 million in fiscal years 2010, 20092012, 2011, and 2008,2010, respectively. As of September 30, 2012 and October 3, 2010 and September 27, 2009,2, 2011, there were $31.4$33.0 million and $37.6$31.9 million of accounts receivable from equity investees, respectively, on our consolidated balance sheets, primarily related to product sales and store license fees.October 3, 2010,September 30, 2012, the aggregate market value of our investment in Starbucks Japan was approximately $286$400 million, determined based on its available quoted market price, which exceeds its carrying value of $154 million.$201 million. Oct 3, 2010 Sep 27, 2009 $ 390.1 $ 315.8 570.3 657.6 260.6 292.0 70.5 76.5 Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 2,128.0 $ 2,100.1 $ 1,961.0 245.3 192.5 171.3 205.1 155.8 136.9 Financial Position as of September 30, 2012 October 2, 2011 Current assets $ 603.1 $ 476.9 Noncurrent assets 735.3 651.4 Current liabilities 411.2 340.1 Noncurrent liabilities 119.7 80.2 Results of Operations for Fiscal Year Ended September 30, 2012 October 2, 2011 October 3, 2010 Net revenues $ 2,796.7 $ 2,395.1 $ 2,128.0 Operating income 353.5 277.0 245.3 Net earnings 286.7 231.1 205.1 October 3, 2010,September 30, 2012, we had a $33.4$41 million investment of equity interests in entities that develop and operate Starbucks licensed retail stores in several global markets. As of October 3, 2010 and September 27, 2009, management determined that the estimated fair values of each cost method investment exceeded the related carrying values. There were no significant impairments recorded during fiscal years 2010, 2009 or 2008.thea retroactive application of the equity method of accounting.Note 8:Property, Plant and Equipment(in millions) Oct 3, 2010 Sep 27, 2009 $ 58.0 $ 58.2 265.7 231.5 3,435.6 3,349.0 1,047.7 1,073.4 290.6 282.9 617.5 586.7 173.6 119.2 5,888.7 5,700.9 (3,472.2 ) (3,164.5 ) $ 2,416.5 $ 2,536.4 Property, Plant and Equipment, net Sep 30, 2012 Oct 2, 2011 Land $ 46.2 $ 44.8 Buildings 225.2 218.5 Leasehold improvements 3,957.6 3,617.7 Store equipment 1,251.0 1,101.8 Roasting equipment 322.8 295.1 Furniture, fixtures and other 836.2 757.8 Work in progress 264.1 127.4 Property, plant and equipment, gross 6,903.1 6,163.1 Less accumulated depreciation (4,244.2 ) (3,808.1 ) Property, plant and equipment, net $ 2,658.9 $ 2,355.0 Other Assets Sep 30, 2012 Oct 2, 2011 Long-term deferred tax asset $ 97.3 $ 156.3 Other intangible assets 143.7 111.9 Other 144.7 141.4 Total other assets $ 385.7 $ 409.6 Accrued Liabilities Sep 30, 2012 Oct 2, 2011 Accrued compensation and related costs $ 381.6 $ 364.4 Accrued occupancy costs 126.9 148.3 Accrued taxes 138.3 109.2 Accrued dividend payable 157.4 126.6 Other 329.6 192.4 Total accrued liabilities $ 1,133.8 $ 940.9 Other Long-Term Liabilities Sep 30, 2012 Oct 2, 2011 Deferred rent $ 201.9 $ 215.2 Unrecognized tax benefits 78.4 56.7 Asset retirement obligations 42.6 50.1 Other 22.4 25.8 Total other long-term liabilities $ 345.3 $ 347.8 Note 9:Other Intangible Assets and Goodwill Oct 3, 2010 Sep 27, 2009 $ 63.5 $ 60.8 16.1 15.0 (8.8 ) (7.6 ) 7.3 7.4 $ 70.8 $ 68.2 7 8 Sep 30, 2012 Oct 2, 2011 Indefinite-lived intangibles $ 87.7 $ 68.6 Definite-lived intangibles 72.3 54.2 Accumulated amortization (16.3 ) (10.9 ) Definite-lived intangibles, net 56.0 43.3 Total other intangible assets $ 143.7 $ 111.9 Definite-lived intangibles approximate remaining weighted average useful life in years 10 11 $1.2$4.5 million $1.7, $2.2 million, and $1.5$1.2 million during fiscal 2010, 20092012, 2011, and 2008,2010, respectively. Amortization expense is estimated to be approximately $1$6 million each year from fiscal 20112013 through fiscal 2015,2017, and a total of approximately $2$26 million thereafter. United States International Other Total $ 109.3 $ 117.4 $ 39.8 $ 266.5 0.0 0.0 0.0 0.0 $ 109.3 $ 117.4 $ 39.8 $ 266.5 0.0 0.0 0.0 0.0 0.0 (1.2 ) 0.0 (1.2 ) (7.0 ) 0.0 0.0 (7.0 ) 0.0 0.8 0.0 0.8 $ 109.3 $ 117.0 $ 39.8 $ 266.1 (7.0 ) 0.0 0.0 (7.0 ) $ 102.3 $ 117.0 $ 39.8 $ 259.1 0.0 0.0 0.0 0.0 1.0 0.0 0.0 1.0 0.0 (1.6 ) 0.0 (1.6 ) 0.0 3.9 0.0 3.9 $ 110.3 $ 120.9 $ 39.8 $ 271.0 (7.0 ) (1.6 ) 0.0 (8.6 ) $ 103.3 $ 119.3 $ 39.8 $ 262.4 Americas EMEA China /
Asia Pacific Channel
Development Other Total Goodwill prior to impairment $ 163.6 $ 3.1 $ 74.8 $ 23.8 $ 5.7 $ 271.0 Accumulated impairment charges (8.6 ) — — — — (8.6 ) Goodwill $ 155.0 $ 3.1 $ 74.8 $ 23.8 $ 5.7 $ 262.4 Acquisitions — 63.8 — — — 63.8 Purchase price adjustment of previous acquisitions — — — — — — Impairment — — — — — — (0.7 ) (3.9 ) — — — (4.6 ) Goodwill prior to impairment $ 162.9 $ 63.0 $ 74.8 $ 23.8 $ 5.7 $ 330.2 Accumulated impairment charges (8.6 ) — — — — (8.6 ) Goodwill $ 154.3 $ 63.0 $ 74.8 $ 23.8 $ 5.7 $ 321.6 Acquisitions 70.5 — — — 7.0 77.5 Purchase price adjustment of previous acquisitions — — — — — — Impairment — — — — — — 2.5 (3.0 ) 0.5 — — — Balance at September 30, 2012 Goodwill prior to impairment $ 235.9 $ 60.0 $ 75.3 $ 23.8 $ 12.7 $ 407.7 Accumulated impairment charges (8.6 ) — — — — (8.6 ) Goodwill $ 227.3 $ 60.0 $ 75.3 $ 23.8 $ 12.7 $ 399.1 Note 10:Debt((1) In conjunction with the change in millions)reportable operating segments, we reclassified goodwill by segment as of October 2, 2011 and October 3, 2010. Oct 3, 2010 Sep 27, 2009 $ 0.0 $ 0.2 549.4 549.2 0.0 0.1 549.4 549.3 $ 549.4 $ 549.5 (2) Other is primarily comprised of changes in the goodwill balance as a result of foreign exchange fluctuations. Our existing $1 billion$500 million unsecured credit facility was replaced in November 2010 with a new $500 million unsecured("the credit facilityfacility”) with various banks, of which $100$100 million may be used for issuances of letters of credit. As with the 2005 credit facility, the new 2010The credit facility is available for working capital, capital expenditures and other corporate purposes, including acquisitions and share repurchases. The 2010 credit facilityrepurchases and is currently set to mature in November 2014. The2014. Starbucks has the option, subject to negotiation and agreement with the related banks, to increase the maximum commitment amount by an additional $500 million. No borrowings were outstanding under the credit facility at the end of fiscal 2012 or fiscal 2011.The interest rate for any borrowings under the 2010 credit facility, based on Starbucks current ratings and fixed charge coverage ratio, is 1.50%0.85% over LIBOR.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 2010 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.$500$500 million under the new credit facility,, with individual maturities that mayour newthe credit facility and the combined borrowing limit is $500$500 million for the commercial paper program and the credit facility. We may issue commercial paper from time to time and the proceeds of the commercial paper financing willmay be used for working capital needs, capital expenditures and other corporate purposes, including acquisitions and share repurchases.No borrowings were outstanding under the commercial paper program at the end of fiscal 2012 or fiscal 2011.3, 2010, we had $152, 2011, a total of $18 million and $17 million, respectively, in letters of credit were outstanding under the oldrespective revolving credit facility. As of September 27, 2009, letters of credit totaling $14 million were outstanding.$550$550 million of 6.25% Senior Notes (the “notes”(“the notes”) due in August 2017, in an underwritten registered public offering. Interest is payable semi-annually on February 15 and August 15 of each year. The notes require us to maintain compliance with certain covenants, which limit future liens and sale and leaseback transactions on certain material properties.$32.7$32.7 million $39.1, $33.3 million, and $53.4$32.7 million in fiscal 2010, 20092012, 2011 and 2008,2010, respectively. In fiscal 2010, 20092012, 2011, and 2008, $4.92010, $3.2 million $2.9, $4.4 million, and $7.2$4.9 million, respectively, of interest was capitalized for new store and other asset construction projects, and included in net property, plant and equipment on the consolidated balance sheets.Note 11:Other Accrued Liabilities and Other Long-term Liabilities(in millions) Oct 3, 2010 Sep 27, 2009 $ 96.5 $ 0.0 166.3 147.5 $ 262.8 $ 147.5 Oct 3, 2010 Sep 27, 2009 $ 239.7 $ 266.0 65.1 55.1 47.7 43.4 22.6 25.1 $ 375.1 $ 389.6 Note 12:Leases Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 688.5 $ 690.0 $ 709.1 26.1 24.7 32.0 $ 714.6 $ 714.7 $ 741.1 Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Minimum rentals $ 759.0 $ 715.6 $ 688.5 Contingent rentals 44.7 34.3 26.1 Total $ 803.7 $ 749.9 $ 714.6 October 3, 2010September 30, 2012(in millions): 718.4 670.0 609.4 544.0 462.6 1,079.8 $ 4,084.2 Fiscal Year Ending 2013 $ 787.9 2014 728.5 2015 640.4 2016 531.5 2017 403.4 Thereafter 968.5 Total minimum lease payments $ 4,060.2 2010, 20092012, 2011, and 2008,2010, we recognized sublease income of $10.9$10.0 million $7.1, $13.7 million, and $3.5$10.9 million, respectively.We had capital lease obligationsNote 13:Shareholders’ Equity$0.001$0.001 par value per share, we have authorized 7.5 million shares of preferred stock, none of which was outstanding at September 30, 2012.3, 2010.during fiscal 2010(in millions, except for average price data): 11.2 $ 25.5 $ 285.6 There were no share repurchases during fiscal 2009. Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Number of shares acquired 12.3 15.6 Average price per share of acquired shares $ 48.15 $ 35.53 Total cost of acquired shares $ 593.2 $ 555.9 October 3, 2010, 10.1September 30, 2012, 12.1 million shares remained available for repurchase under the current authorization. Subsequent to year end, onOn November 15, 2010 we announced an additional share repurchase authorization made by the14, 2012, our Board of Directors inauthorized the amountrepurchase of up to 10an additional 25 million shares in addition to the 10 million remaining under the previous programs.the second quarter of fiscal 2010, the Starbucksyears 2012 and 2011, our Board of Directors approveddeclared the initiation of a cash dividend to shareholders. Quarterly cashfollowing dividends of $0.10 and $0.13(in millions, except per share were paid on April 23, 2010 and August 20, 2010, respectively. During the fourth quarter of fiscal 2010 the Starbucks Board of Directors approved a cash dividend of $0.13 per share which will be paid on December 3, 2010. Dividend Per Share Record date Total Amount Payment Date Fiscal Year 2012: First quarter $0.17 February 8, 2012 $128.2 February 24, 2012 Second quarter $0.17 May 9, 2012 $129.0 May 25, 2012 Third quarter $0.17 August 8, 2012 $129.1 August 24, 2012 Fourth quarter $0.21 November 15, 2012 $157.4 November 30, 2012 Fiscal Year 2011: First quarter $0.13 February 9, 2011 $97.4 February 25, 2011 Second quarter $0.13 May 11, 2011 $97.8 May 27, 2011 Third quarter $0.13 August 10, 2011 $97.4 August 26, 2011 Fourth quarter $0.17 November 17, 2011 $126.6 December 2, 2011 shareholdersour shareholders. Comprehensive income is comprised of the Company. It has two components: net earnings and other comprehensive income. Accumulated other comprehensive income reported on our consolidated balance sheets consists of foreign currency translation adjustments and the unrealized gains and losses, net of applicable taxes, on available-for-sale securities and on derivative instruments designated and qualifying as cash flow and net investment hedges. Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 945.6 $ 390.8 $ 315.5 (0.2 ) 3.3 (4.0 ) (11.3 ) 4.0 0.7 (6.8 ) (6.8 ) (0.9 ) 1.3 1.3 5.0 (17.0 ) 1.8 0.8 8.8 15.2 (7.0 ) $ 937.4 $ 407.8 $ 309.3 The favorable translation adjustment change during fiscal 2010 was primarily due to the weakening of the US dollar against several currencies including the Japanese yen and Canadian dollar, partially offset by the strengthening of the US dollar against the euro. The favorable translation adjustment change during fiscal 2009 was primarily due to the weakening of the US dollar against the Japanese yen, Australian dollar and the euro. The unfavorable translation adjustment change during fiscal 2008 was primarily due to the strengthening of the US dollar against several currencies including the Australian dollar, Korean won and Canadian dollar.Fiscal Year Ended September 30, 2012 October 2, 2011 October 3, 2010 Net earnings attributable to Starbucks $ 1,383.8 $ 1,245.7 $ 945.6 Unrealized holding gains/(losses) on available-for-sale securities, net of tax (provision)/benefit of $(0.3), $(0.3), and $0.1, respectively 0.4 0.4 (0.2 ) Unrealized holding losses on cash flow hedging instruments, net of tax benefit of $4.3 $4.5, and $6.6, respectively (37.9 ) (7.7 ) (11.3 ) Unrealized holding gains/(losses) on net investment hedging instruments, net of tax (provision)/benefit of $(0.4), $4.5, and $4.0, respectively 0.6 (7.6 ) (6.8 ) Reclassification adjustment for net losses realized in net earnings for cash flow hedges, net of tax benefit of $4.3, $6.1, and $0.8, respectively 10.5 10.5 1.3 Net unrealized loss (26.4 ) (4.4 ) (17.0 ) Translation adjustment, net of tax (provision)/benefit of $(3.3), $0.9, and $(3.2), respectively 2.8 (6.5 ) 8.8 Total comprehensive income $ 1,360.2 $ 1,234.8 $ 937.4 Oct 3, 2010 Sep 27, 2009 $ (0.9 ) $ (0.8 ) (40.5 ) (23.7 ) 98.6 89.9 $ 57.2 $ 65.4 Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Net unrealized gains/(losses) on available-for-sale securities $ (0.1 ) $ (0.5 ) Net unrealized gains/(losses) on hedging instruments (72.1 ) (45.3 ) Translation adjustment 94.9 92.1 Accumulated other comprehensive income $ 22.7 $ 46.3 3, 2010,2, 2011, the translation adjustment was net of tax provisions of $4.2 million. As of September 27, 2009, the translation adjustment was net of tax provisions of $1.0 million.$6.6 million and $3.3 million, respectively.Note 14:Employee Stock and Benefit PlansRSUs,restricted stock units (“RSUs”), or stock appreciation rights to employees, non-employee directors and consultants. We issue new shares of common stock upon exercise of stock options and the vesting of RSUs. We also have an employee stock purchase plansplan (“ESPP”).October 3, 2010,September 30, 2012, there were 27.924.6 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 9.08.1 million shares available for issuance under our ESPP.expensesexpense recognized in the consolidated financial statements(in millions): Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 76.8 $ 61.6 $ 57.6 36.8 16.6 5.6 0.0 5.0 11.8 $ 113.6 $ 83.2 $ 75.0 $ 40.6 $ 29.3 $ 24.0 $ 1.9 $ 1.3 $ 1.9 Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Options $ 46.2 $ 60.4 $ 76.8 Restricted Stock Units (“RSUs”) 107.4 84.8 36.8 Total stock-based compensation expense recognized in the consolidated statement of earnings $ 153.6 $ 145.2 $ 113.6 Total related tax benefit 54.2 51.2 40.6 Total capitalized stock-based compensation included in net property, plant and equipment and inventories on the consolidated balance sheets 2.0 2.1 1.9 Options granted in the 2009 exchange program vest over two years and expire seven years from the date of grant. The 2009 exchange program allowed for a one-time stock option exchange designed to provide eligible employees the opportunity to exchange certain outstanding underwater stock options for a lesser amount of new options with lower exercise prices. Options granted to non-employee directors generally vest over one to three years.years. Nearly all outstanding stock options are non-qualified stock options.2010, 20092012, 2011, and 2008 (excludes options granted in the 2009 stock option exchange program described above)2010: Employee Stock Options
Granted During the Period 2010 2009 2008 4.7 4.9 4.7 43.0 % 44.5 % 29.3 % 2.1 % 2.2 % 3.4 % 0.1 % 0.0 % 0.0 % $ 22.28 $ 8.97 $ 22.11 $ 8.50 $ 3.61 $ 6.85 Employee Stock Options
Granted During the PeriodFiscal Year Ended 2012 2011 2010 Expected term (in years) 4.8 5.0 4.7 Expected stock price volatility 38.2 % 39.0 % 43.0 % Risk-free interest rate 1.0 % 1.6 % 2.1 % Expected dividend yield 1.5 % 1.7 % 0.1 % Weighted average grant price $ 44.26 $ 31.46 $ 22.28 Estimated fair value per option granted $ 12.79 $ 9.58 $ 8.50 We did not pay any cash dividends prior to fiscal 2010. The amounts shown above for the estimated fair value per option granted are before the estimated effect of forfeitures, which reduce the amount of expense recorded on the consolidated statementstatements of earnings.the our stock. Such an increase in stock price would benefit all shareholders commensurately.2007, through October 3, 20102012(in millions, except per share and contractual life amounts): Shares
Subject to
Options Weighted
Average
Exercise
Price
per Share Weighted
Average
Remaining
Contractual
Life (Years) Aggregate
Intrinsic
Value 65.5 $ 20.97 6.2 $ 507.5 15.4 22.11 (6.6 ) 10.71 (11.3 ) 28.49 63.0 20.96 5.7 114.9 30.9 8.97 4.7 14.92 (7.2 ) 7.31 (13.5 ) 18.99 (14.3 ) 29.34 63.6 14.75 6.7 442.4 14.9 22.28 (9.6 ) 11.94 (8.2 ) 18.73 60.7 16.52 6.6 611.3 27.3 17.48 4.6 264.1 55.8 16.53 6.5 564.7 Shares
Subject to
Options Weighted
Average
Exercise
Price
per Share Weighted
Average
Remaining
Contractual
Life (Years) Aggregate
Intrinsic
ValueOutstanding, September 27, 2009 63.6 $ 14.75 6.7 $ 442 Granted 14.9 22.28 Exercised (9.6 ) 11.94 Expired/forfeited (8.2 ) 18.73 Outstanding, October 3, 2010 60.7 16.52 6.6 611 Granted 4.3 31.46 Exercised (16.1 ) 14.40 Expired/forfeited (3.6 ) 18.06 Outstanding, October 2, 2011 45.3 18.57 6.4 848 Granted 3.4 44.26 Exercised (13.6 ) 15.99 Expired/forfeited (2.0 ) 20.67 Outstanding, September 30, 2012 33.1 22.19 6.1 945 Exercisable, September 30, 2012 18.4 19.96 5.0 567 Vested and expected to vest, September 30, 2012 32.0 21.92 6.0 923 Options Outstanding Options Exercisable Range of Prices Number of
Options Weighted
Average
Remaining
Contractual
Life Weighted
Average
Exercise
Price Number of
Options Weighted
Average
Exercise
PriceUnder $10.00 9.0 6.0 $ 8.65 5.0 $ 8.65 $10.01 - $20.00 3.6 3.7 15.14 3.3 15.22 $20.01 - $30.00 10.8 6.0 23.14 6.5 23.91 Over $30.00 9.7 7.1 36.36 3.6 32.89 33.1 6.1 $ 22.19 18.4 $ 19.96 October 3, 2010,September 30, 2012, total unrecognized stock-based compensation expense, net of estimated forfeitures, related to nonvested stock options was approximately $70$35 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.7 years.2.3 years. The total intrinsic value of stock options exercised was $118$440 million $44, $323 million, and $50$118 million during the three fiscal year period ended October 3, 2010.years 2012, 2011, and 2010, respectively. The total fair value of options vested was $108$59 million $75, $126 million, and $99$108 million during fiscal years 2010, 20092012, 2011, and 2008,2010, respectively.2007 through October 3, 20102012(in millions, except per share and contractual life amounts): Number
of
Shares Weighted
Average
Grant Date
Fair Value
per Share Weighted
Average
Remaining
Contractual
Life (Years) Aggregate
Intrinsic
Value 0.2 $ 27.83 3.0 $ 4.7 2.0 16.43 0.0 0.00 (0.2 ) 17.27 2.0 17.36 2.5 30.5 3.3 8.78 0.0 0.00 (0.9 ) 13.94 4.4 11.55 1.6 88.2 2.3 22.27 (0.7 ) 16.35 (0.6 ) 12.27 5.4 13.55 1.1 140.8 Number
of
Shares Weighted
Average
Grant Date
Fair Value
per Share Weighted
Average
Remaining
Contractual
Life (Years) Aggregate
Intrinsic
ValueNonvested, September 27, 2009 4.4 $ 11.55 1.6 $ 88 Granted 2.3 22.27 Vested (0.7 ) 16.35 Forfeited/cancelled (0.6 ) 12.27 Nonvested, October 3, 2010 5.4 13.55 1.1 141 Granted 5.4 31.06 Vested (1.7 ) 9.40 Forfeited/cancelled (0.8 ) 25.68 Nonvested, October 2, 2011 8.3 23.11 0.8 309 Granted 4.1 44.05 Vested (4.2 ) 18.93 Forfeited/cancelled (0.9 ) 35.56 Nonvested, September 30, 2012 7.3 34.68 0.9 366 October 3, 2010,September 30, 2012, total unrecognized stock-based compensation expense related to nonvested RSUs, net of estimated forfeitures, was approximately $44$80 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.0 years.0.80.4 million in fiscal 2010.2012.non-employeeskey-employees that enables participants in the plan to defer receipt of ownership of common shares from the exercise of nonqualified stock options. The minimum deferral period is five years.5 years. As of September 30, 2012 and October 3, 2010 and September 27, 2009, 2, 2011, 3.4 million shares were deferred under the terms of this plan. The rights to receive these shares, represented by common stock units, are included in the calculation of basic and diluted earnings per share as common stock equivalents. No new initial deferrals are permitted under this plan; the plan permits re-deferrals of previously deferred shares.$23.5$59.8 million $19.7, $45.5 million, and $25.3$23.5 million in fiscal years 2010, 20092012, 2011, and 2008,2010, respectively.Note 15:Income TaxesFiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 United States $ 1,679.6 $ 1,523.4 $ 1,308.9 Foreign 379.5 287.7 128.1 Total earnings before income taxes $ 2,059.1 $ 1,811.1 $ 1,437.0 Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 457.5 $ 165.3 $ 180.4 79.6 35.0 34.3 38.3 26.3 40.4 (86.7 ) (58.2 ) (111.1 ) $ 488.7 $ 168.4 $ 144.0 Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Current taxes: Federal $ 466.0 $ 344.7 $ 457.5 State 79.9 61.2 79.6 Foreign 76.8 37.3 38.3 Total current taxes 622.7 443.2 575.4 Deferred taxes: Federal 49.2 111.6 (76.0 ) State (0.7 ) 8.3 (9.3 ) Foreign 3.2 — (1.4 ) Total deferred taxes 51.7 119.9 (86.7 ) Total provision for income taxes $ 674.4 $ 563.1 $ 488.7 Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 35.0 % 35.0 % 35.0 % 2.5 % 2.6 % 2.8 % -2.5 % -2.3 % -3.6 % -0.9 % -2.3 % -2.6 % 0.0 % -2.0 % 0.0 % -0.1 % -0.9 % -0.3 % 34.0 % 30.1 % 31.3 % Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Statutory rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal income tax benefit 2.5 % 2.5 % 2.5 % Benefits and taxes related to foreign operations (3.3 )% (3.1 )% (2.5 )% Domestic production activity deduction (0.7 )% (0.8 )% (0.9 )% (0.7 )% (2.5 )% (0.1 )% Effective tax rate 32.8 % 31.1 % 34.0 % (1) $646 million$1.5 billion of cumulative undistributed earnings of foreign subsidiaries and equity investees. We intend to reinvest these earnings for the foreseeable future. If these amounts were distributed to the US, in the form of dividends or otherwise, we would be subject to additional US income taxes.taxes, which could be material. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because suchof the complexities with its hypothetical calculation, and the amount of liability, if any, is dependent on circumstances existing if and when remittance occurs. (in(in millions): Oct 3, 2010 Sep 27, 2009 $ 32.6 $ 0.0 55.2 51.5 100.8 70.1 25.0 24.5 14.9 13.9 58.4 39.3 94.8 99.7 41.0 61.4 115.9 96.6 43.7 20.1 50.6 36.0 $ 632.9 $ 513.1 (88.1 ) (20.3 ) $ 544.8 $ 492.8 (26.2 ) (45.6 ) (19.1 ) (25.4 ) (45.3 ) (71.0 ) $ 499.5 $ 421.8 $ 304.2 $ 286.6 195.3 135.2 $ 499.5 $ 421.8 Sep 30, 2012 Oct 2, 2011 Deferred tax assets: Property, plant and equipment $ 62.7 $ 46.4 Accrued occupancy costs 72.0 55.9 Accrued compensation and related costs 66.9 69.6 Other accrued liabilities 15.7 27.8 Asset retirement obligation asset 20.1 19.0 Deferred revenue 43.7 47.8 Asset impairments 38.5 60.0 Tax credits 14.6 23.0 Stock based compensation 131.8 128.8 Net operating losses 99.2 85.5 Other 80.9 58.6 Total $ 646.1 $ 622.4 Valuation allowance (154.2 ) (137.4 ) Total deferred tax asset, net of valuation allowance $ 491.9 $ 485.0 Deferred tax liabilities: Property, plant and equipment (89.0 ) (66.4 ) Intangible assets and goodwill (34.0 ) (25.2 ) Other (44.8 ) (18.1 ) Total (167.8 ) (109.7 ) Net deferred tax asset $ 324.1 $ 375.3 Reported as: Current deferred income tax assets $ 238.7 $ 230.4 Long-term deferred income tax assets (included in Other assets) 97.3 156.3 Current deferred income tax liabilities (included in Accrued liabilities) (1.3 ) (4.9 ) Long-term deferred income tax liabilities (included in Other long-term liabilities) (10.6 ) (6.5 ) Net deferred tax asset $ 324.1 $ 375.3 their benefits,the benefit, or the future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on management’sour assessments of realizablethe likelihood of realizing the benefit of our deferred tax assets. The valuation allowance as of September 30, 2012 and October 3, 2010 and September 27, 2009 was2, 2011 is primarily related to net operating losses and other deferred tax assets of consolidated foreign subsidiaries. The net change in the total valuation allowance for the years ended September 30, 2012 and October 3, 2010, and September 27, 2009,2, 2011, was an increase of $67.8$16.8 million and $0.3$49.3 million, respectively. During fiscal 2010,2011, we recognized approximately $40$32 million of previously unrecognized deferred tax assets in certain foreign jurisdictions, with a corresponding increase to the valuation allowance due to the uncertainty of their realization.October 3, 2010,September 30, 2012, Starbucks hadhas utilized all of its foreign tax credits and no longer has a foreign tax credit carryforwards of $26.1 million with expiration dates between fiscal years 2014 and 2019. As of the end of fiscal 2010,carryforward.Starbucks has a capital loss carryforwards were $15.4carryforward of $7.1 million, with an expiration dates between fiscal years 2014date of 2015, and 2015. As of October 3, 2010, Starbucks had foreign net operating losses of $145.6$318 million, with the predominant amount having no expiration.$24.7$50.8 million and $57.2$30.1 million are included in accrued taxesliabilities on the consolidated balance sheets as of September 30, 2012 and October 3, 2010 and September 27, 2009,2, 2011, respectively.October 3, 2010,September 30, 2012, we had $68.4$75.3 million of gross unrecognized tax benefits of which $21.6$39.7 million, if recognized, would affect our effective tax rate. We recognize interest and penalties related to income tax matters in income tax expense. As of September 30, 2012 and October 3, 2010 and September 27, 2009,2, 2011, we had accrued interest and penalties of $16.8$5.5 million and $9.9$6.2 million, respectively, before the benefit of the federal tax deduction, recorded on our consolidated balance sheets. Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 49.1 $ 52.6 $ 58.3 35.0 4.2 64.9 (21.4 ) (11.6 ) (37.2 ) 14.1 8.4 17.0 (8.1 ) (0.9 ) (5.4 ) 0.0 (3.0 ) (11.1 ) (0.3 ) (0.6 ) (33.9 ) $ 68.4 $ 49.1 $ 52.6 Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Beginning balance 52.9 68.4 49.1 Increase related to prior year tax positions 8.8 4.4 35.0 Decrease related to prior year tax positions — (32.3 ) (21.4 ) Increase related to current year tax positions 20.0 26.0 14.1 Decrease related to current year tax positions (1.1 ) (0.8 ) (8.1 ) Decreases related to settlements with taxing authorities (0.5 ) (5.0 ) — Decreases related to lapsing of statute of limitations (4.8 ) (7.8 ) (0.3 ) Ending balance 75.3 52.9 68.4 20032006 through 2009. 2011.We are no longer subject to US federal or state examination for years beforeprior to fiscal year 2006,2009, with the exception of fourseven states. We are subject to income tax in many jurisdictions outside the US. We are no longer subject to examination in any material international markets prior to 2003.approximately $9.5 million of the currently remaining unrecognized tax benefits each of which is individually insignificant, maywill change within 12 months, but we do not expect this change to be recognized bymaterial to the end of fiscal 2011 as the result of a lapse of the statute of limitations.consolidated financial statements.Note 16:Earnings per Share Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 945.6 $ 390.8 $ 315.5 744.4 738.7 731.5 19.8 7.2 10.2 764.2 745.9 741.7 $ 1.27 $ 0.53 $ 0.43 $ 1.24 $ 0.52 $ 0.43 Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Net earnings attributable to Starbucks $ 1,383.8 $ 1,245.7 $ 945.6 Weighted average common shares and common stock units outstanding (for basic calculation) 754.4 748.3 744.4 Dilutive effect of outstanding common stock options and RSUs 18.6 21.4 19.8 Weighted average common and common equivalent shares outstanding (for diluted calculation) 773.0 769.7 764.2 EPS — basic $ 1.83 $ 1.66 $ 1.27 EPS — diluted $ 1.79 $ 1.62 $ 1.24 PotentialThe calculation of dilutive shares are excluded fromoutstanding excludes out-of-the-money stock options (i.e., such options’ exercise prices were greater than the computationaverage market price of earnings per share ifour common shares for the period) because their effect isinclusion would have been antidilutive. The number of antidilutiveOut-of-the-money stock options totaled 200.2 million 17, 0.1 million, and 407.9 million in fiscal years as of September 30, 2012, October 2, 2011, and October 3, 2010 2009 and 2008,, respectively.Note 17:Commitments and ContingenciesGuaranteesWe have unconditionally guaranteedrepaymentfirst quarter of certain Japanese yen-denominated bank loansfiscal 2011, Starbucks notified Kraft Foods Global, Inc. (“Kraft”) that we were discontinuing our distribution arrangement with Kraft on March 1, 2011 due to material breaches by Kraft of its obligations under the Supply and related interestLicense Agreement between the Company and feesKraft, dated March 29, 2004 (the “Agreement”), which defined the main distribution arrangement between the parties. Through our arrangement with Kraft, Starbucks sold a selection of an unconsolidated equity investee, Starbucks Japan. The guarantees continue untiland Seattle's Best Coffee branded packaged coffees in grocery and warehouse club stores throughout the loans, including accrued interestUS, and fees, have been paidto grocery stores in full. These guarantees expire in 2014. Our maximum exposure under this commitment asCanada, the UK and other European countries. Kraft managed the distribution, marketing, advertising and promotion of October 3,these products.is $2.6 million and is limitedStarbucks received a notice of arbitration from Kraft putting the commercial dispute between the parties into binding arbitration pursuant to the sumterms of unpaid principal and interest,the Agreement. In addition to denying it materially breached the Agreement, Kraft further alleges that if Starbucks wished to terminate the Agreement it must compensate Kraft as well as other related expenses. These amounts will vary based on fluctuationsprovided in the yen foreign exchange rate. Since there has been no modification of these loan guarantees subsequentAgreement in an amount equal to the adoption of accounting requirements for guarantees, we have applied the disclosure provisions only and have not recorded the guarantees on our consolidated balance sheets.We have commitments under which we unconditionally guarantee our proportionate share of certain borrowings of unconsolidated equity investees. These guarantees have varying expiration dates. As of October 3, 2010, our maximum exposure under these commitments is $2.1 million, which excludes interest and other related costs. The fair value of these guaranteesthe Agreement, with an additional premium of up to October 3,March 1, 2011.$2.2not a proper basis upon which to estimate a possible outcome of the arbitration but was based upon facts and circumstances at the time. Kraft rejected the offer immediately and did not provide a counter-offer, effectively ending the discussions between the parties with regard to any payment. Moreover, the offer was made prior to our investigation of Kraft's breaches and without consideration of Kraft's continuing failure to comply with material terms of the agreements.our consolidated balance sheets.Legal Proceedingswouldcould have a material adverse effect on our consolidated financial position, or results of operations.Note 18:AcquisitionsInoperations or cash flows.first quarternon-retail support organization were completed in fiscal 2010. On a cumulative basis we closed 918 stores on a global basis as part of this effort.we acquired 100% ownership of our business were as follows (in France, converting it from a 50% joint venture with Sigla S.A. (Grupo Vips) of Spain to a company-operated market. We simultaneously sold our 50% ownership interests in the Spain and Portugal markets to Grupo Vips, converting them to licensed markets.In the fourth quarter ofmillions By Type of Cost Total Costs incurred and charged to expense in fiscal 2010 $ 53.0 $ 53.0 $ 0.2 $ (0.2 ) $ 89.2 $ 89.2 $ — $ — Cash payments (27.1 ) (27.1 ) — — Other 0.5 0.5 — — $ 62.6 $ 62.6 $ — $ — Cash payments (18.7 ) (18.7 ) — — Other (5.3 ) (5.3 ) — — $ 38.6 $ 38.6 $ — $ — (1) The remaining liability relates to lease obligations for stores that were previously closed where Starbucks has been unable to terminate the lease or find subtenants for the unused space. we acquired 100% ownership$28.4 million, $24.5 million and $0.1 million of our business in Brazil, converting it from a 49% joint venture with Cafés Sereia do Brasil Participações S.A of Brazilrestructuring charges were recorded to a company-operated market.In the fourth quarter of fiscal 2010, we acquired 100% ownership of a previously consolidated 50% joint venture in the US with Johnson Coffee Corporation, Urban Coffee Opportunities (“UCO”). The following table shows the effects of the change in Starbucks ownership interest in UCO on Starbucks equity: Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 945.6 $ 390.8 $ 315.5 (26.8 ) 0.0 0.0 $ 918.8 $ 390.8 $ 315.5 Note 19:Segment Reportingdecision makingdecision-making purposes. We have threeBeginning with the first quarter of fiscal segments:segments to align with the three-region leadership and organizational structure of our retail business that took effect at the beginning of fiscal 2012.CPG.3) Global Consumer Products Group to the following four reportable segments: 1) Americas, 2) CAP, 3)fourth fiscalsecond quarter of 2010,fiscal 2012, we changed renamed our Global Consumer Products Group segment “Channel Development.” Segment revenues as a percentage of total net revenues for the composition of ouryear ended 2012 were as follows: Americas (75%), EMEA (9%), China / Asia Pacific (5%), and Channel Development (10%).presenting Seattle’s Best Coffee as a separate operating segment that is now reported with Digital Ventures and unallocated corporate expenses within Other. Financialwe revised our prior period financial information to reflect comparable financial information for Seattle’s Best Coffee was previously reported within the US, International, and CPG segments. This changenew segment structure. Historical financial information presented herein reflects the culmination of internal management and reporting realignments, and the expected development of the Seattle’s Best Coffee business. Segment information for all prior periods presented has been reclassified to reflect this change.United StatesUSwhole beanpackaged coffees, single serve coffee products and a focused selection of merchandise primarily through company-operated retailstores and licensed stores. Specialty operations within the US include licensed retail stores.InternationalInternationalThe Americas segment is our most mature business and has achieved significant scale.whole beanpackaged coffees, single serve coffee products and a focused selection of merchandise through company-operated retail stores in Canada, the UK, and several other markets. Specialty operations in internationallicensed stores. Certain markets primarily include retail store licensing operations in nearly 40 countriesand foodservice accounts, primarily in the UK and Canada. Many of our internationalwithin EMEA operations are in the early stages of development thatand require a more extensive support organization, relative to the current levels of revenue and operating income, than Americas.US.Global Consumer Products GroupCPGChannel Development operations sell a selection of whole bean and groundpackaged coffees as well as a selection of premium Tazo® teas through licensing arrangements in US and international markets. CPGglobally. Channel Development operations also produce and sell a variety of ready-to-drink beverages, which include, among others, bottled FrappuccinoStarbucks VIA® beverages, Ready Brew, Starbucks DoubleShot® espresso drinks, coffee and DiscoveriesTazo® chilled cup coffee. In addition, CPG operations produce and sell Starbucks VIA tea K-Cup® Ready Brew, as well as portion packs, Starbucks® super-premium ice creams, through its marketing and distribution agreements and a joint venture.Starbucks Refreshers™ beverages. The US foodservice business, which is included in the Channel Development segment, sells coffee and other related products to institutional foodservice companies with the majority of its sales through national broadline distribution networks.companies.andEvolution Fresh, Digital Ventures, as well asand unallocated corporate expenses pertainingthat pertain to corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment, and are not included in the reported financial results of the operating segments. Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 6,750.3 63 % $ 6,238.4 64 % $ 6,663.3 64 % 1,878.7 18 % 1,680.2 17 % 1,511.7 15 % 1,131.3 10 % 965.2 10 % 987.8 9 % 947.1 9 % 890.8 9 % 1,220.2 12 % $ 10,707.4 100 % $ 9,774.6 100 % $ 10,383.0 100 % Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Beverage $ 7,838.8 59 % $ 7,217.0 62 % $ 6,750.3 63 % Food 2,092.8 16 % 2,008.0 17 % 1,878.7 18 % Packaged and single serve coffees 2,001.1 15 % 1,451.0 12 % 1,131.3 10 % 1,366.8 10 % 1,024.4 9 % 947.1 9 % Total $ 13,299.5 100 % $ 11,700.4 100 % $ 10,707.4 100 % (1)(1) Other includes royalty and licensing revenues, beverage-related accessoriesingredients, packaging and equipment revenues.other merchandise. Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 8,335.4 $ 7,787.7 $ 8,227.0 2,372.0 1,986.9 2,156.0 $ 10,707.4 $ 9,774.6 $ 10,383.0 Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Net revenues from external customers: United States $ 10,177.5 $ 8,966.9 $ 8,335.4 Other countries 3,122.0 2,733.5 2,372.0 Total $ 13,299.5 $ 11,700.4 $ 10,707.4 the UK,China, which together account for approximately 64% of net revenues from other countries for fiscal 2010. Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 2,807.9 $ 2,776.7 $ 3,099.9 821.6 764.3 824.8 $ 3,629.5 $ 3,541.0 $ 3,924.7 Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Long-lived assets: United States $ 2,767.1 $ 2,587.1 $ 2,807.9 Other countries 1,252.5 978.4 821.6 Total $ 4,019.6 $ 3,565.5 $ 3,629.5 interestexpense and income taxes. Management does not evaluate the performance of its operating segments using asset measures. The identifiable assets by segment disclosed in this note are those assets specifically identifiable within each segment and include net property, plant and equipment, equity and cost investments, goodwill, and other intangible assets. Corporate assets are primarily comprised of cash and investments, assets of the corporate headquarters and roasting facilities, and inventory.tabletables below presents financial information byfor our reportable operating segmentsegments and Other for the fiscal years noted(ended September 30, 2012, October 2, 2011, and October 3, 2010 including the reclassifications discussed in millions)Note 1 (in millions): United States International CPG Other Total $ 7,560.4 $ 2,288.8 $ 707.4 $ 150.8 $ 10,707.4 350.7 108.6 3.7 47.4 510.4 0.0 80.8 70.6 (3.3 ) 148.1 1,291.1 225.2 261.4 (358.3 ) 1,419.4 1,482.9 1,272.8 54.1 3,576.1 6,385.9 $ 7,061.7 $ 1,914.3 $ 674.4 $ 124.2 $ 9,774.6 377.9 102.2 4.8 49.8 534.7 0.5 53.6 67.8 0.0 121.9 530.1 91.2 281.8 (341.1 ) 562.0 1,640.8 1,071.3 71.1 2,793.6 5,576.8 $ 7,491.2 $ 2,099.6 $ 680.9 $ 111.3 $ 10,383.0 395.1 108.6 5.4 40.2 549.3 (1.3 ) 54.2 60.7 0.0 113.6 454.0 108.8 269.9 (328.8 ) 503.9 1,956.9 1,066.0 54.6 2,595.1 5,672.6 Americas EMEA Other Total Fiscal 2012 Total net revenues $ 9,936.0 $ 1,141.3 $ 721.4 $ 1,292.2 $ 208.6 $ 13,299.5 Depreciation and amortization expenses 392.3 57.1 23.2 1.3 76.4 550.3 Income (loss) from equity investees 2.1 0.3 122.4 85.2 0.7 210.7 Operating income/(loss) 2,074.4 10.4 253.5 348.5 (689.4 ) 1,997.4 Total assets 2,199.0 467.4 656.6 88.8 4,807.4 8,219.2 Fiscal 2011 Total net revenues $ 9,065.0 $ 1,046.8 $ 552.3 $ 860.5 $ 175.8 $ 11,700.4 Depreciation and amortization expenses 390.8 53.4 18.1 2.4 58.6 523.3 Income (loss) from equity investees 1.6 6.0 92.9 75.6 (2.4 ) 173.7 Operating income/(loss) 1,842.3 40.3 193.1 287.8 (635.0 ) 1,728.5 Total assets 1,841.9 398.2 540.0 54.7 4,525.6 7,360.4 Fiscal 2010 Total net revenues $ 8,488.5 $ 953.4 $ 407.3 $ 707.4 $ 150.8 $ 10,707.4 Depreciation and amortization expenses 392.9 50.6 15.8 3.7 47.4 510.4 Income (loss) from equity investees 0.9 6.8 73.1 70.6 (3.3 ) 148.1 Operating income/(loss) 1,606.8 (5.5 ) 129.6 271.0 (582.5 ) 1,419.4 Total assets 1,837.9 475.8 442.0 54.1 3,576.1 6,385.9 below reconciles the total of the reportable segments’ operating income in the table above to the consolidated earnings before income taxes(in millions): Oct 3, 2010 Sep 27, 2009 Sep 28, 2008 $ 1,419.4 $ 562.0 $ 503.9 50.3 37.0 5.2 (32.7 ) (39.1 ) (53.4 ) $ 1,437.0 $ 559.9 $ 455.7 Note 20:Subsequent EventFiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 Operating income $ 1,997.4 $ 1,728.5 $ 1,419.4 Interest income and other, net 94.4 115.9 50.3 Interest expense (32.7 ) (33.3 ) (32.7 ) Earnings before income taxes $ 2,059.1 $ 1,811.1 $ 1,437.0 2011, Starbucks notified Kraft Foods Global,2013, we signed an agreement to acquire 100% of the outstanding shares of Teavana Holdings, Inc. that we are discontinuing our licensing relationships. Through these relationships with Kraft, Starbucks sells, a selectionspecialty retailer of Starbucks and Seattle’s Best Coffee branded packaged coffees and Tazo®premium loose-leaf teas, in grocery and warehouse club stores throughout the US, and to grocery stores in Canada, the UKauthentic artisanal teawares and other European countries. Kraft manages the distribution, marketing, advertisingtea-related merchandise, for approximately $620 million in cash. The acquisition is expected to close by December 31, 2012, subject to regulatory approval and promotioncustomary closing conditions.3, 2010 and September 27, 2009,2, 2011, and the related consolidated statements of earnings, equity, and cash flows for each of the three years in the period ended October 3, 2010.September 30, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.3, 2010 and September 27, 2009,2, 2011, and the results of their operations and their cash flows for each of the three years in the period ended October 3, 2010,September 30, 2012, in conformity with accounting principles generally accepted in the United States of America.October 3, 2010,September 30, 2012, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 22, 201016, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.22, 2010Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures 2010,2012, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report (October 3, 2010)(September 30, 2012).During the fourth quarter of fiscal 2010, thereOctober 3, 2010.October 3, 2010,September 30, 2012, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.October 3, 2010,September 30, 2012, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.October 3, 2010,September 30, 2012, based on the criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.October 3, 2010,September 30, 2012, of the Company and our report dated November 22, 201016, 2012 expressed an unqualified opinion on those financial statements.22, 2010Item 9B. Other Information None.Item 10. Directors, Executive Officers and Corporate Governance The information required by this item regarding our directors is incorporated herein by reference to the sections entitled “Proposal 1 — Election Of Directors” and “Executive Compensation — Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance — Board Committees and Related Matters” in our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on March 23, 2011 (the “Proxy Statement”). aboutus/corporate_governance.asp.about-us/company-information/corporate-governance. If we make any amendments to this code other than technical, administrative or other non-substantive amendments, or grantsgrant any waivers, including implicit waivers, from a provision of this code to our chief executive officer, chief financial officer or controller, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our website at http://www.starbucks.com/about-us/company-information/corporate-governance or in a report on Form 8-K filed with the SEC.Item 11. Executive Compensation Compensation” andCompensation,” “Compensation of Directors,” “Corporate Governance — Compensation Committee” and "Compensation Committee Report" in the Proxy Statement.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters and “Executive Compensation — Equity Compensation Plan Information” in the Proxy Statement.Item 13. Certain Relationships and Related Transactions, and Director Independence “Executive Compensation — Certain“Certain Relationships and Related Transactions” and “Corporate Governance — Affirmative Determinations Regarding Director Independence and Other Matters” in the Proxy Statement.Item 14. Principal AccountantAccounting Fees and ServicesItem 15. Exhibits, and Financial Statement Schedules September 27, 2009 and September 28, 2008;;3, 2010 and September 27, 2009;2, 2011; September 27, 2009 and September 28, 2008;; September 27, 2009 and September 28, 2008;;STARBUCKS CORPORATIONBy: STARBUCKS CORPORATION By: /s/ Howard Schultz 22, 2010 all said attorneys-in-fact and agents, or any of them or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue thereof.22, 2010.16, 2012. By: Howard Schultz Howard Schultz By: Troy Alstead Troy Alstead By: Barbara BassBarbara Bass William W. Bradley By: William W. BradleyWilliam W. Bradley By: /s/ Mellody HobsonMellody Hobson directorBy: Kevin R. JohnsonKevin R. Johnson Mellody Hobson By: director Kevin R. Johnson By: /s/ Olden Lee Olden Lee Olden Lee By: Sheryl SandbergSheryl Sandberg Joshua Cooper Ramo By: director James G. Shennan, Jr. directorBy: Javier G. TeruelJavier G. Teruel Clara Shih By: director Javier G. Teruel By: /s/ Myron E. Ullman, III director Myron E. Ullman, III directorBy: director Craig E. Weatherup director Incorporated by Reference 3.1 Restated Articles of Incorporation of Starbucks Corporation 10-Q 0-20322 05/12/06 3.1 3.2 Amended and Restated Bylaws of Starbucks Corporation 8-K 0-20322 1/12/09 3.2 4.1 Form of Indenture S-3 ASR 333-145572 8/20/07 4.1 4.2 Form of Note for 6.25% Senior Notes due 2017 8-K 0-20322 8/23/07 4.2 4.3 Form of Supplemental Indenture for 6.25% Senior Notes due 2017 8-K 0-20322 8/23/07 4.3 10.1* Starbucks Corporation Amended and Restated Key Employee Stock Option Plan — 1994, as amended and restated through March 18, 2009 8-K 0-20322 3/20/09 10.2 10.2* Starbucks Corporation Amended and Restated 1989 Stock Option Plan for Non-Employee Directors 10-K 0-20322 12/23/03 10.2 10.3 Starbucks Corporation 1991 Company-Wide Stock Option Plan, as amended and restated through March 18, 2009 8-K 0-20322 3/20/09 10.3 10.3.1 Starbucks Corporation 1991 Company-Wide Stock Option Plan — Rules of the UK Sub-Plan, as amended and restated through November 20, 2003 10-K 0-20322 12/23/03 10.3 10.4* Starbucks Corporation Employee Stock Purchase Plan — 1995 as amended and restated through April 1, 2009 10-Q 0-20322 2/04/09 10.6 10.5 Amended and Restated Lease, dated as of January 1, 2001, between First and Utah Street Associates, L.P. and Starbucks Corporation 10-K 0-20322 12/20/01 10.5 10.6* Starbucks Corporation Executive Management Bonus Plan, as amended and restated effective September 19, 2006 8-K 0-20322 9/25/06 10.1 10.7* Starbucks Corporation Management Deferred Compensation Plan S-8 333-65181 10/01/98 4.1 10.8* Starbucks Corporation 1997 Deferred Stock Plan 10-K 0-20322 12/23/99 10.17 10.9 Starbucks Corporation UK Share Save Plan 10-K 0-20322 12/23/03 10.9 10.10* Starbucks Corporation Directors Deferred Compensation Plan, as amended and restated effective September 29, 2003 10-K 0-20322 12/23/03 10.10 10.11* Consulting Agreement dated April 6, 2009 between Starbucks Corporation and Olden Lee 10-Q 0-20322 08/05/09 10.1 10.12* Amendment No. 1 to Consulting Agreement, dated as of October 1, 2009, between Starbucks Corporation and Olden Lee 10-Q 0-20322 02/02/10 10.1 Incorporated by Reference 10.13 Starbucks Corporation UK Share Incentive Plan, as amended and restated effective November 14, 2006 10-K 0-20322 12/14/06 10.12 10.14* Starbucks Corporation 2005 Long-Term Equity Incentive Plan, as amended and restated effective March 18, 2009 8-K 0-20322 03/20/09 10.1 10.15* 2005 Key Employee Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan, as amended and restated effective November 15, 2005 10-Q 0-20322 02/10/06 10.2 10.16* 2005 Non-Employee Director Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 8-K 0-20322 02/10/05 10.3 10.17* Stock Option Grant Agreement for Purchase of Stock under the 2005 Key Employee Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 8-K 0-20322 02/10/05 10.4 10.18* Stock Option Grant Agreement for Purchase of Stock under the 2005 Non-Employee Director Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 8-K 0-20322 02/10/05 10.5 10.19* Letter Agreement dated February 5, 2009 between Starbucks Corporation and John Culver 10-Q 0-20322 05/06/09 10.4 10.20 2005 Company-Wide Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan, as amended and restated on September 14, 2010 — — — — X 10.21 Stock Option Grant Agreement for Purchase of Stock under the 2005 Company-Wide Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 10-Q 0-20322 08/10/05 10.2 10.22 Credit Agreement dated November 17, 2010 among Starbucks Corporation, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lenders from time to time a party thereto. 8-K 0-20322 11/19/10 10.1 10.23 Commercial Paper Dealer Agreement between Starbucks Corporation and Banc of America Securities LLC, dated as of March 27, 2007 8-K 0-20322 3/27/07 10.1.1 10.24 Commercial Paper Dealer Agreement between Starbucks Corporation and Goldman, Sachs & Co., dated as of March 27, 2007 8-K 0-20322 3/27/07 10.1.2 Incorporated by Reference Exhibit Description Form File No. 2.1 Agreement and Plan of Merger, dated as of November 14, 2012, among Starbucks Corporation, Taj Acquisition Corp. and Teavana Holdings, Inc. 8-K 0-20322 11/15/2012 2.1 3.1 Restated Articles of Incorporation of Starbucks Corporation 10-Q 0-20322 5/12/2006 3.1 3.2 Amended and Restated Bylaws of Starbucks Corporation (As amended and restated through November 13, 2012) — — — — X 4.1 Form of Indenture S-3 ASR 333-145572 8/20/2007 4.1 4.2 Form of Note for 6.25% Senior Notes due 2017 8-K 0-20322 8/23/2007 4.2 4.3 Form of Supplemental Indenture for 6.25% Senior Notes due 2017 8-K 0-20322 8/23/2007 4.3 10.1* Starbucks Corporation Amended and Restated Key Employee Stock Option Plan — 1994, as amended and restated through March 18, 2009 8-K 0-20322 3/20/2009 10.2 10.2* Starbucks Corporation Amended and Restated 1989 Stock Option Plan for Non-Employee Directors 10-K 0-20322 12/23/2003 10.2 10.3* Starbucks Corporation 1991 Company-Wide Stock Option Plan, as amended and restated through March 18, 2009 8-K 0-20322 3/20/2009 10.3 10.3.1* Starbucks Corporation 1991 Company-Wide Stock Option Plan — Rules of the UK Sub-Plan, as amended and restated through November 20, 2003 10-K 0-20322 12/23/2003 10.3.1 10.4* Starbucks Corporation Employee Stock Purchase Plan — 1995 as amended and restated through April 1, 2009 10-Q 0-20322 2/4/2009 10.6 10.5 Amended and Restated Lease, dated as of January 1, 2001, between First and Utah Street Associates, L.P. and Starbucks Corporation 10-K 0-20322 12/20/2001 10.5 10.6* Starbucks Corporation Executive Management Bonus Plan, as amended and restated effective November 8, 2011 10-Q 0-20322 5/2/2012 10.2 10.7* Starbucks Corporation Management Deferred Compensation Plan, as amended and restated effective January 1, 2011 10-Q 0-20322 2/4/2011 10.2 10.8* Starbucks Corporation 1997 Deferred Stock Plan 10-K 0-20322 12/23/1999 10.17 10.9 Starbucks Corporation UK Share Save Plan 10-K 0-20322 12/23/2003 10.9 10.10* Starbucks Corporation Directors Deferred Compensation Plan, as amended and restated effective September 29, 2003 10-K 0-20322 12/23/2003 10.10 Incorporated by Reference Exhibit Description Form File No. 10.11* Starbucks Corporation Deferred Compensation Plan for Non-Employee Directors, effective October 3, 2011 10-K 0-20322 11/18/2011 10.1 10.12* Starbucks Corporation UK Share Incentive Plan, as amended and restated effective November 14, 2006 10-K 0-20322 12/14/2006 10.1 10.13* Starbucks Corporation 2005 Long-Term Equity Incentive Plan, as amended and restated effective March 23, 2011 10-Q 0-20322 5/6/2011 10.1 10.14* 2005 Key Employee Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan, as amended and restated effective November 15, 2005 10-Q 0-20322 2/10/2006 10.2 10.15* 2005 Non-Employee Director Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan, as amended and restated effective September 13, 2011 10-K 0-20322 11/18/2011 10.17 10.16* Form of Stock Option Grant Agreement for Purchase of Stock under the Key Employee Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 10-Q 0-20322 5/2/2012 10.1 10.17* Form of Stock Option Grant Agreement for Purchase of Stock under the 2005 Non-Employee Director Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 8-K 0-20322 2/10/2005 10.5 10.18* Form of Restricted Stock Unit Grant Agreement under the 2005 Non-Employee Director Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 10-K 0-20322 11/18/2011 10.20 10.19* 2005 Company-Wide Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan, as amended and restated on September 14, 2010 10-K 0-20322 11/22/2010 10.20 10.20* Form of Stock Option Grant Agreement for Purchase of Stock under the 2005 Company-Wide Sub-Plan to the Starbucks Corporation 2005 Long-Term Equity Incentive Plan 10-Q 0-20322 8/10/2005 10.2 10.21 Credit Agreement dated November 17, 2010 among Starbucks Corporation, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lenders from time to time a party thereto. 8-K 0-20322 11/19/2010 10.1 10.22 Commercial Paper Dealer Agreement between Starbucks Corporation and Banc of America Securities LLC, dated as of March 27, 2007 8-K 0-20322 3/27/2007 10.1.1 Incorporated by Reference Exhibit Description Form File No. 10.23 Commercial Paper Dealer Agreement between Starbucks Corporation and Goldman, Sachs & Co., dated as of March 27, 2007 8-K 0-20322 3/27/2007 10.1.2 10.24* Letter Agreement dated February 19, 2008 between Starbucks Corporation and Arthur Rubinfeld 10-Q 0-20322 5/8/2008 10.1 10.25* Letter Agreement dated February 21, 2008 between Starbucks Corporation and Clifford Burrows 10-Q 0-20322 5/8/2008 10.3 10.26* Letter Agreement dated November 6, 2008 between Starbucks Corporation and Troy Alstead 8-K 0-20322 11/12/2008 10.1 10.27* Form of Time Vested Restricted Stock Unit Agreement (US) under Starbucks Corporation 2005 Long-Term Equity Incentive Plan 10-K 0-20322 11/18/2011 10.30 10.28* Form of Time Vested Restricted Stock Unit Agreement (International) under Starbucks Corporation 2005 Long-Term Equity Incentive Plan 10-K 0-20322 11/18/2011 10.31 10.29* Form of Performance Based Restricted Stock Unit Agreement under Starbucks Corporation 2005 Long-Term Equity Incentive Plan 10-K 0-20322 11/18/2011 10.32 10.30* Letter Agreement dated November 30, 2009 between Starbucks Corporation and John Culver 10-Q 0-20322 2/2/2010 10.3 10.31* Letter Agreement dated September 1, 2009 between Starbucks Corporation and Annie Young-Scrivner 10-K 0-20322 11/18/2011 10.36 10.32* Letter Agreement dated May 5, 2010, between Starbucks Corporation and Jeff Hansberry 10-K 0-20322 11/18/2011 10.37 10.33* Letter Agreement dated August 9, 2011 between Starbucks Corporation and Michelle Gass 10-K 0-20322 11/18/2011 10.38 10.34* Letter Agreement dated September 16, 2011 between Starbucks Corporation and Michelle Gass 10-K 0-20322 11/18/2011 10.39 12 Computation of Ratio of Earnings to Fixed Charges — — — — X 21 Subsidiaries of Starbucks Corporation — — — — X 23 Consent of Independent Registered Public Accounting Firm — — — — X 31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — — — — X 31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — — — — X Incorporated by Reference 10.25*Letter Agreement dated February 19, 2008 between Starbucks Corporation and Arthur Rubinfeld10-Q0-2032205/08/0810.110.26*Letter Agreement dated February 21, 2008 between Starbucks Corporation and Clifford Burrows10-Q0-2032205/08/0810.310.27*Letter Agreement dated November 6, 2008 between Starbucks Corporation and Troy Alstead8-K0-2032211/12/0810.110.28*Time Vested Restricted Stock Unit Agreement (US) under Starbucks Corporation 2005 Long-Term Equity Incentive Plan8-K0-2032211/7/0810.110.29*Time Vested Restricted Stock Unit Agreement (International) under Starbucks Corporation 2005 Long-Term Equity Incentive Plan8-K0-2032211/7/0810.210.30*Performance Based Restricted Stock Unit Agreement under Starbucks Corporation 2005 Long-Term Equity Incentive Plan8-K0-2032211/7/0810.310.31*Separation Agreement and Release dated November 30, 2009 between Starbucks Corporation and Martin Coles10-Q0-2032202/02/1010.210.32*Letter Agreement dated October 8, 2009 between Starbucks Corporation and Kalen HolmesX10.33*Letter Agreement dated November 30, 2009 between Starbucks Corporation and John Culver10-Q0-2032202/02/1010.312Computation of Ratio of Earnings to Fixed Charges————X21Subsidiaries of Starbucks Corporation————X23Consent of Independent Registered Public Accounting Firm————X31.1Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002————X31.2Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002————X3232** Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 USC.U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101 The following financial statements from the Company’s 10-K for the fiscal year ended September 30, 2012, formatted in XBRL: (i) Consolidated Statements of Earnings, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows (iv) Consolidated Statements of Equity (v) Notes to Consolidated Financial Statements — — — — X Incorporated by ReferenceExhibitNumberExhibit DescriptionFormFile No.Date ofFirst FilingExhibitNumberFiledHerewith101**The following financial statements from the Company’s 10-K for the fiscal year ended October 3, 2010, formatted in XBRL: (i) Condensed Consolidated Statements of Earnings, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows (iv) Consolidated Statements of Equity (v) Notes to Condensed Consolidated Financial Statements*Denotes a management contract or compensatory plan or arrangement.**Furnished herewith.81