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Starbucks

Starbucks. Mitchell Schmitt. Agenda. Quick Preview of Starbucks Income Statement Analysis Litigation Charge Revenue By Segment Selling, General, and Administrative Balance Sheet Analysis PPE Accrued Liab . Intangibles Deferred Tax Cash Conclusion. Relevant Facts.

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Starbucks

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  1. Starbucks Mitchell Schmitt

  2. Agenda • Quick Preview of Starbucks • Income Statement Analysis • Litigation Charge • Revenue By Segment • Selling, General, and Administrative • Balance Sheet Analysis • PPE • Accrued Liab. • Intangibles • Deferred Tax • Cash • Conclusion

  3. Relevant Facts • CEO is Howard Schultz (Highly Regarded) • Headquartered in Seattle, WA • $13.3 B in revenues in 2012 with operating margins of 15% • Nearly 80% of stores are company-owned vs. franchised • SBUX has paid a dividend for the past 12 quarters

  4. Strategy Mission Statement: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. • Product Differentiation; Sell premium products with large profit margins • Outstanding Marketing Campaigns • Repeat Business (Starbucks cards) • Keep Employees Satisfied • Make entering their stores an experience • Company Operated stores

  5. Products Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world • Frappuccino, Lattes, Iced Coffees, Espresso • Also sell tea, other beverages, and fresh food items • Sell packaged products through licensed stores, grocery stores, and other foodservice accounts • K-Cups and Coffee Grounds

  6. Competition • Premium coffee sales compete against quick service restaurants and specialty coffee shops • Main competitors for this segment include Dunkin Donuts, McDonald’s, and Caribou Coffee • Competes with all packaged coffee and tea products sold through supermarkets and other retailers

  7. Litigation Charge • Note 15: Commitments and Contingencies • An arbitrator ruled that Starbucks was required to pay Kraft $2.784B • Had agreed to sell Starbucks and Seattle’s Best Coffee in grocery and warehouse club stores; terminated agreement • One-time charge

  8. I/S with Litigation Charge

  9. Removal of Litigation Charge

  10. Segmenting Revenue • Starbucks segments revenue by regions; the Americas, CAP, and EMEA for in-store sales • Channel Development (Packaged Coffees) and All Other (Teavana and Seattle’s Best) are also revenue sources

  11. Reliance on the United States

  12. Company-owned Stores

  13. Selling, General, and Admin. Expense • $937.9 Million Expense • Comprised of $306.8 Million for Marketing Costs (Note 1) • $54.7 Million for a Defined Contribution Plan (Note 12) • Implied other SGA expenses of $576.4 Million

  14. Property, Plant, and Equipment

  15. Accrued Liabilities

  16. Intangible Assets

  17. Deferred Taxes Assets Liabilities

  18. Deferred Taxes • The footnotes match what is reported on the Balance Sheet • Deferred Taxes are shown on the balance sheet as net current and net long-term

  19. Cash • Starbucks has large amounts of excess cash that was properly classified as financing • Large amounts of cash are held in foreign countries to avoid paying tax on repatriated earnings

  20. Other Matters • Debt • Option to issue $750M commercial paper at variable LIBOR Rate • $750M of 10-year Senior Notes at 3.85% interest • Off-Balance Sheet Financing

  21. Questions???

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