Hello. I need help determining the WACC for the Starbucks company. I need the WACC for the year 2014, 2013, and 2012.

I supplied the financial statements. When estimating the the WACC, please make sure the company has long term debt.

Income Statement (in millions) Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating epenses Other operating expenses Depreciation and amortization expense General and administrative expenses Litigation charge (credit) Total operating expenses Income from equity investees Operating income/(loss) Interest income and other, net Interest expense Earnings/(loss) before income taxes Income tax expense/(benefit) Net earnings including noncontrolling intereests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Balance Sheet (in millions) Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equitment, net Deferred income taxes, net Other assets Other intangible assets Goodwill Total Assets Current liabilities: Accounts payable Accrued litigation charge Accrued liabilities Insurance reserves Deferred revenue Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders' equity: Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Noncontrolling interest Total equity Total Liabilities and Equity 2012 2014 Common Size 2013 Common Size 2012 Common Size $ 12,977.9 $ 11,793.2 $ 10,534.5 $ 1,588.6 $ 1,360.5 $ 1,210.3 $ 1,881.3 $ 1,713.1 $ 1,532.0 $ 16,447.8 $ 14,866.8 $ 13,276.8 $ 6,858.8 $ 6,382.3 $ 5,813.3 $ 4,638.2 $ 4,286.1 $ 3,918.1 $ 457.4 $ 431.8 $ 407.2 $ 709.6 $ 621.4 $ 550.3 $ 991.3 $ 937.9 $ 801.2 $ (20.2) $ 2,784.1 $ $ 13,635.0 $ 15,443.6 $ 11,490.1 $ 268.3 $ 251.4 $ 210.7 $ 3,081.1 $ (325.4) $ 1,997.4 $ 142.7 $ 123.6 $ 94.4 $ (64.1) $ (28.1) $ (32.7) $ 3,159.7 $ (229.9) $ 2,059.1 $ 1,092.0 $ (238.7) $ 674.4 $ 2,067.7 $ 8.8 $ 1,384.7 $ (0.4) $ 0.5 $ 0.9 $ 2,068.1 $ 8.3 $ 1,383.8 0.78904 0.09658 0.11438 1.00000 0.41700 0.28200 0.02781 0.04314 0.06027 (0.00123) 0.82899 0.01631 0.18733 0.00868 (0.00390) 0.19210 0.06639 0.12571 (0.00002) 0.12574 0.79326 0.09151 0.11523 1.00000 0.42930 0.28830 0.02904 0.04180 0.06309 0.18727 1.03880 0.01691 (0.02189) 0.00831 (0.00189) (0.01546) (0.01606) 0.00059 0.00003 0.00056 0.79345 0.09116 0.11539 1.00000 0.43785 0.29511 0.03067 0.04145 0.06035 0.86543 0.01587 0.15044 0.00711 (0.00246) 0.15509 0.05080 0.10429 0.00007 0.10423 2012 2014 Common Size 2013 Common Size 2012 Common Size 2014 2013 2014 2013 $ 1,708.4 $ 135.4 $ 631.0 $ 1,090.9 $ 285.6 $ 317.4 $ 4,168.7 $ 318.4 $ 514.9 $ 3,519.0 $ 903.3 $ 198.9 $ 273.5 $ 856.2 $ 10,752.9 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2,575.7 658.1 561.4 1,111.2 287.7 277.3 5,471.4 58.3 496.5 3,200.5 967.0 185.3 274.8 862.9 11,516.7 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,188.6 848.4 485.9 1,241.5 196.5 238.7 4,199.6 116.0 459.9 2,658.9 97.3 144.7 143.7 399.1 8,219.2 0.15888 0.01259 0.05868 0.10145 0.02656 0.02952 0.38768 0.02961 0.04788 0.32726 0.08401 0.01850 0.02543 0.07963 1.00000 0.22365 0.05714 0.04875 0.09649 0.02498 0.02408 0.47508 0.00506 0.04311 0.27790 0.08397 0.01609 0.02386 0.07493 1.00000 0.14461 0.10322 0.05912 0.15105 0.02391 0.02904 0.51095 0.01411 0.05595 0.32350 0.01184 0.01761 0.01748 0.04856 1.00000 $ $ $ $ $ $ $ $ $ 533.7 1,514.4 196.1 794.5 3,038.7 2,048.3 392.2 5,479.2 $ $ $ $ $ $ $ $ $ 491.7 2,784.1 1,269.3 178.5 653.7 5,377.3 1,299.4 357.7 7,034.4 $ $ $ $ $ $ $ $ $ 398.1 1,133.8 167.7 510.2 2,209.8 549.6 345.3 3,104.7 $ $ $ $ $ $ $ $ 0.7 39.4 5,206.6 25.3 5,272.0 1.7 5,273.7 10,752.9 $ $ $ $ $ $ $ $ 0.8 282.1 4,130.3 67.0 4,480.2 2.1 4,482.3 11,516.7 $ $ $ $ $ $ $ $ 0.7 39.4 5,046.2 22.7 5,109.0 5.5 5,144.5 8,219.2 0.04963 0.14084 0.01824 0.07389 0.28259 0.19049 0.03647 0.50956 0.00007 0.00366 0.48420 0.00235 0.49029 0.00016 0.49044 1.00000 0.04269 0.24174 0.11021 0.01550 0.05676 0.46691 0.11283 0.03106 0.61080 0.00007 0.02449 0.35864 0.00582 0.38902 0.00018 0.38920 1.00000 0.04844 0.13795 0.02040 0.06207 0.26886 0.06687 0.04201 0.37774 0.00009 0.00479 0.61395 0.00276 0.62159 0.00067 0.62591 1.00000 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 x For the Fiscal Year Ended September 30, 2012 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-20322 . Starbucks Corporation (Exact Name of Registrant as Specified in its Charter) Washington (State of Incorporation) 91-1325671 (IRS Employer ID) 2401 Utah Avenue South, Seattle, Washington 98134 (206) 447-1575 (Address of principal executive offices, zip code, telephone number) Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $0.001 par value per share Nasdaq Global Select Market Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No x Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation of S-K ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of \"large accelerated filer,\" \"accelerated filer\" and \"smaller reporting company\" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Non-accelerated filer x (Do not check if a smaller reporting company) Accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No x The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second fiscal quarter, based upon the closing sale price of the registrant's common stock on March 30, 2012 as reported on the NASDAQ Global Select Market was $41 billion . As of November 9, 2012 , there were 743.6 million shares of the registrant's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement for the registrant's Annual Meeting of Shareholders to be held on March 20, 2013 have been incorporated by reference into Part III of this Annual Report on Form 10-K. Table of Contents STARBUCKS CORPORATION Form 10-K For the Fiscal Year Ended September 30, 2012 TABLE OF CONTENTS PART I Item 1 Item 1A Item 1B Item 2 Item 3 Item 4 Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures PART II Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A Controls and Procedures Item 9B Other Information PART III Item 10 Directors, Executive Officers and Corporate Governance Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Item 13 Certain Relationships and Related Transactions, and Director Independence Item 14 Principal Accountant Fees and Services PART IV Item 15 Exhibits, Financial Statement Schedules SIGNATURES INDEX TO EXHIBITS Item 5 Item 6 Item 7 Item 7A Item 8 2 10 17 17 17 18 19 22 25 49 50 89 90 90 92 93 93 93 93 93 94 95 97 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K includes \"forward-looking\" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as \"believes,\" \"expects,\" \"anticipates,\" \"estimates,\" \"intends,\" \"plans,\" \"seeks\" or words of similar meaning, or future or conditional verbs, such as \"will,\" \"should,\" \"could,\" \"may,\" \"aims,\" \"intends,\" or \"projects.\" A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. These forward-looking statements are all based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed under \"Risk Factors\" and \"Management's Discussion and Analysis of Financial Condition and Results of Operations\". Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 1 Table of Contents PART I Item 1. Business General Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 60 countries. Formed in 1985, Starbucks Corporation's common stock trades on the NASDAQ Global Select Market (\"NASDAQ\") under the symbol \"SBUX.\" We purchase and roast high-quality coffees that we sell, along with handcrafted coffee, tea and other beverages and a variety of fresh food items, through company-operated stores. We also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed stores, grocery and national foodservice accounts. In addition to our flagship Starbucks brand, our portfolio also includes Tazo Tea, Seattle's Best Coffee, Starbucks VIA Ready Brew, Starbucks Refreshers beverages, Evolution Fresh, La Boulange bakery brand and the Verismo System by Starbucks. Our objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world. To achieve this goal, we are continuing the disciplined expansion of our global store base. In addition, by leveraging the experience gained through our traditional store model, we continue to offer consumers new coffee products in a 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. In this Annual Report on Form 10-K (\"10-K\" or \"Report\") for the fiscal year ended September 30, 2012 (\"fiscal 2012\"), Starbucks Corporation (together with its subsidiaries) is referred to as \"Starbucks,\" the \"Company,\" \"we,\" \"us\" or \"our.\" Segment Financial Information Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes. Beginning with the first quarter of fiscal 2012, we redefined our reportable operating segments to align with the three-region leadership and organizational structure of our retail business that took effect at the beginning of fiscal 2012. The three-region structure includes: 1) Americas, inclusive of the US, Canada, and Latin America; 2) Europe, Middle East, and Africa, collectively referred to as the \"EMEA\" region; and 3) China / Asia Pacific (\"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 to the following four reportable segments: 1) Americas, 2) EMEA, 3) CAP, and 4) Global Consumer Products Group. In the second quarter of fiscal 2012, we renamed our Global Consumer Products Group segment \"Channel Development.\" Segment revenues as a percentage of total net revenues for fiscal year 2012 were as follows: Americas (75%), EMEA ( 9%), CAP (5%), and Channel Development ( 10%). Concurrent with the change in reportable operating segments, we revised our prior period financial information to reflect comparable financial information for the new segment structure. Historical financial information presented herein reflects this change. The Americas, EMEA, and CAP segments include both company-operated and licensed 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 development and require a more extensive support organization, relative to the current levels of revenue and operating income, than the Americas operations. The Americas and EMEA segments also include foodservice accounts, primarily in Canada and the UK. Our Americas segment also includes the retail and wholesale activities of Bay Bread, LLC (doing business as La Boulange), which was acquired in the fourth quarter of fiscal 2012. 2 Table of Contents Our Channel Development segment includes whole bean and ground coffees, premium Tazo teas, Starbucks VIA Ready Brew, Starbucks coffee and Tazo 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, convenience stores, and US foodservice accounts. Seattle's Best Coffee is reported in \"Other\" along with Evolution Fresh, Digital Ventures and 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 are not included in the reported financial results of the operating segments. The Other category comprised approximately 1% of total net revenues. Financial information for Starbucks reportable operating segments and Other is included in Note 17 to the consolidated financial statements included in Item 8 of this 10-K. Revenue Components We generate our revenues through company-operated stores, licensed stores, consumer packaged goods ("CPG") and foodservice operations. Company-operated and Licensed Store Summary as of September 30, 2012 As a% of Total As a% of Total Americas Americas Stores As a% of Total EMEA EMEA Stores CAP CAP Stores As a% of Total Total Stores Company-operated stores Licensed stores 7,857 5,046 61% 39% 882 987 666 2,628 20% 80% 9,405 8,661 52% 53% Total 12,903 100% 1,869 100% 3,294 100% 18,066 100% 47% 48% The mix of company-operated versus licensed stores in a given market will vary based on several factors, including the ability to access desirable local retail space, the complexity and expected ultimate size of the market for Starbucks, and the ability to leverage the support infrastructure in an existing geographic region. Company-operated Stores Revenue from company-operated stores accounted for 79% of total net revenues during fiscal 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 unique Starbucks Experience . The Starbucks Experience is built upon superior customer service as well as clean and well-maintained company-operated stores that reflect the personalities of the communities in which they operate, thereby building a high degree of customer loyalty. Our strategy for expanding our global retail business is to increase our market share in a disciplined manner, by selectively opening additional stores in new and existing markets, as well as increasing sales in existing stores, to support our long-term strategic 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. 3 Table of Contents The following is a summary of total company-operated store data for the periods indicated: Net Stores Opened (Closed) During the Fiscal Year Ended(1) Sep 30, 2012 Stores Open as of Sep 30, 2012 Oct 2, 2011 Oct 2, 2011 Americas: US Canada Chile Brazil Puerto Rico Total Americas 161 42 (2) 37 6 25 5 5 (2) 234 43 6,866 878 41 53 19 7,857 6,705 836 35 28 19 7,623 EMEA: UK Germany France Switzerland Austria Netherlands Total EMEA (7) 7 5 4 1 10 5 8 8 2 2 25 593 157 67 50 12 600 882 150 62 46 12 2 872 3 CAP: China Thailand 130 Singapore Australia Total CAP 8 2 154 Total company-operated 398 14 58 8 8 408 278 155 141 80 23 73 666 72 21 512 141 9,405 9,007 (1) (1) Store openings are reported net of closures. In the Americas, 279 and 100 company-operated stores were opened during 2012 and 2011, respectively, and 45 and 57 stores were closed during 2012 and 2011, respectively. In EMEA, 27 and 41 company-operated stores were opened during 2012 and 2011, respectively, and 17 and 16 stores were closed during 2012 and 2011, respectively. In CAP, 161 and 87 company-operated stores were opened during 2012 and 2011, respectively, and 7 and 14 stores were closed during 2012 and 2011, respectively. Starbucks company-operated 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 stores. Starbucks stores offer a choice of regular and decaffeinated coffee beverages, a broad selection of Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages, a selection of premium Tazo teas, distinctively packaged roasted whole bean and ground coffees, a variety of Starbucks VIA Ready Brew soluble coffees, Starbucks coffee and Tazo tea K-Cup portion packs, Starbucks Refreshers beverages, juices and bottled water. Starbucks stores also offer an assortment of fresh food items, including selections 4 Table of Contents focusing on high-quality ingredients, nutritional value and great flavor. Food items include pastries, prepared breakfast and lunch sandwiches, oatmeal and salads. A focused selection of beverage-making equipment and accessories are also sold in our stores. Each Starbucks store varies its product mix depending upon the size of the store and its location. To complement the in-store experience, our US company-operated Starbucks stores also provide customers free access to wireless internet. Retail sales mix by product type for company-operated stores: Sep 30, 2012 Fiscal Year Ended 2011 75% 19% Beverages Food Packaged and single serve coffees Coffee-making equipment and other merchandise Oct 3, Oct 2, 2010 75% 19% 75% 19% 4% 4% 2% 2% 100% Total 4% 2% 100% 100% Starbucks Card The Starbucks stored value card program is designed to increase customer loyalty and the frequency of store visits by cardholders. Starbucks Cards are accepted at company-operated and most licensed stores in North America. The cards are also accepted at a number of international locations. Customers who register their cards in the US, Canada, and certain other countries are enrolled in the My Starbucks Rewards program and can receive various benefits depending on the number of Stars earned in a 12-month period. Licensed Stores Product sales to and royalty and license fee revenues from our licensed stores accounted for 9% of total revenues in fiscal 2012. In our licensed store operations, we leverage the expertise of our local partners and share our operating and store development experience. Licensees 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. 5 Table of Contents Starbucks total licensed stores by country as of September 30, 2012 are as follows: Mexico Canada Other China / Asia Pacific Europe/Middle East/Africa Americas US 4,262 356 303 125 Turkey UK 171 168 99 78 65 64 60 United Arab Emirates Spain Kuwait Saudi Arabia Russia Other 42 240 Total 987 Greece Total 5,046 Japan South Korea China Taiwan Philippines Malaysia Indonesia Hong Kong New Zealand Total 965 467 292 271 201 134 133 131 34 2,628 In the Americas, 351 and 296 licensed stores were opened during 2012 and 2011, respectively, and 81 and 564 licensed stores were closed during 2012 and 2011, respectively. The 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 111 licensed stores were opened during 2012 and 2011, respectively, and 38 and 32 licensed stores were closed during 2012 and 2011, respectively. In CAP, 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. Consumer Packaged Goods Consumer packaged goods includes both domestic and international sales of packaged coffee and tea as well as a variety of ready-to-drink beverages and single-serve coffee and tea products to grocery, warehouse club and specialty retail stores. It also includes revenues from product sales to and licensing revenues from manufacturers that produce and market Starbucks and Seattle's Best Coffee branded products through licensing agreements. Revenues from sales of consumer packaged goods comprised 8% of total net revenues in fiscal 2012. Foodservice Revenues from foodservice accounts comprised 4% of total net revenues in fiscal 2012. We sell Starbucks and Seattle's Best Coffee whole bean and ground coffees, 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 Foodservice , and other distributors. Product Supply Starbucks is committed to selling only the finest whole bean coffees and coffee beverages. To ensure compliance with our rigorous coffee standards, we control coffee purchasing, roasting and packaging, and the global distribution of coffee used in our operations. We purchase green coffee beans from multiple coffeeproducing regions around the world and custom roast them to our exacting standards, for our many blends and single origin coffees. The price of coffee is subject to significant volatility. Although most coffee trades in the commodity market, high-altitude arabica coffee of the quality sought by Starbucks tends to trade on a negotiated basis at a premium 6 Table of Contents above the \"C\" coffee commodity price. Both the premium and the 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. We buy coffee using fixed-price and price-to-be-fixed purchase commitments, depending on market conditions, to secure an adequate supply of quality green coffee. Price-to-be-fixed contracts are purchase commitments whereby the quality, quantity, delivery period, and other negotiated terms are agreed upon, but the date, and therefore the price, at which the base \"C\" coffee commodity price component will be fixed has not yet been established. For these types of contracts, either Starbucks or the seller has the option to select a date on which to \"fix\" the base \"C\" coffee commodity price prior to the delivery date. Until prices are fixed, we estimate the total cost of these purchase commitments. Total green coffee purchase commitments as of September 30, 2012 were $854 million , comprised of $557 million under fixed-price contracts and an estimated $297 million under price-to-be-fixed contracts. As of September 30, 2012 , approximately $125 million of our price-to-be-fixed contracts were effectively fixed through the use of futures contracts. All price-to-be-fixed contracts as of September 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 2013. We depend upon our relationships with coffee producers, outside trading companies and exporters for our supply of green coffee. We believe, based on relationships established with our suppliers, the risk of non-delivery on such purchase commitments is remote. 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 six countries. 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. In addition to coffee, we also purchase significant amounts of dairy products, particularly fluid milk, to support the needs of our company-operated stores. For our largest markets, the US, Canada and the UK, we purchase substantially all of our fluid milk requirements from eight dairy suppliers. We believe, based on relationships established with these suppliers, that the risk of non-delivery of sufficient fluid milk to support our stores is remote. Products other than whole bean coffees and coffee beverages sold in Starbucks stores include Evolution Fresh juices and a number of ready-to-drink beverages that are purchased from several specialty suppliers, usually under long-term supply contracts. Food products, such as 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. Competition Our primary competitors for coffee beverage sales are quick-service restaurants and specialty coffee shops. In almost all markets in which we do business, there are numerous competitors in the specialty coffee beverage business. We believe that our customers choose among specialty coffee retailers primarily on the basis of product quality, service and convenience, as well as price. We continue to experience direct competition from large competitors in the US quick-service restaurant sector and the US ready-to-drink coffee beverage market. We also continue to face competition from well-established companies in many international markets. 7 Table of Contents Our coffee and tea products sold through our Channel Development segment compete directly against specialty coffees and teas sold through supermarkets, club stores and specialty retailers and compete indirectly against all other coffees and teas on the market. 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. Patents, Trademarks, Copyrights and Domain Names Starbucks owns and has applied to register numerous trademarks and service marks in the US and in additional countries throughout the world. Some of our trademarks, including Starbucks, the Starbucks logo, Seattle's Best Coffee, Frappuccino, Starbucks VIA 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. We own numerous copyrights for items such as product packaging, promotional materials, in-store graphics and training materials. We also hold patents on certain products, systems and designs. In addition, Starbucks has registered and maintains numerous Internet domain names, including \"Starbucks.com\Starbucks Financial Ratios 2014 2013 CURRENT RATIO = Current Assets / Current Liabilities = 1.37 1.02 1.90 1.02 QUICK (Acid Test) RATIO = (Current Assets - Inventory)/Current Liabilities = 1.01 0.81 1.34 0.45 INVENTORY TURNOVER = COGS / Inventory = 6.29 5.74 4.68 10.69 DAYS SALES OUTSTANDING (DSO) = Accounts Receivable / average sales per day = 14.00 13.78 13.36 FIXED ASSET TURNOVER = Sales / Net fixed Assets = 4.67 4.65 4.99 TOTAL ASSET TURNOVER = Sales / Total Assets = 1.53 1.29 1.62 DEBT RATIO = Tot Debt / Tot Assets = 0.19 0.11 0.07 LIABILITY TO ASSETS RATIO = Tot Liabilities / Tot Assets = 0.51 0.61 0.38 TIMES INTEREST EARNED = EBIT / Interest Expense = N/A 2012 Industry Avg 2.39 8.18 N/A EBITDA COVERAGE RATIO = EBITDA + Lease payments / Interest + Principal payments + Lease payments = 18.33 NET PROFIT MARGIN = Net Income Available to Common Stockholders / Sales = 12.57% 0.06% 10.42% BASIC EARNING POWER (BEP) = EBIT / Total assets = 29.38% -2.00% 25.05% ROA (RETURN ON ASSETS) = Net Income Available to Common Stockholders / Total Assets = 19.23% 0.07% 16.84% 9.68% ROE (RETURN ON EQUITY) = Net Income Available to Common Stockholders / Total common equity = 39.22% 0.19% 27.06% 23.16% THE PRICE/EARNINGS (PE) RATIO = Stock Price / EPS = 27.48 7,697.00 27.71 21.73 THE PRICE/CASH FLOW RATIO = Price per share / Cash flow per share = (65.61) 41.58 944.58 32.85 THE MARKET TO BOOK (M/B) RATIO = Stock Price / Book value per share = 5.29 5.01 4.65 5.13 (in millions, except per share data) Current Assets Current Liabilities Inventory COGS Accounts Receivable Avg Sales per Day Sales Net Fixed Assets Total Assets Total Debt Total Liabilities EBIT Interest Expense Interet Income EBITDA Lease Payments Interest Principal Payments Net Income Available to Common Stockholders Total Common Equity EPS Price per share cash flow per share book value per share shares outstanding(millions) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 28-Sep-14 4,168.70 3,038.70 1,090.90 6,858.80 631.00 45.06 16,447.80 3,519.00 10,752.90 2,048.30 5,479.20 3,159.70 (64.10) 142.70 3,790.70 206.80 - 2,068.10 5,273.70 2.75 75.56 $ (1.15) $ 14.28 753.1 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 29-Sep-13 5,471.40 5,377.30 1,111.20 6,382.30 561.40 40.73 14,866.80 3,200.50 11,516.70 1,299.40 7,034.40 (229.90) (28.10) 123.60 296.00 151.70 (35.20) 8.30 4,482.30 0.01 76.97 1.85 15.37 749.3 30-Sep-12 4,199.60 2,209.80 1,241.50 5,813.30 485.90 36.37 13,276.80 2,658.90 8,219.20 549.60 3,104.70 2,059.10 (32.70) 94.40 2,547.70 127.10 - Source consolidated balance sheet (pg 47, pg 45) consolidated balance sheet (pg 47, pg 45) consolidated balance sheet (pg 47, pg 45) consolidated stmt of earnings (pg 45, pg 43) consolidated balance sheet (pg 47, pg 45) 1,383.80 5,114.50 1.83 50.71 $ 0.05 $ 10.90 754.4 consolidated stmt of earnings (pg 45, pg 43) consolidated stmt of equity (pg 49, pg 47) consolidated stmt of earnings (pg 45, pg 43) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ consolidated stmt of earnings (pg 45, pg 43) consolidated balance sheet (pg 47, pg 45) consolidated balance sheet (pg 47, pg 45) consolidated balance sheet (pg 47, pg 45) consolidated balance sheet (pg 47, pg 45) consolidated stmt of earnings (pg 45, pg 43) consolidated stmt of earnings (pg 45, pg 43) consolidated stmt of earnings (pg 45, pg 43) consolidated stmt of earnings (pg 45, pg 43) consolidated balance sheet (pg 47, pg 45) 2.54 20.04 Income Statement (in millions) Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating epenses Other operating expenses Depreciation and amortization expense General and administrative expenses Litigation charge (credit) Total operating expenses Income from equity investees Operating income/(loss) Interest income and other, net Interest expense Earnings/(loss) before income taxes Income tax expense/(benefit) Net earnings including noncontrolling intereests Net earnings/(loss) attributable to noncontrolling interests Net earnings attributable to Starbucks Balance Sheet (in millions) Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes, net Total current assets Long-term investments Equity and cost investments Property, plant and equitment, net Deferred income taxes, net Other assets Other intangible assets Goodwill Total Assets Current liabilities: Accounts payable Accrued litigation charge Accrued liabilities Insurance reserves Deferred revenue Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders' equity: Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Noncontrolling interest Total equity Total Liabilities and Equity 2012 2014 Common Size 2013 Common Size 2012 Common Size $ 12,977.9 $ 11,793.2 $ 10,534.5 $ 1,588.6 $ 1,360.5 $ 1,210.3 $ 1,881.3 $ 1,713.1 $ 1,532.0 $ 16,447.8 $ 14,866.8 $ 13,276.8 $ 6,858.8 $ 6,382.3 $ 5,813.3 $ 4,638.2 $ 4,286.1 $ 3,918.1 $ 457.4 $ 431.8 $ 407.2 $ 709.6 $ 621.4 $ 550.3 $ 991.3 $ 937.9 $ 801.2 $ (20.2) $ 2,784.1 $ $ 13,635.0 $ 15,443.6 $ 11,490.1 $ 268.3 $ 251.4 $ 210.7 $ 3,081.1 $ (325.4) $ 1,997.4 $ 142.7 $ 123.6 $ 94.4 $ (64.1) $ (28.1) $ (32.7) $ 3,159.7 $ (229.9) $ 2,059.1 $ 1,092.0 $ (238.7) $ 674.4 $ 2,067.7 $ 8.8 $ 1,384.7 $ (0.4) $ 0.5 $ 0.9 $ 2,068.1 $ 8.3 $ 1,383.8 0.78904 0.09658 0.11438 1.00000 0.41700 0.28200 0.02781 0.04314 0.06027 (0.00123) 0.82899 0.01631 0.18733 0.00868 (0.00390) 0.19210 0.06639 0.12571 (0.00002) 0.12574 0.79326 0.09151 0.11523 1.00000 0.42930 0.28830 0.02904 0.04180 0.06309 0.18727 1.03880 0.01691 (0.02189) 0.00831 (0.00189) (0.01546) (0.01606) 0.00059 0.00003 0.00056 0.79345 0.09116 0.11539 1.00000 0.43785 0.29511 0.03067 0.04145 0.06035 0.86543 0.01587 0.15044 0.00711 (0.00246) 0.15509 0.05080 0.10429 0.00007 0.10423 2012 2014 Common Size 2013 Common Size 2012 Common Size 2014 2013 2014 2013 $ 1,708.4 $ 135.4 $ 631.0 $ 1,090.9 $ 285.6 $ 317.4 $ 4,168.7 $ 318.4 $ 514.9 $ 3,519.0 $ 903.3 $ 198.9 $ 273.5 $ 856.2 $ 10,752.9 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2,575.7 658.1 561.4 1,111.2 287.7 277.3 5,471.4 58.3 496.5 3,200.5 967.0 185.3 274.8 862.9 11,516.7 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,188.6 848.4 485.9 1,241.5 196.5 238.7 4,199.6 116.0 459.9 2,658.9 97.3 144.7 143.7 399.1 8,219.2 0.15888 0.01259 0.05868 0.10145 0.02656 0.02952 0.38768 0.02961 0.04788 0.32726 0.08401 0.01850 0.02543 0.07963 1.00000 0.22365 0.05714 0.04875 0.09649 0.02498 0.02408 0.47508 0.00506 0.04311 0.27790 0.08397 0.01609 0.02386 0.07493 1.00000 0.14461 0.10322 0.05912 0.15105 0.02391 0.02904 0.51095 0.01411 0.05595 0.32350 0.01184 0.01761 0.01748 0.04856 1.00000 $ $ $ $ $ $ $ $ $ 533.7 1,514.4 196.1 794.5 3,038.7 2,048.3 392.2 5,479.2 $ $ $ $ $ $ $ $ $ 491.7 2,784.1 1,269.3 178.5 653.7 5,377.3 1,299.4 357.7 7,034.4 $ $ $ $ $ $ $ $ $ 398.1 1,133.8 167.7 510.2 2,209.8 549.6 345.3 3,104.7 $ $ $ $ $ $ $ $ 0.7 39.4 5,206.6 25.3 5,272.0 1.7 5,273.7 10,752.9 $ $ $ $ $ $ $ $ 0.8 282.1 4,130.3 67.0 4,480.2 2.1 4,482.3 11,516.7 $ $ $ $ $ $ $ $ 0.7 39.4 5,046.2 22.7 5,109.0 5.5 5,144.5 8,219.2 0.04963 0.14084 0.01824 0.07389 0.28259 0.19049 0.03647 0.50956 0.00007 0.00366 0.48420 0.00235 0.49029 0.00016 0.49044 1.00000 0.04269 0.24174 0.11021 0.01550 0.05676 0.46691 0.11283 0.03106 0.61080 0.00007 0.02449 0.35864 0.00582 0.38902 0.00018 0.38920 1.00000 0.04844 0.13795 0.02040 0.06207 0.26886 0.06687 0.04201 0.37774 0.00009 0.00479 0.61395 0.00276 0.62159 0.00067 0.62591 1.00000 Starbucks Financial Ratios 2014 2013 2012 CURRENT RATIO = Current Assets / Current Liabilities = 1.37 1.02 1.90 QUICK (Acid Test) RATIO = (Current Assets - Inventory)/Current Liabilities = 1.01 0.81 1.34 INVENTORY TURNOVER = COGS / Inventory = 6.29 5.74 4.68 DAYS SALES OUTSTANDING (DSO) = Accounts Receivable / average sales per day = 14.00 13.78 13.36 FIXED ASSET TURNOVER = Sales / Net fixed Assets = 4.67 4.65 4.99 TOTAL ASSET TURNOVER = Sales / Total Assets = 1.53 1.29 1.62 DEBT RATIO = Tot Debt / Tot Assets = 0.19 0.11 0.07 LIABILITY TO ASSETS RATIO = Tot Liabilities / Tot Assets = 0.51 0.61 0.38 TIMES INTEREST EARNED = EBIT / Interest Expense = N/A EBITDA COVERAGE RATIO = EBITDA + Lease payments / Interest + Principal payments + Lease payments = 8.18 N/A 18.33 2.54 20.04 NET PROFIT MARGIN = Net Income Available to Common Stockholders / Sales = 12.57% 0.06% 10.42% BASIC EARNING POWER (BEP) = EBIT / Total assets = 29.38% -2.00% 25.05% ROA (RETURN ON ASSETS) = Net Income Available to Common Stockholders / Total Assets = 19.23% 0.07% 16.84% ROE (RETURN ON EQUITY) = Net Income Available to Common Stockholders / Total common equity = 39.22% 0.19% 27.06% THE PRICE/EARNINGS (PE) RATIO = Stock Price / EPS = 27.48 7,697.00 27.71 THE PRICE/CASH FLOW RATIO = Price per share / Cash flow per share = (65.61) 41.58 944.58 THE MARKET TO BOOK (M/B) RATIO = Stock Price / Book value per share = 5.29 5.01 4.65 (in\tmillions,\texcept\tper\tshare\tdata) Current\tAssets Current\tLiabiliGes Inventory COGS Accounts\tReceivable Avg\tSales\tper\tDay Sales Net\tFixed\tAssets Total\tAssets Total\tDebt Total\tLiabiliGes EBIT Interest\tExpense Interet\tIncome EBITDA Lease\tPayments Interest Principal\tPayments 28-Sep-14 4,168.70 3,038.70 1,090.90 6,858.80 631.00 45.06 16,447.80 3,519.00 10,752.90 2,048.30 5,479.20 3,159.70 (64.10) 142.70 3,790.70 - 206.80 - $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 30-Sep-12 4,199.60 2,209.80 1,241.50 5,813.30 485.90 36.37 13,276.80 2,658.90 8,219.20 549.60 3,104.70 2,059.10 (32.70) 94.40 2,547.70 - 127.10 - Source consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) Net\tIncome\tAvailable\tto\tCommon Stockholders Total\tCommon\tEquity EPS Price\tper\tshare cash\tow\tper\tshare book\tvalue\tper\tshare shares\toutstanding(millions) $ 2,068.10 $ 8.30 $ 1,383.80 $ 5,273.70 $ 4,482.30 $ 5,114.50 2.75 0.01 1.83 75.56 76.97 50.71 $ (1.15) $ 1.85 $ 0.05 $ 14.28 $ 15.37 $ 10.90 753.1 749.3 754.4 consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) consolidated\tstmt\tof\tequity\t(pg\t49,\tpg\t47) consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 29-Sep-13 5,471.40 5,377.30 1,111.20 6,382.30 561.40 40.73 14,866.80 3,200.50 11,516.70 1,299.40 7,034.40 (229.90) (28.10) 123.60 296.00 - 151.70 (35.20) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) consolidated\tstmt\tof\tearnings\t(pg\t45,\tpg\t43) consolidated\tbalance\tsheet\t(pg\t47,\tpg\t45) 1 Industry Avg 1.02 0.45 10.69 2.39 9.68% 23.16% 21.73 32.85 5.13 2 Income\tStatement\t(in\tmillions) Net\trevenues: Company-operated\tstores Licensed\tstores CPG,\tfoodservice\tand\tother Total\tnet\trevenues Cost\tof\tsales\tincluding\toccupancy\tcosts Store\toperaGng\tepenses Other\toperaGng\texpenses DepreciaGon\tand\tamorGzaGon\texpense General\tand\tadministraGve\texpenses LiGgaGon\tcharge\t(credit) Total\toperaGng\texpenses Income\tfrom\tequity\tinvestees OperaGng\tincome/(loss) Interest\tincome\tand\tother,\tnet Interest\texpense Earnings/(loss)\tbefore\tincome\ttaxes Income\ttax\texpense/(benet) Net\tearnings\tincluding\tnoncontrolling\tintereests Net\tearnings/(loss)\ta`ributable\tto\tnoncontrolling\tinterests Net\tearnings\ta`ributable\tto\tStarbucks Balance\tSheet\t(in\tmillions) Current\tassets: Cash\tand\tcash\tequivalents Short-term\tinvestments Accounts\treceivable,\tnet Inventories Prepaid\texpenses\tand\tother\tcurrent\tassets Deferred\tincome\ttaxes,\tnet Total\tcurrent\tassets Long-term\tinvestments Equity\tand\tcost\tinvestments Property,\tplant\tand\tequitment,\tnet Deferred\tincome\ttaxes,\tnet Other\tassets Other\tintangible\tassets Goodwill 2014 2013 $ 12,977.9 $ 11,793.2 $ 1,588.6 $ 1,360.5 $ 1,881.3 $ 1,713.1 $ 16,447.8 $ 14,866.8 $ 6,858.8 $ 6,382.3 $ 4,638.2 $ 4,286.1 $ 457.4 $ 431.8 $ 709.6 $ 621.4 $ 991.3 $ 937.9 $ (20.2) $ 2,784.1 $ 13,635.0 $ 15,443.6 $ 268.3 $ 251.4 $ 3,081.1 $ (325.4) $ 142.7 $ 123.6 $ (64.1) $ (28.1) $ 3,159.7 $ (229.9) $ 1,092.0 $ (238.7) $ 2,067.7 $ 8.8 $ (0.4) $ 0.5 $ 2,068.1 $ 8.3 2014 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1 1,708.4 135.4 631.0 1,090.9 285.6 317.4 4,168.7 318.4 514.9 3,519.0 903.3 198.9 273.5 856.2 2013 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2,575.7 658.1 561.4 1,111.2 287.7 277.3 5,471.4 58.3 496.5 3,200.5 967.0 185.3 274.8 862.9 Total\tAssets $ 10,752.9 $ 11,516.7 Current\tliabiliGes: Accounts\tpayable Accrued\tliGgaGon\tcharge Accrued\tliabiliGes Insurance\treserves Deferred\trevenue Total\tcurrent\tliabiliGes Long-term\tdebt Other\tlong-term\tliabiliGes Total\tliabiliGes Shareholders'\tequity: Common\tstock AddiGonal\tpaid-in\tcapital Retained\tearnings Accumulated\tother\tcomprehensive\tincome Total\tshareholders'\tequity Noncontrolling\tinterest Total\tequity Total\tLiabiliGes\tand\tEquity $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 491.7 2,784.1 1,269.3 178.5 653.7 5,377.3 1,299.4 357.7 7,034.4 $ 0.7 $ 39.4 $ 5,206.6 $ 25.3 $ 5,272.0 $ 1.7 $ 5,273.7 $ 10,752.9 2 533.7 - 1,514.4 196.1 794.5 3,038.7 2,048.3 392.2 5,479.2 $ $ $ $ $ $ $ $ 0.8 282.1 4,130.3 67.0 4,480.2 2.1 4,482.3 11,516.7 2014 Common Size 2012 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 10,534.5 1,210.3 1,532.0 13,276.8 5,813.3 3,918.1 407.2 550.3 801.2 - 11,490.1 210.7 1,997.4 94.4 (32.7) 2,059.1 674.4 1,384.7 0.9 1,383.8 0.78904 0.09658 0.11438 1.00000 0.41700 0.28200 0.02781 0.04314 0.06027 (0.00123) 0.82899 0.01631 0.18733 0.00868 (0.00390) 0.19210 0.06639 0.12571 (0.00002) 0.12574 1,188.6 848.4 485.9 1,241.5 196.5 238.7 4,199.6 116.0 459.9 2,658.9 97.3 144.7 143.7 399.1 0.79326 0.09151 0.11523 1.00000 0.42930 0.28830 0.02904 0.04180 0.06309 0.18727 1.03880 0.01691 (0.02189) 0.00831 (0.00189) (0.01546) (0.01606) 0.00059 0.00003 0.00056 2014 Common Size 2012 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2013 Common Size 0.15888 0.01259 0.05868 0.10145 0.02656 0.02952 0.38768 0.02961 0.04788 0.32726 0.08401 0.01850 0.02543 0.07963 2012 Common Size 0.79345 0.09116 0.11539 1.00000 0.43785 0.29511 0.03067 0.04145 0.06035 - 0.86543 0.01587 0.15044 0.00711 (0.00246) 0.15509 0.05080 0.10429 0.00007 0.10423 2013 Common Size 0.22365 0.05714 0.04875 0.09649 0.02498 0.02408 0.47508 0.00506 0.04311 0.27790 0.08397 0.01609 0.02386 0.07493 2012 Common Size 0.14461 0.10322 0.05912 0.15105 0.02391 0.02904 0.51095 0.01411 0.05595 0.32350 0.01184 0.01761 0.01748 0.04856 3 $ 8,219.2 1.00000 1.00000 1.00000 $ 398.1 0.04963 0.04269 0.04844 $ - - 0.24174 - $ 1,133.8 0.14084 0.11021 0.13795 $ 167.7 0.01824 0.01550 0.02040 $ 510.2 0.07389 0.05676 0.06207 $ 2,209.8 0.28259 0.46691 0.26886 $ 549.6 0.19049 0.11283 0.06687 $ 345.3 0.03647 0.03106 0.04201 $ 3,104.7 0.50956 0.61080 0.37774 - - - $ 0.7 0.00007 0.00007 0.00009 $ 39.4 0.00366 0.02449 0.00479 $ 5,046.2 0.48420 0.35864 0.61395 $ 22.7 0.00235 0.00582 0.00276 $ 5,109.0 0.49029 0.38902 0.62159 $ 5.5 0.00016 0.00018 0.00067 $ 5,144.5 0.49044 0.38920 0.62591 $ 8,219.2 1.00000 1.00000 1.00000 4 5 6 Income\tStatement\t(in\tmillions) Net\trevenues: Company-operated\tstores Licensed\tstores CPG,\tfoodservice\tand\tother Total\tnet\trevenues Cost\tof\tsales\tincluding\toccupancy\tcosts Store\toperaKng\tepenses Other\toperaKng\texpenses DepreciaKon\tand\tamorKzaKon\texpense General\tand\tadministraKve\texpenses LiKgaKon\tcharge\t(credit) Total\toperaKng\texpenses Income\tfrom\tequity\tinvestees OperaKng\tincome/(loss) Interest\tincome\tand\tother,\tnet Interest\texpense Earnings/(loss)\tbefore\tincome\ttaxes Income\ttax\texpense/(benet) Net\tearnings\tincluding\tnoncontrolling\tintereests Net\tearnings/(loss)\taXributable\tto\tnoncontrolling\tinterests Net\tearnings\taXributable\tto\tStarbucks 2014 2013 $ 12,977.9 $ $ 1,588.6 $ $ 1,881.3 $ $ 16,447.8 $ $ 6,858.8 $ $ 4,638.2 $ $ 457.4 $ $ 709.6 $ $ 991.3 $ $ (20.2) $ $ 13,635.0 $ $ 268.3 $ $ 3,081.1 $ $ 142.7 $ $ (64.1) $ $ 3,159.7 $ $ 1,092.0 $ $ 2,067.7 $ $ (0.4) $ $ 2,068.1 $ Balance\tSheet\t(in\tmillions) Current\tassets: Cash\tand\tcash\tequivalents Short-term\tinvestments Accounts\treceivable,\tnet Inventories Prepaid\texpenses\tand\tother\tcurrent\tassets Deferred\tincome\ttaxes,\tnet Total\tcurrent\tassets Long-term\tinvestments Equity\tand\tcost\tinvestments Property,\tplant\tand\tequitment,\tnet Deferred\tincome\ttaxes,\tnet Other\tassets Other\tintangible\tassets Goodwill $ $ $ $ $ $ $ $ $ $ $ $ $ $ Total\tAssets $ 10,752.9 $ Current\tliabiliKes: Accounts\tpayable Accrued\tliKgaKon\tcharge Accrued\tliabiliKes Insurance\treserves Deferred\trevenue Total\tcurrent\tliabiliKes Long-term\tdebt Other\tlong-term\tliabiliKes Total\tliabiliKes Shareholders'\tequity: Common\tstock AddiKonal\tpaid-in\tcapital Retained\tearnings Accumulated\tother\tcomprehensive\tincome Total\tshareholders'\tequity Noncontrolling\tinterest Total\tequity Total\tLiabiliKes\tand\tEquity 2014 $ $ $ $ $ $ $ $ $ 1,708.4 135.4 631.0 1,090.9 285.6 317.4 4,168.7 318.4 514.9 3,519.0 903.3 198.9 273.5 856.2 11,793.2 1,360.5 1,713.1 14,866.8 6,382.3 4,286.1 431.8 621.4 937.9 2,784.1 15,443.6 251.4 (325.4) 123.6 (28.1) (229.9) (238.7) 8.8 0.5 8.3 2012 2,575.7 658.1 561.4 1,111.2 287.7 277.3 5,471.4 58.3 496.5 3,200.5 967.0 185.3 274.8 862.9 2013 Common Size 2012 Common Size $ 10,534.5 0.78904 0.79326 0.79345 $ 1,210.3 0.09658 0.09151 0.09116 $ 1,532.0 0.11438 0.11523 0.11539 $ 13,276.8 1.00000 1.00000 1.00000 $ 5,813.3 0.41700 0.42930 0.43785 $ 3,918.1 0.28200 0.28830 0.29511 $ 407.2 0.02781 0.02904 0.03067 $ 550.3 0.04314 0.04180 0.04145 $ 801.2 0.06027 0.06309 0.06035 $ - (0.00123) 0.18727 - $ 11,490.1 0.82899 1.03880 0.86543 $ 210.7 0.01631 0.01691 0.01587 $ 1,997.4 0.18733 (0.02189) 0.15044 $ 94.4 0.00868 0.00831 0.00711 $ (32.7) (0.00390) (0.00189) (0.00246) $ 2,059.1 0.19210 (0.01546) 0.15509 $ 674.4 0.06639 (0.01606) 0.05080 $ 1,384.7 0.12571 0.00059 0.10429 $ 0.9 (0.00002) 0.00003 0.00007 $ 1,383.8 0.12574 0.00056 0.10423 2013 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2014 Common Size 2014 Common Size 2012 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 11,516.7 $ 1,188.6 848.4 485.9 1,241.5 196.5 238.7 4,199.6 116.0 459.9 2,658.9 97.3 144.7 143.7 399.1 0.15888 0.01259 0.05868 0.10145 0.02656 0.02952 0.38768 0.02961 0.04788 0.32726 0.08401 0.01850 0.02543 0.07963 2013 Common Size 0.22365 0.05714 0.04875 0.09649 0.02498 0.02408 0.47508 0.00506 0.04311 0.27790 0.08397 0.01609 0.02386 0.07493 2012 Common Size 0.14461 0.10322 0.05912 0.15105 0.02391 0.02904 0.51095 0.01411 0.05595 0.32350 0.01184 0.01761 0.01748 0.04856 8,219.2 1.00000 1.00000 1.00000 533.7 - 1,514.4 196.1 794.5 3,038.7 2,048.3 392.2 5,479.2 $ $ $ $ $ $ $ $ $ 491.7 2,784.1 1,269.3 178.5 653.7 5,377.3 1,299.4 357.7 7,034.4 $ $ $ $ $ $ $ $ $ 398.1 - 1,133.8 167.7 510.2 2,209.8 549.6 345.3 3,104.7 $ 0.7 $ 39.4 $ 5,206.6 $ 25.3 $ 5,272.0 $ 1.7 $ 5,273.7 $ 10,752.9 $ $ $ $ $ $ $ $ 0.8 282.1 4,130.3 67.0 4,480.2 2.1 4,482.3 11,516.7 $ $ $ $ $ $ $ $ 0.7 39.4 5,046.2 22.7 5,109.0 5.5 5,144.5 8,219.2 0.04963 - 0.14084 0.01824 0.07389 0.28259 0.19049 0.03647 0.50956 - 0.00007 0.00366 0.48420 0.00235 0.49029 0.00016 0.49044 1.00000 0.04269 0.24174 0.11021 0.01550 0.05676 0.46691 0.11283 0.03106 0.61080 - 0.00007 0.02449 0.35864 0.00582 0.38902 0.00018 0.38920 1.00000 0.04844 - 0.13795 0.02040 0.06207 0.26886 0.06687 0.04201 0.37774 - 0.00009 0.00479 0.61395 0.00276 0.62159 0.00067 0.62591 1.00000 ParKculars Calcula:on\tof\tWACC\tfor\tStarbucks\tCorpora:on AbbreviaKons 2014 Years 2013 2012 A.\tCalcula:on\tof\tWd\tand\tWe Long-term\tdebt Total\tshareholders\tEquity Value\tof\tFirm D E V=D+E 2048.30 5272.00 7320.30 1299.40 4480.20 5779.60 549.60 5109.00 5658.60 Weight\tof\tDebt Weight\tof\tEquity (Wd) (We) 27.98% 72.02% 22.48% 77.52% 9.71% 90.29% B.\tCalcula:on\tof\tEec:ve\tTax\tRate Tax\tExpense Earnings\tbefore\tTax Eec:ve Tax\tRate T EBT T 1,092.00 3,159.70 34.56% -238.70 674.40 -229.90 2,059.10 103.83% 32.75% C.\tCalcula:on\tof\tCost\tof\tDebt\tpost-\tTax Interest\tExpense Long-term\tdebt Cost\tof\tDebt\t(Pre-Tax) Cost\tof\tDebt\t(Post-Tax) Kd\t(1-T) I D Kd Kd\t(1-T) 64.10 2048.30 3.13% 2.05% 28.10 1299.40 2.16% -0.08% 32.70 549.60 5.95% 4.00% D.\tCalcula:on\tof\tCost\tof\tEquity Average\tMarket\tPrice\tper\tshare Earnings\tper\tShare\t(Basic) Cash\tdividends paid\tper\tshare Earnings\tRetained Reten:on\tRate\t(Earnings\tretained/EPS) Ke MPS\tor\tP0 EPS D0 EPS-DPS b 75.56 2.75 1.1 1.65 60.00% 76.97 0.01 0.89 -0.88 -8800.00% 50.71 1.83 0.72 1.11 60.66% Net Earnings\taXributable\tto\tStarbucks Total\tShareholder's\tEquity ROE=\tNet Earnings\ta[ributable\tto\tStarbucks/\tTotal\tShareholder's\tEquity ROE 2068.10 5272.00 39.23% 8.3 4480.20 0.19% 1383.80 5109.00 27.09% Growth\tRate\t(g=Reten:on\trate\t*\tROE) g=\tb*\tROE 23.54% -16.30% 16.43% Using\tthe\tthe\tgordon\tgrowth\tmodel,\twe\tcan\tnd\tthe\tcost\tof\tequity\tas\tfollows:\tKe=\t[D0(1+g)/MPS]\t+\tg Cost\tof\tEquity Ke 25.34% -15.33% 18.08% WACC=\tWd*Kd\t(1-T)\t+\tWe*Ke 18.82% -11.90% 16.71% Income\tStatement\t(in\tmillions) Net\trevenues: Company-operated\tstores Licensed\tstores CPG,\tfoodservice\tand\tother Total\tnet\trevenues Cost\tof\tsales\tincluding\toccupancy\tcosts Store\toperaKng\tepenses Other\toperaKng\texpenses DepreciaKon\tand\tamorKzaKon\texpense General\tand\tadministraKve\texpenses LiKgaKon\tcharge\t(credit) Total\toperaKng\texpenses Income\tfrom\tequity\tinvestees OperaKng\tincome/(loss) Interest\tincome\tand\tother,\tnet Interest\texpense Earnings/(loss)\tbefore\tincome\ttaxes Income\ttax\texpense/(benet) Net\tearnings\tincluding\tnoncontrolling\tintereests Net\tearnings/(loss)\taXributable\tto\tnoncontrolling\tinterests Net\tearnings\taXributable\tto\tStarbucks 2014 2013 $ 12,977.9 $ $ 1,588.6 $ $ 1,881.3 $ $ 16,447.8 $ $ 6,858.8 $ $ 4,638.2 $ $ 457.4 $ $ 709.6 $ $ 991.3 $ $ (20.2) $ $ 13,635.0 $ $ 268.3 $ $ 3,081.1 $ $ 142.7 $ $ (64.1) $ $ 3,159.7 $ $ 1,092.0 $ $ 2,067.7 $ $ (0.4) $ $ 2,068.1 $ Balance\tSheet\t(in\tmillions) Current\tassets: Cash\tand\tcash\tequivalents Short-term\tinvestments Accounts\treceivable,\tnet Inventories Prepaid\texpenses\tand\tother\tcurrent\tassets Deferred\tincome\ttaxes,\tnet Total\tcurrent\tassets Long-term\tinvestments Equity\tand\tcost\tinvestments Property,\tplant\tand\tequitment,\tnet Deferred\tincome\ttaxes,\tnet Other\tassets Other\tintangible\tassets Goodwill $ $ $ $ $ $ $ $ $ $ $ $ $ $ Total\tAssets $ 10,752.9 $ Current\tliabiliKes: Accounts\tpayable Accrued\tliKgaKon\tcharge Accrued\tliabiliKes Insurance\treserves Deferred\trevenue Total\tcurrent\tliabiliKes Long-term\tdebt Other\tlong-term\tliabiliKes Total\tliabiliKes Shareholders'\tequity: Common\tstock AddiKonal\tpaid-in\tcapital Retained\tearnings Accumulated\tother\tcomprehensive\tincome Total\tshareholders'\tequity Noncontrolling\tinterest Total\tequity Total\tLiabiliKes\tand\tEquity 2014 $ $ $ $ $ $ $ $ $ 1,708.4 135.4 631.0 1,090.9 285.6 317.4 4,168.7 318.4 514.9 3,519.0 903.3 198.9 273.5 856.2 11,793.2 1,360.5 1,713.1 14,866.8 6,382.3 4,286.1 431.8 621.4 937.9 2,784.1 15,443.6 251.4 (325.4) 123.6 (28.1) (229.9) (238.7) 8.8 0.5 8.3 2012 2,575.7 658.1 561.4 1,111.2 287.7 277.3 5,471.4 58.3 496.5 3,200.5 967.0 185.3 274.8 862.9 2013 Common Size 2012 Common Size $ 10,534.5 0.78904 0.79326 0.79345 $ 1,210.3 0.09658 0.09151 0.09116 $ 1,532.0 0.11438 0.11523 0.11539 $ 13,276.8 1.00000 1.00000 1.00000 $ 5,813.3 0.41700 0.42930 0.43785 $ 3,918.1 0.28200 0.28830 0.29511 $ 407.2 0.02781 0.02904 0.03067 $ 550.3 0.04314 0.04180 0.04145 $ 801.2 0.06027 0.06309 0.06035 $ - (0.00123) 0.18727 - $ 11,490.1 0.82899 1.03880 0.86543 $ 210.7 0.01631 0.01691 0.01587 $ 1,997.4 0.18733 (0.02189) 0.15044 $ 94.4 0.00868 0.00831 0.00711 $ (32.7) (0.00390) (0.00189) (0.00246) $ 2,059.1 0.19210 (0.01546) 0.15509 $ 674.4 0.06639 (0.01606) 0.05080 $ 1,384.7 0.12571 0.00059 0.10429 $ 0.9 (0.00002) 0.00003 0.00007 $ 1,383.8 0.12574 0.00056 0.10423 2013 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2014 Common Size 2014 Common Size 2012 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 11,516.7 $ 1,188.6 848.4 485.9 1,241.5 196.5 238.7 4,199.6 116.0 459.9 2,658.9 97.3 144.7 143.7 399.1 0.15888 0.01259 0.05868 0.10145 0.02656 0.02952 0.38768 0.02961 0.04788 0.32726 0.08401 0.01850 0.02543 0.07963 2013 Common Size 0.22365 0.05714 0.04875 0.09649 0.02498 0.02408 0.47508 0.00506 0.04311 0.27790 0.08397 0.01609 0.02386 0.07493 2012 Common Size 0.14461 0.10322 0.05912 0.15105 0.02391 0.02904 0.51095 0.01411 0.05595 0.32350 0.01184 0.01761 0.01748 0.04856 8,219.2 1.00000 1.00000 1.00000 533.7 - 1,514.4 196.1 794.5 3,038.7 2,048.3 392.2 5,479.2 $ $ $ $ $ $ $ $ $ 491.7 2,784.1 1,269.3 178.5 653.7 5,377.3 1,299.4 357.7 7,034.4 $ $ $ $ $ $ $ $ $ 398.1 - 1,133.8 167.7 510.2 2,209.8 549.6 345.3 3,104.7 $ 0.7 $ 39.4 $ 5,206.6 $ 25.3 $ 5,272.0 $ 1.7 $ 5,273.7 $ 10,752.9 $ $ $ $ $ $ $ $ 0.8 282.1 4,130.3 67.0 4,480.2 2.1 4,482.3 11,516.7 $ $ $ $ $ $ $ $ 0.7 39.4 5,046.2 22.7 5,109.0 5.5 5,144.5 8,219.2 0.04963 - 0.14084 0.01824 0.07389 0.28259 0.19049 0.03647 0.50956 - 0.00007 0.00366 0.48420 0.00235 0.49029 0.00016 0.49044 1.00000 0.04269 0.24174 0.11021 0.01550 0.05676 0.46691 0.11283 0.03106 0.61080 - 0.00007 0.02449 0.35864 0.00582 0.38902 0.00018 0.38920 1.00000 0.04844 - 0.13795 0.02040 0.06207 0.26886 0.06687 0.04201 0.37774 - 0.00009 0.00479 0.61395 0.00276 0.62159 0.00067 0.62591 1.00000 ParKculars Calcula:on\tof\tWACC\tfor\tStarbucks\tCorpora:on AbbreviaKons 2014 Years 2013 2012 A.\tCalcula:on\tof\tWd\tand\tWe Long-term\tdebt Total\tshareholders\tEquity Value\tof\tFirm D E V=D+E 2048.30 5272.00 7320.30 1299.40 4480.20 5779.60 549.60 5109.00 5658.60 Weight\tof\tDebt Weight\tof\tEquity (Wd) (We) 27.98% 72.02% 22.48% 77.52% 9.71% 90.29% B.\tCalcula:on\tof\tEec:ve\tTax\tRate Tax\tExpense Earnings\tbefore\tTax Eec:ve Tax\tRate T EBT T 1,092.00 3,159.70 34.56% -238.70 674.40 -229.90 2,059.10 103.83% 32.75% C.\tCalcula:on\tof\tCost\tof\tDebt\tpost-\tTax Interest\tExpense Long-term\tdebt Cost\tof\tDebt\t(Pre-Tax) Cost\tof\tDebt\t(Post-Tax) Kd\t(1-T) I D Kd Kd\t(1-T) 64.10 2048.30 3.13% 2.05% 28.10 1299.40 2.16% -0.08% 32.70 549.60 5.95% 4.00% D.\tCalcula:on\tof\tCost\tof\tEquity Average\tMarket\tPrice\tper\tshare Earnings\tper\tShare\t(Basic) Cash\tdividends paid\tper\tshare Earnings\tRetained Reten:on\tRate\t(Earnings\tretained/EPS) Ke MPS\tor\tP0 EPS D0 EPS-DPS b 75.56 2.75 1.1 1.65 60.00% 76.97 0.01 0.89 -0.88 -8800.00% 50.71 1.83 0.72 1.11 60.66% Net Earnings\taXributable\tto\tStarbucks Total\tShareholder's\tEquity ROE=\tNet Earnings\ta[ributable\tto\tStarbucks/\tTotal\tShareholder's\tEquity ROE 2068.10 5272.00 39.23% 8.3 4480.20 0.19% 1383.80 5109.00 27.09% Growth\tRate\t(g=Reten:on\trate\t*\tROE) g=\tb*\tROE 23.54% -16.30% 16.43% Using\tthe\tthe\tgordon\tgrowth\tmodel,\twe\tcan\tnd\tthe\tcost\tof\tequity\tas\tfollows:\tKe=\t[D0(1+g)/MPS]\t+\tg Cost\tof\tEquity Ke 25.34% -15.33% 18.08% WACC=\tWd*Kd\t(1-T)\t+\tWe*Ke 18.82% -11.90% 16.71%