Item 1 is to be completed in Excel, following the instructions below. Note that Excel formulas must be used for all computations. Credit cannot be awarded for manually-entered amounts. For items 2 through 10, enter your responses into this document, directly under each question. Referenced financial information can be found in the StarbucksFinancials PDF. Present your answers in complete, well-constructed sentences, and be concise and to the point in your responses 1. Follow directions on p. 1-27 in textbook, or on the last few slides in the Module 1 PPT to download Starbucks income statement and balance sheet for fiscal 2013 (the year ended September 29, 2013). Financial statements for public companies are reported to shareholders in their annual reports, also called Form 10-K. Use the downloaded Excel spreadsheets to construct common-size income statements (Starbucks calls them statements of earnings) and balance sheets for both 2013 and 2012. (Information for both years will be found on the fiscal 2013 statements.) Common-size income statements scale each income statement line item by total net revenues (sales). Common-size balance sheets are created by dividing each figure on a given years balance sheet by that years total assets, thereby creating a balance sheet on a percent of assets basis. Note that event liability and stockholders equity items are to be presented/computed on a percent of assets basis. Refer to the fiscal 2013 balance sheet (for the year ended September 29, 2013) to respond to the following items. 2. (a) Write out the Accounting Equation and (b) demonstrate that the accounting equation holds true for Starbucks. 3. Using the common-size information you computed, (a) identify Starbucks major assets and list them below. (b) Explain how you identified the major assets. (c) Why are these major assets appropriate for a company like Starbucks? 4. Explain, in your own words, (a) intangible assets and (b) goodwill. (c) What specific intangible assets might Starbucks have? 5. Show relevant computations. (a) How is Starbucks financed? (b) What proportion of total financing comes from non-owners for fiscal 2013? For fiscal 2012? (c) Explain why the financing side of Starbucks balance changed from fiscal 2012 to fiscal 2013. Refer to the fiscal 2013 statement of earnings (for the year ended September 29, 2013) to respond to the following items. 6. Review the revenue recognition policies of Starbucks discussed in Note 1 (Summary of Significant Accounting Policies). (a) Does Starbucks record revenue when they receive cash from customers? (b) How does Starbucks record revenue on stored value cards (gift cards)? (c) What significant judgments does management need to make in order to measure and record sales revenue at Starbucks? (d) Briefly explain the concept of accrual accounting as it relates to revenue recognition. Provide one relevant example from Starbucks Note 1. 7. Using the common-size information you computed in the common-size statement of earnings (a) Identify Starbucks major expenses and list them below. (b) Explain how you identified the major expenses. (c) Explain any changes in cost structure that you observe from fiscal 2012 to fiscal 2013. 8. Regarding Starbucks large litigation charge in fiscal 2013, (a) explain why Starbucks included this as part of operating income. (b) why do you think Starbucks reported the charge as a separate line item rather than include it in total general and administrative expenses? 9. Was Starbucks profitable in fiscal 2013? In fiscal 2012? Explain your definition of profitable. Refer to the fiscal 2013 statement of cash flows (for the year ended September 29, 2013) to respond to the following items. 10. (a) In general, explain why Starbucks net earnings would be different from net cash provided by operating activities. (b) How much cash did Starbucks use during fiscal 2013 for expenditures for property, plant and equipment? (c) What amount of dividends did Starbucks pay during fiscal 2013? (d) Why does the amount of dividends paid during the year differ from the amount of dividends declared as show in the statement of equity? Please send me your email so I can send you the balance sheet it is 15 pages long.
Item 8. Financial Statements and Supplementary Data STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Sep 29, 2013 Sep 30, 2012 Oct 2 2011 S 11,793.2 S 1,360.5 1,738.5 14,892.2 6,382.3 4,286.1 457.2 621.4 937.9 2,784.1 15,469.0 10,534.5 S 1,210.3 1,554.7 13,299.5 5,813.3 3,918.1 429.9 550.3 801.2 9,632.4 1,007.5 1,060.5 11,700.4 4,915.5 3,594.9 392.8 523.3 749.3 11,512.8 - Fiscal Year Ended Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge Total operating expenses Gain on sale of properties Income from equity investees Operating income/(loss) Interest income and other, net Interest expense Earnings/(loss) before income taxes Income taxes Net earnings including noncontrolling interests Net earnings 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 251.4 210.7 (325.4) 1,997.4 123.6 94.4 (28.1) (32.7) (229.9) 2,059.1 (238.7) 674.4 8.8 1,384.7 0.5 0.9 8.3 $ 1,383.8 S 0.01 $ 1.83 $ 0.01 S 1.79 S 10,175.8 30.2 173.7 1,728.5 115.9 (33.3) 1,811.1 563.1 1,248.0 2.3 1,245.7 1.66 $ S S 1.62 749.3 762.3 0.89 $ 754.4 773.0 0.72 $ 748.3 769.7 S 0.56 See Notes to Consolidated Financial Statements. 4- STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Sep 29. 2013 Oct 2. 2011 Sep 30. 2012 1,384.7 $ 8.8 S 1,248.0 0.7 (0.6) 0.2 47.1 (24.6) (0.3) (42.2) 4.3 0.7 (0.3) (12.2) 4.5 32.8 (12.1) 1.0 (0.4) (12.1) 4.5 Net earnings including noncontrolling interests Other comprehensive income/(loss), net of tax: Unrealized holding gains/(losses) on available-for-sale securities Tax (expense)/benefit Unrealized holding gains/(losses) on cash flow hedging instruments Tax (expense)/benefit Unrealized holding gains/losses) on net investment hedging instruments Tax (expense) benefit Reclassification adjustment for net (gains) losses realized in net earnings for cash flow hedges Tax expense/(benefit) Net unrealized holding gains/(losses) Translation adjustment Tax (expense)/benefit Other comprehensive income/loss) Comprehensive income/(loss) including noncontrolling interests Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Starbucks 46.3 (3.5) 85.6 (41.6) 0.3 14.8 (4.3) (26.4) 6.1 (3.3) (23.6) 1,361.1 0.9 1,360.2 S 16.6 (6.1) (4.4) (7.4) 0.9 (10.9) 1,237.1 2.3 44.3 53.1 0.5 52.6 $ $ 1,234.8 See Notes to Consolidated Financial Statements. -5- STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 29, 2013 Sep 30, 2012 2,575.7 S 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 1,188.6 848.4 485.9 1,241.5 196.5 238.7 4,199.6 116.0 459.9 2,658.9 97.3 144.7 143.7 862.9 399.1 11,516.7 $ 8,219.2 ASSETS 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 equipment, net Deferred income taxes, net Other assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY 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 (S0.001 par value) - authorized, 1,200.0 shares, issued and outstanding, 753.2 shares and 749.3 shares includes 3.4 common stock units), respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY S 398.1 491.7 S 2,784.1 1,269.3 178.5 653.7 5,377.3 1,299.4 357.7 7,034.4 1,133.8 167.7 510.2 2,209.8 549.6 345.3 3,104.7 0.8 282.1 4,130.3 67.0 4,480.2 2.1 4,482.3 11,516.7 S 0.7 39.4 5,046.2 22.7 5,109.0 5.5 5,114.5 8,219.2 $ See Notes to Consolidated Financial Statements. Item 8. Financial Statements and Supplementary Data STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Sep 29, 2013 Sep 30, 2012 Oct 2 2011 S 11,793.2 S 1,360.5 1,738.5 14,892.2 6,382.3 4,286.1 457.2 621.4 937.9 2,784.1 15,469.0 10,534.5 S 1,210.3 1,554.7 13,299.5 5,813.3 3,918.1 429.9 550.3 801.2 9,632.4 1,007.5 1,060.5 11,700.4 4,915.5 3,594.9 392.8 523.3 749.3 11,512.8 - Fiscal Year Ended Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Litigation charge Total operating expenses Gain on sale of properties Income from equity investees Operating income/(loss) Interest income and other, net Interest expense Earnings/(loss) before income taxes Income taxes Net earnings including noncontrolling interests Net earnings 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 251.4 210.7 (325.4) 1,997.4 123.6 94.4 (28.1) (32.7) (229.9) 2,059.1 (238.7) 674.4 8.8 1,384.7 0.5 0.9 8.3 $ 1,383.8 S 0.01 $ 1.83 $ 0.01 S 1.79 S 10,175.8 30.2 173.7 1,728.5 115.9 (33.3) 1,811.1 563.1 1,248.0 2.3 1,245.7 1.66 $ S S 1.62 749.3 762.3 0.89 $ 754.4 773.0 0.72 $ 748.3 769.7 S 0.56 See Notes to Consolidated Financial Statements. 4- STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Sep 29. 2013 Oct 2. 2011 Sep 30. 2012 1,384.7 $ 8.8 S 1,248.0 0.7 (0.6) 0.2 47.1 (24.6) (0.3) (42.2) 4.3 0.7 (0.3) (12.2) 4.5 32.8 (12.1) 1.0 (0.4) (12.1) 4.5 Net earnings including noncontrolling interests Other comprehensive income/(loss), net of tax: Unrealized holding gains/(losses) on available-for-sale securities Tax (expense)/benefit Unrealized holding gains/(losses) on cash flow hedging instruments Tax (expense)/benefit Unrealized holding gains/losses) on net investment hedging instruments Tax (expense) benefit Reclassification adjustment for net (gains) losses realized in net earnings for cash flow hedges Tax expense/(benefit) Net unrealized holding gains/(losses) Translation adjustment Tax (expense)/benefit Other comprehensive income/loss) Comprehensive income/(loss) including noncontrolling interests Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Starbucks 46.3 (3.5) 85.6 (41.6) 0.3 14.8 (4.3) (26.4) 6.1 (3.3) (23.6) 1,361.1 0.9 1,360.2 S 16.6 (6.1) (4.4) (7.4) 0.9 (10.9) 1,237.1 2.3 44.3 53.1 0.5 52.6 $ $ 1,234.8 See Notes to Consolidated Financial Statements. -5- STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 29, 2013 Sep 30, 2012 2,575.7 S 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 1,188.6 848.4 485.9 1,241.5 196.5 238.7 4,199.6 116.0 459.9 2,658.9 97.3 144.7 143.7 862.9 399.1 11,516.7 $ 8,219.2 ASSETS 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 equipment, net Deferred income taxes, net Other assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND EQUITY 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 (S0.001 par value) - authorized, 1,200.0 shares, issued and outstanding, 753.2 shares and 749.3 shares includes 3.4 common stock units), respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY S 398.1 491.7 S 2,784.1 1,269.3 178.5 653.7 5,377.3 1,299.4 357.7 7,034.4 1,133.8 167.7 510.2 2,209.8 549.6 345.3 3,104.7 0.8 282.1 4,130.3 67.0 4,480.2 2.1 4,482.3 11,516.7 S 0.7 39.4 5,046.2 22.7 5,109.0 5.5 5,114.5 8,219.2 $ See Notes to Consolidated Financial Statements
