NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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Note 1:
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Summary of Significant Accounting Policies
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Financial Statement Preparation
The unaudited condensed consolidated financial statements as of
June 30, 2019
, and for
the quarter and three quarters
ended
June 30, 2019
and
July 1, 2018
, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial information for
the quarter and three quarters
ended
June 30, 2019
and
July 1, 2018
reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. In this Quarterly Report on Form 10-Q (“10-Q”), Starbucks Corporation is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.”
Certain prior period information on the condensed consolidated statements of cash flows has been reclassified to conform to the current year presentation.
The financial information as of
September 30, 2018
is derived from our audited consolidated financial statements and notes for the fiscal year ended
September 30, 2018
(“fiscal
2018
”) included in Item 8 in the Fiscal
2018
Annual Report on Form 10-K (the “10-K”). The information included in this 10-Q should be read in conjunction with the footnotes and management’s discussion and analysis of the consolidated financial statements in the 10-K.
The results of operations for
the quarter and three quarters
ended
June 30, 2019
are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending
September 29, 2019
(“fiscal
2019
”).
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In the third quarter of fiscal 2019, we adopted the Financial Accounting Standards Board (“FASB”) issued guidance on the accounting for hedging relationships. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness, expands permissible cash flow hedges on contractually specified components, and simplifies hedge documentation and effectiveness assessments. The adoption of the new guidance did not have a material impact to our financial statements. The presentation and disclosure requirements are being applied prospectively. See
Note 4
, Derivative Instruments for further discussion.
In the first quarter of fiscal 2019, we adopted the new guidance on the accounting for income tax effects of intercompany sales or transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. The primary impact of the adoption was an increase to deferred income taxes, net of
$227.6 million
and a corresponding cumulative adjustment to opening retained earnings at the beginning of fiscal 2019.
In the first quarter of fiscal 2019, we adopted the new guidance on revenue recognition utilizing the modified retrospective method, which primarily changed the accounting method and classification of revenue recognition related to unredeemed stored value cards, referred to as stored value card breakage. Under this new guidance, expected breakage amounts must be recognized proportionately in earnings as redemptions occur. Previously, stored value card breakage was recorded to interest income and other, net utilizing the remote method. Starting in the first quarter of 2019, stored value card breakage was recorded in the revenue lines where stored value cards may be redeemed—primarily company-operated and licensed store revenues. The cumulative impact to retained earnings as of October 1, 2018 was
$268.0 million
.
Impact of adoption on our consolidated balance sheet at September 30, 2018:
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(in millions)
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As reported
Sep 30, 2018
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Revenue Recognition Adoption Impact
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Adjusted
Oct 1, 2018
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Deferred income taxes, net
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$
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134.7
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$
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(11.0
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)
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$
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123.7
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Current liabilities:
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Stored value card liability and current portion of deferred revenue
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1,642.9
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(422.0
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)
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1,220.9
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Deferred revenue
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6,775.7
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64.0
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6,839.7
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Other long-term liabilities
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1,430.5
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79.0
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1,509.5
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Shareholders' equity:
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Retained earnings
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1,457.4
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268.0
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1,725.4
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Due to the adoption, we began classifying stored value card liabilities as current and long-term deferred revenue.
See
Note 2
, Revenue Recognition, for further discussion of classification of impacts of the adoption.
Recent Accounting Pronouncements Not Yet Adopted
In February 2018, the FASB issued guidance on the reclassification of certain tax effects from accumulated other comprehensive income (“AOCI”). The guidance permits entities to reclassify the stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from AOCI to retained earnings. The guidance will be effective at the beginning of our first quarter of fiscal 2020 but permits adoption in an earlier period. The guidance may be applied in the period of adoption or retrospectively to each period in which the effect of the change related to the Tax Act was recognized. We do not expect a material impact upon adoption of this guidance.
In February 2016, the FASB issued guidance on the recognition and measurement of leases. Under the new guidance, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the current accounting for lessors and does not make significant changes to the recognition, measurement or presentation of expenses and cash flows by a lessee. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. We will be applying the guidance, as permitted by the alternative method issued by the FASB, at the beginning of our first quarter of fiscal 2020, with optional practical expedients. In preparation for the adoption of the guidance, we are in the process of implementing controls and key system changes to enable the preparation of financial information. We expect this adoption will result in a right-of-use asset and lease liability in the range of approximately
$8 billion
to
$10 billion
on our condensed consolidated balance sheets but will likely have an insignificant impact on our condensed consolidated statements of earnings.
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Note 2:
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Revenue Recognition
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The following significant revenue recognition accounting policies from our most recent Annual Report on Form 10-K have been restated to reflect the adoption of the new guidance.
Consolidated revenues are presented net of intercompany eliminations for wholly-owned subsidiaries and investees controlled by us and for product sales to and royalty and other fees from licensees accounted for under the equity method. Additionally, consolidated revenues are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and rebates.
Company-operated Store Revenues
Company-operated store revenues are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied. Company-operated store revenues are reported excluding sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities.
Licensed Store Revenues
Licensed store revenues consist of product and equipment sales, royalties and other fees paid by licensees using the Starbucks brand. Sales of coffee, tea, food and related products are generally recognized upon shipment to licensees, depending on contract terms. Shipping charges billed to licensees are also recognized as revenue, and the related shipping costs are included in cost of sales including occupancy costs on our condensed consolidated statements of earnings.
We consider pre-opening services, including site evaluation and selection, store architectural/design and development and operational training, to be performance obligations that are separate from the license to operate under the Starbucks brand as these pre-opening services provide distinct value to our licensees, including business and industry insight and knowledge that transfers value apart from the license. Revenues associated with these pre-opening services are recognized upon completion of the related performance obligations, generally when a store is opened. Royalty revenues are recognized based upon a percentage of reported sales, and other continuing fees, such as marketing and service fees, are recognized as the performance obligations are met.
Stored Value Cards
Stored value cards can be activated through various channels, including at our company-operated and most licensed store locations, online at Starbucks.com or via mobile devices held by our customers, and at certain other third-party websites and locations, such as grocery stores, although they cannot be reloaded at these third-party websites or locations. Amounts loaded onto stored value cards are initially recorded as deferred revenue and recognized as revenue upon redemption. Historically, the majority of stored value cards are redeemed within one year.
In many of our company-owned markets, including the U.S., our stored value cards do not have an expiration date nor do we charge service fees that cause a decrement to customer balances. Based on historical redemption rates, a portion of stored value cards is not expected to be redeemed and will be recognized as breakage over time in proportion to stored value card redemptions. The redemption rates are based on historical redemption patterns for each market, including the timing and business channel in which the card was activated, and unclaimed property laws, if applicable.
Breakage is recognized as company-operated stores and licensed stores revenue within the condensed consolidated statement of earnings. For
the quarter and three quarters
ended
June 30, 2019
, we recognized breakage revenue of
$28.9 million
and
$101.2 million
in company-operated store revenues and
$3.5 million
and
$12.8 million
in licensed store revenues, respectively. Prior to fiscal 2019, breakage was recorded using the remote method and recorded in interest income and other, net. There were no material impacts to the financial results for
the quarter and three quarters
ended
June 30, 2019
, respectively, including the change in income statement presentation.
Loyalty Program
Customers in the U.S., Canada, and certain other countries who register their Starbucks Card are automatically enrolled in the Starbucks
®
Rewards program, which is primarily a spend-based loyalty program. They earn loyalty points (“Stars”) with each purchase at participating Starbucks
®
stores and when making purchases with the Starbucks-branded credit and debit cards. After accumulating a certain number of Stars, the customer earns a reward that can be redeemed for free product that, regardless of where the related Stars were earned within that country, will be honored at company-operated stores and certain participating licensed store locations in that same country.
We defer revenue associated with the estimated selling price of Stars earned by Starbucks
®
Rewards members towards free product as each Star is earned and a corresponding liability is established in deferred revenue. This deferral is based on the estimated value of the product for which the reward is expected to be redeemed, net of estimated unredeemed Stars. Stars generally expire after six months.
When a customer redeems an earned reward, we recognize revenue for the redeemed product and reduce the related deferred revenue. The new guidance does not impact the timing or total revenue recognized related to the loyalty program.
Other Revenues
Other revenues primarily include royalty revenues, sales of packaged coffee, tea and a variety of ready-to-drink beverages and single-serve coffee and tea products to customers outside of our company-operated and licensed stores. Sales of these products are generally recognized upon shipment to customers, depending on contract terms.
Beginning in late fiscal 2018, other revenues also include product sales to and licensing revenue from Nestlé related to our Global Coffee Alliance. Product sales to Nestlé are generally recognized when the product is shipped whereas royalty revenues are recognized based on a percentage of reported sales.
The timing and amount of revenue recognized related to other revenues were not impacted by the adoption of new guidance.
Deferred Revenues
In the fourth quarter of fiscal 2018, we licensed the rights to sell and market our products in authorized channels to Nestlé, establishing the Global Coffee Alliance, and received an upfront prepaid royalty. The upfront payment of approximately
$7 billion
was recorded as deferred revenue as we have continuing performance obligations to support the Global Coffee Alliance, including providing Nestlé access to certain intellectual properties and products for future resale. The upfront payment will be recognized as other revenue on a straight-line basis over the estimated economic life of the arrangement of
40
years. At
June 30, 2019
, the current and long-term deferred revenue related to the Nestlé upfront payment was
$174.0 million
and
$6.6 billion
, respectively.
Additionally, deferred revenues include our unredeemed stored value card liability and unredeemed Stars associated with our loyalty program. The beginning balances of fiscal 2019 current and long-term deferred revenue related to our stored value card and loyalty program were
$906.6 million
and
$64.0 million
, respectively. The balance of current and long-term deferred revenue related to our stored value card and loyalty program was
$1.1 billion
and
$73.4 million
, respectively, as of
June 30, 2019
.
Disaggregation of Revenues
Revenues disaggregated by segment, product type and geographic area are disclosed in
Note 15
, Segment Reporting.
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Note 3:
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Acquisitions, Divestitures and Strategic Alliance
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Fiscal 2019
In the third quarter of fiscal 2019, we sold our company-operated retail business in Thailand to Coffee Concepts Thailand, a joint-venture between Maxim's Caterers Limited and F&N Retail Connection Co. Ltd, converting this operation to a fully licensed market. This transaction resulted in a pre-tax gain of
$601.9 million
, which was included in net gains resulting from divestiture of certain operations on our condensed consolidated statements of earnings.
In the second quarter of fiscal 2019, we sold our company-operated retail businesses in France and the Netherlands to Alsea, S.A.B. de C.V. converting these operations to fully licensed markets. These transactions did not have a material impact to our condensed consolidated statements of earnings.
Fiscal 2018
We entered into an agreement on May 6, 2018 to establish the Global Coffee Alliance with Nestlé. On August 26, 2018, we licensed the rights to market, sell and distribute Starbucks consumer packaged goods and foodservice products in authorized channels to Nestlé. We received an upfront payment of approximately
$7 billion
consisting primarily of prepaid royalties which was recorded as current and long-term deferred revenue. See
Note 2
, Revenue Recognition, for the accounting treatment.
On March 23, 2018, we sold our company-operated retail business in Brazil to SouthRock converting these operations to a fully licensed market. This transaction did not have a material impact to our condensed consolidated financial statements.
On
December 31, 2017
, we acquired the remaining
50%
interest of our East China joint venture (“East China”) from President Chain Store (Hong Kong) Holding Ltd. and Kai Yu (BVI) collectively, “Uni-President Group” or “UPG”, for approximately
$1.4 billion
and resulted in a total gain of
$1.4 billion
that is not subject to income tax, and was presented as gain resulting from acquisition of joint venture on our condensed consolidated statements of earnings in fiscal 2018.
Concurrently, with the purchase of our East China joint venture, we sold our
50%
interest in President Starbucks Coffee Taiwan Limited, our joint venture operations in Taiwan, to UPG for approximately
$181.2 million
. The transaction resulted in a pre-tax gain of
$156.6 million
which was included in net gains resulting from divestiture of certain operations on our condensed consolidated statements of earnings.
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Note 4:
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Derivative Instruments
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The following significant accounting policies related to derivative instruments included in our most recent Annual Report on Form 10-K have been restated to reflect the adoption of the new guidance.
We manage our exposure to various risks within our consolidated financial statements according to a market price risk management policy. Under this policy, we may engage in transactions involving various derivative instruments to hedge interest rates, commodity prices and foreign currency-denominated revenue streams, inventory purchases, assets and liabilities and investments in certain foreign operations. In order to manage our exposure to these risks, we use various types of derivative instruments including forward contracts, commodity futures contracts, collars and swaps. Forward contracts and commodity futures contracts are agreements to buy or sell a quantity of a currency or commodity at a predetermined future date and at a predetermined rate or price. A collar is a strategy that uses a combination of a purchased call option and a sold put option with equal premiums to hedge a portion of anticipated cash flows, or to limit possible gains or losses on an underlying asset or liability to a specific range. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. We do not enter into derivative instruments for speculative purposes.
We record all derivatives on our consolidated balance sheets at fair value and typically do not offset derivative assets and liabilities. Excluding interest rate swaps and foreign currency debt, we generally do not enter into derivative instruments with maturities longer than three years. However, we are allowed to net settle transactions with respective counterparties for certain derivative contracts, inclusive of interest rate swaps and foreign currency forwards, with a single, net amount payable by one party to the other. We also enter into collateral security arrangements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. As of
June 30, 2019
and
September 30, 2018
, we received
$5.5 million
and
$5.4 million
, respectively, of cash collateral related to the derivative instruments under collateral security arrangements. As of
June 30, 2019
and
September 30, 2018
, the potential effects of netting arrangements with our derivative contracts, excluding the effects of collateral, would be a reduction to both derivative assets and liabilities of
$4.5 million
and
$5.5 million
, respectively, resulting in net derivative assets of
$19.4 million
and net derivative liabilities of
$21.0 million
as of
June 30, 2019
, and net derivative assets of
$29.4 million
and net derivative liabilities of
$44.5 million
as of
September 30, 2018
.
By using these derivative instruments, we expose ourselves to potential credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. We minimize this credit risk by entering into transactions with carefully
selected, credit-worthy counterparties and distribute contracts among several financial institutions to reduce the concentration of credit risk.
Cash Flow Hedges
For derivative instruments that are designated and qualify as a cash flow hedge, the derivative's gain or loss is reported as a component of other comprehensive income (“OCI”) and recorded in accumulated other comprehensive income (“AOCI”) on our consolidated balance sheets. The gain or loss is subsequently reclassified into net earnings when the hedged exposure affects net earnings, in the same line item as the underlying hedged item on our consolidated statements of earnings.
Cash flow hedges related to anticipated transactions are designated and documented at the inception of each hedge by matching the terms of the contract to the underlying transaction. Cash flows from hedging transactions are classified in the same categories as the cash flows from the respective hedged items. For de-designated cash flow hedges in which the transactions are no longer likely to occur, the related accumulated derivative gains or losses are recognized in interest income and other, net or interest expense on our consolidated statements of earnings based on the nature of the underlying transaction.
Net Investment Hedges
For derivative instruments that are designated and qualify as a net investment hedge, the derivative's, or qualifying non-derivative instrument’s, gain or loss is reported as a component of OCI and recorded in AOCI. The gain or loss will be subsequently reclassified into net earnings when the hedged net investment is either sold or substantially liquidated.
Fair Value Hedges
For derivative instruments that are designated and qualify as a fair value hedge, the changes in fair value of the derivative instrument and the offsetting changes in fair value of the underlying hedged item due to changes in the hedged risk are recorded in interest income and other, net or interest expense on our consolidated statements of earnings.
Derivatives Not Designated As Hedging Instruments
We also enter into certain foreign currency forward contracts, commodity futures contracts, collars and swaps that are not designated as hedging instruments for accounting purposes. The changes in the fair values of these contracts are immediately recognized in interest income and other, net on our consolidated statements of earnings.
Normal Purchase Normal Sale
We enter into fixed-price and price-to-be-fixed green coffee purchase commitments, which are described further in
Note 6
, Inventories. For both fixed-price and price-to-be-fixed purchase commitments, we expect to take delivery of green coffee and to utilize the coffee in a reasonable period of time in the ordinary course of business. Since these types of purchase commitments qualify for the normal purchase normal sale exemption, they are not recorded as derivative instruments on our consolidated balance sheets.
Interest Rates
From time to time, we enter into designated cash flow hedges to manage the variability in cash flows due to changes in benchmark interest rates. We enter into interest rate swap agreements and treasury locks, which are synthetic forward sales of U.S. treasury securities settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. These agreements are cash settled at the time of the pricing of the related debt. Each derivative agreement's gain or loss is recorded in AOCI and is subsequently reclassified to interest expense over the life of the related debt.
To hedge the exposure to changes in the fair value of our fixed-rate debt, we enter into interest rate swap agreements, which are designated as fair value hedges. The changes in fair values of these derivative instruments and the offsetting changes in fair values of the underlying hedged debt due to changes in the relevant benchmark interest rates are recorded in interest expense. Refer to
Note 9
, Debt, for additional information on our long-term debt.
Foreign Currency
To reduce cash flow volatility from foreign currency fluctuations, we enter into forward and swap contracts to hedge portions of cash flows of anticipated intercompany royalty payments, inventory purchases, and intercompany borrowing and lending activities. The resulting gains and losses from these derivatives are recorded in AOCI and subsequently reclassified to revenue, cost of sales including occupancy costs, or interest income and other, net, respectively, when the hedged exposures affect net earnings.
From time to time, we enter into forward contracts or use foreign currency-denominated debt to hedge the currency exposure of our net investments in certain international operations. The resulting gains and losses from these derivatives are recorded in
AOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.
Foreign currency forward and swap contracts not designated as hedging instruments are used to mitigate the foreign exchange risk of certain other balance sheet items. Gains and losses from these derivatives are largely offset by the financial impact of translating foreign currency-denominated payables and receivables; these gains and losses are recorded in interest income and other, net.
Commodities
Depending on market conditions, we may enter into coffee forward contracts, futures contracts, and collars to hedge a portion of anticipated cash flows under our price-to-be-fixed green coffee contracts, which are described further in
Note 6
, Inventories. The resulting gains and losses are recorded in AOCI and are subsequently reclassified to cost of sales including occupancy costs when the hedged exposure affects net earnings.
To mitigate the price uncertainty of a portion of our future purchases, primarily of dairy products, diesel fuel and other commodities, we enter into swap contracts, futures and collars that are not designated as hedging instruments. The resulting gains and losses are recorded in interest income and other, net to help offset price fluctuations on our beverage, food, packaging and transportation costs, which are included in cost of sales including occupancy costs on our consolidated statements of earnings.
Gains and losses on derivative contracts and foreign currency-denominated debt designated as hedging instruments included in AOCI and expected to be reclassified into earnings within 12 months, net of tax (
in millions
):
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Net Gains/(Losses)
Included in AOCI
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Net Gains/(Losses) Expected to be Reclassified from AOCI into Earnings within 12 Months
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Outstanding Contract/Debt Remaining Maturity
(Months)
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Jun 30,
2019
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Sep 30,
2018
|
|
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Cash Flow Hedges:
|
|
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|
|
|
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Interest rates
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$
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3.0
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$
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24.7
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$
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2.4
|
|
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0
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Cross-currency swaps
|
(3.1
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)
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|
(12.6
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)
|
|
—
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|
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65
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Foreign currency - other
|
6.2
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5.8
|
|
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3.6
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36
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Coffee
|
—
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|
|
(0.2
|
)
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—
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|
30
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Net Investment Hedges:
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Foreign currency
|
16.0
|
|
|
16.0
|
|
|
—
|
|
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0
|
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Foreign currency debt
|
(26.3
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)
|
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3.6
|
|
|
—
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57
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Pretax gains and losses on derivative contracts and foreign currency-denominated long-term debt designated as hedging instruments recognized in OCI and reclassifications from AOCI to earnings (
in millions
):
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Quarter Ended
|
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Location of gain/(loss)
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Gains/(Losses)
Recognized in
OCI Before Reclassifications
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Gains/(Losses) Reclassified from
AOCI to Earnings
|
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|
Jun 30,
2019
|
|
Jul 1,
2018
|
|
Jun 30,
2019
|
|
Jul 1,
2018
|
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Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
|
Interest rates
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Interest expense
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$
|
5.3
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|
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$
|
4.7
|
|
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$
|
1.1
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$
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1.2
|
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Cross-currency swaps
|
Interest expense
|
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(5.8
|
)
|
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19.7
|
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|
0.1
|
|
|
0.1
|
|
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Interest income and other, net
|
|
|
|
(9.9
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)
|
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18.4
|
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|
Foreign currency - other
|
Licensed stores revenues
|
|
(2.7
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)
|
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21.7
|
|
|
2.2
|
|
|
0.5
|
|
|
Cost of sales including occupancy costs
|
|
|
|
1.4
|
|
|
(1.3
|
)
|
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Coffee
|
Cost of sales including occupancy costs
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.5
|
)
|
|
Net Investment Hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency debt
|
|
|
(21.1
|
)
|
|
32.4
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended
|
|
|
Location of gain/(loss)
|
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Gains/(Losses)
Recognized in
OCI Before Reclassifications
|
|
Gains/(Losses) Reclassified from
AOCI to Earnings
|
|
|
|
Jun 30,
2019
|
|
Jul 1,
2018
|
|
Jun 30,
2019
|
|
Jul 1,
2018
|
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
|
Interest rates
|
Interest expense
|
|
$
|
(25.3
|
)
|
|
$
|
1.5
|
|
|
$
|
3.9
|
|
|
$
|
3.6
|
|
|
Cross-currency swaps
|
Interest expense
|
|
(8.4
|
)
|
|
(16.4
|
)
|
|
(0.5
|
)
|
|
0.5
|
|
|
Interest income and other, net
|
|
|
|
(19.7
|
)
|
|
(8.6
|
)
|
|
Foreign currency - other
|
Licensed stores revenues
|
|
9.0
|
|
|
15.6
|
|
|
4.9
|
|
|
(1.2
|
)
|
|
Cost of sales including occupancy costs
|
|
|
|
3.6
|
|
|
(4.5
|
)
|
|
Coffee
|
Cost of sales including occupancy costs
|
|
—
|
|
|
(0.1
|
)
|
|
(0.3
|
)
|
|
(7.3
|
)
|
|
Net Investment Hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
Foreign currency debt
|
|
|
(40.1
|
)
|
|
(11.7
|
)
|
|
—
|
|
|
—
|
|
Pretax gains and losses on non-designated derivatives and designated fair value hedging instruments and the related hedged item recognized in earnings (
in millions
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(Losses) Recognized in Earnings
|
|
|
Location of gain/(loss) recognized in earnings
|
|
Quarter Ended
|
|
Three Quarters Ended
|
|
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
Non-Designated Derivatives:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency - other
|
Interest income and other, net
|
|
$
|
(2.3
|
)
|
|
$
|
(1.3
|
)
|
|
$
|
(9.7
|
)
|
|
$
|
(2.4
|
)
|
|
Dairy
|
Interest income and other, net
|
|
0.3
|
|
|
0.1
|
|
|
(1.9
|
)
|
|
(1.9
|
)
|
|
Diesel fuel and other commodities
|
Interest income and other, net
|
|
(0.8
|
)
|
|
2.0
|
|
|
(5.5
|
)
|
|
2.9
|
|
|
Fair Value Hedges:
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
Interest expense
|
|
15.0
|
|
|
(5.1
|
)
|
|
41.2
|
|
|
(28.5
|
)
|
|
Long-term debt (hedged item)
|
Interest expense
|
|
(16.3
|
)
|
|
5.1
|
|
|
(44.8
|
)
|
|
28.5
|
|
Notional amounts of outstanding derivative contracts
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Interest rate swap
|
$
|
750
|
|
|
$
|
750
|
|
|
Cross-currency swaps
|
357
|
|
|
434
|
|
|
Foreign currency - other
|
1,162
|
|
|
914
|
|
|
Coffee
|
2
|
|
|
—
|
|
|
Dairy
|
5
|
|
|
16
|
|
|
Diesel fuel and other commodities
|
24
|
|
|
21
|
|
Fair value of outstanding derivative contracts (
in millions
) including the location of the asset and/or liability on the condensed consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
|
Balance Sheet Location
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Designated Derivative Instruments:
|
|
|
|
|
|
|
Cross-currency swaps
|
Other long-term assets
|
|
$
|
—
|
|
|
$
|
5.8
|
|
|
Foreign currency - other
|
Prepaid expenses and other current assets
|
|
7.3
|
|
|
9.0
|
|
|
Other long-term assets
|
|
5.7
|
|
|
4.6
|
|
|
Interest rate swap
|
Other long-term assets
|
|
4.6
|
|
|
—
|
|
|
Non-designated Derivative Instruments:
|
|
|
|
|
|
|
Foreign currency
|
Prepaid expenses and other current assets
|
|
5.8
|
|
|
13.7
|
|
|
Dairy
|
Prepaid expenses and other current assets
|
|
0.1
|
|
|
0.2
|
|
|
Diesel fuel and other commodities
|
Prepaid expenses and other current assets
|
|
0.3
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
|
Balance Sheet Location
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Designated Derivative Instruments:
|
|
|
|
|
|
|
Cross-currency swaps
|
Other long-term liabilities
|
|
$
|
11.9
|
|
|
$
|
9.3
|
|
|
Foreign currency - other
|
Accrued liabilities
|
|
2.7
|
|
|
3.6
|
|
|
Other long-term liabilities
|
|
1.7
|
|
|
1.7
|
|
|
Interest rate swap
|
Other long-term liabilities
|
|
—
|
|
|
32.5
|
|
|
Non-designated Derivative Instruments:
|
|
|
|
|
|
|
Foreign currency
|
Accrued liabilities
|
|
6.2
|
|
|
2.5
|
|
|
Other long-term liabilities
|
|
0.6
|
|
|
—
|
|
|
Dairy
|
Accrued liabilities
|
|
—
|
|
|
0.1
|
|
|
Diesel fuel and other commodities
|
Accrued liabilities
|
|
2.4
|
|
|
0.3
|
|
The following amounts were recorded on the condensed consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of hedged assets (liabilities)
|
|
Cumulative amount of fair value hedging adjustment included in the carrying amount
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Location on the balance sheet
|
|
|
|
|
|
|
|
|
Long-term debt
|
$
|
755.8
|
|
|
$
|
711.0
|
|
|
$
|
5.8
|
|
|
$
|
(39.0
|
)
|
Additional disclosures related to cash flow gains and losses included in AOCI, as well as subsequent reclassifications to earnings, are included in
Note 10
, Equity.
|
|
|
|
Note 5:
|
Fair Value Measurements
|
Assets and liabilities measured at fair value on a recurring basis
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
Balance at
June 30, 2019
|
|
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
|
$
|
4,763.3
|
|
|
$
|
4,763.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities
|
|
|
|
|
|
|
|
|
Commercial paper
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
Corporate debt securities
|
4.9
|
|
|
—
|
|
|
4.9
|
|
|
—
|
|
|
Mortgage and other asset-backed securities
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
Total available-for-sale debt securities
|
5.3
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
Marketable equity securities
|
66.8
|
|
|
66.8
|
|
|
—
|
|
|
—
|
|
|
Total short-term investments
|
72.1
|
|
|
66.8
|
|
|
5.3
|
|
|
—
|
|
|
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
|
Derivative assets
|
13.5
|
|
|
0.1
|
|
|
13.4
|
|
|
—
|
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
101.6
|
|
|
—
|
|
|
101.6
|
|
|
—
|
|
|
Auction rate securities
|
5.7
|
|
|
—
|
|
|
—
|
|
|
5.7
|
|
|
U.S. government treasury securities
|
106.2
|
|
|
106.2
|
|
|
—
|
|
|
—
|
|
|
State and local government obligations
|
5.0
|
|
|
—
|
|
|
5.0
|
|
|
—
|
|
|
Mortgage and other asset-backed securities
|
4.1
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
Total long-term investments
|
222.6
|
|
|
106.2
|
|
|
110.7
|
|
|
5.7
|
|
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
Derivative assets
|
10.3
|
|
|
—
|
|
|
10.3
|
|
|
—
|
|
|
Total assets
|
$
|
5,081.8
|
|
|
$
|
4,936.4
|
|
|
$
|
139.7
|
|
|
$
|
5.7
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
$
|
11.3
|
|
|
$
|
0.6
|
|
|
$
|
10.7
|
|
|
$
|
—
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
14.2
|
|
|
—
|
|
|
14.2
|
|
|
—
|
|
|
Total liabilities
|
$
|
25.5
|
|
|
$
|
0.6
|
|
|
$
|
24.9
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
Balance at September 30, 2018
|
|
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
|
$
|
8,756.3
|
|
|
$
|
8,756.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities
|
|
|
|
|
|
|
|
|
Commercial paper
|
8.4
|
|
|
—
|
|
|
8.4
|
|
|
—
|
|
|
Corporate debt securities
|
91.8
|
|
|
—
|
|
|
91.8
|
|
|
—
|
|
|
Mortgage and other asset-backed securities
|
6.0
|
|
|
—
|
|
|
6.0
|
|
|
—
|
|
|
Total available-for-sale debt securities
|
106.2
|
|
|
—
|
|
|
106.2
|
|
|
—
|
|
|
Marketable equity securities
|
75.3
|
|
|
75.3
|
|
|
—
|
|
|
—
|
|
|
Total short-term investments
|
181.5
|
|
|
75.3
|
|
|
106.2
|
|
|
—
|
|
|
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
|
Derivative assets
|
24.5
|
|
|
1.2
|
|
|
23.3
|
|
|
—
|
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities
|
|
|
|
|
|
|
|
|
Agency obligations
|
5.9
|
|
|
—
|
|
|
5.9
|
|
|
—
|
|
|
Corporate debt securities
|
114.5
|
|
|
—
|
|
|
114.5
|
|
|
—
|
|
|
Auction rate securities
|
5.9
|
|
|
—
|
|
|
—
|
|
|
5.9
|
|
|
Foreign government obligations
|
3.6
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
U.S. government treasury securities
|
108.1
|
|
|
108.1
|
|
|
—
|
|
|
—
|
|
|
State and local government obligations
|
4.8
|
|
|
—
|
|
|
4.8
|
|
|
—
|
|
|
Mortgage and other asset-backed securities
|
24.9
|
|
|
—
|
|
|
24.9
|
|
|
—
|
|
|
Total long-term investments
|
267.7
|
|
|
108.1
|
|
|
153.7
|
|
|
5.9
|
|
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
Derivative assets
|
10.4
|
|
|
—
|
|
|
10.4
|
|
|
—
|
|
|
Total assets
|
$
|
9,240.4
|
|
|
$
|
8,940.9
|
|
|
$
|
293.6
|
|
|
$
|
5.9
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
$
|
6.5
|
|
|
$
|
0.4
|
|
|
$
|
6.1
|
|
|
$
|
—
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
43.5
|
|
|
—
|
|
|
43.5
|
|
|
—
|
|
|
Total liabilities
|
$
|
50.0
|
|
|
$
|
0.4
|
|
|
$
|
49.6
|
|
|
$
|
—
|
|
There were no material transfers between levels, and there was no significant activity within Level 3 instruments during the periods presented. The fair values of any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.
Gross unrealized holding gains and losses on available-for-sale debt securities and marketable equity securities were not material as of
June 30, 2019
and
September 30, 2018
.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities recognized or disclosed at fair value on the condensed consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, goodwill and other intangible assets and other assets. These assets are measured at fair value if determined to be impaired.
The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at
Note 9
, Debt. There were no material fair value adjustments during the quarter and
three quarters
ended
June 30, 2019
and
July 1, 2018
.
|
|
|
|
Note 6:
|
Inventories
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Coffee:
|
|
|
|
|
Unroasted
|
$
|
696.8
|
|
|
$
|
588.6
|
|
|
Roasted
|
276.4
|
|
|
281.2
|
|
|
Other merchandise held for sale
|
252.2
|
|
|
273.1
|
|
|
Packaging and other supplies
|
291.8
|
|
|
257.6
|
|
|
Total
|
$
|
1,517.2
|
|
|
$
|
1,400.5
|
|
Other merchandise held for sale includes, among other items, serveware, food and tea. Inventory levels vary due to seasonality, commodity market supply and price fluctuations.
As of
June 30, 2019
, we had committed to purchasing green coffee totaling
$925.7 million
under fixed-price contracts and an estimated
$248.8 million
under price-to-be-fixed contracts. As of
June 30, 2019
,
$1.9 million
of our price-to-be-fixed contracts were effectively fixed through the use of futures contracts. 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 most contracts, either Starbucks or the seller has the option to “fix” the base “C” coffee commodity price prior to the delivery date. For other contracts, Starbucks and the seller may agree upon pricing parameters determined by the base “C” coffee commodity price. 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 these purchase commitments is remote.
|
|
|
|
Note 7:
|
Supplemental Balance Sheet Information
(in millions)
:
|
Prepaid Expenses and Other Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Income tax receivable
|
$
|
107.5
|
|
|
$
|
955.4
|
|
|
Other prepaid expenses and current assets
|
484.1
|
|
|
507.4
|
|
|
Total prepaid expenses and current assets
|
$
|
591.6
|
|
|
$
|
1,462.8
|
|
Property, Plant and Equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Land
|
$
|
46.8
|
|
|
$
|
46.8
|
|
|
Buildings
|
679.6
|
|
|
557.3
|
|
|
Leasehold improvements
|
7,702.6
|
|
|
7,372.8
|
|
|
Store equipment
|
2,533.9
|
|
|
2,400.2
|
|
|
Roasting equipment
|
763.0
|
|
|
658.8
|
|
|
Furniture, fixtures and other
|
1,786.5
|
|
|
1,659.3
|
|
|
Work in progress
|
342.6
|
|
|
501.9
|
|
|
Property, plant and equipment, gross
|
13,855.0
|
|
|
13,197.1
|
|
|
Accumulated depreciation
|
(7,667.2
|
)
|
|
(7,268.0
|
)
|
|
Property, plant and equipment, net
|
$
|
6,187.8
|
|
|
$
|
5,929.1
|
|
Accrued Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Accrued compensation and related costs
|
$
|
636.9
|
|
|
$
|
656.8
|
|
|
Accrued occupancy costs
|
189.1
|
|
|
164.2
|
|
|
Accrued income and other taxes
|
1,265.1
|
|
|
286.6
|
|
|
Accrued dividends payable
|
434.3
|
|
|
445.4
|
|
|
Accrued capital and other operating expenditures
|
713.3
|
|
|
745.4
|
|
|
Total accrued liabilities
|
$
|
3,238.7
|
|
|
$
|
2,298.4
|
|
Note 8:
Other Intangible Assets and Goodwill
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Trade names, trademarks and patents
|
$
|
202.8
|
|
|
$
|
215.9
|
|
|
Other indefinite-lived intangible assets
|
—
|
|
|
15.1
|
|
|
Total indefinite-lived intangible assets
|
$
|
202.8
|
|
|
$
|
231.0
|
|
Finite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
(in millions)
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Acquired and reacquired rights
|
$
|
1,102.7
|
|
|
$
|
(496.1
|
)
|
|
$
|
606.6
|
|
|
$
|
1,081.7
|
|
|
$
|
(320.1
|
)
|
|
$
|
761.6
|
|
|
Acquired trade secrets and processes
|
27.6
|
|
|
(18.5
|
)
|
|
9.1
|
|
|
27.6
|
|
|
(16.5
|
)
|
|
11.1
|
|
|
Trade names, trademarks and patents
|
40.1
|
|
|
(22.0
|
)
|
|
18.1
|
|
|
33.0
|
|
|
(19.5
|
)
|
|
13.5
|
|
|
Licensing agreements
|
16.2
|
|
|
(11.6
|
)
|
|
4.6
|
|
|
14.3
|
|
|
(5.1
|
)
|
|
9.2
|
|
|
Other finite-lived intangible assets
|
22.7
|
|
|
(10.7
|
)
|
|
12.0
|
|
|
25.6
|
|
|
(9.8
|
)
|
|
15.8
|
|
|
Total finite-lived intangible assets
|
$
|
1,209.3
|
|
|
$
|
(558.9
|
)
|
|
$
|
650.4
|
|
|
$
|
1,182.2
|
|
|
$
|
(371.0
|
)
|
|
$
|
811.2
|
|
Amortization expense for finite-lived intangible assets was
$55.2 million
and
$178.4 million
for
the quarter and three quarters
ended
June 30, 2019
and
$58.6 million
and
$131.4 million
for
the quarter and three quarters
ended
July 1, 2018
, respectively.
Estimated future amortization expense as of
June 30, 2019
(
in millions
):
|
|
|
|
|
|
|
|
Fiscal Year Ending
|
|
|
2019 (excluding the three quarters ended June 30, 2019)
|
$
|
55.1
|
|
|
2020
|
220.4
|
|
|
2021
|
199.6
|
|
|
2022
|
166.5
|
|
|
2023
|
2.6
|
|
|
Thereafter
|
6.2
|
|
|
Total estimated future amortization expense
|
$
|
650.4
|
|
Goodwill
Changes in the carrying amount of goodwill by reportable operating segment
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
China/Asia Pacific
|
|
EMEA
|
|
Channel
Development
|
|
Corporate and Other
|
|
Total
|
|
Goodwill balance at September 30, 2018
|
$
|
497.4
|
|
|
$
|
2,986.6
|
|
|
$
|
11.3
|
|
|
$
|
34.7
|
|
|
$
|
11.6
|
|
|
$
|
3,541.6
|
|
|
Acquisition/(divestiture)
|
—
|
|
|
(5.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.5
|
)
|
|
Impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10.5
|
)
|
|
(10.5
|
)
|
|
Other
|
(0.4
|
)
|
|
39.6
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
39.1
|
|
|
Goodwill balance at June 30, 2019
|
$
|
497.0
|
|
|
$
|
3,020.7
|
|
|
$
|
11.3
|
|
|
$
|
34.7
|
|
|
$
|
1.0
|
|
|
$
|
3,564.7
|
|
“Other” primarily consists of changes in the goodwill balance resulting from foreign currency translation.
Short-term Debt
Under our commercial paper program, we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of
$3 billion
, with individual maturities that may vary but not exceed
397 days
from the date of issue. Amounts outstanding under the commercial paper program are required to be backstopped by available commitments under our credit facility. The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases. As of
June 30, 2019
, we had
no
borrowings outstanding under the program.
Long-term Debt
Components of long-term debt including the associated interest rates and related estimated fair values by calendar maturity (
in millions, except interest rates)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun 30, 2019
|
|
Sep 30, 2018
|
|
Stated Interest Rate
|
Effective Interest Rate
(1)
|
|
Issuance
|
Amount
|
Estimated Fair Value
|
|
Amount
|
Estimated Fair Value
|
|
|
2018 notes
|
$
|
—
|
|
$
|
—
|
|
|
$
|
350.0
|
|
$
|
350
|
|
|
2.000
|
%
|
2.012
|
%
|
|
2020 notes
|
500.0
|
|
499
|
|
|
500.0
|
|
490
|
|
|
2.200
|
%
|
2.228
|
%
|
|
2021 notes
|
500.0
|
|
499
|
|
|
500.0
|
|
489
|
|
|
2.100
|
%
|
2.293
|
%
|
|
2021 notes
|
250.0
|
|
249
|
|
|
250.0
|
|
244
|
|
|
2.100
|
%
|
1.600
|
%
|
|
2022 notes
|
500.0
|
|
506
|
|
|
500.0
|
|
486
|
|
|
2.700
|
%
|
2.819
|
%
|
|
2023 notes
(2)
|
750.0
|
|
789
|
|
|
750.0
|
|
759
|
|
|
3.850
|
%
|
2.859
|
%
|
|
2023 notes
|
1,000.0
|
|
1,024
|
|
|
1,000.0
|
|
986
|
|
|
3.100
|
%
|
3.107
|
%
|
|
2024 notes
(3)
|
788.5
|
|
791
|
|
|
748.4
|
|
743
|
|
|
0.372
|
%
|
0.462
|
%
|
|
2025 notes
|
1,250.0
|
|
1,334
|
|
|
1,250.0
|
|
1,249
|
|
|
3.800
|
%
|
3.721
|
%
|
|
2026 notes
|
500.0
|
|
494
|
|
|
500.0
|
|
451
|
|
|
2.450
|
%
|
2.511
|
%
|
|
2028 notes
|
600.0
|
|
630
|
|
|
600.0
|
|
576
|
|
|
3.500
|
%
|
3.529
|
%
|
|
2028 notes
|
750.0
|
|
815
|
|
|
750.0
|
|
754
|
|
|
4.000
|
%
|
3.958
|
%
|
|
2029 notes
(4)
|
1,000.0
|
|
1,048
|
|
|
—
|
|
—
|
|
|
3.550
|
%
|
3.871
|
%
|
|
2045 notes
|
350.0
|
|
368
|
|
|
350.0
|
|
330
|
|
|
4.300
|
%
|
4.348
|
%
|
|
2047 notes
|
500.0
|
|
489
|
|
|
500.0
|
|
438
|
|
|
3.750
|
%
|
3.765
|
%
|
|
2048 notes
|
1,000.0
|
|
1,089
|
|
|
1,000.0
|
|
977
|
|
|
4.500
|
%
|
4.504
|
%
|
|
2049 notes
(4)
|
1,000.0
|
|
1,101
|
|
|
—
|
|
—
|
|
|
4.450
|
%
|
4.433
|
%
|
|
Total
|
11,238.5
|
|
11,725
|
|
|
9,548.4
|
|
9,322
|
|
|
|
|
|
Aggregate debt issuance costs and unamortized premium/(discount), net
|
(85.2
|
)
|
|
|
(69.3
|
)
|
|
|
|
|
|
Hedge accounting fair value adjustment
(2)
|
5.8
|
|
|
|
(39.0
|
)
|
|
|
|
|
|
Total
|
$
|
11,159.1
|
|
|
|
$
|
9,440.1
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes the effects of the amortization of any premium or discount and any gain or loss upon settlement of related treasury locks or forward-starting interest rate swaps utilized to hedge the interest rate risk prior to the debt issuance.
|
|
|
|
|
(2)
|
Amount represents the change in fair value due to changes in benchmark interest rates related to our 2023 notes. Refer to
Note 4
, Derivative Instruments, for additional information on our interest rate swap designated as a fair value hedge.
|
|
|
|
|
(3)
|
Japanese yen-denominated long-term debt.
|
The indentures under which the above notes were issued require us to maintain compliance with certain covenants, including limits on future liens and sale and leaseback transactions on certain material properties. As of June 30, 2019, we were in compliance with all applicable covenants.
The following table summarizes our long-term debt maturities as of
June 30, 2019
by fiscal year (
in millions
):
|
|
|
|
|
|
|
|
Fiscal Year
|
Total
|
|
2020
|
$
|
—
|
|
|
2021
|
1,250.0
|
|
|
2022
|
500.0
|
|
|
2023
|
1,000.0
|
|
|
2024
|
1,538.5
|
|
|
Thereafter
|
6,950.0
|
|
|
Total
|
$
|
11,238.5
|
|
Changes in AOCI by component, net of tax
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
Available-for-Sale Debt Securities
|
|
Cash Flow Hedges
|
|
Net Investment Hedges
|
|
Translation Adjustment and Other
|
|
Total
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) in AOCI, beginning of period
|
$
|
0.1
|
|
|
$
|
4.3
|
|
|
$
|
5.5
|
|
|
$
|
(281.4
|
)
|
|
$
|
(271.5
|
)
|
|
Net gains/(losses) recognized in OCI before reclassifications
|
2.9
|
|
|
(2.6
|
)
|
|
(15.8
|
)
|
|
(64.9
|
)
|
|
(80.4
|
)
|
|
Net (gains)/losses reclassified from AOCI to earnings
|
0.2
|
|
|
4.4
|
|
|
—
|
|
|
(1.7
|
)
|
|
2.9
|
|
|
Other comprehensive income/(loss) attributable to Starbucks
|
3.1
|
|
|
1.8
|
|
|
(15.8
|
)
|
|
(66.6
|
)
|
|
(77.5
|
)
|
|
Net gains/(losses) in AOCI, end of period
|
$
|
3.2
|
|
|
$
|
6.1
|
|
|
$
|
(10.3
|
)
|
|
$
|
(348.0
|
)
|
|
$
|
(349.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2018
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) in AOCI, beginning of period
|
$
|
(5.0
|
)
|
|
$
|
(10.7
|
)
|
|
$
|
(19.1
|
)
|
|
$
|
67.7
|
|
|
$
|
32.9
|
|
|
Net gains/(losses) recognized in OCI before reclassifications
|
(0.4
|
)
|
|
35.6
|
|
|
24.1
|
|
|
(280.6
|
)
|
|
(221.3
|
)
|
|
Net (gains)/losses reclassified from AOCI to earnings
|
0.6
|
|
|
(14.9
|
)
|
|
—
|
|
|
—
|
|
|
(14.3
|
)
|
|
Other comprehensive income/(loss) attributable to Starbucks
|
0.2
|
|
|
20.7
|
|
|
24.1
|
|
|
(280.6
|
)
|
|
(235.6
|
)
|
|
Net gains/(losses) in AOCI, end of period
|
$
|
(4.8
|
)
|
|
$
|
10.0
|
|
|
$
|
5.0
|
|
|
$
|
(212.9
|
)
|
|
$
|
(202.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended
|
Available-for-Sale Debt Securities
|
|
Cash Flow Hedges
|
|
Net Investment Hedges
|
|
Translation Adjustment and Other
|
|
Total
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) in AOCI, beginning of period
|
$
|
(4.9
|
)
|
|
$
|
17.7
|
|
|
$
|
19.6
|
|
|
$
|
(362.7
|
)
|
|
$
|
(330.3
|
)
|
|
Net gains/(losses) recognized in OCI before reclassifications
|
7.5
|
|
|
(18.8
|
)
|
|
(29.9
|
)
|
|
16.4
|
|
|
(24.8
|
)
|
|
Net (gains)/losses reclassified from AOCI to earnings
|
0.6
|
|
|
7.2
|
|
|
—
|
|
|
(1.7
|
)
|
|
6.1
|
|
|
Other comprehensive income/(loss) attributable to Starbucks
|
8.1
|
|
|
(11.6
|
)
|
|
(29.9
|
)
|
|
14.7
|
|
|
(18.7
|
)
|
|
Net gains/(losses) in AOCI, end of period
|
$
|
3.2
|
|
|
$
|
6.1
|
|
|
$
|
(10.3
|
)
|
|
$
|
(348.0
|
)
|
|
$
|
(349.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2018
|
|
|
|
|
|
|
|
|
|
|
Net gains/(losses) in AOCI, beginning of period
|
$
|
(2.5
|
)
|
|
$
|
(4.1
|
)
|
|
$
|
14.0
|
|
|
$
|
(163.0
|
)
|
|
$
|
(155.6
|
)
|
|
Net gains/(losses) recognized in OCI before reclassifications
|
(4.7
|
)
|
|
(0.6
|
)
|
|
(9.0
|
)
|
|
(66.8
|
)
|
|
(81.1
|
)
|
|
Net (gains)/losses reclassified from AOCI to earnings
|
2.4
|
|
|
14.7
|
|
|
—
|
|
|
16.9
|
|
|
34.0
|
|
|
Other comprehensive income/(loss) attributable to Starbucks
|
(2.3
|
)
|
|
14.1
|
|
|
(9.0
|
)
|
|
(49.9
|
)
|
|
(47.1
|
)
|
|
Net gains/(losses) in AOCI, end of period
|
$
|
(4.8
|
)
|
|
$
|
10.0
|
|
|
$
|
5.0
|
|
|
$
|
(212.9
|
)
|
|
$
|
(202.7
|
)
|
Impact of reclassifications from AOCI on the consolidated statements of earnings
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
AOCI
Components
|
|
Amounts Reclassified from AOCI
|
|
Affected Line Item in
the Statements of Earnings
|
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
|
Gains/(losses) on available-for-sale debt securities
|
|
$
|
0.2
|
|
|
$
|
(0.9
|
)
|
|
Interest income and other, net
|
|
Gains/(losses) on cash flow hedges
|
|
(5.1
|
)
|
|
18.4
|
|
|
Please refer to
Note 4
, Derivative Instruments for additional information.
|
|
Translation adjustment
|
|
|
|
|
|
|
|
Thailand
|
|
1.7
|
|
|
—
|
|
|
Net gain resulting from divestiture of certain operations
|
|
|
|
(3.2
|
)
|
|
17.5
|
|
|
Total before tax
|
|
|
|
0.3
|
|
|
(3.2
|
)
|
|
Tax (expense)/benefit
|
|
|
|
$
|
(2.9
|
)
|
|
$
|
14.3
|
|
|
Net of tax
|
|
Three Quarters Ended
|
|
|
|
|
|
|
|
AOCI
Components
|
|
Amounts Reclassified from AOCI
|
|
Affected Line Item in
the Statements of Earnings
|
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
|
Gains/(losses) on available-for-sale debt securities
|
|
$
|
0.9
|
|
|
$
|
(3.3
|
)
|
|
Interest income and other, net
|
|
Gains/(losses) on cash flow hedges
|
|
(8.1
|
)
|
|
(17.5
|
)
|
|
Please refer to
Note 4
, Derivative Instruments for additional information.
|
|
Translation adjustment
|
|
|
|
|
|
|
|
Brazil
|
|
—
|
|
|
(24.1
|
)
|
|
Net gain resulting from divestiture of certain operations
|
|
East China joint venture
|
|
—
|
|
|
7.2
|
|
|
Gain resulting from acquisition of joint venture
|
|
Taiwan joint venture
|
|
—
|
|
|
1.4
|
|
|
Net gain resulting from divestiture of certain operations
|
|
Thailand
|
|
1.7
|
|
|
—
|
|
|
Net gain resulting from divestiture of certain operations
|
|
Other
|
|
—
|
|
|
(1.7
|
)
|
|
Interest income and other, net
|
|
|
|
(5.5
|
)
|
|
(38.0
|
)
|
|
Total before tax
|
|
|
|
(0.6
|
)
|
|
4.0
|
|
|
Tax (expense)/benefit
|
|
|
|
$
|
(6.1
|
)
|
|
$
|
(34.0
|
)
|
|
Net of tax
|
In addition to
2.4 billion
shares of authorized common stock with
$0.001
par value per share, the Company has authorized
7.5 million
shares of preferred stock,
none
of which was outstanding as of
June 30, 2019
.
In September 2018, we entered into accelerated share repurchase agreements (“ASR agreements”) with third-party financial institutions totaling
$5.0 billion
, effective October 1, 2018. We made a
$5.0 billion
upfront payment to the financial institutions and received an initial delivery of
72.0 million
shares. In
March 2019
, we received an additional
4.9 million
shares upon the completion of the program based on a volume-weighted average share price (less discount) of
$65.03
.
In March 2019, we entered into ASR agreements with third-party financial institutions totaling
$2.0 billion
, effective March 22, 2019. We made a
$2.0 billion
upfront payment to the financial institutions and received an initial delivery of
22.2 million
shares. In
June 2019
, we received an additional
3.9 million
shares upon the completion of the program based on a volume-weighted average share price (less discount) of
$76.50
.
Outside of the ASR agreements noted above, we repurchased
13.1 million
shares of common stock for
$954.3 million
on the open market during the
three quarters
ended
June 30, 2019
. In connection with the ASR agreements and other open market transactions, we repurchased
116.1 million
shares of common stock at a total cost of
$8.0 billion
for the
three quarters
ended
June 30, 2019
. During the same period of fiscal 2018, we repurchased
73.0 million
shares at a total cost of
$4.1 billion
. In the first quarter 2019, we announced that our Board of Directors approved an increase of
120 million
shares to our ongoing share repurchase program. As of
June 30, 2019
,
52.7 million
shares remained available for repurchase under current authorizations.
During the
third
quarter of fiscal
2019
, our Board of Directors declared a quarterly cash dividend to shareholders of
$0.36
per share to be paid on
August 23, 2019
to shareholders of record as of the close of business on
August 8, 2019
.
|
|
|
|
Note 11:
|
Employee Stock Plans
|
As of
June 30, 2019
, there were
51.9 million
shares of common stock available for issuance pursuant to future equity-based compensation awards and
12.4 million
shares available for issuance under our employee stock purchase plan.
Stock-based compensation expense recognized in the consolidated statements of earnings
(in millions)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
Options
|
$
|
2.4
|
|
|
$
|
2.0
|
|
|
$
|
17.9
|
|
|
$
|
23.2
|
|
|
Restricted Stock Units (“RSUs”)
|
60.9
|
|
|
66.4
|
|
|
237.5
|
|
|
161.7
|
|
|
Total stock-based compensation expense
|
$
|
63.3
|
|
|
$
|
68.4
|
|
|
$
|
255.4
|
|
|
$
|
184.9
|
|
Stock option and RSU transactions from
September 30, 2018
through
June 30, 2019
(
in millions
):
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
RSUs
|
|
Options outstanding/Nonvested RSUs, September 30, 2018
|
27.3
|
|
|
11.2
|
|
|
Granted
|
0.5
|
|
|
4.5
|
|
|
Options exercised/RSUs vested
|
(10.2
|
)
|
|
(4.4
|
)
|
|
Forfeited/expired
|
(0.9
|
)
|
|
(1.9
|
)
|
|
Options outstanding/Nonvested RSUs, June 30, 2019
|
16.7
|
|
|
9.4
|
|
|
Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of June 30, 2019
|
$
|
6.4
|
|
|
$
|
215.2
|
|
Our interim tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. We recognize the effects of tax legislation in the period in which the law is enacted. Our deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse.
On
December 22, 2017
, the President of the United States signed and enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Act. Except for certain provisions, the Tax Act is effective for tax years beginning on or after
January 1, 2018
. The tax rate for fiscal 2019 and future years was reduced to
21%
from our blended
24.5%
in fiscal 2018. In the first quarter of fiscal 2019 the measurement period related to the Tax Act concluded, which resulted in immaterial adjustments to our provisional estimates.
In the first quarter of fiscal 2019, we revised our indefinite reinvestment assertions for prior years' earnings from certain foreign subsidiaries. This change did not have a material impact to our financial results. In foreign subsidiaries in which we are partially indefinitely reinvested, the gross taxable temporary difference between the accounting basis and tax basis was approximately
$1.3 billion
at December 30, 2018, for which there could be up to approximately
$300 million
of unrecognized tax liability.
During the third quarter of fiscal 2019, we sold our company-operated retail business in Thailand. The effective income tax rate on this transaction was approximately
13%
, which contributed to the reduction of our estimated annual effective tax rate.
While the Tax Act provides for a modified territorial tax system, global intangible low-taxed income (“GILTI”) provisions are applied providing an incremental tax on foreign income. We have made an accounting policy election to treat taxes due under the GILTI provision as a current period expense.
|
|
|
|
Note 13:
|
Earnings per Share
|
Calculation of net earnings per common share (“EPS”) — basic and diluted (
in millions, except EPS
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
Jun 30, 2019
|
|
Jul 1, 2018
|
|
Net earnings attributable to Starbucks
|
$
|
1,372.8
|
|
|
$
|
852.5
|
|
|
$
|
2,796.4
|
|
|
$
|
3,762.8
|
|
|
Weighted average common shares outstanding (for basic calculation)
|
1,211.0
|
|
|
1,377.1
|
|
|
1,230.8
|
|
|
1,397.7
|
|
|
Dilutive effect of outstanding common stock options and RSUs
|
12.0
|
|
|
11.4
|
|
|
11.6
|
|
|
12.2
|
|
|
Weighted average common and common equivalent shares outstanding (for diluted calculation)
|
1,223.0
|
|
|
1,388.5
|
|
|
1,242.4
|
|
|
1,409.9
|
|
|
EPS — basic
|
$
|
1.13
|
|
|
$
|
0.62
|
|
|
$
|
2.27
|
|
|
$
|
2.69
|
|
|
EPS — diluted
|
$
|
1.12
|
|
|
$
|
0.61
|
|
|
$
|
2.25
|
|
|
$
|
2.67
|
|
Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and nonvested) and unvested RSUs, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money stock options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. As of
June 30, 2019
, we had
no
out-of-the-money stock options, compared to
7.9 million
as of
July 1, 2018
.
|
|
|
|
Note 14:
|
Commitments and Contingencies
|
Legal Proceedings
On April 13, 2010, an organization named Council for Education and Research on Toxics (“Plaintiff”) filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and certain other defendants who manufacture, package, distribute or sell brewed coffee. The lawsuit is
Council for Education and Research on Toxics v. Starbucks Corporation, et al
. On May 9, 2011, the Plaintiff filed an additional lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company and additional defendants who manufacture, package, distribute or sell packaged coffee. The lawsuit is
Council for Education and Research on Toxics v. Brad Barry LLC, et al
.. Both cases have since been consolidated and now include nearly eighty defendants, which constitute the great majority of the coffee industry in California. Plaintiff alleges that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65. Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of two thousand five hundred dollars per day per violation of Proposition 65. The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.
The Company, as part of a joint defense group organized to defend against the lawsuit, disputes the claims of the Plaintiff. Acrylamide is not added to coffee but is present in all coffee in small amounts (parts per billion) as a byproduct of the coffee bean roasting process. The Company has asserted multiple affirmative defenses. Trial of the first phase of the case commenced on September 8, 2014, and was limited to three affirmative defenses shared by all defendants. On September 1, 2015, the trial court issued a final ruling adverse to defendants on all Phase 1 defenses. Trial of the second phase of the case commenced in the fall of 2017. On May 7, 2018, the trial court issued a ruling adverse to defendants on the Phase 2 defense, the Company's last remaining defense to liability. On June 22, 2018, the California Office of Environmental Health Hazard Assessment (OEHHA) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65. The case was set to proceed to a third phase trial on damages, remedies and attorneys' fees on October 15, 2018. However, on October 12, 2018, the California Court of Appeal granted the defendants request for a stay of the Phase 3 trial.
On June 3, 2019, the Office of Administrative Law (OAL) approved the coffee exemption regulation. The regulation will be effective on October 1, 2019. On June 24, 2019, the Court of Appeal lifted the stay of the litigation. A status conference before the trial judge to discuss the motions that each party intends to bring is scheduled for August 23, 2019. At this stage of the proceedings, Starbucks believes that the likelihood that the Company will ultimately incur a loss in connection with this litigation is less than reasonably possible. Accordingly, no loss contingency was recorded for this matter.
Starbucks is party to various other legal proceedings arising in the ordinary course of business, including certain employment litigation cases that have been certified as class or collective actions, but, except as noted above, is not currently a party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations or cash flows.
|
|
|
|
Note 15:
|
Segment Reporting
|
Segment information is prepared on the same basis that our ceo, who is our chief operating decision maker, manages the segments, evaluates financial results and makes key operating decisions.
Consolidated revenue mix by product type (
in millions
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended
|
|
|
Jun 30, 2019
|
|
Jul 1, 2018
(1)
|
|
Jun 30, 2019
|
|
Jul 1, 2018
(1)
|
|
Beverage
|
$
|
4,122.1
|
|
|
60
|
%
|
|
$
|
3,766.2
|
|
|
60
|
%
|
|
$
|
11,814.2
|
|
|
60
|
%
|
|
$
|
10,705.2
|
|
|
58
|
%
|
|
Food
|
1,220.3
|
|
|
18
|
%
|
|
1,132.6
|
|
|
18
|
%
|
|
3,566.1
|
|
|
18
|
%
|
|
3,242.8
|
|
|
18
|
%
|
|
Other
(2)
|
1,480.6
|
|
|
22
|
%
|
|
1,411.5
|
|
|
22
|
%
|
|
4,381.3
|
|
|
22
|
%
|
|
4,467.9
|
|
|
24
|
%
|
|
Total
|
$
|
6,823.0
|
|
|
100
|
%
|
|
$
|
6,310.3
|
|
|
100
|
%
|
|
$
|
19,761.6
|
|
|
100
|
%
|
|
$
|
18,415.9
|
|
|
100
|
%
|
(1)
Prior period amounts have not been restated for the revenue recognition adoption and continue to be reported under accounting standards in effect for that period.
(2)
“Other” primarily consists of packaged and single-serve coffees and teas, royalty and licensing revenues, beverage-related ingredients, serveware, and ready-to-drink beverages, among other items.
The table below presents financial information for our reportable operating segments and Corporate and Other segment
(in millions)
:
Quarter Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
China/
Asia Pacific
|
|
EMEA
|
|
Channel
Development
|
|
Corporate and Other
|
|
Total
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
$
|
4,671.8
|
|
|
$
|
1,336.9
|
|
|
$
|
231.7
|
|
|
$
|
533.3
|
|
|
$
|
49.3
|
|
|
$
|
6,823.0
|
|
|
Depreciation and amortization expenses
|
173.2
|
|
|
118.9
|
|
|
5.4
|
|
|
0.2
|
|
|
45.4
|
|
|
343.1
|
|
|
Income from equity investees
|
—
|
|
|
27.2
|
|
|
—
|
|
|
48.8
|
|
|
—
|
|
|
76.0
|
|
|
Operating income/(loss)
|
1,067.1
|
|
|
269.8
|
|
|
16.6
|
|
|
181.9
|
|
|
(414.1
|
)
|
|
1,121.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
(1)
|
$
|
4,224.0
|
|
|
$
|
1,229.0
|
|
|
$
|
261.7
|
|
|
$
|
567.4
|
|
|
$
|
28.2
|
|
|
$
|
6,310.3
|
|
|
Depreciation and amortization expenses
|
159.3
|
|
|
120.7
|
|
|
8.0
|
|
|
0.2
|
|
|
41.8
|
|
|
330.0
|
|
|
Income from equity investees
|
—
|
|
|
23.5
|
|
|
—
|
|
|
47.9
|
|
|
—
|
|
|
71.4
|
|
|
Operating income/(loss)
|
906.8
|
|
|
234.1
|
|
|
29.2
|
|
|
232.8
|
|
|
(364.7
|
)
|
|
1,038.2
|
|
(1)
Prior period amounts have not been restated for the revenue recognition adoption and continue to be reported under the accounting standards in effect for that period.
Three Quarters Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
China/
Asia Pacific
|
|
EMEA
|
|
Channel
Development
|
|
Corporate and Other
|
|
Total
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
$
|
13,583.8
|
|
|
$
|
3,853.4
|
|
|
$
|
725.6
|
|
|
$
|
1,484.5
|
|
|
$
|
114.3
|
|
|
$
|
19,761.6
|
|
|
Depreciation and amortization expenses
|
509.6
|
|
|
357.2
|
|
|
20.1
|
|
|
12.6
|
|
|
133.0
|
|
|
1,032.5
|
|
|
Income from equity investees
|
—
|
|
|
75.7
|
|
|
—
|
|
|
130.4
|
|
|
—
|
|
|
206.1
|
|
|
Operating income/(loss)
|
2,978.0
|
|
|
722.9
|
|
|
40.8
|
|
|
506.6
|
|
|
(1,253.7
|
)
|
|
2,994.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
(1)
|
$
|
12,478.0
|
|
|
$
|
3,259.1
|
|
|
$
|
780.8
|
|
|
$
|
1,758.0
|
|
|
$
|
140.0
|
|
|
$
|
18,415.9
|
|
|
Depreciation and amortization expenses
|
477.7
|
|
|
296.0
|
|
|
23.5
|
|
|
1.2
|
|
|
122.0
|
|
|
920.4
|
|
|
Income from equity investees
|
—
|
|
|
91.0
|
|
|
—
|
|
|
122.5
|
|
|
—
|
|
|
213.5
|
|
|
Operating income/(loss)
|
2,685.9
|
|
|
635.4
|
|
|
50.6
|
|
|
736.2
|
|
|
(1,181.2
|
)
|
|
2,926.9
|
|
(1)
Prior period amounts have not been restated for the revenue recognition adoption and continue to be reported under the accounting standards in effect for that period.
Lease exit costs associated with our restructuring efforts, primarily related to the closure of Teavana
TM/MC
retail stores and certain Starbucks
®
company-operated stores, are recognized concurrently with actual store closures. These expenses are primarily recorded within Corporate and Other and Americas. Total lease exit costs are expected to be approximately
$195.1 million
of which
$18.5 million
and
$47.5 million
were recorded within restructuring and impairments on the consolidated statement of earnings in
the quarter and three quarters
ended
June 30, 2019
, respectively. In fiscal year 2018,
$1.5 million
and
$119.0 million
of lease exit costs were recorded within restructuring and impairments in
the quarter and three quarters
ended
July 1, 2018
, respectively. Previous lease exit costs recorded within restructuring expenses for fiscal 2018 and 2017 totaled
$135.0 million
.