Starbucks Posts Strong Fourth Quarter and Fiscal 2009 Results
SEATTLE, Nov 05, 2009 (BUSINESS WIRE) --
Company: Starbucks Corp. (SBUX)
--Company Reports Improving Comparable Store Sales Trends
--Increases FY10 Earnings Outlook
--Fiscal Fourth Quarter 2009 Highlights:
--Comparable store sales trends improved in U.S. and International segments on both sequential quarter and year-over-year basis.
--Consolidated same store sales improved to negative 1% from negative 5% in the previous quarter.
--Operating margin improved 760 basis points to 8.2%.
--Non-GAAP operating margin improved 570 basis points to 10.4%.
--EPS of $0.20 compared to $0.01 in Q408
--Non-GAAP EPS increased to $0.24, a 140% increase from $0.10 in the prior year period.
--Full Fiscal Year 2009 Highlights:
--Cost savings initiatives delivered full-year savings of approximately $580 million, exceeding target by $30 million.
--Operating margin improved 80 basis points to 5.7%.
--Non-GAAP operating margin improved 110 basis points to 9.2%.
--EPS increased 21% to $0.52 from $0.43 in the prior year; Non-GAAP EPS increased 13% to $0.80 from $0.71 in the prior year.
--Operating cash flow totaled $1.4 billion and free cash flow exceeded $900 million.
Starbucks Corporation (NASDAQ:SBUX) today reported financial results for its fourth quarter and fiscal year ended September 27, 2009 and increased its FY10 earnings outlook based on improving same store sales trends and the increasing impact of its cost savings efforts.
"Starbucks strong performance in Q4 and fiscal 2009 overall is the result of our successful efforts to improve our customer and partner experiences, the initiatives and innovations we have introduced over the past 18 months and the significant, permanent changes we have made to our cost structure," said Howard Schultz, chairman, president and ceo. "We are seeing broad-based improvement across our global business, and are cautiously optimistic about the upcoming holiday period," added Schultz.
"Improving top line trends, coupled with a disciplined operational focus in both our stores and our support organization, position us well for long-term, profitable growth," commented Troy Alstead, executive vice president and cfo. "As a result, we are increasing our non-GAAP EPS outlook for fiscal year 2010 to a range of 15% to 20% growth over fiscal 2009."
13 Weeks Ended 52 Weeks Ended
27-Sep-09 28-Sep-08 Change 27-Sep-09 28-Sep-08 Change
GAAP EPS $ 0.20 $ 0.01 1,900% $ 0.52 $ 0.43 21%
Adjustments(1) $ 0.04 $ 0.09 -56% $ 0.28 $ 0.28 $ -
Non-GAAP EPS $ 0.24 $ 0.10 140% $ 0.80 $ 0.71 13%
(1) Adjustments include restructuring charges in 2008 and 2009, plus other transformation charges in 2008. See the Reconciliation of Selected GAAP Measures to Non-GAAP Measures at the end of this document for further detail.
Fourth Quarter Fiscal 2009
Summary
13 Weeks Ended
27-Sep-09 28-Sep-08 Change
Revenues (in $ millions) $ 2,422.2 $ 2,515.5 -4%
GAAP Operating Income (in $ millions) $ 199.4 $ 14.2 1,304%
GAAP Operating Margin 8.2% 0.6% 760 bps
Non-GAAP Operating Income (in $ millions) $ 252.6 $ 119.3 112%
Non-GAAP Operating Margin 10.4% 4.7% 570 bps
Consolidated company revenues for Q409 were $2.4 billion, compared to $2.5 billion in Q408. The revenue decline resulted primarily from the impact of foreign currency translation related to the strengthening of the U.S. dollar compared to UK and Canadian currencies, 385 net fewer company-operated stores open in Q409 compared to Q408, and a 1% decline in consolidated comparable store sales.
Non-GAAP Q409 operating income totaled $252.6 million, representing non-GAAP operating margin expansion of 570 basis points to 10.4%. This improvement was driven by cost savings initiatives implemented throughout the organization, culminating in Q409 savings of approximately $210 million. The majority of these savings are the result of in-store operating improvements focused on labor efficiencies and reduced product waste, and lower non-store support costs. These improvements were partially offset by higher general and administrative expenses, related to higher performance-based compensation expenses in the quarter. Results for both years exclude restructuring charges as well as other transformation charges in fiscal 2008.
Restructuring Charges
Restructuring charges of $53.2 million for the quarter were nearly all due to lease exit and other costs associated with the closure of U.S. and International company-operated stores. Starbucks actions to rationalize its global store portfolio included plans to close approximately 800 company-operated stores in the U.S., restructure the company's business in Australia, and close approximately 100 additional International company-operated stores. At the end of fiscal 2009, nearly all of the approximately 800 U.S. stores, 61 stores in Australia and 40 stores in other International markets had been closed. The remaining International store closures are expected to be completed by the end of fiscal 2010, with related lease exit costs expected to be recognized concurrently with the actual closures.
Q4 U.S. Segment Results
13 Weeks Ended
27-Sep-09 28-Sep-08 Change
Revenues (in $ millions) $ 1,720.5 $ 1,790.8 -4%
GAAP Operating Income (in $ millions) $ 160.1 $ 30.4 427%
GAAP Operating Margin 9.3% 1.7% 760 bps
Non-GAAP Operating Income (in $ millions) $ 206.8 $ 79.5 160%
Non-GAAP Operating Margin 12.0% 4.4% 760 bps
NOTE: The U.S. foodservice business, which was previously reported within U.S. specialty revenues in the U.S. segment, is now reported in the CPG segment, as a result of recent internal management realignments within the U.S. and CPG business units.
Net revenues were $1.7 billion in Q409 compared to $1.8 billion in Q408, with the decline due to decreased revenues from fewer company-operated retail stores. U.S. comparable store sales declined 1%, due to a decrease in the number of transactions.
Non-GAAP U.S. operating income for Q409 was $206.8 million compared to $79.5 million for the same period a year ago. Non-GAAP operating margin expanded to 12.0% in Q409 compared to 4.4% in the corresponding period of fiscal 2008. The margin increase was driven by the implementation of initiatives to increase labor efficiency and reduce product waste, as well as lower non-store support costs. Lower dairy commodity costs also contributed to the operating margin improvement.
Q4 International Segment Results
13 Weeks Ended
27-Sep-09 28-Sep-08 Change
Revenues (in $ millions) $ 513.6 $ 533.6 -4%
GAAP Operating Income (in $ millions) $ 39.6 $ 2.6 1,423%
GAAP Operating Margin 7.7% 0.5% 720 bps
Non-GAAP Operating Income (in $ millions) $ 45.2 $ 21.8 107%
Non-GAAP Operating Margin 8.8% 4.1% 470 bps
Net revenues were $513.6 million in Q409 compared to $533.6 million in Q408, with the decline primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollar.
Non-GAAP operating income increased to $45.2 million in Q409 compared to $21.8 million for the same period a year ago, with the related non-GAAP operating margin expanding 470 basis points to 8.8% from 4.1% in Q408. The margin increase was driven by lower cost of sales including occupancy costs primarily related to controlled discretionary spending, and to operational improvements to reduce food and dairy waste.
Q4 Global Consumer Products
Group Segment Results
13 Weeks Ended
27-Sep-09 28-Sep-08 Change
Revenues (in $ millions) $ 188.1 $ 191.1 -2%
GAAP Operating Income (in $ millions) $ 92.8 $ 84.0 10%
GAAP Operating Margin 49.3% 44.0% 530 bps
NOTE: The U.S. foodservice business, which was previously reported within U.S. specialty revenues in the U.S. segment, is now reported in the CPG segment, as a result of recent internal management realignments within the U.S. and CPG business units.
Net revenues were $188.1 million in Q409 compared to $191.1 million in Q408. This decrease was due to lower foodservice revenues caused by continued softness in the hospitality industry, partially offset by higher revenues from packaged coffee.
Operating income for the CPG segment improved to $92.8 million in Q409 from $84.0 million in Q408, reflecting growth of 10%. Operating margin increased 530 basis points to 49.3% of net revenues, with the improvement due primarily to reduced expenses in the U.S. foodservice business and lower marketing expenses compared to Q408, which included the launch of ready-to-drink products in Japan. Higher income from equity investees also contributed to the year-over-year improvement.
Fiscal 2009 - Year in Review
52 Weeks Ended
27-Sep-09 28-Sep-08 Change
Net New Stores -45 1,669 -1,714
Revenues (in $ millions) $ 9,774.6 $ 10,383.0 -6%
GAAP Operating Income (in $ millions) $ 562.0 $ 503.9 12%
GAAP Operating Margin 5.7% 4.9% 80 bps
Non-GAAP Operating Income (in $ millions) $ 894.4 $ 843.3 6%
Non-GAAP Operating Margin 9.2% 8.1% 110 bps
For fiscal 2009, consolidated net revenues decreased 6% to $9.8 billion from $10.4 billion in fiscal 2008, predominantly due to lower U.S. company-operated retail revenues. Company-operated retail revenues in fiscal 2009 declined 7% to $8.2 billion from $8.8 billion in fiscal 2008, primarily due to a 6% decline in comparable store sales, and the effects of a stronger U.S. dollar relative to the British pound and Canadian dollar. The decline in consolidated comparable store sales was driven by a 6% decline in the U.S. segment.
Non-GAAP operating income was $894.4 million and non-GAAP operating margin was 9.2%, an expansion of 110 basis points from the prior year. This improvement was primarily due to operational changes designed to improve labor efficiency and reduce product waste in company-operated stores, and to lower non-store support costs. Cost savings initiatives for the full year delivered approximately $580 million, exceeding the original target by approximately $180 million.
The higher level of actual savings was largely due to earlier than expected results from the initiatives that were put in place over the course of the year.
Liquidity
Starbucks strong operating cash flow of $1.4 billion, combined with lower capital expenditures due to disciplined store growth during the year, resulted in free cash flow of over $900 million for fiscal 2009. The company had no short term debt at the end of the year, and had cash and liquid investments totaling more than $650 million.
Fiscal 2010 Targets
Starbucks has set the following financial and operational targets for fiscal 2010:
-- The company is targeting revenue growth in the low-to-mid single digits, driven by modestly positive comparable store sales, a 53rd fiscal week, and approximately 300 planned net new stores.
-- Starbucks is targeting approximately 100 net new stores in the U.S. and approximately 200 net new stores in International markets. Both the U.S. and International net new additions are expected to be primarily licensed stores.
-- Starbucks outlook on the U.S. operating margin has further improved; the company is now targeting full-year operating margin improvements for both the U.S. segment and the International segment (excluding restructuring charges) of 200 to 250 basis points. The CPG segment margin is expected to remain in its current range of 35% to 40%. The cumulative result of these expected margins is a consolidated non-GAAP operating margin that is anticipated to reach double digits.
-- The company now expects non-GAAP EPS growth in the range of 15% to 20% from FY09 non-GAAP EPS of $0.80, excluding $0.02 to $0.03 of expected restructuring charges, and including approximately $0.02 to $0.03 of additional EPS from the extra week in the fiscal fourth quarter, as fiscal 2010 is a 53-week year for Starbucks.
-- Starbucks expects to see little net impact from commodities, with higher dairy prices being offset by slightly favorable coffee prices.
-- The company is currently expecting an effective tax rate in the range of 34% to 35%.
-- Capital expenditures are expected to be in the range of $500 million to $550 million. Approximately half of this amount will be allocated to renovations and store equipment upgrades, one quarter to systems upgrades, and one quarter to new stores and other capital investments.
-- Starbucks expects cash flow from operations to be approximately $1.4 billion, and free cash flow of approximately $900 million.
Conference Call
Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman, president and ceo, and Troy Alstead, executive vice president and chief financial officer. The call will be broadcast live over the Internet and can be accessed at the company's web site address of http://investor.starbucks.com. A replay of the call will be available via telephone through 9:00 p.m. Pacific Time on Monday, November 9, 2009, by calling 1-800-642-1687, reservation number 61844426. A replay of the call will also be available via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific Time on Friday, December 4, 2009, at the following URL: http://investor.starbucks.com.
The company's consolidated statements of earnings, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications. This information should be reviewed in conjunction with this press release. Please refer to the company's Annual Report on Form 10-K for the fiscal year ended September 28, 2008, and Quarterly Reports on Form 10-Q for fiscal 2009, for additional information.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality arabica coffee in the world. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at www.starbucks.com.
Forward-Looking Statements
This release contains forward-looking statements relating to certain company initiatives, strategies and plans, as well as trends in or expectations regarding, the effects of company initiatives, earnings per share, store openings and closings, cost savings, operating margins, restructuring charges, cash from operations, capital expenditures, free cash flow and the cyclical nature of the business. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to a number of significant risks and uncertainties. Actual future results may differ materially depending on a variety of factors including, but not limited to, coffee, dairy and other raw material prices and availability, successful execution of the company's initiatives, fluctuations in U.S. and international economies and currencies, the impact of competition, the effect of legal proceedings, and other risks detailed in the company filing with the Securities and Exchange Commission, including the "Risk Factors" section of Starbucks Annual Report on Form 10-K for the fiscal year ended September 28, 2008. The company assumes no obligation to update any of these forward-looking statements.
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
13 Weeks Ended 13 Weeks Ended
Sep 27, Sep 28, % Sep 27, Sep 28,
2009 2008 Change 2009 2008
(in millions, except per share data)
As a % of total net revenues
Net revenues:
Company-operated retail $ 2,028.4 $ 2,097.3 (3.3 ) % 83.7 % 83.4 %
Specialty:
Licensing 304.2 311.2 (2.2 ) 12.6 12.4
Foodservice and other 89.6 107.0 (16.3 ) 3.7 4.3
Total specialty 393.8 418.2 (5.8 ) 16.3 16.6
Total net revenues 2,422.2 2,515.5 (3.7 ) 100.0 100.0
Cost of sales including occupancy costs 1,041.2 1,189.5 (12.5 ) 43.0 47.3
Store operating expenses 847.5 932.4 (9.1 ) 35.0 37.1
Other operating expenses 58.6 82.0 (28.5 ) 2.4 3.3
Depreciation and amortization expenses 132.6 138.2 (4.1 ) 5.5 5.5
General and administrative expenses 133.2 96.5 38.0 5.5 3.8
Restructuring charges 53.2 99.2 (46.4 ) 2.2 3.9
Total operating expenses 2,266.3 2,537.8 (10.7 ) 93.6 100.9
Income from equity investees 43.5 36.5 19.2 1.8 1.5
Operating income 199.4 14.2 nm 8.2 0.6
Interest income and other, net 17.9 (2.8 ) nm 0.7 (0.1 )
Interest expense (8.6 ) (12.6 ) nm (0.4 ) (0.5 )
Earnings before income taxes 208.7 (1.2 ) nm 8.6 (0.0 )
Income taxes 58.7 (6.6 ) nm 2.4 (0.3 )
Net earnings $ 150.0 $ 5.4 nm 6.2 % 0.2 %
Net earnings per common share - diluted $ 0.20 $ 0.01 nm %
Weighted avg. shares outstanding - diluted 757.9 741.9
Supplemental Ratios:
Store operating expenses as a percentage of company-operated 41.8 % 44.5 %
retail revenues
Other operating expenses as a percentage of specialty revenues 14.9 % 19.6 %
Effective tax rate 28.1 % nm %
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
52 Weeks Ended 52 Weeks Ended
Sep 27, Sep 28, % Sep 27, Sep 28,
2009 2008 Change 2009 2008
(in millions, except per share data)
As a % of total net revenues
Net revenues:
Company-operated retail $ 8,180.1 $ 8,771.9 (6.7 ) % 83.7 % 84.5 %
Specialty:
Licensing 1,222.3 1,171.6 4.3 12.5 11.3
Foodservice and other 372.2 439.5 (15.3 ) 3.8 4.2
Total specialty 1,594.5 1,611.1 (1.0 ) 16.3 15.5
Total net revenues 9,774.6 10,383.0 (5.9 ) 100.0 100.0
Cost of sales including occupancy costs 4,324.9 4,645.3 (6.9 ) 44.2 44.7
Store operating expenses 3,425.1 3,745.1 (8.5 ) 35.0 36.1
Other operating expenses 264.4 330.1 (19.9 ) 2.7 3.2
Depreciation and amortization expenses 534.7 549.3 (2.7 ) 5.5 5.3
General and administrative expenses 453.0 456.0 (0.7 ) 4.6 4.4
Restructuring charges 332.4 266.9 24.5 3.4 2.6
Total operating expenses 9,334.5 9,992.7 (6.6 ) 95.5 96.2
Income from equity investees 121.9 113.6 7.3 1.2 1.1
Operating income 562.0 503.9 11.5 5.7 4.9
Interest income and other, net 36.3 9.0 nm 0.4 0.1
Interest expense (39.1 ) (53.4 ) nm (0.4 ) (0.5 )
Earnings before income taxes 559.2 459.5 21.7 5.7 4.4
Income taxes 168.4 144.0 16.9 1.7 1.4
Net earnings $ 390.8 $ 315.5 23.9 4.0 % 3.0 %
Net earnings per common share - diluted $ 0.52 $ 0.43 20.9 %
Weighted avg. shares outstanding - diluted 745.9 741.7
Supplemental Ratios:
Store operating expenses as a percentage of company-operated 41.9 % 42.7 %
retail revenues
Other operating expenses as a percentage of specialty revenues 16.6 % 20.5 %
Effective tax rate 30.1 % 31.3 %
Segment Results
The tables below present reportable segment results net of intersegment eliminations (in millions):
United States Sep 27, Sep 28, % Sep 27, Sep 28,
2009 2008 Change 2009 2008
13 Weeks Ended As a % of U.S. total net revenues
Net revenues:
Company-operated retail $ 1,595.0 $ 1,651.5 (3.4 ) % 92.7 % 92.2 %
Specialty:
Licensing 124.7 132.1 (5.6 ) 7.2 7.4
Foodservice and other 0.8 7.2 (88.9 ) 0.0 0.4
Total specialty 125.5 139.3 (9.9 ) 7.3 7.8
Total net revenues 1,720.5 1,790.8 (3.9 ) 100.0 100.0
Cost of sales including occupancy costs 689.8 812.4 (15.1 ) 40.1 45.4
Store operating expenses 690.5 762.1 (9.4 ) 40.1 42.6
Other operating expenses 19.0 28.7 (33.8 ) 1.1 1.6
Depreciation and amortization expenses 92.3 97.6 (5.4 ) 5.4 5.5
General and administrative expenses 22.1 16.0 38.1 1.3 0.9
Restructuring charges 46.7 43.2 8.1 2.7 2.4
Total operating expenses 1,560.4 1,760.0 (11.3 ) 90.7 98.3
Income from equity investees - (0.4 ) nm - (0.0 )
Operating income $ 160.1 $ 30.4 426.6 % 9.3 % 1.7 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated 43.3 % 46.1 %
retail revenues
Other operating expenses as a percentage of specialty revenues 15.1 % 20.6 %
52 Weeks Ended
Net revenues:
Company-operated retail $ 6,572.1 $ 6,997.7 (6.1 ) % 92.5 % 92.9 %
Specialty:
Licensing 528.9 504.2 4.9 7.4 6.7
Foodservice and other 3.6 30.1 (88.0 ) 0.1 0.4
Total specialty 532.5 534.3 (0.3 ) 7.5 7.1
Total net revenues 7,104.6 7,532.0 (5.7 ) 100.0 100.0
Cost of sales including occupancy costs 2,965.7 3,206.3 (7.5 ) 41.7 42.6
Store operating expenses 2,815.1 3,081.0 (8.6 ) 39.6 40.9
Other operating expenses 81.4 111.7 (27.1 ) 1.1 1.5
Depreciation and amortization expenses 378.1 395.4 (4.4 ) 5.3 5.2
General and administrative expenses 86.7 71.2 21.8 1.2 0.9
Restructuring charges 246.3 210.9 16.8 3.5 2.8
Total operating expenses 6,573.3 7,076.5 (7.1 ) 92.5 94.0
Income from equity investees 0.5 (1.3 ) nm 0.0 (0.0 )
Operating income $ 531.8 $ 454.2 17.1 % 7.5 % 6.0 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated 42.8 % 44.0 %
retail revenues
Other operating expenses as a percentage of specialty revenues 15.3 % 20.9 %
International Sep 27, Sep 28, % Sep 27, Sep 28,
2009 2008 Change 2009 2008
13 Weeks Ended As a % of International
total net revenues
Net revenues:
Company-operated retail $ 433.4 $ 445.8 (2.8 ) % 84.4 % 83.5 %
Specialty:
Licensing 67.7 74.1 (8.6 ) 13.2 13.9
Foodservice and other 12.5 13.7 (8.8 ) 2.4 2.6
Total specialty 80.2 87.8 (8.7 ) 15.6 16.5
Total net revenues 513.6 533.6 (3.7 ) 100.0 100.0
Cost of sales including occupancy costs 254.9 278.7 (8.5 ) 49.6 52.2
Store operating expenses 157.0 170.3 (7.8 ) 30.6 31.9
Other operating expenses 16.1 22.4 (28.1 ) 3.1 4.2
Depreciation and amortization expenses 26.9 28.7 (6.3 ) 5.2 5.4
General and administrative expenses 28.6 23.8 20.2 5.6 4.5
Restructuring charges 5.6 19.2 (70.8 ) 1.1 3.6
Total operating expenses 489.1 543.1 (9.9 ) 95.2 101.8
Income from equity investees 15.1 12.1 24.8 2.9 2.3
Operating income $ 39.6 $ 2.6 nm % 7.7 % 0.5 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated 36.2 % 38.2 %
retail revenues
Other operating expenses as a percentage of specialty revenues 20.1 % 25.5 %
52 Weeks Ended
Net revenues:
Company-operated retail $ 1,608.0 $ 1,774.2 (9.4 ) % 83.7 % 84.3 %
Specialty:
Licensing 266.2 274.8 (3.1 ) 13.9 13.1
Foodservice and other 46.2 54.4 (15.1 ) 2.4 2.6
Total specialty 312.4 329.2 (5.1 ) 16.3 15.7
Total net revenues 1,920.4 2,103.4 (8.7 ) 100.0 100.0
Cost of sales including occupancy costs 963.7 1,054.0 (8.6 ) 50.2 50.1
Store operating expenses 610.0 664.1 (8.1 ) 31.8 31.6
Other operating expenses 72.9 88.5 (17.6 ) 3.8 4.2
Depreciation and amortization expenses 102.5 108.8 (5.8 ) 5.3 5.2
General and administrative expenses 105.0 113.0 (7.1 ) 5.5 5.4
Restructuring charges 27.0 19.2 40.6 1.4 0.9
Total operating expenses 1,881.1 2,047.6 (8.1 ) 98.0 97.3
Income from equity investees 53.6 54.2 (1.1 ) 2.8 2.6
Operating income $ 92.9 $ 110.0 (15.5 ) % 4.8 % 5.2 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated 37.9 % 37.4 %
retail revenues
Other operating expenses as a percentage of specialty revenues 23.3 % 26.9 %
Global CPG Sep 27, Sep 28, % Sep 27, Sep 28,
2009 2008 Change 2009 2008
13 Weeks Ended As a % of CPG
total net revenues
Licensing $ 111.8 $ 105.0 6.5 % 59.4 % 54.9 %
Foodservice 76.3 86.1 (11.4 ) 40.6 45.1
Total specialty revenues 188.1 191.1 (1.6 ) 100.0 100.0
Cost of sales 96.5 98.4 (1.9 ) 51.3 51.5
Other operating expenses 23.5 30.9 (23.9 ) 12.5 16.2
Depreciation and amortization expenses 1.3 1.6 (18.8 ) 0.7 0.8
General and administrative expenses 2.4 1.0 nm 1.3 0.5
Total operating expenses 123.7 131.9 (6.2 ) 65.8 69.0
Income from equity investees 28.4 24.8 14.5 15.1 13.0
Operating income $ 92.8 $ 84.0 10.5 % 49.3 % 44.0 %
52 Weeks Ended
Licensing revenues $ 427.2 $ 392.6 8.8 % 57.0 % 52.5 %
Foodservice revenues 322.4 355.0 (9.2 ) 43.0 47.5
Total specialty revenues 749.6 747.6 0.3 100.0 100.0
Cost of sales 395.5 385.0 2.7 52.8 51.5
Other operating expenses 110.1 129.9 (15.2 ) 14.7 17.4
Depreciation and amortization expenses 5.7 6.3 (9.5 ) 0.8 0.8
General and administrative expenses 8.8 7.9 11.4 1.2 1.1
Restructuring charges 1.0 - nm 0.1 -
Total operating expenses 521.1 529.1 (1.5 ) 69.5 70.8
Income from equity investees 67.8 60.7 11.7 9.0 8.1
Operating income $ 296.3 $ 279.2 6.1 % 39.5 % 37.3 %
Unallocated Corporate Sep 27, Sep 28, % Sep 27, Sep 28,
2009 2008 Change 2009 2008
As a % of total net revenues
13 Weeks Ended
Depreciation and amortization expenses $ 12.1 $ 10.3 17.5 % 0.5 % 0.4 %
General and administrative expenses 80.1 55.7 43.8 3.3 2.2
Restructuring charges 0.9 36.8 (97.6 ) 0.0 1.5
Operating loss $ (93.1 ) $ (102.8 ) (9.4 ) % (3.8 ) % (4.1 ) %
52 Weeks Ended
Depreciation and amortization expenses $ 48.4 $ 38.8 24.7 % 0.5 % 0.4 %
General and administrative expenses 252.5 263.9 (4.3 ) 2.6 2.5
Restructuring charges 58.1 36.8 57.9 0.6 0.4
Operating loss $ (359.0 ) $ (339.5 ) 5.7 % (3.7 ) % (3.3 ) %
STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
(unaudited)
Sep 27, 2009 Sep 28, 2008
ASSETS
Current assets:
Cash and cash equivalents $ 599.8 $ 269.8
Short-term investments - available-for-sale securities 21.5 3.0
Short-term investments - trading securities 44.8 49.5
Accounts receivable, net 271.0 329.5
Inventories 664.9 692.8
Prepaid expenses and other current assets 147.2 169.2
Deferred income taxes, net 286.6 234.2
Total current assets 2,035.8 1,748.0
Long-term investments - available-for-sale securities 71.2 71.4
Equity and cost investments 352.3 302.6
Property, plant and equipment, net 2,536.4 2,956.4
Other assets 253.8 261.1
Other intangible assets 68.2 66.6
Goodwill 259.1 266.5
TOTAL ASSETS $ 5,576.8 $ 5,672.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Commercial paper and short-term borrowings $ - $ 713.0
Accounts payable 267.1 324.9
Accrued compensation and related costs 307.5 253.6
Accrued occupancy costs 188.1 136.1
Accrued taxes 127.8 76.1
Insurance reserves 154.3 152.5
Other accrued expenses 147.3 164.4
Deferred revenue 388.7 368.4
Current portion of long-term debt 0.2 0.7
Total current liabilities 1,581.0 2,189.7
Long-term debt 549.3 549.6
Other long-term liabilities 400.8 442.4
Total liabilities 2,531.1 3,181.7
Shareholders' equity:
Common stock ($0.001 par value) - authorized, 1,200.0 shares; 0.7 0.7
issued and outstanding, 742.9 and 735.5 shares, respectively,
(includes 3.4 common stock units in both periods)
Additional paid-in-capital 147.0 -
Other additional paid-in-capital 39.4 39.4
Retained earnings 2,793.2 2,402.4
Accumulated other comprehensive income 65.4 48.4
Total shareholders' equity 3,045.7 2,490.9
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,576.8 $ 5,672.6
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
52 Weeks Ended
Sep 27, 2009 Sep 28, 2008
OPERATING ACTIVITIES:
Net earnings $ 390.8 $ 315.5
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 563.3 604.5
Provision for impairments and asset disposals 224.4 325.0
Deferred income taxes, net (69.6 ) (117.1 )
Equity income of investees (78.4 ) (61.3 )
Distributions of income from equity investees 53.0 52.6
Stock-based compensation 83.2 75.0
Tax benefit from exercise of stock options 2.0 3.8
Excess tax benefit from exercise of stock options (15.9 ) (14.7 )
Other 5.4 (0.1 )
Cash provided/(used) by changes in operating assets and liabilities:
Inventories 28.5 (0.6 )
Accounts payable (53.0 ) (63.9 )
Accrued taxes 57.2 7.3
Deferred revenue 16.3 72.4
Other operating assets 120.5 (11.2 )
Other operating liabilities 61.3 71.5
Net cash provided by operating activities 1,389.0 1,258.7
INVESTING ACTIVITIES:
Purchase of available-for-sale securities (129.2 ) (71.8 )
Maturities and calls of available-for-sale securities 111.0 20.0
Sale of available-for-sale securities 5.0 75.9
Acquisitions, net of cash acquired - (74.2 )
Net purchases of equity, other investments and other assets (4.8 ) (52.0 )
Additions to property, plant and equipment (445.6 ) (984.5 )
Proceeds from sale of property, plant and equipment 42.5 -
Net cash used by investing activities (421.1 ) (1,086.6 )
FINANCING ACTIVITIES:
Proceeds from issuance of commercial paper 20,965.4 65,770.8
Repayments of commercial paper (21,378.5 ) (66,068.0 )
Proceeds from short-term borrowings 1,338.0 528.2
Repayments of short-term borrowings (1,638.0 ) (228.8 )
Proceeds from issuance of common stock 57.3 112.3
Excess tax benefit from exercise of stock options 15.9 14.7
Principal payments on long-term debt (0.7 ) (0.6 )
Repurchase of common stock - (311.4 )
Other (1.6 ) (1.7 )
Net cash used by financing activities (642.2 ) (184.5 )
Effect of exchange rate changes on cash and cash equivalents 4.3 0.9
Net increase/(decrease) in cash and cash equivalents 330.0 (11.5 )
CASH AND CASH EQUIVALENTS:
Beginning of period 269.8 281.3
End of period $ 599.8 $ 269.8
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net repayments of commercial paper and short-term borrowings for the $ (713.1 ) $ 2.2
period
Cash paid during the period for:
Interest, net of capitalized interest $ 39.8 $ 52.7
Income taxes $ 162.0 $ 259.5
Fiscal Fourth Quarter 2009 Store
Data
The company's store data for the periods presented are as follows:
Net stores opened/(closed) during the period
13 Weeks Ended 52 Weeks Ended Stores open as of
Sep 27, Sep 28, Sep 27, Sep 28, Sep 27, Sep 28,
2009 2008 2009 2008 2009 2008
United States:
Company-operated Stores (107) (137 ) (474 ) 445 6,764 7,238
Licensed Stores (31) 134 35 438 4,364 4,329
(138) (3 ) (439 ) 883 11,128 11,567
International:
Company-operated Stores (1) 7 5 89 236 2,068 1,979
Licensed Stores (1) 37 130 305 550 3,439 3,134
44 135 394 786 5,507 5,113
Total (94) 132 (45 ) 1,669 16,635 16,680
(1) International store data has been adjusted for the acquisition of retail store locations in Quebec and Atlantic Canada from former licensees Coffee Vision, Inc. and Coffee Vision Atlantic, Inc., by reclassifying historical information from Licensed Stores to Company-operated Stores.
Fiscal 2009 Store Reconciliation Company-operated new stores U.S. New 121 Closed (595 ) Total company-operated net U.S. (474 ) International New 152 Closed (63 ) Total company-operated net International 89 TOTAL company-operated net new stores (385 ) Licensed new stores U.S. New 286 Closed (251 ) Total licensed net U.S. 35 International New 390 Closed (85 ) Total licensed net International 305 TOTAL licensed net new stores 340 TOTAL CONSOLIDATED NET NEW STORES (45 )
Non-GAAP Disclosure
In addition to the GAAP results provided in this release, the company provides non-GAAP operating income, non-GAAP operating margin, non-GAAP earnings per share (non-GAAP EPS), as well as free cash flow. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP operating income, non-GAAP operating margin and non-GAAP earnings per share (non-GAAP EPS) are operating income, operating margin and diluted net earnings per share, respectively. The GAAP measure most directly comparable to free cash flow is cash flow from operations (or net cash provided by operating activities).
The non-GAAP financial measures provided in this release for fiscal 2009, other than free cash flow, exclude restructuring charges, primarily related to company-operated store closures and the impacts of workforce reductions. The non-GAAP financial measures provided in this release for fiscal 2008 exclude restructuring charges, primarily related to company-operated store closures and the impacts of workforce reductions, and costs related to the company's transformation efforts during fiscal 2008 consisting primarily of charges related to slowing the pace of U.S. store openings and the associated termination of future site commitments, related inventory and store assets. Free cash flow is defined as cash flow from operations less capital expenditures (or net additions to property, plant and equipment). The company's management believes that providing these non-GAAP financial measures better enables investors to understand and evaluate the company's historical and prospective operating performance. More specifically, for historical non-GAAP financial measures other than free cash flow, management excludes each of those items mentioned above because it believes that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of the company's future operating performance or comparisons to the company's past operating performance.
These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of the company's results as reported under GAAP. Other companies may calculate these non-GAAP financial measures differently than the company does, limiting the usefulness of those measures for comparative purposes.
STARBUCKS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(unaudited)
(in millions, except per share data)
13 Weeks Ended 52 Weeks Ended
Sep 27, Sep 28, Sep 27, Sep 28,
2009 2008 2009 2008
Consolidated
Operating income, as reported (GAAP) $ 199.4 $ 14.2 $ 562.0 $ 503.9
Restructuring charges 53.2 99.2 332.4 266.9
Other transformation charges - 5.9 - 72.5
Non-GAAP operating income $ 252.6 $ 119.3 $ 894.4 $ 843.3
Operating margin, as reported (GAAP) 8.2 % 0.6 % 5.7 % 4.9 %
Restructuring charges 2.2 3.9 3.4 2.6
Other transformation charges - 0.2 - 0.6
Non-GAAP operating margin 10.4 % 4.7 % 9.2 % 8.1 %
Net earnings, as reported (GAAP) $ 150.0 $ 5.4 $ 390.8 $ 315.5
Restructuring charges, net of tax 34.1 61.9 207.4 165.4
Other transformation charges, net of tax - 3.7 - 44.9
Non-GAAP net income $ 184.1 $ 71.0 $ 598.2 $ 525.8
Diluted EPS, as reported (GAAP) $ 0.20 $ 0.01 $ 0.52 $ 0.43
Restructuring charges, net of tax 0.04 0.08 0.28 0.22
Other transformation charges, net of tax - 0.01 - 0.06
Non-GAAP Diluted EPS $ 0.24 $ 0.10 $ 0.80 $ 0.71
Fiscal year 2009 free cash flow:
Net cash provided by operating activities $ 1,389.0
Additions to property, plant and equipment (445.6 )
Free cash flow $ 943.4
STARBUCKS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(unaudited)
(in millions, except per share data)
13 Weeks Ended 52 Weeks Ended
Sep 27, Sep 28, Sep 27, Sep 28,
2009 2008 2009 2008
United States
Operating income, as reported (GAAP) $ 160.1 $ 30.4 $ 531.8 $ 454.2
Restructuring charges 46.7 43.2 246.3 210.9
Other transformation charges - 5.9 - 64.8
Non-GAAP operating income $ 206.8 $ 79.5 $ 778.1 $ 729.9
Cost of sales including occupancy costs ratio, as reported (GAAP) 40.1 % 45.4 % 41.7 % 42.6 %
Other transformation charges - (0.1 ) % - (0.1 )
Non-GAAP cost of sales including occupancy costs ratio 40.1 % 45.3 % 41.7 % 42.5 %
Store operating expenses ratio, as reported (GAAP) 40.1 % 42.6 % 39.6 % 40.9 %
Other transformation charges - (0.2 ) - (0.7 )
Non-GAAP store operating expenses ratio 40.1 % 42.4 % 39.6 % 40.2 %
Operating margin, as reported (GAAP) 9.3 % 1.7 % 7.5 % 6.0 %
Restructuring charges 2.7 2.4 3.5 2.8
Other transformation charges - 0.3 - 0.9
Non-GAAP operating margin 12.0 % 4.4 % 11.0 % 9.7 %
International
Operating income, as reported (GAAP) $ 39.6 $ 2.6 $ 92.9 $ 110.0
Restructuring charges 5.6 19.2 27.0 19.2
Other transformation charges - - - 7.9
Non-GAAP operating income $ 45.2 $ 21.8 $ 119.9 $ 137.1
Operating margin, as reported (GAAP) 7.7 % 0.5 % 4.8 % 5.2 %
Restructuring charges 1.1 3.6 1.4 0.9
Other transformation charges - - - 0.4
Non-GAAP operating margin 8.8 % 4.1 % 6.2 % 6.5 %
SOURCE: Starbucks Coffee Company
Starbucks Coffee Company Investor Relations: JoAnn DeGrande, 206-318-7118 investorrelations@starbucks.com or Media: Valerie O'Neil, 206-318-7100 press@starbucks.com
Copyright (C) 2009 BusinessWire. All rights reserved
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Company: Starbucks Corp. (SBUX)
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