<PAGE>
- ----------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ___ to ___
Commission File Number 0-20322
-----------------------------
STARBUCKS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Washington 91-1325671
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2401 Utah Avenue South, Seattle, Washington 98134
(Address of Principal Executive Office, including Zip Code)
(206) 447-1575
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of February 1, 1998, there were 86,577,836 shares of the Registrant's Common
Stock outstanding.
- --------------------------------------------------------------------------------
<PAGE>
STARBUCKS CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements................................. 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk ................................. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 13
Item 6. Exhibits and Reports on Form 8-K..................... 13
Signature..................................................... 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended
December 28, December 29,
1997 1996
(13 Weeks) (13 Weeks)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net revenues $316,952 $239,142
Cost of sales and related occupancy costs 143,744 115,559
Store operating expenses 95,602 70,101
Other operating expenses 9,531 7,779
Depreciation and amortization 15,773 11,476
General and administrative expenses 17,783 12,920
- -------------------------------------------------------------------------------------
Operating income 34,519 21,307
Interest and other income 2,157 3,895
Interest expense (734) (1,804)
- -------------------------------------------------------------------------------------
Earnings before income taxes 35,942 23,398
Income taxes 13,838 9,008
- -------------------------------------------------------------------------------------
Net earnings $ 22,104 $ 14,390
=====================================================================================
Net earnings per common share - basic $ 0.26 $ 0.19
=====================================================================================
Net earnings per common and common equivalent share -
diluted $ 0.25 $ 0.18
=====================================================================================
Weighted average common shares outstanding - basic 84,018 77,725
Weighted average common and common equivalent shares
outstanding - diluted 89,825 88,439
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except numbers of shares)
<TABLE>
<CAPTION>
December 28, September 28,
1997 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $104,350 $ 70,126
Short-term investments 76,927 83,504
Accounts and notes receivable 34,076 30,524
Inventories 115,281 119,526
Prepaid expenses and other current assets 9,395 8,763
Deferred income taxes, net 6,483 4,164
- ------------------------------------------------------------------------------------
Total current assets 346,512 316,607
Joint ventures and other investments 35,364 34,464
Property, plant and equipment, net 510,365 483,259
Deposits and other assets 13,551 16,342
- ------------------------------------------------------------------------------------
Total $905,792 $850,672
====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 54,213 $ 46,324
Checks drawn in excess of bank balances 32,738 25,807
Accrued compensation and related costs 27,226 25,894
Accrued interest payable 0 2,927
Accrued occupancy costs 14,022 12,184
Other accrued expenses 41,241 25,893
- ------------------------------------------------------------------------------------
Total current liabilities 169,440 139,029
Deferred income taxes, net 14,912 12,784
Capital lease obligations 1,656 2,009
Convertible subordinated debentures 0 165,020
Shareholders' equity:
Common stock, no par value -- 150,000,000 shares
authorized; 86,392,091 and 79,058,754 shares,
respectively, issued and outstanding 554,337 386,877
Retained earnings, including cumulative translation
adjustment of $(2,865) and $(1,603), respectively,
and net unrealized holding (loss) gain on
investments of $(285) and $63, respectively 165,447 144,953
- ------------------------------------------------------------------------------------
Total shareholders' equity 719,784 531,830
- ------------------------------------------------------------------------------------
Total $905,792 $850,672
====================================================================================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
- ----------------------------------------------------------------------------------
December 28, December 29,
1997 1996
(13 Weeks) (13 Weeks)
<S> <C> <C>
- ----------------------------------------------------------------------------------
Operating activities:
Net earnings $ 22,104 $ 14,390
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 17,486 12,503
Deferred income taxes, net 28 1,159
Equity in losses of investees 45 1,318
Cash provided (used) by changes in operating
assets and liabilities:
Accounts and notes receivable (3,559) (733)
Inventories 4,201 19,976
Prepaid expenses and other current assets (640) (362)
Accounts payable 7,599 (8,104)
Income taxes payable 9,905 3,860
Accrued compensation and related costs 1,292 755
Accrued occupancy costs 1,838 1,280
Accrued interest payable (2,927) (1,792)
Other accrued expenses 5,601 2,413
- ----------------------------------------------------------------------------------
Net cash provided by operating activities 62,973 46,663
Investing activities:
Purchase of investments (22,698) (51,442)
Maturity of investments 28,740 882
Sale of investments 4,150 31,700
Investments in joint ventures and equity securities (6,131) (35)
Distributions from joint venture 1,000 0
Additions to property, plant and equipment (45,050) (36,766)
Additions to deposits and other assets (380) (1,578)
- ----------------------------------------------------------------------------------
Net cash used by investing activities (40,369) (57,239)
Financing activities:
Increase in cash provided by checks drawn in excess
of bank balances 6,898 6,823
Proceeds from sale of common stock under employee
stock purchase plan 879 684
Exercise of stock options 2,950 2,868
Tax benefit from exercise of non-qualified stock
options 1,565 1,912
Payments on capital lease obligations (545) (217)
- ----------------------------------------------------------------------------------
Net cash provided by financing activities 11,747 12,070
- ----------------------------------------------------------------------------------
Balance, carried forward 34,351 1,494
</TABLE>
(Continued on next page)
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Balance, brought forward 34,351 1,494
Effect of exchange rate changes on cash and
cash equivalents (127) 45
- ----------------------------------------------------------------------------------
Net increase in cash and cash equivalents 34,224 1,539
Cash and cash equivalents:
Beginning of the period 70,126 126,215
- ----------------------------------------------------------------------------------
End of the period $104,350 $127,754
==================================================================================
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 3,568 $ 3,555
Income taxes 2,569 2,071
Noncash financing and investing transactions:
Net unrealized holding loss on investments (348) (344)
Conversion of convertible debt into common stock,
net of unamortized issue costs and accrued
interest 162,066 0
Common stock tendered in settlement
of stock options exercised 4,859 0
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
STARBUCKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the 13 Weeks Ended December 28, 1997 and
December 29, 1996
NOTE 1: FINANCIAL STATEMENT PREPARATION:
The consolidated financial statements as of December 28, 1997 and September 28,
1997 and for the 13-week periods ended December 28, 1997 and December 29, 1996
have been prepared by Starbucks Corporation ("Starbucks" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"). The financial information for the 13-week periods ended December
28, 1997 and December 29, 1996 is unaudited, but, in the opinion of management,
reflects all adjustments (consisting only of normal recurring adjustments and
accruals) necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods. The financial information
as of September 28, 1997, is derived from the Company's audited consolidated
financial statements and notes thereto contained in the Company's Annual Report
to Shareholders and incorporated by reference into the Company's Annual Report
on Form 10-k for the year ended September 28, 1997, and should be read in
conjunction with such financial statements. Certain reclassifications of prior
year's balances have been made to conform to the current format.
The results of operations for the 13-week period ended December 28, 1997, are
not necessarily indicative of the results of operations that may be achieved for
the entire fiscal year ending September 27, 1998.
NOTE 2: EARNINGS PER SHARE:
During the first quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) 128 "Earnings per Share." The computation
of basic earnings per share, in accordance with SFAS 128, is based on the
weighted average number of common shares outstanding during the period. The
computation of diluted earnings per share, in accordance with SFAS 128, also
includes the dilutive effect of common stock equivalents consisting primarily of
certain shares subject to stock options. The computation of diluted earnings per
share assumes conversion of the Company's convertible subordinated debentures
using the "if converted" method, when such securities are dilutive, with net
income adjusted for the after-tax interest expense and amortization of issuance
costs applicable to these debentures.
NOTE 3: INVENTORIES:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 28, September 28,
1997 1997
<S> <C> <C>
- -----------------------------------------------------------------
Coffee:
Unroasted $ 62,841 $ 65,197
Roasted 16,352 13,932
Other merchandise held for sale 29,461 33,168
Packaging and other supplies 6,627 7,229
- -----------------------------------------------------------------
$115,281 $119,526
=================================================================
</TABLE>
As of December 28, 1997, the Company had fixed-price purchase commitments for
green coffee totaling approximately $44 million.
7
<PAGE>
NOTE 4: PROPERTY, PLANT, AND EQUIPMENT:
Property, plant, and equipment consist of the following
(in thousands):
<TABLE>
<CAPTION>
December 28, September 28,
1997 1997
<S> <C> <C>
- --------------------------------------------------------------------
Land $ 3,602 $ 3,602
Building 8,338 8,338
Leasehold improvements 373,207 350,173
Roasting and store equipment 175,831 167,547
Furniture, fixtures and other 56,127 47,378
- --------------------------------------------------------------------
617,105 577,038
Less accumulated depreciation
and amortization (157,914) (143,339)
- --------------------------------------------------------------------
459,191 433,699
Construction in process 51,174 49,560
- --------------------------------------------------------------------
$510,365 $483,259
====================================================================
</TABLE>
NOTE 5: CONVERTIBLE SUBORDINATED DEBENTURES:
On October 21, 1997, the Company called for redemption its 4 1/4% Convertible
Subordinated Debentures Due 2002. Substantially all of these debentures were
converted into the Company's common stock prior to the redemption date. The
total principal amount converted, net of unamortized issue costs, accrued but
unpaid interest, and costs of conversion, was credited to common stock.
NOTE 6: DEFERRED STOCK PLAN:
During the first quarter of fiscal 1998, the Company adopted a Deferred Stock
Plan for certain key employees which enables participants in the plan to defer
receipt of ownership of common shares from the exercise of non-qualified stock
options. The minimum deferral period is five years. During the first quarter of
fiscal 1998, 424,273 shares were deferred under the terms of this plan.
8
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements which follow, including anticipated store openings, planned
capital expenditures, and trends in or expectations regarding the Company's
operations, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are based on
currently available operating, financial and competitive information, and are
subject to risks and uncertainties. Actual future results and trends may differ
materially depending on a variety of factors, including, but not limited to,
coffee and other raw materials prices and availability, successful execution of
internal performance and expansion plans, the impact of competition, the
availability of financing, the volatility of interest rates and securities
prices, the effect of legal proceedings and other risks detailed herein and in
the Company's Securities and Exchange Commission filings, including the
Company's Annual Report to Shareholders for the fiscal year ended September 28,
1997.
General
During the 13-week period ending December 28, 1997, Starbucks Corporation
("Starbucks" or the "Company") derived approximately 86% of net revenues from
its Company-operated retail stores. The Company's specialty sales operations,
which include product sales to and royalties and fees from licensees and joint
ventures, as well as sales to wholesale customers and grocery stores, accounted
for approximately 12% of net revenues. Direct response operations accounted for
the remainder of net revenues.
The Company's fiscal year ends on the Sunday closest to September 30. Fiscal
years ending on September 27, 1998 and September 28, 1997 each include 52 weeks.
RESULTS OF OPERATIONS -- FOR THE 13 WEEKS ENDED DECEMBER 28, 1997, COMPARED TO
THE 13 WEEKS ENDED DECEMBER 29, 1996
Revenues. Net revenues for the 13 weeks ended December 28, 1997 increased 33%
to $317.0 million from $239.1 million for the corresponding period in fiscal
1997. Retail sales increased 32% to $270.9 million from $205.3 million due
primarily to the opening of new retail stores combined with an increase in
comparable store sales (sales from stores open 13 months or longer) of 5% for
the period. The increase in comparable store sales resulted from an increase in
the average dollar value per transaction combined with an increase in the number
of transactions. During the 13 weeks ended December 28, 1997, the Company opened
119 stores in continental North America. The Company ended the period with
1,389 Company-operated stores in continental North America.
As part of its expansion strategy of clustering stores in existing markets,
Starbucks has experienced a certain level of cannibalization of existing stores
by new stores as the store concentration has increased. This cannibalization,
as well as increased competition and other factors, has and may continue to put
downward pressure on the Company's comparable store sales growth.
Specialty sales revenues increased 54% to $38.5 million for the 13 weeks ended
December 28, 1997, compared to $25.0 million for the corresponding period in
fiscal 1997. Specialty sales growth was broad-based across numerous categories,
including sales to the Company's joint ventures and licensees, multi-unit
retailers, office coffee distributors, business dining accounts, and a chain of
wholesale clubs. Starbucks sells roasted coffee to its joint venture with
Pepsi-Cola Company, a division of PepsiCo, Inc., (the "Pepsi Joint Venture") for
use in the manufacture of its bottled Frappuccino beverage. The Company also
sells coffee extract to Dreyer's Grand Ice Cream, Inc., ("Dreyer's") for use in
the manufacture of Starbucks branded ice cream sold by the Company's joint
venture with Dreyer's (the "Ice Cream Joint Venture"). During the 13 weeks
ended December 28, 1997, licensees (including those in which the Company is a
joint venture partner) opened
9
<PAGE>
11 stores in continental North America and nine stores in the Pacific Rim. The
Company ended the period with 103 licensed stores in continental North America
and 26 licensed stores in the Pacific Rim. Direct response sales decreased 14%
to $7.6 million for the 13 weeks ended December 28, 1997, compared to $8.8
million for the corresponding period in fiscal 1997.
Costs and Expenses. Cost of sales and related occupancy costs as a percentage
of net revenues decreased to 45.4% for the 13 weeks ended December 28, 1997,
from 48.3% for the corresponding period in fiscal 1997. This decrease was
primarily the result of prior year sales price increases and a favorable sales
mix shift during the first quarter. Cost of sales reflected, more significantly
than in the previous quarter, the higher cost of coffees purchased during the
sustained spike in green coffee costs which began in December 1996 and continues
through the present.
Store operating expenses as a percentage of retail sales increased to 35.3% for
the 13 weeks ended December 28, 1997, from 34.1% for the corresponding period in
fiscal 1997. The increase was due to higher payroll-related costs partially
offset by lower advertising expenditures.
Other operating expenses (expenses associated with the Company's operations
other than North American retail, as well as the Company's share of joint
venture profits and losses) decreased to 3.0% of net revenues for the 13 weeks
ended December 28, 1997, from 3.3% for the corresponding period in fiscal 1997.
The decrease was due primarily to improved results of both the Company's Pepsi
and Ice Cream Joint Ventures.
Depreciation and amortization as a percentage of net revenues increased 0.2% to
5.0% for the 13 weeks ended December 28, 1997 from 4.8% for the corresponding
period in fiscal 1997.
General and administrative expenses as a percentage of net revenues were 5.6%
for the 13 weeks ended December 28, 1997, compared to 5.4% for the same period
in fiscal 1997. This increase was primarily due to higher recruiting and
relocation expenses.
Interest and other income for the 13 weeks ended December 28, 1997 was $2.2
million compared to $3.9 million for the corresponding period in fiscal 1997.
The decrease in interest and other income is due primarily to lower average
investment balances.
Interest expense for the 13 weeks ended December 28, 1997 was $0.7 million
compared to $1.8 million for the corresponding period in fiscal 1997. The
decrease was due to the conversion of the Company's $165 million convertible
subordinated debentures to common stock during the first quarter of fiscal 1998.
Income Taxes. The Company's effective tax rate for the 13 weeks ended December
28, 1997 and December 29, 1996 was 38.5%. Management does not anticipate any
significant fluctuations in the tax rate for the remainder of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the period with $182.3 million in total cash and investments
and working capital of $177.1 million. Cash and cash equivalents increased by
$34.2 million for the 13 weeks ended December 28, 1997 to $104.4 million.
Cash provided by operating activities totaled $63.0 million for the first 13
weeks of fiscal 1998 resulting primarily from net earnings before non-cash
charges of $39.7 million.
Cash used by investing activities for the first 13 weeks of fiscal 1998 totaled
$40.4 million. This included capital additions to property, plant and equipment
of $45.1 million related to opening 119 new Company-operated stores, purchasing
roasting and packaging equipment, remodeling certain existing stores and
enhancing existing information systems. The Company's investing activities in
marketable
10
<PAGE>
debt securities during the first quarter provided $10.2 million. During the
first quarter, the Company made equity investments of $6.1 million in its Pepsi
and international joint ventures and received a $1.0 million distribution from
its Ice Cream Joint Venture. The Company invested excess cash primarily in
short-term, investment-grade marketable debt securities.
Cash provided by financing activities for the first 13 weeks of fiscal 1998
totaled $11.7 million. An increase in checks drawn in excess of bank balances
provided $6.9 million. The exercise of employee stock options and the related
income tax benefit available to the Company upon exercise of these options
provided an additional $4.5 million.
Cash requirements for the remainder of fiscal 1998, other than normal operating
expenses, are expected to consist primarily of capital expenditures related to
the addition of new Company-operated retail stores. The Company and its
licensees plan to open a total of at least 350 new stores in continental North
America during fiscal 1998. The Company also anticipates incurring additional
expenditures for enhancing its production capacity and information systems and
remodeling certain existing stores. While there can be no assurance that current
expectations will be realized, management expects capital expenditures for the
remainder of fiscal 1998 to be approximately $155 million. Longer term, the
Company expects to reach its goal of at least 2000 stores in continental North
America by the end of the year 2000 using cash flow generated from operations
supplemented by additional debt or equity financing, if necessary.
Management currently anticipates additional cash requirements of approximately
$4 million for its domestic joint ventures and international expansion during
the remainder of fiscal 1998.
Management believes that existing cash and investments plus cash generated from
operations should be sufficient to finance capital requirements for its core
businesses for the remainder of fiscal 1998. Any new joint ventures, other new
business opportunities, or store expansion rates substantially in excess of that
presently planned may require additional debt or equity financing.
COFFEE PRICES AND AVAILABILITY AND GENERAL RISK CONDITIONS
Green coffee commodity prices are subject to substantial price fluctuations,
generally caused by multiple factors including weather, political and economic
conditions in certain coffee-producing countries and other supply-related
matters. In addition, green coffee prices have been affected in the past, and
may be affected in the future, by the actions of certain organizations and
associations, such as the International Coffee Organization and the Association
of Coffee Producing Countries, which have historically attempted to influence
commodity prices of green coffee through agreements establishing export quotas
or restricting coffee supplies worldwide. During fiscal 1997, worldwide green
coffee commodity prices increased significantly and remain high relative to
historical levels. In response, the Company effected sales price increases last
fiscal year on its whole bean coffees and its coffee beverages to mitigate the
effects of anticipated increases in its costs of supply. Because the Company had
existing inventories and fixed-price purchase commitments for some of its green
coffee requirements at the time of these sales price increases, the Company's
margins during the remainder of fiscal 1997 and the first quarter of fiscal 1998
were favorably impacted by these sales price increases relative to the first
quarter of fiscal 1997. However, cost of sales is increasingly impacted by the
higher cost coffees purchased since the sustained rise in coffee costs.
The Company enters into fixed-price purchase commitments in order to secure an
adequate supply of quality green coffee and bring greater certainty to the cost
of sales in future periods. As of December 28, 1997, the Company had
approximately $44 million in fixed-price purchase commitments which, together
with existing inventory, is expected to meet a substantial portion of its
remaining fiscal 1998 green coffee requirements. The Company believes, based on
relationships established with its suppliers in the past, that the risk of non-
delivery on such purchase commitments is remote. Because the Company uses the
moving average cost method for its coffee inventories, the cost of sales in
future periods will be
11
<PAGE>
impacted by future receipts under these fixed-price commitments as well as
price-to-be-established contracts and uncontracted purchases.
Although green coffee commodity prices are lower than the highs reached during
mid-fiscal 1997, they are still high relative to historical levels. If coffee
commodity prices remain at their current levels, the Company will continue to
incur substantially higher costs for the specialty coffees it purchases compared
to fiscal 1997. The Company's ability to raise sales prices in response to
rising coffee prices may be limited.
In addition to fluctuating coffee prices, management believes that the Company's
future results of operations and earnings could be significantly impacted by
other factors such as increased competition within the specialty coffee
industry, the Company's ability to find optimal store locations at favorable
lease rates, the increased costs associated with opening and operating retail
stores in new markets, the Company's continued ability to hire, train, and
retain qualified personnel, and the Company's ability to obtain adequate capital
to finance its planned expansion.
SEASONALITY AND QUARTERLY RESULTS
The Company's business is subject to seasonal fluctuations. Significant portions
of the Company's net revenues and profits are realized during the first quarter
of the Company's fiscal year, which includes the December holiday season. In
addition, quarterly results are affected by the timing of the opening of new
stores, and the Company's rapid growth may conceal the impact of seasonal
influences. Because of the seasonality of the Company's business, results for
any quarter are not necessarily indicative of the results that may be achieved
for the full fiscal year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company maintains investment portfolio holdings of various issuers, types
and maturities. These securities are classified as available-for-sale, and are
recorded on the balance sheet at fair value, with unrealized gains or losses
reported as a separate component of retained earnings. The Company does not
hedge its interest rate exposures.
The Company is subject to foreign currency exchange rate exposure, primarily
related to its retail operations in Canada. Historically, this exposure has had
a minimal impact on the Company. At the present time, the Company does not
hedge foreign currency risk, but may hedge known transaction exposure in the
future.
The Company may, from time to time, enter into futures contracts to hedge price-
to-be-established coffee purchase commitments with the objective of minimizing
cost risk due to market fluctuations. The Company did not purchase or sell
futures contracts during the first quarter of fiscal 1998.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to various legal proceedings arising in the ordinary
course of its business, but is not currently a party to any legal proceeding
that management believes would have a material adverse effect on the financial
position or results of operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
11 Statement re: computation of per share earnings
27 Financial data schedule
(b) Forms 8-K:
No reports on Form 8-K were filed by the Company during the 13-week
period ended December 28, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARBUCKS CORPORATION
Dated: February 10, 1998 By: /s/ Michael Casey
----------------------------
Michael Casey
executive vice president and
chief financial officer
Signing on behalf of the
registrant and as principal
financial officer
13
<PAGE>
STARBUCKS CORPORATION
---------------------
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
Three Months Ended
December 28, December 29,
1997 1996
(13 Weeks) (13 Weeks)
- ----------------------------------------------------------------------------
<S> <C> <C>
NET EARNINGS PER COMMON SHARE
CALCULATION-BASIC:
Net earnings $22,104 $14,390
============================================================================
Weighted average common shares calculation-basic:
Weighted average number of common shares
outstanding 84,018 77,725
============================================================================
Net earnings per common share-basic $ 0.26 $ 0.19
============================================================================
NET EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE CALCULATION-DILUTED/(1)/:
Net earnings calculation:
Net earnings $22,104 $14,390
Add after-tax interest expense on Debentures 348 1,075
Add after-tax amortization of issuance costs
related to the Debentures 30 89
- ----------------------------------------------------------------------------
Adjusted net earnings $22,482 $15,554
============================================================================
Weighted average common and common equivalent
shares calculation- diluted:
Weighted average number of common shares
outstanding 84,018 77,725
Dilutive effect of outstanding common stock
options 2,999 3,616
Assuming conversion of Convertible Subordinated
Debentures 2,808 7,098
- ----------------------------------------------------------------------------
Weighted average common and common equivalent
shares-diluted 89,825 88,439
============================================================================
Net earnings per common and common equivalent
share-diluted $ 0.25 $ 0.18
============================================================================
</TABLE>
- ---------------------
(1) Diluted earnings per share assumes conversion of the Company's convertible
subordinated debentures using the "if converted" method, when such
securities are dilutive, with income adjusted for the after-tax interest
expense and amortization applicable to these debentures.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STARBUCKS CORPORATION FIRST QUARTER FISCAL 1998 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> DEC-28-1997
<CASH> 104,350
<SECURITIES> 76,927
<RECEIVABLES> 34,076
<ALLOWANCES> 355
<INVENTORY> 115,281
<CURRENT-ASSETS> 346,512
<PP&E> 668,279
<DEPRECIATION> 157,914
<TOTAL-ASSETS> 905,792
<CURRENT-LIABILITIES> 169,440
<BONDS> 1,656
0
0
<COMMON> 554,337
<OTHER-SE> 165,447
<TOTAL-LIABILITY-AND-EQUITY> 905,792
<SALES> 316,952
<TOTAL-REVENUES> 316,952
<CGS> 143,744
<TOTAL-COSTS> 143,744
<OTHER-EXPENSES> 138,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 734
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