DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2018 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
of
Incorporation)
(IRS
Employer
ID)
2401 Utah Avenue South, Seattle, Washington 98134 (206) 447-1575
(Address
of
principal
executive
offices,
zip
code,
telephone
number) Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per share
Nasdaq Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x
No ?
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ?
No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x
No ?
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (? 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x
No ?
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation of S-K (? 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ?
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2
of the Exchange Act.
Large accelerated filer
x
? Accelerated filer
Non-accelerated filer
?
? Smaller reporting company
Emerging growth company
?
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ?
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ?
No x The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second fiscal quarter, based upon the closing sale price of the registrant's common stock on April 1, 2018 as reported on the NASDAQ Global Select Market was $77.8 billion . As of November 9, 2018 , there were 1,240.6 million shares of the registrant's Common Stock outstanding.
Table of Contents
DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement for the registrant's Annual Meeting of Shareholders to be held on March 20, 2019 have been incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
STARBUCKS CORPORATION Form 10-K
For the Fiscal Year Ended September 30, 2018 TABLE OF CONTENTS
PART I
Item 1
Business
2
Item 1A
Risk Factors
10
Item 1B
Unresolved Staff Comments
18
Item 2
Properties
18
Item 3
Legal Proceedings
18
Item 4
Mine Safety Disclosures
19
PART II
Item 5
Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
20
Item 6
Selected Financial Data
22
Item 7
Management's Discussion and Analysis of Financial Condition and Results of Operations
25
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
48
Item 8
Financial Statements and Supplementary Data
49
Index For Notes to Consolidated Financial Statements
54
Report of Independent Registered Public Accounting Firm
89
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
90
Item 9A
Controls and Procedures
90
Item 9B
Other Information
92
PART III
Item 10
Directors, Executive Officers and Corporate Governance
93
Item 11
Executive Compensation
93
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
93
Item 13
Certain Relationships and Related Transactions, and Director Independence
93
Item 14
Principal Accounting Fees and Services
93
PART IV
Item 15
Exhibits, Financial Statement Schedules
94
SIGNATURES
101
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forwardlooking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "seeks" or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," "may," "aims," "intends," or "projects." A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. These forward-looking statements are all based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Table of Contents
PART I
Item 1. Business
General
Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 78 markets. Formed in 1985, Starbucks Corporation's common stock trades on the NASDAQ Global Select Market ("NASDAQ") under the symbol "SBUX." We purchase and roast high-quality coffees that we sell, along with handcrafted coffee, tea and other beverages and a variety of high-quality food items through company-operated stores. We also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed stores, grocery and foodservice accounts. In addition to our flagship Starbucks Coffee brand, we sell goods and services under the following brands: Teavana, Seattle's Best Coffee, Evolution Fresh, La Boulange, Ethos, Starbucks Reserve and Princi.
Our objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world. To achieve this, we are continuing the disciplined expansion of our global store base, adding stores in both existing, developed markets such as the U.S., and in newer, higher growth markets such as China, as well as optimizing the mix of company-operated and licensed stores around the world. In addition, by leveraging the experience gained through our traditional store model, we continue to offer consumers new coffee and other products in a variety of forms, across new categories, diverse channels and alternative store formats. We also believe our Starbucks Global Social Impact strategy, commitments related to ethically sourcing high-quality coffee, contributing positively to the communities we do business in and being an employer of choice are contributors to our objective.
In this Annual Report on Form 10-K ("10-K" or "Report") for the fiscal year ended September 30, 2018 ("fiscal 2018 "), Starbucks Corporation (together with its subsidiaries) is referred to as "Starbucks," the "Company," "we," "us" or "our."
Segment Financial Information
Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes. On August 26, 2018, our Channel Development segment finalized licensing and distribution agreements with Nestl? S.A. ("Nestl?") to sell and market our consumer packaged goods ("CPG") and foodservice products and received an upfront prepaid royalty payment of approximately $7 billion. As a result, we realigned our organizational and operating segment structures in support of the newly established Global Coffee Alliance. The scope of the arrangement converts the majority of our previously defined Channel Development segment operations, as well as certain smaller businesses previously reported in the Americas, EMEA and Corporate and Other (previously All Other Segments), to licensed operations with Nestl?, and our reportable segments have been restated as if those smaller businesses were previously within our Channel Development segment.
We have four reportable operating segments: 1) Americas, which is inclusive of the U.S., Canada, and Latin America; 2) China/Asia Pacific ("CAP"); 3) Europe, Middle East, and Africa ("EMEA") and 4) Channel Development. We also have several non-reportable operating segments, including Siren Retail, which consists of Starbucks Reserve TM Roastery & Tasting Rooms, Starbucks Reserve brand stores and products and Princi operations, as well as Evolution Fresh and the Teavana retail business which substantially ceased operations during fiscal 2018. Collectively, the combined group of non-reportable operating segments is reported within Corporate and Other. Revenues from our reportable segments and Corporate and Other as a percentage of total net revenues for fiscal 2018 were as follows: Americas ( 68% ), CAP ( 18% ), EMEA ( 4% ), Channel Development ( 9% ) and Corporate and Other ( 1% ).
Our Americas, CAP and EMEA segments include both company-operated and licensed stores. Our Americas segment is our most mature business and has achieved significant scale. Certain markets within our CAP and EMEA operations are either in various stages of development or undergoing transformations of their business models. Therefore, they may require a more extensive support organization, relative to their current levels of revenue and operating income, than our Americas operations.
Our Channel Development segment includes roasted whole bean and ground coffees, Seattle's Best Coffee ? , Starbucks- and Teavana-branded single-serve products, a variety of ready-to-drink beverages, such as Frappuccino ? , Starbucks Doubleshot ? , Starbucks Refreshers ? beverages and Teavana TM/MC iced tea, and other branded products sold worldwide outside of our company-operated and licensed stores. Historically our consumer packaged goods have been sold directly to grocery, warehouse club and specialty retail stores and through institutional foodservice companies. With the establishment of the Global Coffee Alliance with Nestl?, a large portion of our Channel Development business transitioned to a licensed model in the fourth quarter of fiscal 2018. Additionally, the CPG and foodservice businesses previously included in our Americas, EMEA and Corporate and Other (previously All Other Segments) were also transitioned to a licensed model under the Global Coffee Alliance and realigned to the Channel Development segment. Our collaborative relationships with PepsiCo, Inc., Anheuser-Busch InBev, Tingyi Holding Corp., Arla Foods and others for our global ready-to-drink beverage businesses in this segment are excluded from the Global Coffee Alliance.
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