STARBUCKS CORPORATION

[Pages:44]Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 31, 2017

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

(State or Other Jurisdiction of Incorporation or Organization)

91-1325671

(IRS Employer Identification No.)

2401 Utah Avenue South, Seattle, Washington 98134

(Address of principal executive offices)

(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 ?

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x

No ?

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

?

(Do not check if a smaller reporting company)

Smaller reporting company ?

Emerging growth company

?

If an emerging growth company, indicate by check mark 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 Exchange Act): Yes ?

No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Title

Common Stock, par value $0.001 per share

Shares Outstanding as of January 24, 2018

1,405.6 million

Table of Contents

STARBUCKS CORPORATION FORM 10-Q

For the Quarterly Period Ended December 31, 2017 Table of Contents

PART I. FINANCIAL INFORMATION

Item 1

Financial Statements (Unaudited):

3

Condensed Consolidated Statements of Earnings

3

Condensed Consolidated Statements of Comprehensive Income

4

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Cash Flows

6

Index For Notes to Condensed Consolidated Financial Statements

7

Notes to Condensed Consolidated Financial Statements

8

Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4

Controls and Procedures

37

PART II. OTHER INFORMATION

Item 1

Legal Proceedings

38

Item 1A Risk Factors

38

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 6

Exhibits

39

Signatures

40

Table of Contents Item 1. Financial Statements

PART I -- FINANCIAL INFORMATION

STARBUCKS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in

millions,

except

per

share

data) (unaudited)

Net revenues: Company-operated stores Licensed stores CPG, foodservice and other

Total net revenues Cost of sales including occupancy costs Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring expenses

Total operating expenses Income from equity investees

Operating income Gain resulting from acquisition of joint venture Gains resulting from divestiture of certain operations Interest income and other, net Interest expense

Earnings before income taxes Income tax expense

Net earnings including noncontrolling interests Net loss attributable to noncontrolling interests Net earnings attributable to Starbucks Earnings per share - basic Earnings per share - diluted Weighted average shares outstanding: Basic Diluted Cash dividends declared per share

See

Notes

to

Condensed

Consolidated

Financial

Statements.

3

Quarter Ended

Dec 31, 2017

Jan 1, 2017

$

4,741.8 $

4,469.3

682.4 649.5

602.4 661.2

6,073.7 2,502.9 1,737.0

141.6

5,732.9 2,295.0 1,638.2

145.4

258.8

249.7

379.1 27.6

356.4 --

5,047.0 89.4

4,684.7 84.4

1,116.1 1,326.3

501.2 88.2

1,132.6 -- --

24.1

(25.9)

(23.8)

3,005.9

1,132.9

755.8

381.4

2,250.1 (0.1)

751.5 (0.3)

$

2,250.2 $

751.8

$

1.58 $

0.52

$

1.57 $

0.51

1,421.0

1,457.5

1,434.6

1,470.5

$

0.30 $

0.25

Table of Contents

STARBUCKS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in

millions,

unaudited)

Net earnings including noncontrolling interests

$

Other comprehensive income/(loss), net of tax:

Unrealized holding losses on available-for-sale securities

Tax (expense)/benefit

Unrealized gains/(losses) on cash flow hedging instruments

Tax (expense)/benefit

Unrealized gains/(losses) on net investment hedging instruments

Tax (expense)/benefit

Translation adjustment and other

Tax (expense)/benefit

Reclassification adjustment for net (gains)/losses realized in net earnings for available-for-sale securities, hedging instruments, and translation adjustment

Tax expense/(benefit)

Other comprehensive income/(loss)

Comprehensive income including noncontrolling interests

Comprehensive loss attributable to noncontrolling interests

Comprehensive income attributable to Starbucks

$

Quarter Ended

Dec 31, 2017

Jan 1, 2017

2,250.1 $

751.5

(2.8) 1.0 (3.7) 0.8 (0.3) 0.1 18.0 2.9

15.1

(0.8) 30.3 2,280.4 (0.1) 2,280.5 $

(13.4) 4.1

113.5 (26.5) 41.1 (15.2) (171.8)

--

(81.7)

16.0 (133.9) 617.6

(0.3) 617.9

See

Notes

to

Condensed

Consolidated

Financial

Statements. 4

Table of Contents

STARBUCKS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS

(in

millions,

except

per

share

data) (unaudited)

ASSETS Current assets:

Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets

Total current assets Long-term investments Equity and cost investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS

LIABILITIES AND EQUITY Current liabilities:

Accounts payable Accrued liabilities Insurance reserves Stored value card liability Current portion of long-term debt

Total current liabilities Long-term debt Other long-term liabilities

Total liabilities Shareholders' equity:

Common stock ($0.001 par value) -- authorized, 2,400.0 shares; issued and outstanding, 1,407.6 and 1,431.6 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss

Total shareholders' equity Noncontrolling interests

Total equity TOTAL LIABILITIES AND EQUITY

See

Notes

to

Condensed

Consolidated

Financial

Statements.

5

Dec 31, 2017

Oct 1, 2017

$

3,661.4 $

2,462.3

106.6

228.6

851.8

870.4

1,313.2

1,364.0

950.5

358.1

6,883.5

5,283.4

363.5

542.3

287.6

481.6

5,378.7

4,919.5

157.9

795.4

526.3

362.8

1,246.2

441.4

3,674.8

1,539.2

$

18,518.5 $

14,365.6

$

852.1 $

3,761.1

210.0

1,668.0

349.9

6,841.1

4,566.5

1,352.0

12,759.6

782.5 1,934.5

215.2 1,288.5

-- 4,220.7 3,932.6

755.3 8,908.6

1.4

1.4

41.1

41.1

5,834.9

5,563.2

(125.3)

(155.6)

5,752.1

5,450.1

6.8

6.9

5,758.9

5,457.0

$

18,518.5 $

14,365.6

Table of Contents

STARBUCKS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in

millions,

unaudited)

OPERATING ACTIVITIES:

Net earnings including noncontrolling interests

$

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

Deferred income taxes, net Income earned from equity method investees Distributions received from equity method investees Gain resulting from acquisition of joint venture

Gains resulting from divestiture of certain retail operations

Stock-based compensation Other Cash provided by changes in operating assets and liabilities:

Accounts receivable

Inventories Accounts payable Stored value card liability Other operating assets and liabilities

Net cash provided by operating activities

INVESTING ACTIVITIES:

Purchases of investments

Sales of investments Maturities and calls of investments Additions to property, plant and equipment

Cash acquired from purchase of equity in joint venture

Net proceeds from the sale of certain operations Other Net cash provided by/(used by) investing activities

FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Repayments of long-term debt

Proceeds from issuance of common stock

Cash dividends paid Repurchase of common stock Minimum tax withholdings on share-based awards

Other

Net cash used by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase/(decrease) in cash and cash equivalents

CASH AND CASH EQUIVALENTS:

Beginning of period

End of period

$

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest, net of capitalized interest

$

Income taxes, net of refunds

$

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

Payable for East China acquisition (Note 2)

$

See

Notes

to

Condensed

Consolidated

Financial

Statements.

Quarter Ended

Dec 31, 2017

Jan 1, 2017

2,250.1 $

751.5

272.4 744.8 (66.2) 81.3 (1,326.3) (501.2) 61.4

3.3

263.2 56.4 (65.3) 39.1 -- -- 55.0 9.3

1.3 71.2 28.1 359.6 (145.8) 1,834.0

(128.7) 146.4 (34.7) 425.0

12.6 1,529.8

(35.2) 316.1 21.3 (429.3) 129.5 397.1

(4.5) 395.0

(323.4) 149.6

18.1 (307.4)

-- -- 61.6 (401.5)

998.3 --

54.3 (428.1) (1,601.0) (56.0)

(7.2) (1,039.7)

9.8 1,199.1

-- (400.0)

51.2 (364.0) (408.1) (68.3)

0.1 (1,189.1)

(33.4) (94.2)

2,462.3 3,661.4 $

2,128.8 2,034.6

38.3 $ 140.1 $

1,431.0 $

41.1 270.8

--

6

Table of Contents

STARBUCKS CORPORATION INDEX FOR NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1

Summary of Significant Accounting Policies

8

Note 2

Acquisitions and Divestitures

9

Note 3

Derivative Financial Instruments

12

Note 4

Fair Value Measurements

15

Note 5

Inventories

17

Note 6

Supplemental Balance Sheet Information

17

Note 7

Debt

18

Note 8

Equity

20

Note 9

Employee Stock Plans

21

Note 10

Income Taxes

22

Note 11

Earnings per Share

22

Note 12

Segment Reporting

23

7

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