STARBUCKS CORPORATION

[Pages:51]Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 28, 2021

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)

Securities registered pursuant to Section 12(b) of the Act:

Title

Common Stock, par value $0.001 per share

Trading Symbol

SBUX

Name of each exchange on which registered

NASDAQ Global Select Market

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 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

? 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.

Shares Outstanding as of April 21, 2021

1,178.3 million

Table of Contents

STARBUCKS CORPORATION FORM 10-Q

For the Quarterly Period Ended March 28, 2021 Table of Contents

PART I. FINANCIAL INFORMATION

Item 1

Financial Statements (Unaudited):

3

Consolidated Statements of Earnings

3

Consolidated Statements of Comprehensive Income

4

Consolidated Balance Sheets

5

Consolidated Statements of Cash Flows

6

Consolidated Statements of Equity

7

Index for Notes to Consolidated Financial Statements

9

Notes to Consolidated Financial Statements

10

Item 2

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

30

Item 3

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4

Controls and Procedures

44

PART II. OTHER INFORMATION

Item 1

Legal Proceedings

45

Item 1A

Risk Factors

45

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 6

Exhibits

46

Signatures

47

Table of Contents

Item 1. Financial Statements

PART I -- FINANCIAL INFORMATION

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share data) (unaudited)

Net revenues:

Quarter Ended

Mar 28, 2021

Mar 29, 2020

Company-operated stores

$

5,653.1 $

4,766.0 $

Licensed stores

595.0

689.8

Other

419.9

539.9

Total net revenues

6,668.0

5,995.7

Product and distribution costs

1,992.4

1,997.7

Store operating expenses

2,823.3

2,721.4

Other operating expenses

87.7

95.0

Depreciation and amortization expenses

366.7

356.3

General and administrative expenses

464.4

406.5

Restructuring and impairments

23.0

(0.7)

Total operating expenses

5,757.5

5,576.2

Income from equity investees

77.1

67.9

Operating income

987.6

487.4

Interest income and other, net

17.3

2.0

Interest expense

(115.0)

(99.2)

Earnings before income taxes

889.9

390.2

Income tax expense

230.5

65.4

Net earnings including noncontrolling interests

659.4

324.8

Net loss attributable to noncontrolling interests

--

(3.6)

Net earnings attributable to Starbucks

$

659.4 $

328.4 $

Earnings per share - basic

$

0.56 $

0.28 $

Earnings per share - diluted

$

0.56 $

0.28 $

Weighted average shares outstanding:

Basic

1,177.5

1,171.8

Diluted

1,184.8

1,180.7

Two Quarters Ended

Mar 28, 2021

Mar 29, 2020

11,379.6 $ 1,208.8

829.1 13,417.5 4,041.5 5,690.7

179.5 732.6 936.5 95.2 11,676.0 159.7 1,901.2 32.7 (235.8) 1,698.1 416.5 1,281.6

-- 1,281.6 $

1.09 $ 1.08 $

10,546.6 1,481.9 1,064.3 13,092.8 4,234.2 5,542.9

196.7 707.4 840.7

5.6 11,527.5

141.9 1,707.2

18.0 (191.1) 1,534.1 324.0 1,210.1

(4.0) 1,214.1

1.03 1.02

1,176.3 1,183.9

1,176.1 1,185.8

See Notes to Consolidated Financial Statements.

3

Table of Contents

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, unaudited)

Quarter Ended

Mar 28, 2021

Mar 29, 2020

Net earnings including noncontrolling interests

$

659.4 $

324.8 $

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

Unrealized holding gains/(losses) on available-for-sale debt securities

(2.5)

3.2

Tax (expense)/benefit

0.5

(0.7)

Unrealized gains/(losses) on cash flow hedging instruments

97.2

(127.9)

Tax (expense)/benefit

(23.9)

31.2

Unrealized gains/(losses) on net investment hedging instruments

47.7

57.6

Tax (expense)/benefit

(12.1)

(14.6)

Translation adjustment and other

(83.4)

(79.9)

Tax (expense)/benefit

2.2

1.5

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

(7.9)

(6.4)

Tax expense/(benefit)

1.8

1.6

Other comprehensive income/(loss)

19.6

(134.4)

Comprehensive income including noncontrolling interests

679.0

190.4

Comprehensive income/(loss) attributable to noncontrolling interests

--

(3.6)

Comprehensive income attributable to Starbucks

$

679.0 $

194.0 $

Two Quarters Ended

Mar 28, 2021

Mar 29, 2020

1,281.6 $

1,210.1

(3.0) 0.6 104.9 (26.8) 17.5 (4.5) 155.3 2.2

(11.5)

3.6 238.3 1,519.9

-- 1,519.9 $

3.1 (0.7) (95.5) 24.6 81.3 (20.6) (3.8) 1.5

(17.1)

3.9 (23.3) 1,186.8 (4.0) 1,190.8

See Notes to Consolidated Financial Statements.

4

Table of Contents

STARBUCKS CORPORATION 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 investments

Property, plant and equipment, net

Operating lease, right-of-use asset

Deferred income taxes, net

Other long-term assets

Other intangible assets

Goodwill

TOTAL ASSETS

$

LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)

Current liabilities:

Accounts payable

$

Accrued liabilities

Accrued payroll and benefits

Income taxes payable

Current portion of operating lease liability

Stored value card liability and current portion of deferred revenue

Short-term debt

Current portion of long-term debt

Total current liabilities

Long-term debt

Operating lease liability

Deferred revenue

Other long-term liabilities

Total liabilities

Shareholders' deficit:

Common stock ($0.001 par value) -- authorized, 2,400.0 shares; issued and outstanding, 1,177.9 and 1,173.3 shares, respectively

Additional paid-in capital

Retained deficit

Accumulated other comprehensive loss

Total shareholders' deficit

Noncontrolling interests

Total deficit

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)

$

Mar 28, 2021

3,880.7 $ 123.0 880.2

1,503.6 592.0

6,979.5 284.8 499.4

6,123.1 8,036.8 1,770.0

574.9 444.3 3,658.9 28,371.7 $

1,033.6 $ 1,771.6

646.1 117.0 1,296.4 1,622.1 18.3

-- 6,505.1 14,630.3 7,577.7 6,532.1

774.8 36,020.0

1.2 595.4 (8,124.3) (126.3) (7,654.0)

5.7 (7,648.3) 28,371.7 $

Sep 27, 2020

4,350.9 281.2 883.4

1,551.4 739.5

7,806.4 206.1 478.7

6,241.4 8,134.1 1,789.9

568.6 552.1 3,597.2 29,374.5

997.9 1,160.7

696.0 98.2 1,248.8 1,456.5 438.8 1,249.9 7,346.8 14,659.6 7,661.7 6,598.5 907.3 37,173.9

1.2 373.9 (7,815.6) (364.6) (7,805.1)

5.7 (7,799.4) 29,374.5

See Notes to Consolidated Financial Statements. 5

Table of Contents

STARBUCKS CORPORATION 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 Stock-based compensation Non-cash lease costs Loss on retirement and impairment of assets Other Cash provided by/(used in) changes in operating assets and liabilities:

Accounts receivable Inventories Prepaid expenses and other current assets Income taxes payable Accounts payable Deferred revenue Operating lease 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 Other Net cash used in investing activities FINANCING ACTIVITIES: Net proceeds/(payments) from issuance of commercial paper Net proceeds from issuance of short-term debt Repayments of short-term debt 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 provided by/(used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net 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

See Notes to Consolidated Financial Statements.

6

Two Quarters Ended

Mar 28, 2021

Mar 29, 2020

$

1,281.6 $

1,210.1

772.9 (25.2) (131.3) 130.2 175.3 617.9 175.4 (15.4)

746.9 47.7 (116.3) 98.1 146.6 596.3 30.9 36.8

12.8 51.3 139.7 40.0 21.3 89.8 (676.3) 59.5 2,719.5

(60.7) 36.9 (247.7) (1,227.4) (186.4) 112.1 (608.6) (140.5) 474.8

(321.7) 121.7 289.0 (647.9) (20.1) (579.0)

(65.1) 93.7

4.3 (758.3)

(22.5) (747.9)

(296.5) 203.3 (320.5)

-- (1,250.0)

134.4 (1,058.0)

-- (90.1)

-- (2,677.4)

66.7 (470.2)

613.0 494.1

-- 1,739.7

-- 65.4 (965.2) (1,698.9) (87.6) (10.4) 150.1

8.7 (114.3)

4,350.9

2,686.6

$

3,880.7 $

2,572.3

$

250.8 $

186.3

$

236.2 $

1,726.2

Table of Contents

Balance, December 27, 2020 Net earnings Other comprehensive income/(loss) Stock-based compensation expense Exercise of stock options/vesting of RSUs Sale of common stock Cash dividends declared, $0.45 per share Balance, March 28, 2021

Balance, December 29, 2019 Net earnings/(loss) Other comprehensive income/(loss) Stock-based compensation expense Exercise of stock options/vesting of RSUs Sale of common stock Repurchase of common stock Cash dividends declared, $0.41 per share Balance, March 29, 2020

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EQUITY For the Quarters Ended March 28, 2021 and March 29, 2020

(in millions, except per share data, unaudited)

Common Stock

Shares

Amount

Additional Paid-in Capital

Accumulated

Other

Retained

Comprehensive Shareholders' Noncontrolling

Earnings/(Deficit) Income/(Loss) Equity/(Deficit) Interests

Total

1,177.2 $

1.2 $ 488.6 $ (8,253.6) $ (145.9) $ (7,909.7) $

5.7 $ (7,904.0)

--

--

--

659.4

--

659.4

--

659.4

--

--

--

--

19.6

19.6

--

19.6

--

--

76.7

--

--

76.7

--

76.7

0.6

--

20.0

0.1

--

10.1

--

--

20.0

--

20.0

--

--

10.1

--

10.1

-- 1,177.9 $

-- 1.2 $

-- 595.4 $

(530.1) (8,124.3) $

--

(530.1)

(126.3) $ (7,654.0) $

--

(530.1)

5.7 $ (7,648.3)

1,174.5 $ -- -- --

0.8 0.1 (7.3)

-- 1,168.1 $

1.2 $ -- -- --

-- -- --

-- 1.2 $

41.1 $ -- --

57.1

13.6 9.6

(80.3)

-- 41.1 $

(6,414.8) $ 328.4 -- --

-- -- (486.8)

(477.4) (7,050.6) $

(387.4) $ --

(134.4) --

(6,759.9) $ 328.4 (134.4) 57.1

--

13.6

--

9.6

--

(567.1)

--

(477.4)

(521.8) $ (7,530.1) $

0.8 $ (6,759.1)

(3.6)

324.8

--

(134.4)

--

57.1

--

13.6

--

9.6

--

(567.1)

--

(477.4)

(2.8) $ (7,532.9)

See Notes to Consolidated Financial Statements.

7

Table of Contents

Balance, September 27, 2020 Cumulative effect of adoption of new accounting guidance Net earnings Other comprehensive income/(loss) Stock-based compensation expense Exercise of stock options/vesting of RSUs Sale of common stock Cash dividends declared, $1.35 per share Balance, March 28, 2021

Balance, September 29, 2019 Cumulative effect of adoption of new accounting guidance Net earnings/(loss) Other comprehensive income/(loss) Stock-based compensation expense Exercise of stock options/vesting of RSUs Sale of common stock Repurchase of common stock Cash dividends declared, $0.82 per share Balance, March 29, 2020

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EQUITY For the Two Quarters Ended March 28, 2021 and March 29, 2020

(in millions, except per share data, unaudited)

Common Stock

Shares

Amount

Additional Paid-in Capital

Accumulated

Other

Retained

Comprehensive Shareholders' Noncontrolling

Earnings/(Deficit) Income/(Loss) Equity/(Deficit) Interests

Total

1,173.3 $

1.2 $ 373.9 $ (7,815.6) $ (364.6) $ (7,805.1) $

5.7 $ (7,799.4)

--

--

--

(2.2)

--

(2.2)

--

--

--

1,281.6

--

1,281.6

--

--

--

--

238.3

238.3

--

--

177.2

--

--

177.2

--

(2.2)

--

1,281.6

--

238.3

--

177.2

4.4

--

24.0

0.2

--

20.3

--

--

24.0

--

24.0

--

--

20.3

--

20.3

-- 1,177.9 $

-- 1.2 $

-- 595.4 $

(1,588.1) (8,124.3) $

--

(1,588.1)

(126.3) $ (7,654.0) $

-- (1,588.1) 5.7 $ (7,648.3)

1,184.6 $

-- -- -- --

3.6 0.2 (20.3)

-- 1,168.1 $

1.2 $ 41.1 $

--

--

--

--

--

--

--

148.4

--

(40.5)

--

18.5

--

(126.4)

-- 1.2 $

-- 41.1 $

(5,771.2) $

12.5 1,214.1

-- --

-- -- (1,548.6)

(957.4) (7,050.6) $

(503.3) $ (6,232.2) $

4.8 -- (23.3) --

17.3 1,214.1

(23.3) 148.4

--

(40.5)

--

18.5

--

(1,675.0)

--

(957.4)

(521.8) $ (7,530.1) $

1.2 $ (6,231.0)

--

17.3

(4.0)

1,210.1

--

(23.3)

--

148.4

--

(40.5)

--

18.5

-- (1,675.0)

--

(957.4)

(2.8) $ (7,532.9)

See Notes to Consolidated Financial Statements.

8

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