Starbucks 2000 Annual Report Download - page 21

In September 2000, the Emerging Issues Task Force (“EITF”) reached a consensus regarding Issue
00-10, “Accounting for Shipping and Handling Fees and Costs,” which requires any shipping and
handling costs billed to customers in a sale transaction to be classified as revenue. The Company will
adopt Issue 00-10 as of October 2, 2000, and does not expect it to have a material impact on the
Company’s consolidated results of operations.
EITF Issue 00-15, “Classification in the Statement of Cash Flows of the Income Tax Benefit Realized by
a Company upon Employee Exercise of a Nonqualified Stock Option,” was adopted by the Company in
fiscal 2000. Issue 00-15 requires the income tax benefit resulting from the exercise of nonqualified
stock options to be classified as cash provided by operating activities in the consolidated statements of
cash flows.
reclassifications
Certain reclassifications of prior years’ balances have been made to conform to the fiscal 2000 presentation.
Note 2: Business combinations
During fiscal 2000, Starbucks acquired the outstanding stock of Tympanum, Inc. (d/b/a “Hear Music”),
a music retailer, and of Coffee Partners Co. Ltd., the company licensed to operate Starbucks stores in
Thailand (“Thailand Operations”). The combined purchase price for these two acquisitions was $14.1
million. During fiscal 1999, Starbucks acquired the net assets of Tazo, L.L.C., a Portland, Oregon-
based tea company that produces premium tea products, and the stock of Pasqua Inc., a San Francisco,
California-based roaster and retailer of specialty coffee. The combined purchase price for these two
acquisitions was $16.5 million. All of the above acquisitions were accounted for under the purchase method
of accounting. Results of operations of the acquired companies are included on the accompanying
consolidated financial statements from the dates of acquisition. During fiscal 1998, Starbucks acquired
the United Kingdom-based Seattle Coffee Holdings Limited (“Seattle Coffee Company”) in a pooling-
of-interests transaction (the “Transaction”). In conjunction with the Transaction, Starbucks recorded
pre-tax charges of $8.9 million in direct merger costs and $6.6 million in other charges
associated with the integration of Seattle Coffee Company. The historical financial statements for the
periods prior to the Transaction were restated as though the companies had always been combined.
The following summarizes the Company’s net revenues, net earnings and earnings per share for the
periods in fiscal 1998 prior to and following the Transaction (in thousands, except earnings per share):
SEATTLE
COFFEE
STARBUCKS COMPANY COMBINED
34 Weeks prior to the Transaction:
Net revenues $ 805,151 $ 15,675 $ 820,826
Net earnings 45,811 (3,312) 42,499
Net earnings per share — diluted 0.25 (0.02) 0.23
18 Weeks after the Transaction:
Net revenues $ 487,876
Net earnings 25,873
Net earnings per share — diluted 0.15
Note 3: Cash and cash equivalents
Cash and cash equivalents consist of the following (in thousands):
Oct 1, 2000 Oct 3, 1999
Operating funds and interest-bearing deposits $ 48,821 $ 39,926
Commercial paper 998 7,980
Money market funds 20,998 18,513
Total $ 70,817 $ 66,419
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