Starbucks 2000 Annual Report Download - page 23

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Note 5: Inventories
Inventories consist of the following (in thousands):
Oct 1, 2000 Oct 3, 1999
Coffee:
Unroasted $ 90,807 $ 95,001
Roasted 27,880 28,065
Other merchandise held for sale 59,420 37,564
Packaging and other supplies 23,549 20,256
Total $ 201,656 $ 180,886
As of October 1, 2000, the Company had fixed-price inventory purchase commitments for green
coffee totaling approximately $84 million. 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.
Note 6: Joint ventures
The Company has two joint ventures to produce and distribute Starbucks branded products. The North
American Coffee Partnership is a 50/50 joint venture partnership with the Pepsi-Cola Company to
develop and distribute bottled Frappuccino®coffee drink. The Starbucks Ice Cream Partnership is a
50/50 joint venture partnership with Dreyer’s Grand Ice Cream, Inc. to develop and distribute premium
ice creams.
The Company is a partner in several other joint ventures that operate licensed Starbucks retail stores,
including Starbucks Coffee Japan Limited, a 50/50 joint venture partnership with a Japanese retailer
and restauranteur, SAZABY Inc., to develop Starbucks retail stores in Japan. The Company also has
interests in joint ventures to develop Starbucks retail stores in Hawaii, Taiwan, Shanghai, Hong Kong
and Switzerland.
The Company accounts for these investments using the equity method when Starbucks is deemed to have
significant influence over the investee but is not the controlling or managing partner; otherwise, the
investment is accounted for using the cost method. The Company’s share of income and losses for equity
method joint ventures is included in “Joint venture income” on the accompanying consolidated statements
of earnings. This line includes both the Company’s proportionate share of gross margin resulting from the
sale of coffee and other products to the joint ventures and the Company’s proportionate share of royalty
and license fee revenues received from the joint ventures.
The Company’s investments in these joint ventures are as follows (in thousands):
EQUITY COST
JOINT JOINT
VENTURES VENTURES TOTAL
Balance, September 28, 1997 $ 29,263 $ - $ 29,263
Allocated share of losses (14) - (14)
Distributions from joint ventures (2,750) - (2,750)
Capital contributions 12,059 359 12,418
Balance, September 27, 1998 38,558 359 38,917
Allocated share of income 2,318 - 2,318
Distributions from joint ventures (8,983) - (8,983)
Capital contributions 10,466 - 10,466
Balance, October 3, 1999 42,359 359 42,718
Allocated share of income 15,139 - 15,139
Distributions from joint ventures (14,279) - (14,279)
Capital contributions 8,049 424 8,473
Balance, October 1, 2000 $ 51,268 $ 783 $ 52,051
The Company has a consolidated 90/10 joint venture with Starbucks Coffee Company (Australia) Pty
Ltd. to develop retail stores in Australia. In addition, the Company has a consolidated 50/50 joint
venture, Urban Coffee Opportunities, LLC, with Johnson Development Corporation to develop retail
stores in under-served urban communities.
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