Starbucks 2000 Annual Report Download - page 30

The Internet-related investment losses of 58.8 million during fiscal 2000 negatively impacted the diluted
earnings per share calculation by $0.22. Excluding these losses, the diluted net earnings per common and
common equivalent share was $0.71. See Notes 4 and 7.
Options with exercise prices greater than the average market price were not included in the computation
of diluted earnings per share. These options totaled 0.3 million, 0.6 million and 0.3 million for fiscal
2000, 1999 and 1998, respectively.
Note 15: Commitments and contingencies
In connection with various bank loans entered into by Starbucks Coffee Japan Limited, the Company has
guaranteed $25.4 million of the outstanding debt in the event of default by Starbucks Coffee Japan Limited.
In the normal course of business, the Company has various legal claims and other contingent matters
outstanding. Management believes that any ultimate liability arising from these actions would not have a
material adverse effect on the Company’s results of operations or financial condition as of and for the
fiscal year ended October 1, 2000.
Note 16: Segment reporting
In fiscal 1999, the Company adopted SFAS No. 131, “Disclosures about Segments of an Enterprise and
Related Information,” which establishes reporting and disclosure standards for an enterprise’s operating
segments. Operating segments are defined as components of an enterprise for which separate financial
information is available and regularly reviewed by the Company’s senior management.
The Company is organized into a number of business units. The Company’s North American retail
business sells coffee beverages, whole bean coffees and related hardware and equipment through
Company-operated retail stores in the United States and Canada. The Company’s international retail
business consists of entities that own and operate retail stores in the United Kingdom, Thailand and
Australia. These two retail segments are managed by different presidents within the Company and are
measured and evaluated separately by senior management.
The Company operates through several other business units, each of which is managed and evaluated
independently. These other business units are organized around the strategic relationships that govern the
distribution of products to the customer. These relationships include retail store licensing agreements,
wholesale accounts, grocery channel licensing agreements, joint ventures and direct-to-consumer
marketing channels. Revenues from these segments include both sales to unaffiliated customers and inter-
segment sales, which are accounted for on a basis consistent with sales to unaffiliated customers.
Intersegment sales and other intersegment transactions have been eliminated on the accompanying
consolidated financial statements.
The accounting policies of the operating segments are the same as those described in the summary of
significant accounting policies in Note 1. Operating income represents earnings before interest and
other income/expense and income taxes. No allocations of overhead, interest or income taxes are made
to the segments. Identifiable assets by segment are those assets used in the Company’s operations in each
segment. General corporate assets include cash and investments, unallocated assets of the corporate
headquarters and roasting facilities, deferred taxes and certain intangibles. Management evaluates
performance of the segments based on direct product sales and operating costs.
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