What changed in this filing

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Item 1. Financial Statements

2021-04-27 compared with 2021-01-26 · 239 added, 124 removed, 621 unchanged (37% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Quarter Ended

Quarter Ended Two Quarters Ended

Net revenues:

28 unchanged sentences

(in millions, unaudited)

Quarter Ended

Quarter Ended Two Quarters Ended

Net earnings including noncontrolling interests $ 659.4 $ 324.8 $ 1,281.6 $ 1,210.1

64 unchanged sentences

(in millions, unaudited)

Quarter Ended

Two Quarters Ended

OPERATING ACTIVITIES:

9 unchanged sentences

Other ( 15.4 ) 36.8

Cash provided by changes in operating assets and liabilities:

Cash provided by/(used in) changes in operating assets and liabilities:

Accounts receivable 12.8 ( 60.7 )

15 unchanged sentences

FINANCING ACTIVITIES:

Net proceeds from issuance of commercial paper — 398.9

Net proceeds/(payments) from issuance of commercial paper ( 296.5 ) 613.0

Net proceeds from issuance of short-term debt 203.3 494.1

Repayments of short-term debt ( 320.5 ) —

Proceeds from issuance of long-term debt — 1,739.7

Repayments of long-term debt ( 1,250.0 ) —

3 unchanged sentences

Minimum tax withholdings on share-based awards ( 90.1 ) ( 87.6 )

Net cash used in financing activities ( 965.8 ) ( 1,123.0 )

Other — ( 10.4 )

Net cash provided by/(used in) financing activities ( 2,677.4 ) 150.1

Effect of exchange rate changes on cash and cash equivalents 66.7 8.7

Net increase in cash and cash equivalents 677.2 353.9

Net decrease in cash and cash equivalents ( 470.2 ) ( 114.3 )

CASH AND CASH EQUIVALENTS:

8 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

For the Quarters Ended December 27, 2020 and December 29, 2019

For the Quarters Ended March 28, 2021 and March 29, 2020

(in millions, except per share data, unaudited)

6 unchanged sentences

Shares Amount

Balance, December 27, 2020

1,177.2 $ 1.2 $ 488.6 $ ( 8,253.6 ) $ ( 145.9 ) $ ( 7,909.7 ) $ 5.7 $ ( 7,904.0 )

Net earnings — — — 659.4 — 659.4 — 659.4

Other comprehensive income/(loss) — — — — 19.6 19.6 — 19.6

Stock-based compensation expense — — 76.7 — — 76.7 — 76.7

Exercise of stock options/vesting of RSUs 0.6 — 20.0 — — 20.0 — 20.0

Sale of common stock 0.1 — 10.1 — — 10.1 — 10.1

Cash dividends declared, $ 0.45 per share

— — — ( 530.1 ) — ( 530.1 ) — ( 530.1 )

Balance, March 28, 2021

1,177.9 $ 1.2 $ 595.4 $ ( 8,124.3 ) $ ( 126.3 ) $ ( 7,654.0 ) $ 5.7 $ ( 7,648.3 )

Balance, December 29, 2019

1,174.5 $ 1.2 $ 41.1 $ ( 6,414.8 ) $ ( 387.4 ) $ ( 6,759.9 ) $ 0.8 $ ( 6,759.1 )

Net earnings/(loss) — — — 328.4 — 328.4 ( 3.6 ) 324.8

Other comprehensive income/(loss) — — — — ( 134.4 ) ( 134.4 ) — ( 134.4 )

Stock-based compensation expense — — 57.1 — — 57.1 — 57.1

Exercise of stock options/vesting of RSUs 0.8 — 13.6 — — 13.6 — 13.6

Sale of common stock 0.1 — 9.6 — — 9.6 — 9.6

Repurchase of common stock ( 7.3 ) — ( 80.3 ) ( 486.8 ) — ( 567.1 ) — ( 567.1 )

Cash dividends declared, $ 0.41 per share

— — — ( 477.4 ) — ( 477.4 ) — ( 477.4 )

Balance, March 29, 2020

1,168.1 $ 1.2 $ 41.1 $ ( 7,050.6 ) $ ( 521.8 ) $ ( 7,530.1 ) $ ( 2.8 ) $ ( 7,532.9 )

See Notes to Consolidated Financial Statements.

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 Additional Paid-in Capital Retained

Earnings/(Deficit) Accumulated

Comprehensive

Income/(Loss) Shareholders’

Equity/(Deficit) Noncontrolling

Interests Total

Shares Amount

Balance, September 27, 2020

8 unchanged sentences

— — — ( 1,588.1 ) — ( 1,588.1 ) — ( 1,588.1 )

Balance, December 27, 2020

Balance, March 28, 2021

1,177.9 $ 1.2 $ 595.4 $ ( 8,124.3 ) $ ( 126.3 ) $ ( 7,654.0 ) $ 5.7 $ ( 7,648.3 )

10 unchanged sentences

— — — ( 957.4 ) — ( 957.4 ) — ( 957.4 )

Balance, December 29, 2019

Balance, March 29, 2020

1,168.1 $ 1.2 $ 41.1 $ ( 7,050.6 ) $ ( 521.8 ) $ ( 7,530.1 ) $ ( 2.8 ) $ ( 7,532.9 )

12 unchanged sentences

Note 11 Employee Stock Plans

Note 12 Income Taxes

Note 13 Earnings per Share

5 unchanged sentences

Financial Statement Preparation

The unaudited consolidated financial statements as of December 27, 2020, and for the quarters ended December 27, 2020 and December 29, 2019, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”).

In the opinion of management, the financial information for the quarters ended December 27, 2020 and December 29, 2019 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

The unaudited consolidated financial statements as of March 28, 2021, and for the quarter and two quarters ended March 28, 2021 and March 29, 2020, have been prepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission (“SEC”).

In the opinion of management, the financial information for the quarter and two quarters ended March 28, 2021 and March 29, 2020 reflects all adjustments and accruals, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

In this Quarterly Report on Form 10-Q (“10-Q”), Starbucks Corporation is referred to as “Starbucks,” the “Company,” “we,” “us” or “our.”

Certain prior period information on the consolidated statements of cash flows has been reclassified to conform to the current year presentation.

The financial information as of September 27, 2020 is derived from our audited consolidated financial statements and notes for the fiscal year ended September 27, 2020 (“fiscal 2020”) included in Item 8 in the Fiscal 2020 Annual Report on Form 10-K (“10-K”).

The information included in this 10-Q should be read in conjunction with the footnotes and management’s discussion and analysis of the consolidated financial statements in the 10-K.

The results of operations for the quarter ended December 27, 2020 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending October 3, 2021 (“fiscal 2021”).

The results of operations for the quarter and two quarters ended March 28, 2021 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending October 3, 2021 (“fiscal 2021”).

Additionally, our 2021 fiscal year will include 53 weeks, with the 53rd week falling in the fourth fiscal quarter.

The novel coronavirus, known as the global pandemic COVID-19, was first identified in December 2019 before spreading to markets where we have company-operated or licensed stores.

We have since established the necessary protocols to operate safely, and our businesses continue to recover.

As of the end of the first quarter of fiscal 2021, nearly all our company-operated and licensed stores have re-opened;

We have since established the necessary protocols to operate safely, and our businesses continue to recover as sales in the U.S.

and China, our two lead growth markets, have returned to roughly pre-pandemic levels.

As of the end of the second quarter of fiscal 2021, nearly all our company-operated and licensed stores have re-opened;

however, many were operating at less than full capacity.

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We elected to treat qualified government subsidies from the U.S., Canada and other governments as offsets to the related operating expenses.

During the first quarter of fiscal 2021, qualified payroll credits reduced our store operating expenses by $ 19.8 million on our consolidated statement of earnings.

After netting the qualified U.S.

payroll tax credits against our payroll tax payable, a receivable of $ 149.3 million was included in prepaid expenses and other current assets as of December 27, 2020.

During the first fiscal quarter of fiscal 2021, we deferred $ 76.5 million of qualified payroll tax payments, and as of December 27, 2020, deferred payroll tax payments of $ 227.5 million were included in other long-term liabilities on our consolidated balance sheets.

During the quarter and two quarters ended March 28, 2021, qualified payroll and other credits reduced our store operating expenses by $ 97.4 million and $ 117.2 million, respectively, on our consolidated statement of earnings.

During the quarter ended March 29, 2020, the qualified payroll tax credits reduced our store operating expenses by approximately $ 35 million on our consolidated statement of earnings.

After netting the qualified credits against our payable, a receivable of $ 158.6 million was included in prepaid expenses and other current assets as of March 28, 2021.

During the quarter and two quarters ended March 28, 2021, we deferred $ 5.2 million and $ 81.7 million, respectively, of qualified payroll tax payments, and as of March 28, 2021, deferred payroll tax payments of $ 116.4 million were included in both accrued liabilities and other long-term liabilities, respectively, on our consolidated balance sheets.

Restructuring

In fiscal 2020, we announced a plan to optimize our North America store portfolio, primarily in dense metropolitan markets by blending store formats to better cater to changing customer tastes and preferences.

As of December 27, 2020, we expect the total number of closures to be approximately 800 stores in the U.S.

As of December 27, 2020, we have identified 713 stores for closure under our restructuring plans, and as a result we recorded approximately $ 72.2 million to restructuring and impairments on our consolidated statement of earnings.

Of this total, $ 42.6 million related to the impairment of store assets for which either a triggering event occurred and the assets were determined not to be recoverable or the store was permanently closed.

An additional $ 29.6 million was associated with accelerated amortization of right-of-use (“ROU”) lease assets due to planned store closures prior to the end of contractual lease terms.

For impaired store asset groups, we estimated the fair values using an income approach incorporating internal projections of revenue growth and operating expenses that are considered Level 3 fair value measurements, as well as applicable discount rates and market lease rates.

In fiscal 2020, we announced a plan to optimize our North America store portfolio, primarily in dense metropolitan markets by developing new store formats to better cater to changing customer tastes and preferences.

As of March 28, 2021, we expect the total number of closures to be approximately 800 stores in the U.S.

and Canada and have identified 760 stores for closure under our restructuring plans.

As a result we recorded approximately $ 23.0 million and $ 95.2 million to restructuring and impairments on our consolidated statement of earnings during the quarter and two quarters ended March 28, 2021, respectively.

Of these totals, $ 8.6 million and $ 51.2 million related to the impairment of store assets for which either a triggering event occurred and the assets were determined not to be recoverable or the store was permanently closed, respectively.

During the quarter and two quarters ended March 28, 2021, an additional $ 14.4 million and $ 44.0 million, respectively, was associated with accelerated amortization of right-of-use (“ROU”) lease assets due to planned store closures prior to the end of contractual lease terms.

rates and market lease rates.

The application of these projections and fair value measurements did not have a significant impact on our final impairment decisions given that we plan to fully exit the majority of these identified stores over the next 9 to 12 months.

We expect total future restructuring costs, which are attributable to our Americas segment, to be approximately $ 30 million to $ 40 million.

These restructuring costs include accelerated amortization or impairments of ROU assets due to planned store closures prior to the end of contractual lease terms ($ 90 million to $ 100 million), store impairment and disposal costs not previously recorded as part of our ongoing store impairment process ($ 10 million to $ 15 million), with the remaining amount related to employee termination costs.

As we have previously recorded impairment charges for stores that may be identified for

closure under our plans, and because store closure decisions are still subject to change, the final costs associated with these store closures may vary from these estimates.

These restructuring costs primarily include accelerated amortization or impairments of ROU assets due to planned store closures prior to the end of contractual lease terms.

The remaining balance includes store impairment and disposal costs not previously recorded as part of our ongoing store impairment process and employee termination costs.

As we have previously recorded impairment charges for stores that may be identified for closure under our plans, and because store closure decisions are still subject to change, the final costs associated with these store closures may vary from these estimates.

These costs will depend on the asset carrying value and remaining lease term of the specific stores identified.

Future restructuring costs are expected to be incurred primarily over the next 9 to 12 months as stores are specifically identified for closure or, in the case of lease exit costs, either when a store ceases operations or when a reduced lease term is reasonably certain due to expected, early lease termination.

As of December 27, 2020, restructuring liabilities totaling $ 24.4 million were included in current and non-current operating lease liability for the remaining outstanding rent liabilities due to landlords.

The associated expense was recognized in fiscal 2020 or during the first quarter of fiscal 2021 for stores that were either closed or reasonably certain to close in fiscal 2021.

Additionally, $ 14.9 million of accrued employee termination costs is included in accrued payroll and benefits.

Cash payments were immaterial for the first quarter of fiscal 2021.

As of March 28, 2021, restructuring liabilities totaling $ 21.4 million were included in current and non-current operating lease liability for the remaining outstanding rent liabilities due to landlords.

The associated expense was recognized in fiscal 2020 or during the first two quarters of fiscal 2021 for stores that were either closed or reasonably certain to close under the plan.

Additionally, $ 10.4 million of accrued employee termination costs was included in accrued payroll and benefits.

Cash payments were $ 23.2 million for the first two quarters of fiscal 2021.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued guidance replacing the incurred loss impairment methodology with a new methodology that reflects current expected credit losses on financial assets, including receivables and available-for-sale securities.

In June 2016, the Financial Accounting Standards Board ("FASB") issued guidance replacing the incurred loss impairment methodology with a new methodology that reflects current expected credit losses on financial assets, including receivables and available-for-sale securities.

The new methodology requires entities to estimate and recognize expected credit losses each reporting period.

The guidance was adopted during the first quarter of fiscal 2021 under the modified retrospective approach which included a $ 2.2 million transition adjustment to opening shareholders' retained deficit on our consolidated statements of equity upon adoption.

The guidance was adopted during the first quarter of fiscal 2021 under the modified retrospective approach and resulted in a $ 2.2 million transition adjustment to opening shareholders' retained deficit on our consolidated statements of equity.

Recent Accounting Pronouncements Not Yet Adopted

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These agreements are cash settled at the time of the pricing of the related debt.

Each derivative agreement's gain or loss is recorded in AOCI and is subsequently reclassified to interest expense over the life of the related debt.

Each derivative agreement's gain or loss is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified to interest expense over the life of the related debt.

To hedge the exposure to changes in the fair value of our fixed-rate debt, we enter into interest rate swap agreements, which are designated as fair value hedges.

5 unchanged sentences

From time to time, we may enter into financial instruments, including, but not limited to, forward and swap contracts or foreign currency-denominated debt, to hedge the currency exposure of our net investments in certain international operations.

The resulting gains and losses from these derivatives are recorded in AOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.

resulting gains and losses from these derivatives are recorded in AOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.

Foreign currency forward and swap contracts not designated as hedging instruments are used to mitigate the foreign exchange risk of certain other balance sheet items.

8 unchanged sentences

For de-designated cash flow hedges in which the underlying transactions are no longer probable of occurring, the related accumulated derivative gains or losses are recognized in interest income and other, net on our consolidated statements of earnings.

There was no such significant cash flow hedge dedesignations in the periods presented.

During the quarter and two quarters ended March 29, 2020, we de-designated certain cash flow hedges due to the global COVID-19 impacts, which resulted in the release of an insignificant net gain from AOCI to our consolidated statement of earnings.

There were no significant cash flow hedge de-designations in fiscal 2021.

To mitigate the price uncertainty of a portion of our future purchases, including diesel fuel and other commodities, we enter into swap contracts, futures and collars that are not designated as hedging instruments.

4 unchanged sentences

Net Gains/(Losses) Expected to be Reclassified from AOCI into Earnings within 12 Months Outstanding Contract/Debt Remaining Maturity

Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020

Cash Flow Hedges:

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Quarter Ended

Gains/(Losses)

Recognized in

OCI Before Reclassifications

Gains/(Losses) Reclassified from

Gains/(Losses) Recognized in

OCI Before Reclassifications Gains/(Losses) Reclassified from

AOCI to Earnings

Location of gain/(loss)

Dec 27, 2020 Dec 29, 2019 Dec 27, 2020 Dec 29, 2019

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

Cash Flow Hedges:

3 unchanged sentences

Dairy ( 0.9 ) ( 4.9 ) ( 0.6 ) 0.7 Product and distribution costs

— ( 0.6 ) Interest income and other, net (1)

Foreign currency - other 7.1 26.8 0.2 0.9 Licensed stores revenues

( 1.9 ) ( 1.0 ) Product and distribution costs

— 2.0 Interest income and other, net (1)

Interest rates 71.5 ( 140.6 ) ( 0.5 ) 0.5 Interest expense

( 3.6 ) — Interest income and other, net

Net Investment Hedges:

1 unchanged sentence

Foreign currency debt 41.6 ( 0.4 ) — —

(1) As a result of the global COVID-19 impacts, Starbucks discontinued cash flow hedges during the quarter ended March 29, 2020.

Two Quarters Ended

Gains/(Losses) Recognized in

OCI Before Reclassifications Gains/(Losses) Reclassified from

AOCI to Earnings Location of gain/(loss)

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

Cash Flow Hedges:

Coffee 17.7 ( 1.1 ) ( 2.7 ) — Product and distribution costs

Cross-currency swaps 10.4 9.1 1.6 ( 0.6 ) Interest expense

8.7 5.8 Interest income and other, net

Dairy 1.6 ( 5.0 ) 2.0 0.7 Product and distribution costs

— ( 0.6 ) Interest income and other, net (1)

Foreign currency - other ( 18.8 ) 22.1 0.2 2.6 Licensed stores revenues

( 1.9 ) ( 1.3 ) Product and distribution costs

— 2.0 Interest income and other, net (1)

Interest rates 94.0 ( 120.6 ) ( 1.1 ) 1.3 Interest expense

( 3.6 ) — Interest income and other, net

Net Investment Hedges:

Cross-currency swaps ( 10.4 ) 68.7 6.6 7.2 Interest expense

Foreign currency debt 27.9 12.6 — —

(1) As a result of the global COVID-19 impacts, Starbucks discontinued cash flow hedges during the two quarters ended March 29, 2020.

Pre-tax gains and losses on non-designated derivatives and designated fair value hedging instruments and the related fair value hedged item recognized in earnings ( in millions ):

Gains/(Losses) Recognized in Earnings

Location of gain/(loss) recognized in earnings Quarter Ended

Dec 27, 2020 Dec 29, 2019

Location of gain/(loss) recognized in earnings Quarter Ended Two Quarters Ended

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

Non-Designated Derivatives:

5 unchanged sentences

Notional amounts of outstanding derivative contracts (in millions) :

Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020

Coffee $ 210 $ 63

5 unchanged sentences

Derivative Assets

Balance Sheet Location Dec 27, 2020 Sep 27, 2020

Balance Sheet Location Mar 28, 2021 Sep 27, 2020

Designated Derivative Instruments:

4 unchanged sentences

Other long-term assets 4.3 3.8

Interest rates Other long-term assets 24.7 —

Interest rate swap Other long-term assets 38.5 45.8

3 unchanged sentences

Derivative Liabilities

Balance Sheet Location Dec 27, 2020 Sep 27, 2020

Balance Sheet Location Mar 28, 2021 Sep 27, 2020

Designated Derivative Instruments:

11 unchanged sentences

Carrying amount of hedged item Cumulative amount of fair value hedging adjustment included in the carrying amount

Dec 27, 2020 Sep 27, 2020 Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020 Mar 28, 2021 Sep 27, 2020

Location on the balance sheet

4 unchanged sentences

Fair Value Measurements at Reporting Date Using

December 27, 2020 Quoted Prices

Identical Assets

Other Observable

Unobservable Inputs

March 28, 2021 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Cash and cash equivalents $ 3,880.7 $ 3,880.7 $ — $ —

1 unchanged sentence

Available-for-sale debt securities

Certificates of deposit 1.6 — 1.6 —

Commercial paper 38.5 — 38.5 —

Corporate debt securities 14.0 — 14.0 —

Mortgage and other asset-backed securities 16.7 — 16.7 —

State and local government obligations 1.0 — 1.0 —

8 unchanged sentences

Corporate debt securities 167.4 — 167.4 —

Foreign government obligations 4.0 — 4.0 —

Mortgage and other asset-backed securities 18.0 — 18.0 —

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Fair Value Measurements at Reporting Date Using

September 27, 2020 Quoted Prices

Identical Assets

Other Observable

September 27, 2020 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant

Unobservable Inputs

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The fair values of any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.

Gross unrealized holding gains and losses on available-for-sale debt securities and marketable equity securities were not material as of December 27, 2020 and September 27, 2020.

Gross unrealized holding gains and losses on available-for-sale debt securities and marketable equity securities were not material as of March 28, 2021 and September 27, 2020.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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These assets are measured at fair value if determined to be impaired.

During our first quarter of fiscal 2021, we recorded asset impairment charges, primarily related to restructuring efforts for our North America store portfolio.

During our first two quarters of fiscal 2021, we recorded asset impairment charges, primarily related to restructuring efforts for our North America store portfolio.

See Note 1 , Summary of Significant Accounting Policies, for further discussion.

The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 7 , Debt.

There were no material fair value adjustments during the quarters ended December 27, 2020 and December 29, 2019.

There were no material fair value adjustments during the two quarters ended March 28, 2021 and March 29, 2020.

Inventories (in millions) :

Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020

Unroasted $ 690.0 $ 664.7

5 unchanged sentences

Inventory levels vary due to seasonality, commodity market supply and price fluctuations.

As of December 27, 2020, we had committed to purchasing green coffee totaling $ 809 million under fixed-price contracts and an estimated $ 554 million under price-to-be-fixed contracts.

As of March 28, 2021, we had committed to purchasing green coffee totaling $ 637 million under fixed-price contracts and an estimated $ 654 million under price-to-be-fixed contracts.

We expect to take physical delivery for these contracts.

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Until prices are fixed, we estimate the total cost of these purchase commitments.

We believe, based on relationships established with our suppliers in the past and continuous monitoring, the risk of non-delivery on these purchase commitments is remote.

We believe, based on established relationships with our suppliers and continuous monitoring, the risk of non-delivery on these purchase commitments is remote.

During the second quarter of fiscal 2020, we wrote off approximately $ 50 million of inventory that was expiring or expected to expire due to COVID-19 related store closures, primarily perishable food and beverage ingredients located at our stores, distribution centers and suppliers.

We did not record significant write-offs related to COVID-19 during the first half of fiscal 2021.

Supplemental Balance Sheet and Statement of Earnings Information (in millions) :

Prepaid Expenses and Other Current Assets

Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020

Income tax receivable $ 180.6 $ 356.9

3 unchanged sentences

Property, Plant and Equipment, net

Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020

Land $ 46.2 $ 46.0

9 unchanged sentences

Accrued Liabilities

Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020

Accrued occupancy costs $ 76.1 $ 76.9

5 unchanged sentences

Store Operating Expenses

Quarter Ended

Dec 27, 2020 Dec 29, 2019

Quarter Ended Two Quarters Ended

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

Wages and benefits $ 1,664.9 $ 1,608.0 $ 3,271.1 $ 3,206.0

4 unchanged sentences

Indefinite-Lived Intangible Assets

(in millions) Dec 27, 2020 Sep 27, 2020

(in millions) Mar 28, 2021 Sep 27, 2020

Trade names, trademarks and patents $ 95.7 $ 95.0

Finite-Lived Intangible Assets

Dec 27, 2020 Sep 27, 2020

Mar 28, 2021 Sep 27, 2020

(in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

5 unchanged sentences

Total finite-lived intangible assets $ 1,330.5 $ ( 981.9 ) $ 348.6 $ 1,307.9 $ ( 850.8 ) $ 457.1

Amortization expense for finite-lived intangible assets was $ 61.2 million for the quarter ended December 27, 2020 and $ 54.1 million for the quarter ended December 29, 2019, respectively.

Estimated future amortization expense as of December 27, 2020 ( in millions ):

Amortization expense for finite-lived intangible assets was $ 62.2 million and $ 123.4 million for the quarter and two quarters ended March 28, 2021, respectively and $ 54.5 million and $ 108.6 million for the quarter and two quarters ended March 29, 2020, respectively.

Estimated future amortization expense as of March 28, 2021 ( in millions ):

Fiscal Year Total

2021 (excluding the quarter ended December 27, 2020)

2021 (excluding the two quarters ended March 28, 2021)

Thereafter 3.0

1 unchanged sentence

Changes in the carrying amount of goodwill by reportable operating segment (in millions) :

Americas International Channel

Development Corporate and Other Total

Americas International Channel Development Corporate and Other Total

Goodwill balance at September 27, 2020

1 unchanged sentence

1.6 60.1 — — 61.7

Goodwill balance at December 27, 2020

Goodwill balance at March 28, 2021

$ 498.1 $ 3,125.1 $ 34.7 $ 1.0 $ 3,658.9

4 unchanged sentences

The proceeds from borrowings under our commercial paper program may be used for working capital needs, capital expenditures and other corporate purposes, including, but not limited to, business expansion, payment of cash dividends on our common stock and share repurchases.

As of December 27, 2020, we had $ 299.7 million of borrowings outstanding under the program, net of unamortized discount, of which the majority matures in the second quarter of fiscal 2021.

As of March 28, 2021, we had no borrowings outstanding under the program.

Additionally, we hold the following Japanese yen-denominated credit facilities that are available for working capital needs and capital expenditures within our Japanese market:

• A ¥ 10 billion, or $ 96.5 million, facility is currently set to mature on March 26, 2021 .

Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300 %.

• A ¥ 10 billion, or $ 96.5 million, facility is currently set to mature on October 29, 2021 .

Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.350 %.

• A ¥ 5 billion, or $ 45.8 million, facility is currently set to mature on December 30, 2021 .

Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.400 %.

As of December 27, 2020, we had ¥ 20 billion , or $ 192.9 million, of borrowings outstanding under these credit facilities.

• A ¥ 10 billion, or $ 91.6 million, facility is currently set to mature on March 26, 2022 .

Borrowings under the credit facility are subject to terms defined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.350 %.

As of March 28, 2021, we had ¥ 2 billion , or $ 18.3 million, of borrowings outstanding under these credit facilities.

Long-term Debt

Components of long-term debt including the associated interest rates and related estimated fair values by calendar maturity ( in millions, except interest rates) :

Dec 27, 2020 Sep 27, 2020 Stated Interest Rate Effective Interest Rate (1)

Mar 28, 2021 Sep 27, 2020 Stated Interest Rate Effective Interest Rate (1)

Issuance Amount Estimated Fair Value Amount Estimated Fair Value

2 unchanged sentences

February 2021 notes (2)

— — 500.0 502.3 2.100 % 2.293 %

February 2021 notes (2)

— — 250.0 251.1 2.100 % 1.600 %

May 2022 notes 500.0 505.3 500.0 506.5 1.300 % 1.334 %

24 unchanged sentences

(1) Includes the effects of the amortization of any premium or discount and any gain or loss upon settlement of related treasury locks or forward-starting interest rate swaps utilized to hedge interest rate risk prior to the debt issuance.

(2) November 2020 notes were repaid in the first quarter of fiscal 2021.

(2) November 2020 and February 2021 notes were repaid in the first and second quarters of fiscal 2021, respectively.

(3) Amount includes the change in fair value due to changes in benchmark interest rates related to our October 2023 notes.

1 unchanged sentence

(4) Japanese yen-denominated long-term debt.

The following table summarizes our long-term debt maturities as of December 27, 2020 by fiscal year ( in millions ):

The following table summarizes our long-term debt maturities as of March 28, 2021 by fiscal year ( in millions ):

Fiscal Year Total

1 unchanged sentence

Total $ 14,728.5

For the quarter ended December 27, 2020, we recognized accelerated lease right-of-use ("ROU") asset amortization costs of $ 29.6 million, which was recognized within restructuring and impairments on the consolidated statements of earnings.

For the quarter and two quarters ended March 28, 2021, we recognized accelerated lease ROU asset amortization costs of $ 14.4 million and $ 44.0 million, which was recognized within restructuring and impairments on the consolidated statements of earnings.

The components of lease costs (in millions) :

Quarter Ended

Dec 27, 2020 Dec 29, 2019

Quarter Ended Two Quarters Ended

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

Operating lease costs (1)

3 unchanged sentences

Total lease costs $ 621.2 $ 582.9 $ 1,261.7 $ 1,193.1

(1) Operating lease costs were net of immaterial amounts of sublease income and rent concessions .

(1) Operating lease costs were net of immaterial amounts of sublease income.

For the quarter and two quarters ended March 28, 2021, operating lease costs were also net of immaterial amounts of rent concessions.

The following table includes supplemental information (in millions) :

Quarter Ended

Dec 27, 2020 Dec 29, 2019

Two Quarters Ended

Mar 28, 2021 Mar 29, 2020

Cash paid related to operating lease liabilities $ 792.4 $ 726.0

Operating lease liabilities arising from obtaining ROU assets 659.6 506.6

Dec 27, 2020 Dec 29, 2019

Mar 28, 2021 Mar 29, 2020

Weighted-average remaining operating lease term 8.7 years 8.9 years

1 unchanged sentence

Finance lease assets are recorded in property, plant and equipment, net with the corresponding lease liabilities included in accrued liabilities and other long-term liabilities on the consolidated balance sheet.

There were no material finance leases as of December 27, 2020.

There were no material finance leases as of March 28, 2021.

Minimum future maturities of operating lease liabilities (in millions) :

Fiscal Year Total

2021 (excluding the quarter ended December 27, 2020)

2021 (excluding the two quarters ended March 28, 2021)

Thereafter 4,137.9

2 unchanged sentences

Total $ 8,874.1

As of December 27, 2020, we have entered into operating leases that have not yet commenced of $ 723.4 million, primarily related to real estate leases.

As of March 28, 2021, we have entered into operating leases that have not yet commenced of $ 761.9 million, primarily related to real estate leases.

These leases will commence between fiscal year 2021 and fiscal year 2027 with lease terms ranging from 3 years to 20 years.

1 unchanged sentence

Our deferred revenue primarily consists of the prepaid royalty from Nestlé, for which we have continuing performance obligations to support the Global Coffee Alliance, our unredeemed stored value card liability and unredeemed loyalty points (“Stars”) associated with our loyalty program.

At December 27, 2020, the current and long-term deferred revenue related to the Nestlé was $ 180.3 million and $ 6.5 billion, respectively.

During both quarters ended December 27, 2020 and December 29, 2019, we recognized $ 44.2 million of prepaid royalty revenue related to Nestlé.

As of March 28, 2021, the current and long-term deferred revenue related to Nestlé was $ 178.9 million and $ 6.4 billion, respectively.

During both quarters and two quarters ended March 28, 2021 and March 29, 2020, we recognized $ 44.2 million and $ 88.4 million of prepaid royalty revenue related to Nestlé, respectively.

Changes in our deferred revenue balance related to our stored value cards and loyalty program (in millions) :

Quarter Ended December 27, 2020 Total

Stored value cards and loyalty program at September 27, 2020

Quarter Ended March 28, 2021

Stored value cards and loyalty program at December 27, 2020

Revenue deferred - card activations, card reloads and Stars earned 2,709.7

Revenue recognized - card and Stars redemptions and breakage ( 2,977.8 )

Stored value cards and loyalty program at March 28, 2021 (2)

Quarter Ended March 29, 2020

Stored value cards and loyalty program at December 29, 2019

Quarter Ended December 29, 2019 Total

Revenue deferred - card activations, card reloads and Stars earned 2,453.6

Revenue recognized - card and Stars redemptions and breakage ( 2,736.4 )

Stored value cards and loyalty program at March 29, 2020 (2)

Two Quarters Ended March 28, 2021

Stored value cards and loyalty program at September 27, 2020

1 unchanged sentence

Revenue recognized - card and Stars redemptions and breakage ( 5,958.0 )

Stored value cards and loyalty program at December 29, 2019 (2)

Stored value cards and loyalty program at March 28, 2021 (2)

Two Quarters Ended March 29, 2020

Stored value cards and loyalty program at September 29, 2019

Revenue deferred - card activations, card reloads and Stars earned 5,961.1

Revenue recognized - card and Stars redemptions and breakage ( 5,798.3 )

Stored value cards and loyalty program at March 29, 2020 (2)

(1) “Other” primarily consists of changes in the stored value cards and loyalty program balances resulting from foreign currency translation.

(2) As of December 27, 2020 and December 29, 2019, approximately $ 1,623.7 million and $ 1,460.9 million of these amounts were current, respectively.

(2) As of March 28, 2021 and March 29, 2020, approximately $ 1,370.4 million and $ 1,191.5 million of these amounts were current, respectively.

Changes in AOCI by component, net of tax (in millions) :

Quarter Ended Available-for-Sale Debt Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total

December 27, 2020

March 28, 2021

Net gains/(losses) in AOCI, beginning of period $ 4.1 $ ( 75.5 ) $ ( 13.5 ) $ ( 61.0 ) $ ( 145.9 )

3 unchanged sentences

Net gains/(losses) in AOCI, end of period $ 2.0 $ ( 5.7 ) $ 19.6 $ ( 142.2 ) $ ( 126.3 )

December 29, 2019

March 29, 2020

Net gains/(losses) in AOCI, beginning of period $ 3.2 $ 33.7 $ 7.7 $ ( 432.0 ) $ ( 387.4 )

2 unchanged sentences

Other comprehensive income/(loss) attributable to Starbucks 2.4 ( 98.5 ) 40.1 ( 78.4 ) ( 134.4 )

Net gains/(losses) in AOCI, end of period $ 5.6 $ ( 64.8 ) $ 47.8 $ ( 510.4 ) $ ( 521.8 )

Two Quarters Ended Available-for-Sale Debt Securities Cash Flow Hedges Net Investment Hedges Translation Adjustment and Other Total

March 28, 2021

Net gains/(losses) in AOCI, beginning of period $ 5.7 $ ( 82.1 ) $ 11.5 $ ( 299.7 ) $ ( 364.6 )

Net gains/(losses) recognized in OCI before reclassifications ( 2.4 ) 78.1 13.0 157.5 246.2

Net (gains)/losses reclassified from AOCI to earnings ( 1.3 ) ( 1.7 ) ( 4.9 ) — ( 7.9 )

Other comprehensive income/(loss) attributable to Starbucks ( 3.7 ) 76.4 8.1 157.5 238.3

Net gains/(losses) in AOCI, end of period $ 2.0 $ ( 5.7 ) $ 19.6 $ ( 142.2 ) $ ( 126.3 )

March 29, 2020

Net gains/(losses) in AOCI, beginning of period $ 3.9 $ 11.0 $ ( 10.1 ) $ ( 508.1 ) $ ( 503.3 )

Net gains/(losses) recognized in OCI before reclassifications 2.4 ( 70.9 ) 60.7 ( 2.3 ) ( 10.1 )

Net (gains)/losses reclassified from AOCI to earnings — ( 7.9 ) ( 5.3 ) — ( 13.2 )

Other comprehensive income/(loss) attributable to Starbucks 2.4 ( 78.8 ) 55.4 ( 2.3 ) ( 23.3 )

Cumulative effect of accounting adoption ( 0.7 ) 3.0 2.5 — 4.8

4 unchanged sentences

the Statements of Earnings

Dec 27, 2020 Dec 29, 2019

Mar 28, 2021 Mar 29, 2020

Gains/(losses) on available-for-sale debt securities $ 0.2 $ 0.2 Interest income and other, net

4 unchanged sentences

$ 6.1 $ 4.8 Net of tax

In addition to 2.4 billion shares of authorized common stock with $ 0.001 par value per share, the Company has authorized 7.5 million shares of preferred stock, none of which was outstanding as of December 27, 2020.

As of December 27, 2020, 48.9 million shares remained available for repurchase under current authorizations.

Two Quarters Ended

Components Amounts Reclassified from AOCI Affected Line Item in

the Statements of Earnings

Mar 28, 2021 Mar 29, 2020

Gains/(losses) on available-for-sale debt securities $ 1.7 $ — Interest income and other, net

Gains/(losses) on cash flow hedges 3.2 9.9 Please refer to Note 2 , Derivative Financial Instruments for additional information.

Gains/(losses) on net investment hedges 6.6 7.2 Interest expense

11.5 17.1 Total before tax

( 3.6 ) ( 3.9 ) Tax (expense)/benefit

$ 7.9 $ 13.2 Net of tax

As of March 28, 2021, 48.9 million shares remained available for repurchase under current authorizations.

We have suspended our share repurchase program until we restore certain financial leverage targets, which we currently expect to occur in late fiscal 2021.

On September 30, 2020, which was early in the first quarter of fiscal 2021, our Board of Directors approved a quarterly cash dividend to shareholders of $ 0.45 per share to be paid on November 27, 2020 to shareholders of record as of the close of business on November 12, 2020.

In November 2020, our Board of Directors approved a quarterly cash dividend to shareholders of $ 0.45 per share to be paid on March 5, 2021 to shareholders of record as of the close of business on February 18, 2021.

During the second quarter of fiscal 2021, our Board of Directors approved a quarterly cash dividend to shareholders of $ 0.45 per share to be paid on May 28, 2021 to shareholders of record as of the close of business on May 13, 2021.

Employee Stock Plans

As of December 27, 2020, there were 39.4 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 11.8 million shares available for issuance under our employee stock purchase plan.

As of March 28, 2021, there were 40.1 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 11.7 million shares available for issuance under our employee stock purchase plan.

Stock-based compensation expense recognized in the consolidated statements of earnings (in millions) :

Quarter Ended

Dec 27, 2020 Dec 29, 2019

Quarter Ended Two Quarters Ended

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

Options $ 0.9 $ 0.7 $ 1.8 $ 2.4

1 unchanged sentence

Total stock-based compensation expense $ 76.0 $ 56.3 $ 175.3 $ 146.6

Stock option and RSU transactions from September 27, 2020 through December 27, 2020 ( in millions ):

Stock option and RSU transactions from September 27, 2020 through March 28, 2021 ( in millions ):

Stock Options RSUs

3 unchanged sentences

Forfeited/expired ( 0.1 ) ( 0.8 )

Options outstanding/Nonvested RSUs, December 27, 2020

Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 27, 2020

Options outstanding/Nonvested RSUs, March 28, 2021

Total unrecognized stock-based compensation expense, net of estimated forfeitures, as of March 28, 2021

$ 0.3 $ 253.8

The effective tax rate for the quarter ended March 28, 2021 was 25.9 % compared to 16.8 % for the same quarter in fiscal 2020.

The increase was primarily due to higher earnings, including the foreign rate differential on our jurisdictional mix of earnings, partially offset by lapping valuation allowances recorded against deferred tax assets of certain international jurisdictions in the prior year.

The effective tax rate for the first two quarters ended March 28, 2021 was 24.5 % compared to 21.1 % for the same period in fiscal 2020.

Earnings per Share

Calculation of net earnings per common share (“EPS”) — basic and diluted ( in millions, except EPS ):

Quarter Ended

Dec 27, 2020 Dec 29, 2019

Quarter Ended Two Quarters Ended

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

Net earnings attributable to Starbucks $ 659.4 $ 328.4 $ 1,281.6 $ 1,214.1

6 unchanged sentences

The calculation of dilutive shares outstanding would exclude out-of-the-money stock options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would be antidilutive.

As of December 27, 2020 and December 29, 2019, we had no out-of-the-money stock options .

As of March 28, 2021 and March 29, 2020, we had no out-of-the-money stock options .

Commitments and Contingencies

26 unchanged sentences

The Notice of Entry of Judgment from the court was served on October 6, 2020 and the Plaintiff filed a Notice of Appeal on November 20, 2020.

The court issued a briefing schedule, and the parties are working through the appellate process.

Starbucks believes that the likelihood that the Company will ultimately incur a material loss in connection with this litigation is less than reasonably possible.

4 unchanged sentences

Consolidated revenue mix by product type (1) ( in millions ):

Quarter Ended

Dec 27, 2020 Dec 29, 2019

Quarter Ended Two Quarters Ended

Mar 28, 2021 Mar 29, 2020 Mar 28, 2021 Mar 29, 2020

$ 4,212.8 63 % $ 3,530.9 59 % $ 8,464.5 63 % $ 7,789.4 59 %

5 unchanged sentences

(3) Food includes sales within our company-operated stores.

(4) “Other” primarily consists of packaged and single-serve coffees and teas, serveware, royalty and licensing revenues, beverage-related ingredients and ready-to-drink beverages, among other items.

(4) “Other” primarily consists of packaged and single-serve coffees and teas, royalty and licensing revenues, serveware, beverage-related ingredients and ready-to-drink beverages, among other items.

The table below presents financial information for our reportable operating segments and Corporate and Other segment (in millions) :

1 unchanged sentence

Americas International Channel Development Corporate and Other Total

December 27, 2020

March 28, 2021

Total net revenues $ 4,664.6 $ 1,610.9 $ 369.9 $ 22.6 $ 6,668.0

2 unchanged sentences

Operating income/(loss) 905.3 251.5 172.6 ( 341.8 ) 987.6

December 29, 2019

March 29, 2020

Total net revenues $ 4,330.0 $ 1,134.6 $ 519.1 $ 12.0 $ 5,995.7

2 unchanged sentences

Operating income/(loss) 621.2 ( 15.4 ) 189.6 ( 308.0 ) 487.4

Two Quarters Ended

Americas International Channel Development Corporate and Other Total

March 28, 2021

Total net revenues $ 9,367.9 $ 3,265.3 $ 741.2 $ 43.1 $ 13,417.5

Depreciation and amortization expenses 374.9 283.4 0.6 73.7 732.6

Income from equity investees — 53.0 106.7 — 159.7

Operating income/(loss) 1,718.7 526.3 353.3 ( 697.1 ) 1,901.2

March 29, 2020

Total net revenues $ 9,340.9 $ 2,705.7 $ 1,013.7 $ 32.5 $ 13,092.8

Depreciation and amortization expenses 380.7 256.7 0.6 69.4 707.4

Income from equity investees — 55.8 86.1 — 141.9

Operating income/(loss) 1,720.0 260.5 365.1 ( 638.4 ) 1,707.2

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements